ACER’s Position Paper towards greater consistency of cost benefit analysis methodologies, published today, identifies topics where consistency is needed across the Cost Benefit Analysis methodologies (CBA methodologies) currently under development by the European Commission and the European electricity and gas grid operators.

Greater consistency of CBA methodologies will enable a more efficient energy system across Europe by ensuring similar terms of assessment of projects in a technology neutral way.

Why did ACER issue this Position Paper?

The updated TEN-E Regulation (Regulation (EU) 2022/869) introduced the task of the development of separate CBA methodologies for the various energy infrastructure categories and by different entities:  

• The EU network of transmission system operators for electricity (ENTSO-E) for electricity transmission projects (including offshore grids);
• The EU network of transmission system operators for gas (ENTSOG)  for hydrogen projects; and
• The European Commission (EC) for projects of energy storage, electricity smart grids, gas smart grids, electrolysers and CO2 networks and facilities.

ACER must provide opinions on the ENTSO-E and ENTSOG CBA methodologies and on the draft lists of PCIs prepared by the EC. The Regulation tasks ACER with promoting consistency in the CBA methodologies developed by the EC with the CBA methodologies elaborated by ENTSO-E and ENTSOG.

To this end, ACER’s Position Paper sets out the topics where consistency should be promoted among all CBA methodologies.

Where is consistency of CBA methodologies needed?

1. Common input data set and assumptions;
2. Selection and use of scenarios and ways to deal with uncertainty;
3. Length of assessment period, residual value of projects, and social discount rate;
4. Definition of reference case networks;
5. Treatment of interdependency with other projects;
6. Project implementation status;
7. Clustering rules;
8. Criteria to assess the plausibility of projects’ commissioning dates;
9. Implementation Guidelines;
10. Definition and handling of capital and operational expenditures;
11. Consideration of the impact of the future extreme weather events on infrastructure resilience;
12. Approach to calculate social and environmental impacts of projects;
13. Methodology to calculate the benefit-to-cost ratio and Net Present Value of projects;
14. Sensitivities;
15. Modelling interlinkages of CBA methodologies;
16. Presentation of CBA results.

Next steps

The ACER Position Paper could serve as a reference document, e.g. during the cooperation with the EC and the ENTSOs during the development phase of their CBA methodologies, as well as when drafting the ACER opinions on the ENTSOs’ CBA methodologies, or when the EC Advisory Board for Climate Change forms their views on the methodologies.

Access the ACER Position Paper.

In response to the energy crisis, every Member State introduced emergency measures to support their citizens and economy, and to mitigate security of energy supply risks.

Today, ACER publishes an inventory of 400+ measures adopted by Member States to cope with the energy crisis. ACER publishes its inventory in the form of an interactive dashboard, providing a high-level analysis of the measures. In a second step, ACER will proceed with an assessment of the measures, focusing on lessons learned and publishing a fuller report in July 2023.

How is ACER’s inventory of energy measures relevant?

ACER’s detailed EU-wide picture of the energy emergency measures adopted across Europe is timely:

• As energy and fiscal policy makers consider next steps now to cope with persistent short term energy challenges;
• With Member States starting to re-evaluate their energy emergency support measures in the context of falling energy prices; and
• Given recent calls (by certain EU bodies) for fiscal policy (in the current high inflation environment) to be targeted, tailored and temporary.

Lessons from measures taken over the past year and a half could help Member States direct any future energy emergency support measures, when and where deemed appropriate, to those who need it most.

What is ACER’s inventory of emergency measures about?

• The inventory collects over 400 measures implemented by Member States from July 2021 until February 2023.
• It relies on information collected by the European Commission, directly from Member States, as well as on publicly available information. National regulators validated and complemented the information.
• ACER clusters the measures related to gas and electricity into categories according to criteria, such as the primary purpose of the measure or the specific group of (targeted) consumers.

What are ACER’s high-level findings to date?

