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Bidding zone - a cornerstone of market-based electricity trading
European Union Electricity Market Glossary

 

 

 

Bidding zone is the largest geographical area within which market participants are able to exchange energy without capacity allocation (Article 2(3) of the Regulation 543/2013 of 14 June 2013 on submission and publication of data in electricity markets).

 

New

6 April 2018 - ENTSO-E published First Edition Bidding Zone Review, Final Report

Within bidding zone electricity market wholesale prices are uniform (ENTSO-E Annual Report 2015, p. 17). Market participants who wish to buy or sell electricity in another bidding zone have to take into account grid constraints. 

 

The key point is that in the single European Union electricity market electricity offerings within the bidding zone are possible without having to acquire transmission capacity to conclude electricity trades.

 

In other words, the conception of the “copper plate” applies within bidding zones only.

 

It is often underlined that bidding zones reflecting supply and demand distribution are prerequisite for reaching the full potential of capacity allocation methods, the flow based method including.

 

Article 13(2) of the European Commission Proposal of 30 November 3016 for a Regulation of the European Parliament and of the Council on the internal market for electricity (being the part of the Winter Energy Package) envisions the rule that each bidding zone should be equal to an imbalance price area.

 

bidding zone 

Zonal vs. nodal congestion management design

 

 

The legal approach to bidding zones in the EU Internal Electricity Market reflects the political decision of a zonal rather than a nodal market model (where wholesale electricity prices are determined by physical node on the network).

 

ACER's Consultation document: “The influence of existing bidding zones on electricity markets” (PC_2013_E_04, 31 July 2013, p. 5) describes in short the aforementioned different congestion management designs.

 

ACER firstly reminds that the zonal design defines limited geographical areas (zones), within which trading between generators and loads is unlimited.

 

However, to cope with operational security constraints of the network, trading between these areas is limited by transmission capacity based on capacity calculation and allocation process.

 

An extreme implementation of this approach would result in one large bidding zone (copper plate) without capacity allocation and where all operational constraints are tackled via remedial actions.

 

The nodal design, in turn, considers all trades between generators and loads as equal in terms of using the infrastructure.

 

While in nodal design the bid price and quantity of each generator and load is weighed against its influence on the physical network, in zonal design only the import or export of electricity in each bidding zone is weighed against its influence on the physical network.

 

In the zonal design, congestion management methods consist of preventive and of curative methods.

 

Preventive methods define ex-ante limitations to trade by calculating the cross zonal capacities and allocating them efficiently to market players so that they can decide on how to dispatch generators and loads.

 

Curative methods aim at modifying this initial dispatch when operational security is endangered with methods such as redispatching or countertrading.

 

These can also be classified as non-costly (e.g. topology switching, positioning the phase shifting transformers – PSTs) or costly (e.g. redispatching and countertrading).

 

The costs of undertaking costly remedial actions are often socialised on all consumers of a bidding zone through transmission tariffs.

 

In general, the larger the zone, the larger the proportion of congestions managed by redispatching; however, this also depends on the strength of the network within the zone.

 

In other words, the aggregation of nodes into zones may have a side effect on the quantity of remedial actions the Transmission System Operator (TSO) needs to apply in order to ensure operational security.

 

The European target model for the electricity market foresees a zonal approach implying the implementation of a mainly preventive way to tackle congestions between properly defined bidding zones by calculating and allocating cross-zonal capacities.

 

Remaining (mainly inside zones) congestions are to be managed by curative measures such as redispatching or countertrade.

 

 

Bidding Zones delineation and significance

 

 

According to the EU legal framework bidding zones should be defined in a manner to ensure efficient congestion management and overall market efficiency.

 

quote

Opinion of the Agency for the Cooperation of Energy Regulators No 9/2015 of 23 September 2015, p. 6

 

 

In Europe, wholesale electricity markets are structured in bidding zones, featuring equal prices within them. Within each bidding zone, any consumer is allowed to contract power with any generator without limitations and hence disregarding the physical reality of the transmission network. This simplification, which aims at facilitating trade within each bidding zone, is however often made at the expense of electricity trading between bidding zones. For the latter TSO's indeed apply capacity allocation methods, through which they, ex-ante and most of the time, limit the amount of available cross-zonal capacity (i.e. net transmission capacities NTCs) to ensure that physical flows, including inside zones, remain within the network operational security limits.

...

For historical reasons, the bidding zones' boundaries mostly correspond to the borders between EU Member States, even though some Member States (e.g. Italy and Sweden) are split into several bidding zones. 

