On 22 May 2024, the National Regulatory Authorities (NRAs) of the Continental Europe Synchronous Area (CE) requested from ACER a six-months extension to decide on the Transmission System Operators’ (TSOs') proposal to introduce a probabilistic dimensioning approach of Frequency Containment Reserves (FCRs). This new approach aims to improve how FCRs are calculated to stabilise the power grid’s frequency during supply and demand imbalances.

The countries of the Continental Europe Synchronous Area are Austria, Belgium, Bulgaria, Croatia, Czechia, Denmark, France, Germany, Greece, Hungary, Italy, Luxembourg, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia and Spain.

What does Frequency Containment Reserve (FCR) mean?

Under the EU Network Code on System Operation, FCRs (also known as primary control reserves) are active power reserves used as a first response to stabilise the power grid’s frequency after an imbalance between supply and demand.

In the event of a frequency deviation (e.g. following a planned or unplanned power plant outage), their power output can be quickly adjusted to restore grid stability.

Why consider probabilistic dimensioning for FCR?

Historically, TSOs in this region have used a ‘deterministic’ criterion for FCR dimensioning, ensuring that the FCR can handle frequency deviations resulting from the worst-case system outages, typically set at 3000 MW.

In November 2023, TSOs proposed a ‘probabilistic’ dimensioning for FCRs, which considers load and generation patterns, as well as inertia factors (such as synthetic and real-time minimum inertia). This approach aims to enhance the power system’s resilience by reducing the probability of insufficient FCR capacity to once every 20 years or less.

What are the next steps?

ACER intends to act promptly on this request, aiming to issue a decision by the end of July 2024.

If ACER decides to grant this extension, 11 January 2025 would be the new deadline for CE NRAs to reach an agreement on the TSOs’ proposal.

Congratulations to Mr. Miro Prek, as well as Prof. Andrea Biondi and Prof. Piet Eeckhout for their re-appointment as Chair and Vice-Chairs of the ACER Board of Appeal for an additional term of two and a half years (until 17 October 2026).

We look forward to continuing the fruitful cooperation and shared commitment with the Chair, the Vice-Chairs, the Members and the Alternates of the ACER Board of Appeal. Their standing, integrity and expertise are invaluable.

About the ACER Board of Appeal

The Board of Appeal plays an important role dealing with appeals lodged against ACER decisions. As such, it is important that its members and alternates act independently and in the public interest.

It is composed by six members and six alternates. They have a mandate of 5 years, which can be renewed. Members and alternates are selected among senior staff of the national regulatory authorities, competition authorities or other national or EU institutions with relevant experience in the energy sector.

On 24 May 2024, the European National Regulatory Authorities (NRAs) referred to ACER a joint proposal from all Transmission System Operators (TSOs) to amend the methodology for calculating scheduled exchanges resulting from single day-ahead coupling (SDAC).

What is the methodology about?

The methodology describes how the scheduled exchanges between bidding zones, scheduling areas and Nominated Electricity Market Operators’ (NEMOs’) trading hubs are calculated in the SDAC. Scheduled exchanges are electricity transfers scheduled between geographic areas for each market time unit and for a given direction.

Why amend the methodology?

The methodology was previously amended in May 2023 to improve how scheduled exchanges between NEMOs’ trading hubs are calculated.

In the new proposal, TSOs deem it necessary to further improve the SDAC algorithm to enable the effective implementation of the 15-minute Market Time Unit (MTU) in the SDAC (expected for January 2025). The robustness of the algorithm needs to be enhanced to handle the increased volume of data within the limited calculation timeframe. To achieve this, TSOs propose introducing a back-up functionality for the calculation of the scheduled exchanges between bidding zones.

What are the next steps?

ACER expects to decide on the amended methodology by September 2024.

Contact Information

Interested parties may contact ACER on this matter at ACER-ELE-2024-009@acer.europa.eu by 28 June 2024 at the latest.

Relevant documents

All TSOs’ proposal to amend the day-ahead scheduled exchanges methodology.

All TSOs’ proposal to amend the day-ahead scheduled exchanges methodology (in track changes).

Explanatory note.

