Cross-zonal capacity in the EU energy market is defined as the capability of the interconnected system to accommodate energy transfer between bidding zones.

                    
                     
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15 March 2024

ACER amends the methodology for electricity intraday flow-based capacity calculation in the Core region

ACER Decision No 03/2024 of 14 March 2024 on the second and third amendment of the intraday capacity calculation methodology of the Core capacity calculation regionACER Decision on Core ID CCM

Annex III, Intraday capacity calculation methodology of the Core capacity calculation region in accordance with Article 20ff of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management, Consolidated version of 14 March 2024


21 July 2023

ACER’s report on cross-zonal capacities and the 70% margin available for cross-zonal electricity trade finds:

• Interconnection capacity available for cross-zonal trade of electricity remains low across the EU. The minimum 70% target of interconnection capacity is still far off for most Member States.

• Reaching the 70% target is a collective effort: Each Member State’s actions (or inactions) impact other Member States and ultimately consumers.

• Lifting both internal and cross-zonal constraints is necessary to achieving the 70% target. Old barriers persist:

◦ Loop flows, i.e., internal trades within country A creating electrical flow through country B, thus creating congestion;

◦ Insufficient and costly remedial actions;

◦ No mechanism in place for sharing the cost of remedial actions


4 July 2023

Public Consultation on ACER’s Decision on the amendments of Core region electricity intraday capacity calculation methodology, PC_2023_E_06


13 April 2023

Public Consultation on the ACER Decisions on proposals for a harmonised cross-zonal capacity allocation methodology and RCCs' tasks of sizing and procurement, PC_2023_E_02 

 

24 March 2023

Regional TSO proposal for the Balancing Timeframe Capacity Calculation Methodology, in accordance with Article 37 of Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing. This proposal covers the Capacity Calculation Methodology for the Balancing Timeframe for the Baltic Capacity Calculation Region.

 

9 February 2023

TSOs submitted to ACER a proposal for the harmonised methodology for cross-zonal capacity allocation for the exchange of balancing capacity or sharing of reserves.


19 January 2023 

Amendment proposal on Art. 15(1) of CCR Hansa ID/DA Capacity Calculation Methodology

 

18 January 2023

ACER Decision No 03/2023 of 18 January 2023 on the long-term capacity calculation methodology of the Core capacity calculation region

Annex I Methodology

   

 

The identical definitions in this regard can be found in:

- Article 2(10) of the Regulation 543/2013 of 14 June 2013 on submission and publication of data in electricity markets,

- Article 2(70) of the Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), as well as

- Article 2(5) Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector.

Cross-zonal capacity can be expressed either as:

- a coordinated net transmission capacity (CNTC) value, or

- a flow-based parameter.

Firmness of allocated cross-zonal capacity is crucial from the perspective of electricity trading.

Article 16(3) of the Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges (an integral part of the so-called Third Energy Package), read: 

“The maximum capacity of the interconnections and/or the transmission networks affecting cross-zonal flows shall be made available to market participants, complying with safety standards of secure network operation”.

Moreover, Point 1.7 of Annex I to the same Regulation stipulated that Transmission System Operators (TSOs) were not allowed to limit interconnection capacity in order to solve congestion inside their own control area.

Another important rule is expressed in Article 21(I)(b)(ii) of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling), which specifies that capacity calculation and allocation methodologies must be based on “rules for avoiding undue discrimination between internal and cross-zonal exchanges”.

Recommendation of the Agency No 02/2016 of 11 November 2016 on the common capacity calculation and redispatching and countertrading cost-sharing methodologies establishes two high-level capacity calculation principles:

1. limitations on internal network elements should not be considered in cross-zonal capacity calculation methods,

2. the capacity of the cross-zonal network elements considered in the common capacity calculation methodologies should not be reduced in order to accommodate Loop Flows (LFs).

TSOs and National Regulatory Authorities (NRAs) are expected by the ACER to follow these high-level principles when developing, approving, implementing and monitoring their capacity calculation methodologies. However, the Recommendation allows for deviations from these principles if they are properly justified (from an operational security and socio-economical point of view at the EU level) and do not unduly discriminate against cross-zonal exchanges.

Building on the above approach ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume, October 2017, p. 21, 22) introduced the concept of ‘benchmark’ capacity, which is defined as the capacity that could be made available to the market if the two high-level principles underlying the Recommendation No 02/2016 were strictly followed.

As deviations from the high-level principles are acceptable subject to adequate justifications, as outlined above, according to ACER and CEER the monitoring of capacity calculation should not only focus on the deviations from the benchmark capacities but also on the proportion of capacity of Critical Network Elements (CNEs) that is made available for cross-border exchanges and the proportion reserved for internal exchanges.

In 2017, two sets of data enabling the ACER to enhance its analysis on cross-zonal capacity calculation, were provided to the ACER for the first time:

1. TSOs provided information on the Common Grid Model (CGM) for continental Europe,

2. the Core (CWE) region TSOs provided via ENTSO-E detailed information on the most relevant data items used in the flow-based capacity calculation process in the Core (CWE) region (data included, inter alia, hourly information on the forecasted physical flows on internal and cross-zonal transmission lines in the Core (CWE) region resulting from internal exchanges, these forecasted physical flows are used to define the constraints determining the tradable cross-zonal capacity in a flow-based context).