 

Therefore national borders are not a key driver for the delineation of bidding zones in the EU Internal Electricity Market, although some are defined in this way (for example France, the Netherlands, Poland, etc.).

 

Examples of bidding zones, which are larger than national borders, are Austria, Germany and Luxembourg and the Single Electricity Market for the island of Ireland (note, however, that according to the Opinion of the Agency for the Cooperation of Energy Regulators No 9/2015 of 23 September 2015, and the Decision of the Agency for the Cooperation of Energy Regulators No 06/2016 of 17 November 2016 on the electricity transmission system operators’ proposal for the determination of capacity calculation regions, the implementation of a capacity allocation procedure on the DE-AT border is required).

 

Some countries like Italy, Denmark, Norway or Sweden apply several bidding zones within their territory.

  

Article 13(1) of the aforementioned Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity of 30 November 2016 stipulates that bidding zone borders must be based on "long-term, structural congestions in the transmission network and bidding zones must not contain such congestions".

 

According to the said draft Regulation, the configuration of bidding zones in the European Union must be designed in such a way as to "maximise economic efficiency and cross-border trading opportunities while maintaining security of supply."

 

The EU regulations envision bidding zones can be modified by splitting, merging or adjusting the bidding zone borders.

 

The important element of the legal framework is that bidding zones must be identical for all market timeframes.

 

The bidding zone definition refers to the 'capacity allocation' which means the attribution of cross zonal capacity, where the latter, in turn, denotes the capability of the interconnected system to accommodate energy transfer between bidding zones.

 

ACER Recommendation No 2/2016 of 14 November 2016 on the common capacity calculation and redispatching and countertrading cost sharing methodologies underlines congestion problems are addressed with capacity allocation (p. 5).

 

This implies that geographical areas within which market participants are able to exchange energy without capacity allocation, i.e. bidding zones, should be configured in such a way that:

 

- congestion appears only on the borders between bidding zones and there is no congestion inside bidding zone,

 

- internal exchanges inside bidding zones do not create loop flows through other bidding zones (creating congestion in those bidding zones and reducing the capacity between zones).

 

Cross zonal capacity can be expressed either as a coordinated net transmission capacity value or flow based parameters, and takes into account operational security constraints - see definitions, in particular, in:

 

- Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM Regulation (Regulation on market coupling),

 

- Commission Regulation 543/2013 of 14 June 2013 on submission and publication of data in electricity markets.

 

The CACM Regulation requires that the price coupling algorithm must simultaneously produce for each bidding zone and for each market time unit at least:


(a) a single clearing price in EUR/MWh (Article 39(2)(a) of the CACM Regulation),


(b) a single net position (Article 39(2)(b) of the CACM Regulation).

 

Recital 11 of the Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM Regulation (Regulation on market coupling)

 

Bidding zones reflecting supply and demand distribution are a cornerstone of market-based electricity trading and are a prerequisite for reaching the full potential of capacity allocation methods including the flow based method. Bidding zones therefore should be defined in a manner to ensure efficient congestion management and overall market efficiency. Bidding zones can be subsequently modified by splitting, merging or adjusting the zone borders. The bidding zones should be identical for all market time-frames. The review process of bidding zone configurations provided for in this Regulation will play an important role in the identification of structural bottlenecks and will allow for more efficient bidding zone delineation.

 


Bidding zones are also inherently linked with Physical Transmission Rights which are defined as a rights whose holder is entitled to physically transfer a certain volume of electricity in a certain period of time between two bidding zones in a specific direction.

 

Bidding zones will be consistent across different market timeframes and will be relatively stable across time, while reflecting changing network conditions.

 

It is noteworthy, the bidding zones' configuration (detailed provisions thereon stipulated in Articles 32 - 34 of the CACM Regulation) may have impacts on investments in generation and consumption.

 

In case the review process leads to a bidding zones' new configuration, some generators may be called to participate to the capacity allocation and congestion management process with previously unforeseen costs and risks.

 

Each generation and load unit must belong to only one bidding zone for each market time unit.

 

The bidding zones' determination is a complex and prolonged process. First practical examples of the bidding zones' reconfiguration show it is also a controversial one. 

 

On 15 May 2017, national regulatory authorities of Germany and Austria informed about their bilateral agreement on common framework for congestion management at the border between Austria and Germany, as a follow up to the earlier ACER's Decision.

 

According to the joint statement published by German and Austrian authorities, congestion management scheme for the exchange of electricity at the border between Austria and Germany is to be introduced as from 1 October 2018.

