The Clean Energy package introduces provisions regarding:
- Transparent and non-discriminatory procurement of non-frequency related ancillary services;
- TSO ownership and control over assets providing non-frequency related ancillary services; and
- A mandate to provide further rules through Network Codes on the provision of non-frequency related ancillary services.
CEER supports a level playing field for the delivery of ancillary services. Market arrangements or market-based compensation, where appropriate, may allow for the most cost-efficient procurement and utilisation of existing and new technologies.
It is, however, important to keep in mind current technical limitations of non-frequency related ancillary services and their geographical limitations (e.g. the ability to supply and or absorb reactive power from distant sources). Due to the local nature of some of these services and therefore the inherent market power concerns, not all non-frequency related ancillary services are well suited for market-based approaches. The optimum design of products is also expected to differ according to the locality. Before being required to carry out a cost benefit analysis to justify non-market based approaches (as per the current Clean Energy package proposals), it would be preferable to assess whether the possibility for a well-functioning market exists for these services.
Therefore, given the existing technical and geographical limitations, rather than predefining a prescriptive requirement for market-based procurement for all non-frequency related ancillary services in European-wide legislation, a more suitable approach would be to allow for more local discretion on a case-by-case basis, taking into account different technical and local circumstances.
A more flexible and principles-based approach would also ensure that innovation in the provision of these services is not inhibited.3 With such an approach, CEER supports further work on a progressive convergence of the principles for the provision of non-frequency related ancillary services. This could be complemented by mapping current practices and sharing best practice among energy regulators in CEER. If this approach does not work and legislation is deemed necessary, and able to demonstrate that it would not have unintended consequences such as inhibiting innovation, CEER considers that a first step should be to build upon existing Network Codes and Guidelines.
CEER also agrees that TSOs and DSOs should coordinate to ensure approaches to accessing these services, which deliver the best outcomes for the system as a whole. In addition, requirements on connectees will remain an important (non-market based) and complementary route to ensuring secure operation of the system. As more activity occurs at local distribution level, and given the variety of local circumstances and large number of DSOs across Europe, regulatory authorities should retain discretion, applying European-wide principles appropriate with local circumstances.
In summary, CEER recommends the following with respect to these issues:
- While market based procurement can be efficient for certain types of non-frequency ancillary services, the local nature of the services and the inherent market power concerns calls for discretion on a case-by-case basis.
- CEER supports a level playing field for the delivery of ancillary services, fair compensation for its provision and appropriate coordination between DSOs and TSOs in accessing these services.
- Mapping current practices and sharing best practice, guided by a progressive convergence on the principles, is a more appropriate means of delivering efficient non- frequency related ancillary services than through a Network Code.
Efficient System Operation, CEER White Paper series (paper # IV) on the European Commission’s Clean Energy Proposals, 16 June 2017CEER White Paper series (paper # IV) on the European Commission’s Clean Energy Proposals, 16 June 2017, p. 3, 4