ACER’s 2024 report finds that congestion progressively diminished in 2023 due to adjustments of gas demand, supply, and flow paths to reduce reliance on Russian gas. However, the repercussions of the gas market crisis remain clear, as price convergence between European gas hubs has not yet reached the pre-crisis levels.

What does congestion mean?

Different types of congestion can occur in gas markets:

• Contractual congestion happens when the capacity of the gas transportation system is fully booked but remains partially unused, with actual gas flows below the technical limit of the gas system. This can prevent other users from accessing the gas network, leading to inefficiencies. Bringing unused capacity back to the market eases contractual congestion.
• Physical congestion occurs when gas flows reach the technical limit of the gas system. If structural bottlenecks happen, a careful assessment must be done on the need for further investment in the gas system, not necessarily in transmission assets. This assessment should be done in line with the EU’s energy and climate policies, ensure security of supply, and mitigate the risk of future asset stranding.

Addressing the most acute congestions by optimising the use of transmission capacities remains a short-term action that can help deal with tight market conditions.

What are the key findings?

The report finds that in 2023:

• Congestion diminished but remains present on key west-east routes that allow to reduce the reliance on gas supplies from Russia.
• 35 exit and entry sides at Interconnection Points (IPs) were congested, a decrease from 50 congested IPs in 2022.
• New LNG import capacity boosted supply and helped remove congestion at entry points from Norway and the UK.
• Improved market conditions at the most critical bottlenecks reduced the spreads between hub prices. As a consequence, this lowered the incentive for network users to pay high premiums to acquire capacity to move gas between those hubs.
• Total congestion revenues collected by Transmission System Operators (TSOs) amounted to €140 million, a significant drop from the €3.4 billion generated from capacity auctions in 2022. However, this figure remains high compared to the pre-crisis level of €55 million in 2021.

What does ACER recommend?

• Neighbouring TSOs should closely coordinate to maximise the availability of firm and interruptible capacities.
• Neighbouring National Regulatory Authorities (NRAs) should collaborate to remove any regulatory barriers that hinder the optimal use of the existing network for reconfigured supply routes.
• TSOs shall assess whether new investments are needed to address physical bottlenecks that persist after operational optimisations.
• NRAs need to assess whether investments to eliminate structural bottlenecks align with the EU’s energy and climate policies, and security of supply requirements.

What are the next steps?

ACER reports annually on the status of contractual congestion in the EU gas markets and on how it is managed.

Considering the monitoring results, the NRAs shall decide on the application of congestion management procedures in their own countries.

On 8 May 2024, ACER received electricity system operators’ proposal for an EU-wide network code on demand response. The proposal was drafted by the EU Distribution System Operators Entity (EU DSO Entity) and the European Network of Transmission System Operators (ENTSO-E). Their proposal also includes amendments to the three related electricity network codes: balancing, system operation, and demand connection.

After reviewing and where necessary revising the system operators’ proposal, ACER will consult on its revised draft in autumn 2024 before submitting it to the European Commission by March 2025.

Why is this network code relevant?

The network code on demand response will:

• Establish harmonised rules to facilitate market access for demand response, including load, storage and distributed generation (aggregated or not).
• Enable market-based procurement of services by Distribution System Operators (DSOs) and Transmission System operators (TSOs).
• Be applicable in all EU Member States.

Demand response is key for integrating the growing share of renewable energy and new electricity loads (e.g. resulting from heat pumps and electric vehicles) in a cost-efficient way.

In developing this draft network code, ACER is contributing to a more cost-efficient and clean energy transition by facilitating access to EU wholesale electricity markets for smaller actors, including consumers.

Have your say!

ACER is running a public consultation from 5 September to 31 October 2024 on what will be ACER-revised draft proposal. ACER will run a  webinar during the consultation period, on 1 October 2024.

Background

In June 2022, ACER was mandated by the European Commission to draft a framework guideline on demand response which serves as guidance for the system operators to then draft the EU network code. After engaging stakeholders via a public consultation and a workshop during the summer of 2022, ACER submitted the framework guideline to the European Commission in December 2022. The European Commission cleared ACER’s framework guideline in March 2023, and asked the DSO Entity and ENTSO-E to draft the proposal for the new binding EU rules.

What are the next steps?