To increase the cross-zonal capacity ACER recommended the full implementation of the principles on cross-zonal capacity calculation included in the aforementioned Recommendation No 02/2016, i.e.:

- the maximum feasible cross-zonal capacity should be made available to the market rather than the left overs,

- the costs of the remedial actions (e.g. redispatching) needed to guarantee maximum cross-zonal capacity should be fairly shared among TSOs.

Where the use of the available remedial actions is not sufficient to ensure an appropriate level of cross-zonal capacities, or it is found to be ‘too costly’, the ACER recommends that a reconfiguration of bidding zones be applied.

According to the ACER the EU Member States could consider setting a binding target for the availability of existing and future cross-border capacity, e.g. by defining a minimum share of physical cross-zonal capacity which should be made available for cross-zonal trade (a suggestion materialised later in Article 16 of the Regulation (EU) 2019/943). The underlying assumption of the above ACER’s analysis was that if the bidding zones were properly defined according to physical constraints the only factor limiting trade between two bidding zones would be the capacity of the network elements on the bidding zone borders (i.e. the interconnection lines). 

In order to assign a benchmark capacity value to a specific border, a distinction between HVDC (High-Voltage Direct Current) interconnectors and High-Voltage Alternating Current (HVAC) interconnectors needs to be made. In the case of HVDC interconnectors, the benchmark capacity is assumed to be equal to the thermal capacity of the interconnector (since HVDC interconnectors are virtually unaffected by the factors that impact available cross-zonal capacity on HVAC interconnectors). In the case of HVAC interconnectors, there are also other elements limiting the capacity that can be offered to the market. HVDC interconnectors are not impacted by unscheduled flows (composed of Loop Flows, along with the unscheduled allocated flows (UAFs)). HVDC interconnectors, moreover, are usually not considered in the N-1 assessment.

 

Cross-zonal capacity in the Clean Energy Package (CEP)

 

Without prejudice to the obligation to maximize capacities for cross-zonal trade, Regulation (EU) 2019/943 on the internal market for electricity (Recast Electricity Market Regulation) in Article 16(8) prescribes that TSOs are required to make available, as from 1 January 2020, for cross-zonal trade a minimum binding level of capacity (70%). The purpose of offering a minimum level of available capacity for cross-zonal trade is to reduce the effects of loop flows and internal congestions on cross-zonal trade and to give a predictable cross-zonal capacity value for market participants.

 

 

Regulation (EU) 2019/943 on the internal market for electricity, Article 16(8), Recitals 27 and 28

 

Article 16(8)

 

Transmission system operators shall not limit the volume of interconnection capacity to be made available to market participants as a means of solving congestion inside their own bidding zone or as a means of managing flows resulting from transactions internal to bidding zones. Without prejudice to the application of the derogations under paragraphs 3 and 9 of this Article and to the application of Article 15(2), this paragraph shall be considered to be complied with where the following minimum levels of available capacity for cross-zonal trade are reached:

(a) for borders using a coordinated net transmission capacity approach, the minimum capacity shall be 70 % of the transmission capacity respecting operational security limits after deduction of contingencies, as determined in accordance with the capacity allocation and congestion management guideline adopted on the basis of Article 18(5) of Regulation (EC) No 714/2009;

(b) for borders using a flow-based approach, the minimum capacity shall be a margin set in the capacity calculation process as available for flows induced by cross-zonal exchange. The margin shall be 70 % of the capacity respecting operational security limits of internal and cross-zonal critical network elements, taking into account contingencies, as determined in accordance with the capacity allocation and congestion management guideline adopted on the basis of Article 18(5) of Regulation (EC) No 714/2009.

The total amount of 30 % can be used for the reliability margins, loop flows and internal flows on each critical network element.

 

Recital 27 

Uncoordinated curtailments of interconnector capacities increasingly limit the exchange of electricity between Member States and have become a serious obstacle to the development of a functioning internal market for electricity. The maximum level of capacity of interconnectors and the critical network elements should therefore be made available, complying with the safety standards of secure network operation including respecting the security standard for contingencies (N-1). However, there are some limitations to setting the capacity level in a meshed grid. Clear minimum levels of available capacity for cross-zonal trade need to be put in place in order to reduce the effects of loop flows and internal congestions on cross-zonal trade and to give a predictable capacity value for market participants. Where the flow-based approach is used, that minimum capacity should determine the minimum share of the capacity of a cross-zonal or an internal critical network element respecting operational security limits to be used as an input for coordinated capacity calculation under Regulation (EU) 2015/1222, taking into account contingencies. The total remaining share of capacity may be used for reliability margins, loop flows and internal flows. Furthermore, in the case of foreseeable problems for ensuring grid security, derogations should be possible for a limited transitional phase. Such derogations should be accompanied by a methodology and projects providing for a long-term solution.

 

Recital 28

The transmission capacity to which the 70 % minimum capacity criterion shall apply in the net transmission capacity (NTC) approach is the maximum transmission of active power which respects operational security limits and takes into account contingencies. The coordinated calculation of this capacity also takes into account that electricity flows are distributed unevenly between individual components and is not just adding capacities of interconnecting lines. This capacity does not take into account the reliability margin, loop flows or internal flows which are taken into account within the remaining 30 %.

 

Provisions in the Recast Electricity Market Regulation aim to ensure non-discrimination of cross-zonal exchanges. In particular, Article 16(8) prescribes that “Transmission system operators shall not limit the volume of interconnection capacity to be made available to market participants as a means of solving congestion inside their own bidding zone or as a means of managing flows resulting from transactions internal to bidding zones”.