 

The currently unlimited trade capacities on the German-Austrian electricity market should amount to at least 4.9 GW and be offered to market participants as long-term capacity.

 

Additionally, the day-ahead capacity allocation at the Austrian-German border is to be integrated in the existing Central Western European flow-based capacity calculation and allocation process.

 

EFET Press release 110/17 of 12 May 2017 "The implementation of the German-Austrian bidding zone split should be transparent and not before 1 January 2019" argued that enacting a split in the middle of the year "would effectively nullify calendar (yearly) contracts that have already been exchanged for 2018, and force market participants to re-arrange their hedging strategies for 2018 at short notice".

 

Further implications of the said bidding zone reconfiguration, in particular with respect to electricity trading in the forward and intra-day perspectives, were set out in the EFET statement of 11 May 2017 on the implementation of the BNetzA decision requesting TSOs to allocate cross-border transmission capacity at the German-Austrian border.

 

Also the V4 Transmission system operators (ČEPS, MAVIR, PSE, SEPS) and TRANSELECTRICA "are deeply concerned by nontransparent developments around the implementation of congestion management at the Austrian-German border" (Press release of the V4 Transmission system operators (ČEPS, MAVIR, PSE, SEPS) and TRANSELECTRICA are deeply concerned by nontransparent developments around the implementation of congestion management at the Austrian-German border).

 

ČEPS, MAVIR, PSE, SEPS and TRANSELECTRICA said in the above document: "we are confronted with at least 4.9 GW of guaranteed long-term capacity between Germany and Austria, without any technical justification and explanation of its impact on the capacities on other Core CCR bidding zone borders and secure system operation including the need for remedial actions and congestion income distribution".

 

 

Bidding Zones configuration

 

 

The CACM Regulation provides a framework that allows bidding zone configuration to adapt to the evolution of physical congestion (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity Market in 2015, September 2016, p. 18).

 

However, this requires the consensus of the TSOs, the EU Member States and National Regulatory Authorities (NRAs) on methods and proposals to amend the bidding zone configuration.

 

Provisions on Bidding Zones configuration are stipulated in Articles 32 and 33 of the CACM.

 

European Commission's Final Report of 30 November 2016 of the Sector Inquiry on Capacity Mechanisms ({SWD(2016) 385 final}, COM(2016) 752 final) found that inefficiently defined bidding zones create distortions both within a country and across borders, and concluded that an appropriate definition of bidding zones is likely to be the most efficient way to avoid the need for costly re-dispatching.

 

Commission Staff Working Document, Accompanying the document Report from the Commission, Interim Report of the Sector Inquiry on Capacity Mechanisms ({C(2016) 2107 final}, 13.4.2016 SWD(2016) 119 final) argues the bidding zones defined based on transmission constraints can allow zonal electricity prices to provide more accurate signals for the efficient location of generation capacity and electricity demand.

 

Given the price formed in each zone reflects the overall demand/supply balance in the zone, ideally, for electricity prices to appropriately signal local scarcity, the market area or bidding zone needs to reflect the technical limits of the transmission system.

 

Therefore, the price in a very large zone may not indicate with sufficient precision where additional generation capacity is most needed and transmission constraints may cause inefficient plants to run instead of more efficient ones.

 

On such occasions TSOs are forced to revert to re-dispatching measures in order to ensure system balance and minimize loop flows, leading to significant costs for consumers and possible market distortions.

 

Another area where bidding zones' configuration is particularly important are European resource adequacy assessments.

 

These estimations cover the overall adequacy of the electricity system to supply current and projected demands for electricity for a ten-year period from the date of that assessment (in a yearly resolution), and, according to Article 19(4)(a) of the said draft Regulation of 30 November 2016, are to be carried out on a bidding zone level.

 

 

Results of the first edition of the bidding zone review process - March 2018

 

 

In its letter dated 21 December 2016 ACER has initiated the first edition of the bidding zone review process, specifying Central Europe (Austria, Belgium, the Czech Republic, Denmark, France, Germany, Hungary, Italy (North), Luxembourg, the Netherlands, Poland, Slovakia and Slovenia) as the relevant region.

 

The process began with the publication by the ENTSO-E of the document “First Edition of the Bidding Zone Review, Draft Version for Public Consultation”, lasted 15 months and ended on 21 March 2018 (First Edition Bidding Zone Review, Final Report, March 2018).