• ACER public consultation: 5 September - 31 October 2024.
• ACER webinar: 1 October 2024, 14:00-16:00 (CET).

ACER will submit the revised network code proposal to the European Commission by March 2025.

ACER publishes today a consultancy study on the expected social welfare benefits of implementing co-optimisation in the day-ahead coupling algorithm as compared to the current electricity market design.

The study also examines which benefits can be achieved in an intermediate market design known as market-based allocation of cross-zonal capacity. This design is already in use in the Nordics and is expected to be implemented in other parts of the EU in the coming years.

The study was commissioned in October 2023 to support the ongoing decision-making process on the amendment of the methodology for the price coupling algorithm and the continuous trading matching algorithm.

What is co-optimisation and why is it important?

Amending the day-ahead coupling algorithm is necessary to enable a co-optimised allocation of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. By allocating cross-zonal capacity where its market value is the highest, co-optimisation facilitates the integration of the balancing capacity markets and allows for a more efficient use of cross-zonal capacity.

Unlike the market-based allocation process, which allocates cross-zonal capacity for the exchange of balancing capacity or sharing of reserves before the day-ahead energy auction, co-optimisation clears both markets simultaneously, thus allowing to fully capture their interdependencies.

What are the key findings of the study?

The study concludes the following:

• Day-ahead energy and balancing capacity markets are strongly interdependent as they rely on the same generating units to operate.
• Co-optimisation could save the EU about €1.3 billion annually compared to the current market design, while moving to the market-based allocation process is expected to provide annual benefits of around €160 million.
• The benefits of co-optimisation are 15% higher in a design where market participants are not required to forecast the day-ahead energy market outcome when bidding for balancing capacity.
• In sequential designs (i.e. the current market design and the market-based allocation process), fixed costs are prone to be misrepresented, leading to inefficient resource commitment. Co-optimisation improves overall system efficiency by accurately optimising both fixed and variable costs, resulting in better resource allocation.
• Under sequential designs, significant adjustments to unit setpoints (i.e. how much power generating units produce) occur after the day-ahead market. If the intraday market cannot accommodate these adjustments, the efficiency gains from co-optimisation nearly double, leading to potential savings of around €2.3 billion annually.

Get involved!

ACER opens today a public consultation to collect stakeholders’ insights on the study’s findings. You have until 19 June 2024 to submit your views.

Register for ACER’s webinar on 10 June 2024 to learn about the main findings of the study, including insights on the design of bids that would allow to best capture the interactions between day-ahead and balancing capacity markets.

The outcomes of the consultation and webinar will inform ACER’s decision-making on the proposed amendments to the methodology, which is scheduled to be finalised by early autumn 2024.

On Thursday 20 June, ACER will launch a public consultation to gather stakeholders’ views on the benefits and drawbacks of introducing voluntary templates for Power Purchase Agreement (PPA) contracts in the EU energy market.

What are Power Purchase Agreements?

Power Purchase Agreements (PPAs) are contractual arrangements between electricity producers (frequently renewable energy generators) and buyers. By providing renewable electricity at mutually agreed rates, these contracts foster stability for both parties and promote the adoption of renewable energy sources (RES).

In accordance with the EU Regulation to improve the Union’s Electricity Market Design (EMD), which has been adopted by the Council of the EU on 21 May 2024, Member States shall implement policies and measures to promote the uptake of PPAs by removing unjustified barriers and disproportionate or discriminatory practices. This should contribute to improving energy pricing predictability and help meet national climate and energy targets.

Why the need for a consultation?

The EMD mandates ACER to assess the need to develop and issue voluntary templates for PPAs. As ACER assessment must reflect the needs of the different parties involved, it is key that this is done in close coordination with relevant institutions and stakeholders.

For this reason, ACER will run a public consultation (from 20 June to 18 July 2024) to gather inputs from interested stakeholders and ensure an informed and inclusive decision-making process.

What are the next steps?

The public consultation will run from 20 June to 18 July 2024.

As a follow up, ACER will evaluate the feedback received in the consultation and the conclusions reached by the consultative expert group established in May 2024.

If the assessment (expected in Autumn 2024) highlights the need to develop templates for PPA contracts, ACER, together with all Nominated Electricity Market Operators (NEMOs), will start the process in Winter 2024.