The above requirement is deemed to be fulfilled, if “...the following minimum levels of available capacity for cross-zonal trade are reached:

- for borders using a coordinated net transmission capacity approach, the minimum capacity shall be 70% of the transmission capacity respecting operational security limits after deduction of contingencies [...]

- for borders using a flow-based approach, the minimum capacity shall be a margin set in the capacity calculation process as available for flows induced by cross-zonal exchange. The margin shall be 70% of the capacity respecting operational security limits of internal and cross-zonal critical network elements, taking into account contingencies [...]”. 

This Article 16(8) finally mentions that “The total amount of 30% can be used for the reliability margins, loop flows and internal flows on each critical network element”. 

ACER/CEER Annual Report of 11 November 2019 on the results of the monitoring the internal electricity markets in 2018 concludes that (p. 25) from 1 January 2020 onwards, at least 70% of the maximum admissible active power flow (Fmax) shall be made available for cross-zonal trade on all critical network elements contingencies (CNECs). This requirement will apply unless the EU Member States implement action plans where structural congestion has been identified pursuant to Article 15 of the Recast Electricity Market Regulation, or NRAs introduce coordinated derogations pursuant to Article 16(9) of the same Regulation.

The ACER politics on derogations is rigorous, for example, on 26 October 2022 the ACER decided not to grant the Swedish TSO a derogation from the 70% requirement.

As the said Report of 11 November 2019 further observes, while the main underlying principles remain similar, "the Agency, in monitoring the amount of capacity made available to the market, no longer focuses on benchmarking cross-zonal capacities (as in previous years), but instead estimates the share of Fmax available for cross-zonal trade in line with the adopted CCMs, and compare it with the target set by the recast Electricity Regulation".

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See also:

  
ACER's website, Cross-zonal capacity - 70% target

 

Capacity allocation

 

Firmness of allocated cross-zonal capacity 

 

Network Code on Electricity Balancing (Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing - NC EB), Articles 36 - 43

 

Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling), Article 21(I)(b)(ii)

 

Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector, Article 2(5)

 

Regulation 543/2013 of 14 June 2013 on submission and publication of data in electricity markets, Article 2(10)

The Agency, following numerous interactions with the European Commission, ENTSO-E, NRAs and TSOs, issued a Recommendation (the Recommendation No 01/2019 of 8 August 2019 on the implementation of the minimum margin to be made available for cross-border trade, according to Article 16(8) of the Regulation (EU) 2019/943) to support legal compliance enforcement.

The Recommendation describes how to estimate the margin available for cross-zonal trade (MACZT) on CNECs for the time period between 2016 and 2018. The main calculation principles included in the methodological paper are:
a) the calculations focus on the DA timeframe until coordinated ID capacity calculation is implemented;
b) the MACZT mostly stems from trade on EU bidding-zone borders. The impact of borders between EU and non-EU countries is separately monitored; and
c) the MACZT is only monitored for CNECs, and is split between the margin made available within coordinated capacity calculation (MCCC), and the flow induced by cross-zonal exchanges beyond coordinated capacity calculation (MNCC).

As a consequence, the concept of coordination areas is introduced. It describes sets of bidding-zone borders within which capacity calculation is fully coordinated.

Beyond the aforementioned developments, it is useful to recall, methodologies for the cross-zonal capacity calculations were among the most controversial aspects during the negotiations, which led to the adoption of the Clean Energy Package (CEP) in 2019.

The ACER in the infoflash of 8 June 2018 highlighted the main reasons for the EU energy market regulators’ anxiety in this regard:

“European Energy Regulators are concerned that some provisions in the Clean Energy Package, as they are emerging from the current negotiations, might derail the implementation of efficient cross-border capacity calculation.

The recent developments in the legislative process for the recast of the Electricity Regulation – especially in respect to Articles 13 and 14 – were discussed at the 75th meeting of the Agency’s Board of Regulators (BoR) on 6 June.

The Director and the vast majority of National Regulatory Authorities represented in the BoR expressed their concerns about the setting of an arbitrary minimum target for cross-border commercial capacities for all European interconnectors, along with the possibility for Member States to opt out until 2026 from the framework provided by the Capacity Allocation and Congestion Management (CACM) Guideline if they are unable to meet this target.

The Agency strongly believes that this approach goes against some fundamental principles and obligations under the Treaty on European Union and the Third Energy Package, such as efficiency, transparency, non-discrimination and regulatory independence.

The same concerns were expressed by the Agency at the European Electricity Regulatory Forum in Florence last week. There, the Agency highlighted that the Internal Energy Market is based on the well-established principle that electricity shall be allowed to move freely across the Union, in line with the freedom of movement of goods and services established by the Treaty on European Union. This relies on the right of transparent and non-discriminatory access to electricity grids. Articles 13 and 14 in the Electricity Regulation recast should indeed serve the same free-movement principle, which is a prerequisite for cross-border electricity trade in the Internal Energy Market and, thereby, for delivering benefits to consumers.

The aim of these provisions, as the European Commission’s proposal reiterates, should be to address the persisting problem of significant national limitations to cross-border electricity flows and to ensure that electricity exchanges are not unduly restricted. Therefore, the Agency  calls upon the European Institutions to reaffirm the cross-border capacity calculation approach as defined in the CACM Guideline and, thus, to reinstate the text of Articles 13 and 14 of the Electricity Regulation recast as proposed by the European Commission".