 

In the said Final Report of March 2018 ENTSO-E concluded that:

 

“[...] the evaluation presented in this First Edition of the Bidding Zone Review does not provide sufficient evidence for a modification of or for maintaining of the current bidding zone configuration. Hence, the participating TSOs recommend that, given the lack of clear evidence, the current bidding zone delimitation be maintained.

This recommendation should in no way be interpreted as an endorsement of or an objection against the pending split of the German/Luxembourgian and Austrian bidding zones, where TSOs respect all relevant regulatory decisions, e. g. the decision of the Agency for the Cooperation of Energy Regulators no 06/2016 of 17 November 2016 on the electricity transmission system operators’ proposal for the determination of capacity calculation regions and the requests of the regulatory authorities of Germany and Austria” (p. 13).

 

The results of the first bidding zone review have been criticised by some stakeholders.


In particular, EFET in its response of 9 March 2018 said:


“While we understand the political difficultly that a recommendation to delineate bidding zones borders without regard for Member States borders may face at a regulatory and political level, we believe it is not the role of ENTSO-E to care for such concerns. Rather, ENTSO-E is expected to deliver a technical analysis with hopefully a strong recommendation for a bidding zones delineation expected to maximise welfare at European level. Hence, we were very disappointed to see ENTSO-E abandon the model-based scenarios partly for concerns related to the reliability of the modelling, but also partly for judging the results as politically unrealistic. Concerning the expert-based scenarios, we expressed our disappointment from the start of the project on the imbalance between the splitting and the merging scenarios [...].”


In the above document EFET also expressed bitter complaints as to the organisation and the transparency of the whole process.

 

 

 

 

 

Bidding zones for purposes of forward capacity allocation

 

 

It is noteworthy, the bidding zones determined pursuant to CACM apply also to long term capacity calculation and forward capacity allocation timeframes (see Article 27(1) of the Network Code on Forward Capacity Allocation (FCA)).

 

Where bidding zone border(s) no longer exist, holders of Long Term Transmission Rights on those Bidding Zone Border(s) will be entitled to reimbursement based on the initial price paid for the Long Term Transmission Rights.

 

The forward capacity allocation will enable long term cross zonal trade and provide market participants with long term cross zonal hedging opportunities against congestion costs and day ahead congestion pricing, compatible with bidding zone delimitation.

 

 

Article 8
 of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)

 

Forward markets

 

1. In line with regulation (EU) 2016/1719, transmission system operators shall issue long-term transmission rights or have equivalent measures in place to allow for market participants, in particular owners of generation facilities using renewable energies, to hedge price risks across bidding zone borders.

 

2. Long-term transmission rights shall be allocated in a transparent, market based and non-discriminatory manner through a single allocation platform. Long-term transmission rights shall be firm and be transferable between market participants.

 

3. Subject to compliance with treaty rules on competition, market operators shall be free to develop forward hedging products including for the long-term to provide market participants, in particular owners of generation facilities using renewable energies, with appropriate possibilities to hedge financial risks from price fluctuations. Member States shall not restrict such hedging activity to trades within a Member State or bidding zone.

 

 

 

 

Electricity exchanges inside and between bidding zones

 

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014 (of November 2015) analysed complexities involved with the electricity exchanges inside and between bidding zones (p. 161, 162).

 

quote

Commission Staff Working Document, Accompanying the document Report from the Commission, Interim Report of the Sector Inquiry on Capacity Mechanisms {C(2016) 2107 final}, 13.4.2016 SWD(2016) 119 final, p. 133

 

Bidding zones in the European Union are being 'coupled', in line with the target model. Market coupling aims to ensure the interconnectors that link bidding zones are used most efficiently to send power between markets to where demand is greatest.

 

Most of Europe is now coupled day ahead with implicit allocation of cross-border transmission capacity. This means that prices and interconnector flows are jointly determined in a single step, for each hour of the following day. This is established through the matching of bids and offers across the power exchange/s operating in Europe. Roughly characterised, the prices for each hour in neighbouring markets are then compared, and the capacity of interconnectors is used to allow power offered in the lower priced zone to be matched with bids in the higher priced zone until either the prices in the two zones converge, or all available interconnection capacity is exhausted.

 

The CACM Regulation, which came into force in mid-August 2015, obliges each Member State to develop market coupling rules for day-ahead markets as well as intraday markets...

 

This price-matching process creates flow schedules for the interconnectors in real time.

 

The said Report firstly refers to the fact that in Europe wholesale electricity markets are structured in bidding zones featuring equal prices within each of them.