• Every Member State has adopted energy emergency support measures.
• 1/3 of the measures aim at what we have labelled broader security of supply objectives, while 2/3 aim to tackle affordability for end-consumers.
• Almost 1/2 of the measures take the form of direct support to final consumers.
• 1/2 of the measures targeting broader security of supply objectives aim at increasing energy efficiency and renewable generation uptake, thereby also contributing to the Green Deal and Fit-for-55 policy goals.
• Some measures aiming at replacing the use of gas for heating or for producing electricity could, however, hamper the decarbonisation goals; hence, their use should be limited to areas where alternatives to safeguarding security of supply are not readily available.
• 40% of the measures aiming at tackling energy affordability target households (sometimes inter alia with other consumer groups) but less than 1/4 of them target vulnerable consumers.
• 60% of the measures aiming at providing direct support to consumers come in the form of income support (e.g. one-off cash payments), while the rest come in the form of discounts in the energy bills (price support).

What’s next?

ACER plans to publish a fuller analysis of emergency measures in July 2023 to further assist policy makers.

As this ACER inventory might not be complete, ACER welcomes feedback on its inventory (by 16 April 2023), to be sent to 2023_emergency_measures(at)acer.europa.eu.

Access the Emergency Measures inventory.

Some regions of Europe’s electricity single day-ahead coupling (SDAC) rely on so-called “second auctions” in case of extremely high or low prices. Those auctions, only triggered by extreme prices, allow market participants to adapt their bids prior to a second run of the SDAC auction.

Recently, Transmission System Operators (TSOs) and Nominated Electricity Market Operators (NEMOs) have introduced second auctions in the bidding zones of the Baltic region.

Hence, ACER would like to better understand how EU market participants consider the current functioning and potential evolutions of second auctions. ACER therefore invites EU market participants to fill in a survey by Thursday, 30 March 2023.

Enter the survey.

Since 13th January, as required by Council Regulation (EU) 2022/2576, ACER publishes a daily Liquefied Natural Gas (LNG) price assessment. On 8 March, ACER will start applying an updated version (Beta 2.0) of the methodology for its LNG price assessments.

Why update the methodology and why now?

• The aim (as per the Regulation) is for ACER to produce an objective price assessment that reflects the price of LNG spot transactions.
• On some days, there were insufficient eligible LNG spot transactions to calculate the price assessment as per the established methodology (which required a minimum of 5 transactions over 5 rolling days).
• After observing the initial methodology (Beta 1.0) for a few weeks, ACER has decided to update it.
• The Regulation also requires ACER to publish a LNG benchmark by 31 March 2023. ACER intends to start applying the new LNG price methodology as of 8 March in order to verify it until the benchmark’s go-live on 31 March 2023.

What are the main changes to the LNG price assessment methodology and why is it relevant?

• A single EU LNG price will be calculated on top of the current practice of prices for 2 zones (North-West Europe and South Europe).
• ACER’s Beta 1.0 methodology used a 5-day rolling window to aggregate transactions and thus build a price that is representative of the market conditions. Beta 2.0 further shifts the weight of the calculation to the most recent transactions and is at the same time extending the calculation window to 10 days.

This will increase the robustness of the LNG price calculation.

Has ACER consulted stakeholders on its work?

ACER works closely with stakeholders to have a meaningful LNG price assessment that is genuinely representative and not arbitrary. ACER developed and now subsequently refined, with the help of an LNG Expert Group and in consultation with the European Commission, a robust beta methodology underpinning the ACER LNG price assessment.

In addition, ACER intends to further update the Guidance on reporting LNG market data, and improve its TERMINAL platform to improve the user experience. The updated reporting Guidance will mainly clarify important details to assure better data quality. 

Both updated documents will benefit from the advice of its LNG Expert Group, close engagement with market participants (e.g. via roundtables, webinars), input from other stakeholders and ACER price assessors’ experience so far.

Access the updated LNG price assessment methodology (Beta 2.0).

Learn more about the LNG price assessment.