 

 

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast),

 

Article 6(3)
Balancing markets shall ensure operational security whilst allowing for maximum use and efficient allocation of cross-zonal capacity across timeframes in accordance with Article 17.

 

Article 17
Allocation of cross-zonal capacity across timeframes

1.Transmission system operators shall recalculate available cross-zonal capacity at least after day-ahead gate closure times and after intraday cross-zonal gate closure times. Transmission system operators shall allocate the available cross-zonal capacity plus any remaining cross-zonal capacity not previously allocated and any cross-zonal capacity released by physical transmission right holders from previous allocations in the following cross-zonal capacity allocation process.

2. Transmission system operators shall propose an appropriate structure for the allocation of cross-zonal capacity across timeframes, including day-ahead, intraday and balancing. That allocation structure shall be subject to review by the relevant regulatory authorities. In drawing up their proposal, the transmission system operators shall take into account:

(a) the characteristics of the markets;

(b) the operational conditions of the electricity system, such as the implications of netting firmly declared schedules;

(c) the level of harmonisation of the percentages allocated to different timeframes and the timeframes adopted for the different cross-zonal capacity allocation mechanisms that are already in place.

3. Where cross-zonal capacity is available after the intraday cross-zonal gate closure time, transmission system operators shall use the cross-zonal capacity for the exchange of balancing energy or for the operation of the imbalance netting process.

4. Where cross-zonal capacity is allocated for the exchange of balancing capacity or sharing of reserves pursuant to Article 6(8) of this Regulation, transmission system operators shall use the methodologies developed in the guideline on electricity balancing adopted on the basis of Article 6(11) of Regulation (EC) No 714/2009.

5. Transmission system operators shall not increase the reliability margin calculated pursuant to Regulation (EU) 2015/1222 due to the exchange of balancing capacity or sharing of reserves.

 

Cross-zonal capacity for balancing services

 

Article 6(3) of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), stipulates that balancing markets must ensure operational security whilst allowing for maximum use and efficient allocation of cross-zonal capacity across timeframes.

Cross-zonal capacity for balancing services is regulated in Articles 36 - 43 of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing - see box below.

According to Article 38(7) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 if physical transmission right holders use cross zonal capacity for the exchange of balancing capacity, the capacity shall be considered as nominated solely for the purpose of excluding it from the application of the use-it-or-sell-it (‘UIOSI’) principle.

Article 39 of the said Regulation envisions the following rules for the calculation of market value of cross-zonal capacity:

1. the market value of cross-zonal capacity for the exchange of energy and for the exchange of balancing capacity or sharing of reserves used in a co-optimised or market-based allocation process is based on the actual or forecasted market values of cross-zonal capacity;

2. the actual market value of cross-zonal capacity for the exchange of energy is calculated based on the bids of market participants in the day-ahead markets, and take into account, where relevant and possible, expected bids of market participants in the intraday markets;
3. the actual market value of cross-zonal capacity for the exchange of balancing capacity used in a co-optimised or a market-based allocation process is calculated based on balancing capacity bids submitted to the capacity procurement optimisation function;
4. the actual market value of cross-zonal capacity for the sharing of reserves used in a co-optimised or a market-based allocation process is calculated based on the avoided costs of procuring balancing capacity;
5. the forecasted market value of cross-zonal capacity is based on one of the following alternative principles:
(a) the use of transparent market indicators that disclose the market value of cross-zonal capacity; or
(b) the use of a forecasting methodology enabling the accurate and reliable assessment of the market value of cross-zonal capacity;

6. the forecasted market value of cross-zonal capacity for the exchange of energy between bidding zones is calculated based on the expected differences in market prices of the day-ahead and, where relevant and possible, intraday markets between bidding zones (additional relevant factors influencing demand and generation patterns in the different bidding zones are also taken into account).

 

Market-based allocation process of cross-zonal capacity

 

According to Article 41(2) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 cross-zonal capacity allocated on a market-based process shall be limited to 10 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors.

This volume limitation may not apply where the contracting is done not more than two days in advance of the provision of the balancing capacity or for bidding zone borders connected through DC interconnectors until the co-optimised allocation process is harmonised at Union level.

Article 41(5) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 stipulates that cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves via the market-based allocation process shall be used only for the exchange of balancing capacity or sharing of reserves and associated exchange of balancing energy.

 

Allocation of cross-zonal capacity based on an economic efficiency analysis

 

Article 42(2) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 stipulates that the allocation of cross-zonal capacity based on an economic efficiency analysis shall be limited to 5 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors.

This volume limitation may not apply for bidding zone borders connected through DC interconnectors until the co-optimised or market-based allocation processes are harmonised at Union level.

 

Pricing of cross-zonal capacity

 

Article 30(3) of the said Commission Regulation (EU) 2017/2195 of 23 November 2017 includes the requirement for pricing of cross-zonal capacity, which shall “reflect market congestion” and be based on the prices for balancing energy.

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast) in Article 17(3) - (5) envisions that where cross-zonal capacity is available after the intraday cross-zonal gate closure time, transmission system operators use the cross-zonal capacity for the exchange of balancing energy or for the operation of the imbalance netting process.

The development of respective methodologies by the TSOs is also foreseen where cross-zonal capacity is allocated for the exchange of balancing capacity or sharing of reserves, provided that in such a case TSOs must not increase the reliability margin.