 

Within each bidding zone, any consumer is allowed to contract electricity with any generator without limitations, hence disregarding any possible physical limitation of the transmission network to transport the exchanged energy.

 

However, this simplifcation, which aims at facilitating trade within limited geographical areas is often made at the expense of electricity trading between bidding zones.

 

Because TSOs cannot limit exchanges within bidding zones, the only way for them to ensure operational security is to limit exchanges between them.

 

For the latter, TSOs indeed apply capacity calculation and allocation, by which they ex-ante limit the amount of available cross-zonal capacity to ensure that physical ows on the network inside and between zones remain within the operational security limits.
In capacity calculation, TSOs forecast the ows caused by exchanges inside zones.

 

The remaining available capacity of the network elements are then offered to the market for cross-zonal trade.

 

Therefore, exchanges inside zones cause ows on network elements that are prioritised over ows from cross-zonal exchanges.

 

This prioritisation and discrimination is inherent in the zonal market design.

 

However, Regulation (EC) No 714/2009, and in particular the CACM Regulation, require that capacity calculation and allocation should not result in undue discrimination between internal and cross-zonal exchanges. This is also underlined by the so-called Winter Energy Package of December 2016 (see box).

 

The question of undue discrimination essentially translates into how the capacity of the network elements (either internal or interconnectors) are allocated to internal and cross-zonal exchanges.

 

Two typical examples of discrimination between internal and cross-zonal exchanges are particularly considered:

quote

 

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD) (so-called Winter Energy Package)

 

 

Article 6
(2)(h)


Day-ahead and intraday markets shall [...] make no distinction between trades made within a bidding zone and across bidding zones.

 

Recital 14


To efficiently steer necessary investments, prices also need to provide signals where electricity is most needed. In a zonal electricity system, correct locational signals require a coherent, objective and reliable determination of bidding zones via a transparent process. In order to ensure efficient operation and planning of the Union electricity network and to provide effective price signals for new generation capacity, demand response or transmission infrastructure, bidding zones should reflect structural congestion. In particular, cross-zonal capacity should not be reduced in order to resolve internal congestion.

 

 

a) When cross-zonal capacity is limited by the capacity of interconnectors and the capacity of those interconnectors is reduced not only for the application of N-1 criteria and a reasonable level of reliability margin, but also to accommodate ows resulting from internal exchanges (i.e. loop ows, loop flows) and ows resulting from non-coordinated capacity allocation on other borders (i.e. Unscheduled Allocated Flows (UAFs)); and


b) When cross-zonal capacity is limited by the capacity of internal network elements and when the capacity of those internal network elements is disproportionally allocated for internal exchanges and very little capacity is allocated to cross-zonal exchanges. According to Point 1.7 of the Annex I to Regulation (EC) No 714/2009 such a situation may be tolerated only as a temporary solution.

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity Markets in 2015, September 2016 also refers to the aforementioned reasoning (p. 21).

 

In the said Report of September 2016 ACER argues that, in general, physical cross-zonal capacity can be limited during the capacity calculation process, beyond what is needed for the application of N-1 criterion and a reasonable level of reliability margin, for the following three reasons:

 

- to accommodate planned grid maintenance works during a certain period;

 

- to accommodate flows resulting from internal exchanges (i.e. loop flows) and flows resulting from non-coordinated capacity allocation on other borders (i.e. Unscheduled Allocated Flows (UAFs)); and

 

- to relieve congestion inside a bidding zone (control area).

 

Inevitably, the bidding zones’ delineation along with the cross-zonal capacity modelling will remain among the hottest topics of the EU electricity market discussions.

 

 

Bidding zones vs. LFC blocks vs. LFC areas

 

 

Interactions between the bidding zones, load-frequency control blocks (LFC blocks) and load-frequency control areas (LFC areas) are the following (Explanatory Document to All TSOs’ proposal 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, 18 June 2018, p. 9):

 

A. A bidding zone can consist of one LFC block which consists of one LFC area (e.g. France);


B. A bidding zone can consist of one LFC block with more than one LFC areas (Germany after the bidding zone split);


C. A bidding zone can consist of more than one LFC block and each of the LFC block can have more than one LFC areas (bidding zone of Germany and Austria before the bidding zone split);


D. A LFC block can consist of one LFC area which includes more than one bidding zone (Italy, current NORDIC configuration);


E. A LFC block consists of more than one LFC area where each LFC area equals one bidding zone (future NORDIC system).

 

 

 

Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling)

 