Principles for applying co-optimised cross-zonal capacity allocation in the balancing timeframe have been set out in Article 3 of ACER Decision No 12/2020 of 17 June 2020 on the methodology for a co-optimised allocation process of cross-zonal capacity (COCZCA).

According to this Decision:



(1) the co-optimised allocation process shall be integrated within the SDAC algorithm and shall allocate cross-zonal capacities for the exchange of standard balancing capacity products or sharing of reserves following the objective in Article 9(2);



(2) the settlement of the standard balancing capacity bids with the balancing service providers for where co-optimised cross-zonal allocation is applied shall be based on cross-border marginal pricing (pay-as-cleared);


(3) cross-zonal capacities for the exchange of standard balancing capacity products or sharing of reserves from co-optimised cross-zonal allocation shall be exclusively provided to the respective platform, pursuant to Articles 19 to 21 of the EB Regulation, of the product they were allocated for.

On 5 September 2022 the Core TSOs opened the public consultation the proposal on the Balancing Timeframe Capacity Calculation Methodology, the analogous public consultation of the CCR Hansa was published on 1 September 2022.

 


ACER Decision No 12/2020 of 17 June 2020 on the methodology for a co-optimised allocation process of cross-zonal capacity (COCZCA) 

Annex I, Methodology for a co-optimised allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves in accordance with Article 40(1) of the Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing 

Article 3
Principles for applying co-optimised cross-zonal capacity allocation

(1) The co-optimised allocation process shall be integrated within the SDAC algorithm and shall allocate cross-zonal capacities for the exchange of standard balancing capacity products or sharing of reserves following the objective in Article 9(2).
(2) The contracting period of standard balancing capacity bids exchanged with the application of co-optimisation shall be equal to or a multiple of the day-ahead market time unit and shall be less or equal to the total amount of day-ahead market time units of the concerned day.
(3) The validity period of bids from standard balancing capacity products used for co-optimised cross-zonal allocation shall be equal to the day-ahead market time unit.
(4) The settlement of the standard balancing capacity bids with the balancing service providers for where co- optimised cross-zonal allocation is applied shall be based on cross-border marginal pricing (pay-as- cleared).
(5) Cross-zonal capacities for the exchange of standard balancing capacity products or sharing of reserves from co-optimised cross-zonal allocation shall be exclusively provided to the respective platform, pursuant to Articles 19 to 21 of the EB Regulation, of the product they were allocated for.
(6) The process of releasing allocated cross-zonal capacity for the exchange of balancing capacity or sharing of reserves in accordance with Article 10(2) shall be coordinated between the balancing energy platforms pursuant to Articles 19 to 21 of the EB Regulation.

Article 4
Notification process for the use of the co-optimised allocation process

Each TSO intending to apply co-optimised cross-zonal allocation shall notify TSOs of the same synchronous area three (3) months prior to entering into operation in accordance with Article 150 of the SO Regulation and inform all stakeholders and all TSOs through an announcement on the ENTSO-E website, at least three months prior to entering into operation. The announcement on the ENTSO-E website shall include a detailed description of the specifications in accordance with EB Article 38(2) as well as the type of standard balancing capacity product which will be exchanged or shared and foreseen date of entry into operation.

 

 

quote

 

Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing

 

Cross-zonal capacity for balancing services

 

Chapter 1
Exchange of balancing energy or imbalance netting process

 

Article 36

Use of cross-zonal capacity

1. All TSOs shall use the available cross-zonal capacity, computed according to paragraphs 2 and 3 of Article 37, for the exchange of balancing energy or for operating the imbalance netting process.
2. Two or more TSOs exchanging balancing capacity may use cross-zonal capacity for the exchange of balancing energy when cross-zonal capacity is:
(a) available pursuant to Article 33(6);
(b) released pursuant to paragraphs 8 and 9 of Article 38;
(c) allocated pursuant to Articles 40, 41 and 42.


Article 37

Cross-zonal capacity calculation

1. After the intraday-cross-zonal gate closure time, TSOs shall continuously update the availability of cross-zonal capacity for the exchange of balancing energy or for operating the imbalance netting process. Cross-zonal capacity shall be updated every time a portion of cross-zonal capacity has been used or when cross-zonal capacity has been recalculated.
2. Before the implementation of the capacity calculation methodology pursuant to paragraph 3, TSOs shall use the cross-zonal capacity remaining after the intraday cross-zonal gate closure time.
3. By five years after entry into force of this Regulation, all TSOs of a capacity calculation region shall develop a methodology for cross-zonal capacity calculation within the balancing timeframe for the exchange of balancing energy or for operating the imbalance netting process. Such methodology shall avoid market distortions and shall be consistent with the cross-zonal capacity calculation methodology applied in the intraday timeframe established under Regulation (EU) 2015/1222.

 

Chapter 2

Exchange of balancing capacity or sharing of reserves

 

Article 38

General requirements

1. Two or more TSOs may at their initiative or at the request of their relevant regulatory authorities in accordance with Article 37 of Directive 2009/72/EC set up a proposal for the application of one of the following processes:
(a) co-optimised allocation process pursuant to Article 40;
(b) market-based allocation process pursuant to Article 41;
(c) allocation process based on economic efficiency analysis pursuant to Article 42.
Cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves before the entry into force of this Regulation may continue to be used for that purpose until the expiry of the contracting period.
2. The proposal for the application of the allocation process shall include:

(a) the bidding zone borders, the market timeframe, the duration of application and the methodology to be applied;
(b) in case of allocation process based on economic efficiency analysis, the volume of allocated cross zonal capacity and the actual economic efficiency analysis justifying the efficiency of such allocation.
3. By five years after entry into force of this Regulation, all TSOs shall develop a proposal to harmonise the methodology for the allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves per timeframe pursuant to Article 40 and, where relevant, pursuant to Articles 41 and 42.
4. Cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves shall be used exclusively for frequency restoration reserves with manual activation, for frequency restoration reserves with automatic activation and for replacement reserves. The reliability margin calculated pursuant to Regulation (EU) 2015/1222 shall be used for operating and exchanging frequency containment reserves, except on Direct Current (‘DC’) interconnectors for which cross-zonal capacity for operating and exchanging frequency containment reserves may also be allocated in accordance with paragraph 1.
5. TSOs may allocate cross-zonal capacity for the exchange of balancing capacity or sharing of reserves only if cross-zonal capacity is calculated in accordance with the capacity calculation methodologies developed pursuant to Regulation (EU) 2015/1222 and (EU) 2016/1719.
6. TSOs shall include cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves as already allocated cross-zonal capacity in the calculations of cross-zonal capacity.
7. If physical transmission right holders use cross-zonal capacity for the exchange of balancing capacity, the capacity shall be considered as nominated solely for the purpose of excluding it from the application of the use-it-or-sell-it (‘UIOSI’) principle.
8. All TSOs exchanging balancing capacity or sharing of reserves shall regularly assess whether the cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves is still needed for that purpose. Where the allocation process based on economic efficiency analysis is applied, this assessment shall be done at least every year. When cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves is no longer needed, it shall be released as soon as possible and returned in the subsequent capacity allocation timeframes. Such cross-zonal capacity shall no longer be included as already allocated cross-zonal capacity in the calculations of cross-zonal capacity.
9. When cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves has not been used for the associated exchange of balancing energy, it shall be released for the exchange of balancing energy with shorter activation times or for operating the imbalance netting process.

 

Article 39

Calculation of market value of cross-zonal capacity

1. The market value of cross-zonal capacity for the exchange of energy and for the exchange of balancing capacity or sharing of reserves used in a co-optimised or market-based allocation process shall be based on the actual or forecasted market values of cross-zonal capacity.
2. The actual market value of cross-zonal capacity for the exchange of energy shall be calculated based on the bids of market participants in the day-ahead markets, and take into account, where relevant and possible, expected bids of market participants in the intraday markets.
3. The actual market value of cross-zonal capacity for the exchange of balancing capacity used in a co-optimised or a market-based allocation process shall be calculated based on balancing capacity bids submitted to the capacity procurement optimisation function pursuant to Article 33( 3).
4. The actual market value of cross-zonal capacity for the sharing of reserves used in a co-optimised or a market-based allocation process shall be calculated based on the avoided costs of procuring balancing capacity.
5. The forecasted market value of cross-zonal capacity shall be based on one of the following alternative principles:
(a) the use of transparent market indicators that disclose the market value of cross-zonal capacity; or
(b) the use of a forecasting methodology enabling the accurate and reliable assessment of the market value of cross-zonal capacity.
The forecasted market value of cross-zonal capacity for the exchange of energy between bidding zones shall be calculated based on the expected differences in market prices of the day-ahead and, where relevant and possible, intraday markets between bidding zones. When calculating the forecasted market value, additional relevant factors influencing demand and generation patterns in the different bidding zones shall be taken duly into account.
6. The efficiency of the forecasting methodology pursuant to paragraph 5(b), including a comparison of the forecasted and actual market values of the cross-zonal capacity, may be reviewed by the relevant regulatory authorities. Where the contracting is done not more than two days in advance of the provision of the balancing capacity, the relevant regulatory authorities may, following this review, set a limit other than that specified in Article 41(2).


Article 40

Co-optimised allocation process

1. By two years after entry into force of this Regulation, all TSOs shall develop a proposal for a methodology for a co-optimised allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. This methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of not more than one day and where the contracting is done not more than one day in advance of the provision of the balancing capacity. The methodology shall include:
(a) the notification process for the use of the co-optimised allocation process;
(b) a detailed description of how cross-zonal capacity shall be allocated to bids for the exchange of energy and bids for the exchange of balancing capacity or sharing of reserves in a single optimisation process performed for both implicit and explicit auctions;
(c) a detailed description of the pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated to bids for the exchange of balancing capacity or sharing of reserves via the co-optimised allocation process;
(d) the process to define the maximum volume of allocated cross-zonal capacity for the exchange of balancing capacity or sharing of reserves.
2. This methodology shall be based on a comparison of the actual market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves and the actual market value of cross-zonal capacity for the exchange of energy.
3. The pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated to bids for the exchange of balancing capacity or sharing of reserves via the co-optimised allocation process shall ensure equal treatment with the cross-zonal capacity allocated to bids for the exchange of energy.
4. Cross-zonal capacity allocated to bids for the exchange of balancing capacity or sharing of reserves via the co-optimised allocation process shall be used only for the exchange of balancing capacity or sharing of reserves and associated exchange of balancing energy.