Chapter 2

Bidding zone configuration

 

Article 32

Reviewing existing bidding zone configurations

 

1. A review of an existing bidding zone configuration may be launched by:

 

(a) the Agency, in accordance with Article 34(7);

 

(b) several regulatory authorities, pursuant to a recommendation from the Agency in accordance with Article 34;

 

(c) TSOs of a capacity calculation region, together with all concerned TSOs whose control areas, including intercon­nectors, are within the geographic area in which the bidding zone configuration shall be assessed in accordance with paragraph 2(a);

 

(d) one single regulatory authority or TSO with the approval of its competent regulatory authority, for the bidding zones inside the TSO's control area, if the bidding zone configuration has negligible impact on neighbouring TSOs' control areas, including interconnectors, and the review of bidding zone configuration is necessary to improve efficiency, or to maintain operational security;

 

(e) Member States in a capacity calculation region.

 

2. If a review is launched in accordance with paragraph 1(a),(b), (c) or (e), the entity launching the review shall specify:

 

(a) the geographic area in which bidding zone configuration shall be assessed and the neighbouring geographic areas for which impacts shall be taken into account;

 

(b) the participating TSOs;

 

(c) the participating regulatory authorities.

 

3. If a review is launched in accordance with paragraph 1(d), the following conditions shall apply:

 

(a) the geographic area in which bidding zone configuration is assessed shall be limited to the control area of the relevant TSO, including interconnectors;

 

(b) the TSO of the relevant control area shall be the only TSO participating in the review;

 

(c) the competent regulatory authority shall be the only regulatory authority participating in the review;

 

(d) the relevant TSO and regulatory authority, respectively, shall give the neighbouring TSOs and regulatory authorities mutually agreed prior notice of the launch of the review, giving reasons; and


(e) the conditions for the review shall be specified, and the results of the review and proposal for the relevant regulatory authorities shall be published.

 

4. The review process shall consist of two steps.

 

(a) In the first step, the TSOs participating in a review of bidding zone configuration shall develop the methodology and assumptions that will be used in the review process and propose alternative bidding zone configurations for the assessment. The proposal on methodology and assumptions and alternative bidding zone configuration shall be submitted to the participating regulatory authorities, which shall be able to require coordinated amendments within three months.

 

(b) In the second step, the TSOs participating in a review of bidding zone configuration shall: (i) assess and compare the current bidding zone configuration and each alternative bidding zone configuration using the criteria specified in Article 33; (ii) hold a consultation in accordance with Article 12 and a workshop regarding the alternative bidding zone configuration proposals compared to the existing bidding zone configuration, including timescales for implementation, unless the bidding zone configuration has negligible impact on neighbouring TSOs' control areas; (iii) submit a joint proposal to maintain or amend the bidding zone configuration to the participating Member States and the participating regulatory authorities within 15 months of the decision to launch a review.

 

(c) On receiving the joint proposal to maintain or to amend the bidding zone configuration in accordance with point (iii) above, the participating Member States or, where provided by Member States, the regulatory authorities shall within six months reach an agreement on the proposal to maintain or amend the bidding zone configuration.

 

5. NEMOs or market participants shall, if requested by TSOs, provide the TSOs participating in a review of a bidding zone with information to enable them to assess bidding zone configurations. This information shall be shared only between the participating TSOs for the sole purpose of assessing bidding zone configurations.

 

6.The initiative for the review of the bidding zones configuration and its results shall be published by ENTSO for Electricity, or if the review was launched in accordance with paragraph 1(d), by the participating TSO.

 

Article 33

Criteria for reviewing bidding zone configurations

 

1.If a review of bidding zone configuration is carried out in accordance with Article 32, at least the following criteria shall be considered:

 

(a) in respect of network security:

(i) the ability of bidding zone configurations to ensure operational security and security of supply;

(ii) the degree of uncertainty in cross–zonal capacity calculation.

 

(b) in respect of overall market efficiency:

(i) any increase or decrease in economic efficiency arising from the change;

(ii) market efficiency, including, at least the cost of guaranteeing firmness of capacity, market liquidity, market concentration and market power, the facilitation of effective competition, price signals for building infrastructure, the accuracy and robustness of price signals;

(iii) transaction and transition costs, including the cost of amending existing contractual obligations incurred by market participants, NEMOs and TSOs;

(iv) the cost of building new infrastructure which may relieve existing congestion; (v) the need to ensure that the market outcome is feasible without the need for extensive application of economically inefficient remedial actions; (vi) any adverse effects of internal transactions on other bidding zones to ensure compliance with point 1.7 of Annex I to Regulation (EC) No 714/2009; (vii) the impact on the operation and efficiency of the balancing mechanisms and imbalance settlement processes.