Article 41

Market-based allocation process

1. By two years after entry into force of this Regulation, all TSOs of a capacity calculation region may develop a proposal for a methodology for a market-based allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. This methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of not more than one day and where the contracting is done not more than one week in advance of the provision of the balancing capacity. The methodology shall include:
(a) the notification process for the use of the market-based allocation process;
(b) a detailed description of how to determine the actual market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and the forecasted market value of cross-zonal capacity for the exchange of energy, and if applicable the actual market value of cross-zonal capacity for exchanges of energy and the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves;
(c) a detailed description of the pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated to bids for the exchange of balancing capacity or sharing of reserves via the market-based allocation process;
(d) the process to define the maximum volume of allocated cross-zonal capacity for the exchange of balancing capacity or sharing of reserves pursuant to paragraph 2.
2. Cross-zonal capacity allocated on a market-based process shall be limited to 10 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors.
This volume limitation may not apply where the contracting is done not more than two days in advance of the provision of the balancing capacity or for bidding zone borders connected through DC interconnectors until the co-optimised allocation process is harmonised at Union level pursuant to Article 38(3).
3. This methodology shall be based on a comparison of the actual market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves and the forecasted market value of cross-zonal capacity for the exchange of energy, or on a comparison of the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and the actual market value of cross-zonal capacity for the exchange of energy.
4. The pricing method, the firmness regime and the sharing of congestion income for cross-zonal capacity that has been allocated for the exchange of balancing capacity or sharing of reserves via the market-based process shall ensure equal treatment with the cross-zonal capacity allocated for the exchange of energy.
5. Cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves via the market-based allocation process shall be used only for the exchange of balancing capacity or sharing of reserves and associated exchange of balancing energy.


Article 42

Allocation process based on economic efficiency analysis

1. By two years after entry into force of this Regulation, all TSOs of a capacity calculation region may develop a proposal for a methodology for the allocation of cross-zonal capacity based on an economic efficiency analysis. Such methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of more than one day and where the contracting is done more than one week in advance of the provision of the balancing capacity. The methodology shall include:
(a) the rules and principles for allocating cross-zonal capacity based on an economic efficiency analysis;
(b) a detailed description of how to determine the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and an assessment of the market value of cross-zonal capacity for the exchange of energy;
(c) a detailed description of the pricing method, firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated based on an economic efficiency analysis;
(d) the maximum volume of allocated cross-zonal capacity for the exchange of balancing capacity or sharing of reserves pursuant to paragraph 2.
2. The allocation of cross-zonal capacity based on an economic efficiency analysis shall be limited to 5 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors. This volume limitation may not apply for bidding zone borders connected through DC interconnectors until the co-optimised or market-based allocation processes are harmonised at Union level pursuant to Article 38(3).
3. The methodology for the allocation of cross-zonal capacity based on an economic efficiency analysis shall be based on a comparison of the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and the forecasted market value of cross-zonal capacity for the exchange of energy.
4. The pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated for the exchange of balancing capacity or sharing of reserves based on an economic efficiency analysis shall ensure equal treatment with the cross-zonal capacity allocated for the exchange of energy.
5. TSOs referred to in paragraph 1 shall develop a proposal for a list of each individual allocation of cross-zonal capacity based on an economic efficiency analysis. Such list shall include:
(a) the specification of the bidding zone border;
(b) the volume of allocated cross-zonal capacity;
(c) the period during which the cross-zonal capacity would be allocated for the exchange of balancing capacity or sharing of reserves;
(d) the economic analysis justifying the efficiency of such allocation.
6. TSOs referred to in paragraph 1 shall reassess the value of the allocated cross-zonal capacity in the process of the procurement of balancing capacity and release the allocated cross-zonal capacity which is no longer beneficial for the exchange of balancing capacity or sharing of reserves.


Article 43

Use of cross-zonal capacity by balancing service providers 

1. Balancing service providers which have a contract for balancing capacity with a TSO on the basis of a TSO-BSP model pursuant to Article 35 shall have the right to use cross-zonal capacity for the exchange of balancing capacity if they are holders of physical transmission rights.
2. Balancing service providers which use cross-zonal capacity for the exchange of balancing capacity on the basis of a TSO-BSP model pursuant to Article 35 shall nominate their physical transmission rights for the exchange of balancing capacity to the concerned TSOs. Such physical transmission rights shall provide the right to their holders to nominate the exchange of balancing energy to the concerned TSOs and shall therefore be excluded from the application of the UIOSI principle.
3. Cross-zonal capacity allocated for the exchange of balancing capacity in accordance with paragraph 2 shall be included as already allocated cross-zonal capacity in the calculations of cross-zonal capacity. 



 

quote

 

All TSOs’ proposal of 18 June 2018 for the implementation framework for a European platform for the imbalance netting process in accordance with Article 22 of Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing, ENTSO-E, Article 3(5)

 

The CZC on borders shall be determined as follows:
(a) The available CZC is updated in accordance with Article 37 of the EBGL. The automatic frequency restoration power exchange on bidding zone borders must not exceed the CZC updated in accordance with Article 37 of the EBGL. Bidding zone borders inside an LFC area, scheduling area borders and the respective CZC limitations shall not be explicitly considered by the optimisation algorithm.
(b) If a border between two LFC areas does not match with a bidding zone border according to Regulation (EC) 2015/1222 establishing a guideline on capacity allocation and congestion management (“CACM”) and hence, no CZC between the respective LFC areas is defined, the available CZC on this border is considered equal to the respective technical IT limitation agreed by all member TSOs as long as no affected TSO requests an operational limitation in accordance with Article 150(3) of the SOGL.
(c) The available CZC used by the optimisation algorithm as constraint must not exceed additional limitations requested by affected TSOs in accordance with Article 150 of the SOGL.
(d) The affected TSOs shall publish the request for additional limitations no later than 30 minutes after the end of the relevant validity period in which the additional limitations have been requested. In the context of the INIF, the validity period is 15 minutes.

(e) The affected TSOs shall provide the justification for the additional limitation on request to all participating TSOs.
(f) All participating TSO are considered as affected TSOs.
(6) All borders between participating TSOs shall be included with their CZC in the imbalance netting process. However, the CZC of borders where one or more transmission lines linking the adjacent LFC areas are high-voltage direct current (“HVDC”) systems can be permanently limited based on technical reasons. The limitation may disable any exchange on this border when the border is constituted only of high-voltage direct current systems. The limitation of such a border is allowed when duly justified jointly by the two TSOs concerned by this border. The concerned NRAs shall be notified of this limitation. The technical justification shall be published by the concerned TSOs.

 

 

Cross-zonal capacity in the intraday electricity market

 

On 14 March 2024 ACER amended the methodology for electricity intraday flow-based capacity calculation in the Core region - see ACER Decision No 03/2024 of 14 March 2024 on the second and third amendment of the intraday capacity calculation methodology of the Core capacity calculation region (ACER Decision on Core ID CCM) and Annex III thereto: Intraday capacity calculation methodology of the Core capacity calculation region in accordance with Article 20ff of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management, Consolidated version of 14 March 2024.

The rules for pricing cross-zonal capacities in the intraday market perspective are covered as part of the article on single intraday coupling (SIDC).

 

Cross-zonal capacity in the forward electricity market

 

In the forward markets perspective, currently, there are multiple cross-zonal allocation rules in the EU to be aligned and implemented by the forward capacity single allocation platform (SAP) based on harmonised allocation rules.

The objective of optimising the allocation of long‐term cross‐zonal capacity is achieved with the Forward Capacity Harmonised Allocation Rules (HAR), hence, the harmonised rules will simplify the trading activities for long‐term products across European borders (Recital 8 of the Annex I to the ACER Decision 03/2017).

In practice long-term capacity calculation methodology occurs contentious, as follows from the ACER’s consultation document of 5 July 2021 “Core Long Term Capacity Calculation methodology - public consultation survey”:

“The Proposal applies a flow-based approach with multiple scenarios on a yearly and a monthly level for the calculation of flow-based parameters.
ACER supports the application of a flow-based approach, as this approach is in line with the FCA Regulation and the CACM Regulation. In ACER’s view, a flow-based approach is appropriate for meshed networks such as the Core CCR and consistent with the approach applied in Core Day-ahead CCM. Most importantly, ACER understands that all efforts of Core TSOs to implement the Coordinated NTC approach in Core CCR have failed, as TSOs could not to agree how to split the interdependent cross-zonal capacities among different bidding zone borders. In case of flow-based approach, such a split is not necessary, since the flow based allocation determines the volume of allocated capacities per each border based on maximisation of economic surplus.
The proposed application of a flow-based approach implies that flow-based parameters will be used for allocating capacities (see Article 29 and Article 30 of the CACM Regulation). As the auctions currently performed by the single allocation platform do not support the use of flow-based parameters for capacity allocation, ACER has requested all TSOs to propose amendments to the following terms and conditions or methodologies in order to accommodate the long term flow-based capacity allocation approach:
requirements for the single allocation platform pursuant to Article 49 of the FCA Regulation (SAP); harmonised allocation rules pursuant to Article 51 of the FCA Regulation (HAR); congestion income distribution methodology pursuant to Article 57 of the FCA Regulation (CiD);methodology for sharing costs incurred to ensure firmness and remuneration of long-term transmission rights pursuant to Article 61 of the FCA Regulation (FRC)”.

In this regard the ACER adopted the Decision No 14/2021 of 3 November 2021 on the long-term capacity calculation methodology of the Core capacity calculation region. According to the Decision long-term capacity calculation methodology for the Core region covers yearly and monthly capacity calculation processes by applying the flow-based approach, which is compatible with the day-ahead capacity calculation methodology applied since June 2022. The Core long-term capacity calculation methodology is planned to be implemented by the end of 2024.

The above Decision has been amended by the ACER’s Decision 03/2023, which is planned to be implemented by the end of 2024. ACER Decision No 03/2023 of 18 January 2023 on the long-term capacity calculation methodology of the Core capacity calculation region is the follow-up to the ACER’s Board of Appeal’s Decision of 7 July 2022. The main amendments of the methodology include amendments to Article 17, which describes the capacity validation process performed by the Core TSOs and the Coordinated Capacity Calculator. ACER amended Article 17 by listing the situations in which a TSO may change the long-term capacity on their own critical network elements with contingencies (CNECs) during the validation process. The list mentions all situations possibly requiring a correction of the long-term capacity for reasons of operational security during the validation stage. ACER has introduced additional paragraphs of Article 17 in order:

  • to cover exceptional topologies from the outage planning coordination process, not modelled through the reference timestamps and common grid models (CGMs);
  • to list the situations and operational security limits which the flow-based approach is unable to capture. While thermal limits can be modelled with the flow-based approach, voltage limits, short-circuit current limits, frequency and dynamic stability limits might not be;
  • to explicitly cover the situations where the operational security limits could be modelled with the input data for the flow-based approach, but they would be overwritten by the application of the minimum RAM; and
  • to introduce changes to the reporting obligations for all listed validation situations.

 

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