 

(c) in respect of the stability and robustness of bidding zones:

(i) the need for bidding zones to be sufficiently stable and robust over time;

(ii) the need for bidding zones to be consistent for all capacity calculation time-frames;

(iii) the need for each generation and load unit to belong to only one bidding zone for each market time unit;

(iv) the location and frequency of congestion, if structural congestion influences the delimitation of bidding zones, taking into account any future investment which may relieve existing congestion.

 

2. A bidding zone review in accordance with Article 32 shall include scenarios which take into account a range of likely infrastructure developments throughout the period of 10 years starting from the year following the year in which the decision to launch the review was taken.

 

Article 34

Regular reporting on current bidding zone configuration by ENTSO for Electricity and the Agency

 

1.The Agency shall assess the efficiency of current bidding zone configuration every three years.

 

It shall:

(a) request ENTSO for Electricity to draft a technical report on current bidding zone configuration; and

(b) draft a market report evaluating the impact of current bidding zone configuration on market efficiency.

 

2.The technical report referred to in paragraph 1 second subparagraph point (a) shall include at least:

(a) a list of structural congestion and other major physical congestion, including locations and frequency;

(b) an analysis of the expected evolution or removal of physical congestion resulting from investment in networks or from significant changes in generation or in consumption patterns;

(c) an analysis of the share of power flows that do not result from the capacity allocation mechanism, for each capacity calculation region, where appropriate;
(d) congestion incomes and firmness costs;
(e) a scenario encompassing a ten year time-frame.

 

3. Each TSO shall provide data and analysis to allow the technical report on current bidding zone configuration to be produced in a timely manner.

 

4.ENTSO for Electricity shall deliver to the Agency the technical report on current bidding zone configuration no later than nine months after the request by the Agency.

 

5. The technical report on current bidding zone configuration shall cover the last three full calendar years preceding the request by the Agency.

 

6. Without prejudice to the confidentiality obligations provided for in Article 13, ENTSO for Electricity shall make the technical report available to the public.

 

7. If the technical or market report reveals inefficiencies in the current bidding zone configuration, the Agency may request TSOs to launch a review of an existing bidding zone configuration in accordance with Article 32(1).

 

 

 

 

Article 13 of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD)

 

Definition of bidding zones

 

1. Bidding zone borders shall be based on long-term, structural congestions in the transmission network and bidding zones shall not contain such congestions. The configuration of bidding zones in the Union shall be designed in such a way as to maximise economic efficiency and cross-border trading opportunities while maintaining security of supply.

 

2. Each bidding zone should be equal to an imbalance price area.

 

3. In order to ensure an optimal bidding zone definition in closely interconnected areas, a bidding zone review shall be carried out. That review shall include analysis of the configuration of bidding zones in a coordinated manner with the involvement of affected stakeholders from all affected Member States, following the process in accordance with Articles 32 to 34 of Regulation (EU) 2015/1222. The Agency shall approve and may request amendments to the methodology and assumptions that will be used in the bidding zone review process as well as the alternative bidding zone configurations considered.

 

4. The transmission system operators participating in the bidding zone review shall submit a proposal to the Commission regarding whether to amend or maintain the bidding zone configuration. Based on that proposal, the Commission shall adopt a decision whether to amend or maintain the bidding zone configuration, [no later than 6 months after entry into force of this Regulation, specific date to be inserted by OP] or by six months after the conclusion of the bidding zone configuration launched in accordance with points (a), (b) or (c) of Article 32(1) of Regulation (EU) 2015/1222, whichever comes later.

 

5. The decision referred to in paragraph 4 shall be based on the result of the bidding zone review and the transmission system operators' proposal concerning its maintenance or amendment. The decision shall be justified, in particular as regards possible deviations from the result of the bidding zone review.

 

6. Where further bidding zone reviews are launched under Article 32(1)(a), (b) or (c) of Regulation (EU) 2015/1222, the Commission may adopt a decision within six months of the conclusion of that bidding zone review.

 

7. The Commission shall consult relevant stakeholders on its decisions under this Article before they are adopted.

 

8. The Commission decision shall specify the date of implementation of a change. That implementation date shall balance the need for expediency with practical considerations, including forward trade of electricity. The Commission may define appropriate transitional arrangements as part of its decision.

 

 

 

 

We acknowledge that the current delineation of bidding zones is rather a heritage from the past, with bidding zone borders often following Member States borders, and that a regular review of bidding zones is a relevant exercise. However, we have also repeatedly insisted that changes to bidding zones should only be carried out following careful consideration of not only of network congestion, but also of long- term economic efficiency. Any proposal to re-delineate bidding zones following a review should be carefully handled, take into account the likely evolution of market fundamentals (changing fuel mix, prices etc.), and allow for planned future generation, demand response and storage investments and future grid reinforcement. Also, the stability of bidding zones over time is of particular importance to ensure the relevance of price signals and the existence of true hedging opportunities on the forward market.

 

We are therefore concerned about the new Article 13 of the draft recast Regulation that seeks to simplify and bring about a quicker implementation of bidding zone reviews. Article 13.6 of the draft recast Regulation takes the final decision on the delineation of bidding zones away from Member States and makes it a decision of the European Commission. It is not clear why it is deemed necessary to reform this process already as even the first bidding zone review initiated according to the CACM GL has not yet been finalised.

 

The risk of repeated bidding zone changes in the short or medium term (even without these changes actually taking place) undermines the functioning of the forward power market and impairs the scope for that market to give locational generation investment signals. Ultimately the frustration, due to the unforeseen imposition of basis changes, of forward hedges entered into on a cross-border basis will be to the detriment of consumers of electricity. Furthermore, decisions about investment in, refurbishment of and divestment of generation, demand response and storage assets, become more difficult in an environment where bidding zone boundaries might change at short notice.

 

We believe that the existing process in Article 32.4(c) of the CACM GL is an adequate instrument to ensure that Member States effectively performs their duties as guarantors of security of supply according to Article 194 of the Treaty on the Functioning of the EU. It also ensures that Member States play a role in balancing the interests of system security, market efficiency and consumer protection when changes to bidding zones delineation are being discussed. Therefore, we suggest the removal of Articles 13.6 to 13.8 of the draft recast Regulation.

 

EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, p. 6,7

 

 

 

 

 

chronicle

Bidding zones regulatory chronicle 

 

 

6 April 2018 - ENTSO-E published First Edition Bidding Zone Review, Final Report

 

9 February 2018:

 

- ENTSO-E opened  First Edition Bidding Zone Review

 

First Edition of the Bidding Zone Review, Draft Version for Public Consultation until 9 March 2018 published

 

 

 

 

 

 

IMG 0744

    Documentation    

 

 

 

 

 

Regulation 543/2013 of 14 June 2013 on submission and publication of data in electricity markets, Article 2(3) 

 

First Edition Bidding Zone Review, Final Report, March 2018

 

First Edition of the Bidding Zone Review, Draft Version for Public Consultation until 9 March 2018

 

ENTSO-E consultation on its draft bidding zones review report, EFET response, 9 March 2018

 

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD), Article 4(2)(h), Article 13(2), Recital 14

 

ENTSO-E Annual Report 2015, p. 17

 

EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, p. 6,7

 

ACER Recommendation No 2/2016 of 14 November 2016 on the common capacity calculation and redispatching and countertrading cost sharing methodologies, p. 5

 

ACER's Consultation document: The influence of existing bidding zones on electricity markets, PC_2013_E_04, 31 July 2013p. 5 

 

Commission Staff Working Document, Accompanying the document Report from the Commission, Interim Report of the Sector Inquiry on Capacity Mechanisms {C(2016) 2107 final}, 13.4.2016, SWD(2016) 119 final, p. 133

 

European Commission's Final Report of 30 November 2016 of the Sector Inquiry on Capacity Mechanisms ({SWD(2016) 385 final}, COM(2016) 752 final)

 

Decision of the Agency for the Cooperation of Energy Regulators No 06/2016 of 17 November 2016 on the electricity transmission system operators' proposal for the determination of the capacity calculation regions

 

Annexes to the CCR Decision of 17 November 2016

 

Opinion of the Agency for the Cooperation of Energy Regulators No 9/2015 of 23 September 2015, p. 6 

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015

 

Platts, Severe flaws in market coupling rooted in Germany's single price zone: CREG

 

 

 

 

 

 

 

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    Links    

 

 

 

 

Scheduling area 

 

Responsibility area

  

Synchronous area 

 

Capacity Calculation Regions (CCRs)

 

Monitoring area 

 

 

 

 

 

 

 

 

 

 

 

Last Updated on Monday, 04 February 2019 23:04
 

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