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EU Internal Energy Market Network Codes - basic information

 

 

The development and implementation of network codes and guidelines has been designed as an important step to be taken in order to fully integrate the European Union Internal Energy Market (IEM).

 

Network codes "are the building blocks of the IEM. They will provide Europe with a coherent, strong and efficient set of harmonised rules and requirements covering all important cross-border aspects of the electricity sector: connection requirements, the coordination of system operations and the completion of pan-European electricity markets", said in 2015 the ENTSO-E (as the voice of the EU Transmission System Operators (TSOs)) in its Work Programme.

 

This action comes with parallel institutional work on the full implementation and enforcement of the Third Energy Package, the enhancement of investments in energy infrastructure, the collaboration within regional initiatives as well as the enforcement of competition and State aid rules.

 

The legally binding nature of network codes means that they can have a fundamental bearing on market participants' businesses.

 

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast) in Recital 42 explains that the network codes “are not intended to replace the necessary national network codes for non-cross-border issues”.

 

 

Electricity network codes

 

 

Among electricity network codes in the EU Internal Energy Market the following ones deserve particular interest:

 

1. Network Code on System Operation (System Operation Guidelines - SOGL) – the instrument integrating earlier editions of three draft network codes: on the Operational Security, Operational Planning & Scheduling (NC OPS) and Load-Frequency Control & Reserves (NC LCFR),

 

2. Regulation establishing a Guideline on Capacity Calculation and Congestion Management (CACM Regulation),

  

3. Network Code on Requirements for Grid Connection Applicable to All Generating Facilities (NC RfG),

 

quote

ACER Consolidated Annual Activity Report (CAAR) 2017, p. 8

 

[...] the adoption of all the electricity Network Codes and Guidelines and their entry into force does not imply that rule-making is complete.

 

In fact the four Guidelines adopted in the electricity sector – on CACM, on Forward Capacity Allocation, on System Operation and on Electricity Balancing – envisage close to 200 “terms and conditions or methodologies” to be approved at EU-wide or regional level

 

4. Demand Connection Code (NC DCC),

 

5. Forward Capacity Allocation Network Code (FCA NC),

 

6. Balancing Network Code (Electricity Balancing Guidelines - EBGL or NC EB),

  

7. Emergency and Restoration Network Code (NC ER),

 

8. Network Code on High Voltage Direct Current Connections (HVDC).

 

Network codes complement each other and provide a single set of pan-European market rules covering all timeframes.

 

The initial goal was to have these rules in place by 2014, but the work occurred more complex and was finally completed in 2017.

 

Moreover, not all legislative pieces were so mature to take the form of the code and, at the present stage, were adopted as the guidelines only (on balancing, CACM, forward capacity allocation and system operation).

 

The classification of issues between CACM Regulation and the Network Code on System Operation is based on the following:

 

- the Network Code on System Operation covers topics related to the physical operation of the power system, where physical scenarios are hypothesised and physical risks are involved;

 

- CACM covers topics related to the operation of the electricity market and involves financial risks and risks involved with market scenarios while taking into account the physical risks described in the Network Code on System Operation.

 

The above classification evolved over time. An example is the Network Code on System Operation itself, which, before merging, was represented by three separate system operations draft network codes:

- on load-frequency control and reserves,

- on operational security, and

- on operational planning and scheduling.

 

 

Gas network codes

 

 

Important EU network codes in the gas market are:

 

1. CAM Network Code

 

Commission Regulation (EU) 2017/459 of 16 March 2017 establishing a network code on capacity allocation mechanisms in gas transmission systems and repealing Regulation (EU) No 984/2013, OJ L 72, 17.3.2017, p. 1–28, standardises cross-border capacity products and their allocation via transparent auctions held on joined booking platforms,

 

Commission Regulation (EU) No 984/2013 of 14 October 2013 establishing a Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems and supplementing Regulation (EC) No 715/2009 of the European Parliament and of the Council (became applicable in 2015);

 

2. Network Code on Gas Balancing of Transmission Networks (Commission Regulation (EU) No 312/2014 of 26 March 2014 establishing the Network Code on Gas Balancing of Transmission Networks) establishes a set of market-based measures for balancing, where both the Transmission System Operator (TSO) and market participants are incentivised to buy and sell gas for balancing purposes on the spot markets. 

This is subject to the publication by the TSO of reliable and updated data on the system's current and forecasted status and on the market participants' positions (became applicable in 2015);

 

3. The Congestion Management Procedure (CMP) Guidelines (Commission Decision of 24 August 2012 on amending Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks (2012/490/EU)) establish a set of measures in order to prevent and reduce contractual congestions at cross-border points in the EU (entered into application in 2013);

 

4. Interoperability Network Code - Commission Regulation (EU) 2015/703 of 30 April 2015 establishing a network code on interoperability and data exchange rules;

 

5. Security of Gas Supply Regulation (SoS) - Regulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC;

 

6. Tariffs Network Code - Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonised transmission tariff structures for gas, OJ L 72, 17.3.2017, p. 29–56 (see here the ACER's website on the Tariffs Network Code).

 

 

Network codes and the guidelines

 

 

Although all the abovementioned legislative pieces carry the form of the Commission Regulation and, as all EU regulations, are equally binding and directly applicable, their legal form is, in fact, differentiated:

 

- NC RfG, DCC, NC HVDC and NC ER took the form of network codes (adopted under Article 6 of Regulation (EC) 714/2009), while


- CACM, EBGL, FCA and SOGL are guidelines (their legal basis is Article 18 of Regulation (EC) 714/2009).

 

Differences between the two categories are somewhat subtle and initially all the above regulations were intended to be network codes (both categories are being adopted in the same comitology procedure), nevertheless the more complex subject matter, complexities involved with divergences between electricity systems of EU Member States made necessary to cover some topics in the more general form of guidelines.

 

As an effect, network codes and the guidelines differ as regards the amendment procedures, which are described:

 

- for network codes in Article 7 of Regulation 714/2009,


- for guidelines of Article 18(5) Regulation 714/2009.

 

It can be assessed that guidelines have been used by legislators where the legislative choices at the time of drafting were not conclusive and there was a need for transmission system operators to develop further and detailed methodologies in certain areas.

 

 

Network codes development procedure

 

 

quote

European Commission, Public Consultation Paper, Establishment of the annual priority lists for the development of network codes and guidelines for 2016 and beyond

 

Once a network code is submitted by ACER to the Commission recommending its adoption the Commission starts the adoption phase ("Commission adoption phase").

 

As the Third Energy Package has not yet been aligned to the Lisbon Treaty, the network codes and guidelines are still being adopted according to Article 5a (1) to (4) and Article 7 of Decision 1999/468/EC, having regard to Article 8 thereof ("regulatory procedure with scrutiny").

 

Therefore, in order to adopt a network code it has to be finalised and translated by the Commission. Furthermore it needs to obtain a positive vote by the competent Committee composed of Member States' representatives.

 

After the positive vote of the Committee the Commission needs to adapt the translations in line the network code voted upon and submit it to the European Parliament and the Council.

 

The European Parliament and Council then have three months to scrutinise it. If, on the expiry of this period, neither has opposed it, the network code will be adopted and published by the Commission.

 

 

Legal set-up under the Third Energy Package

 

The key actors involved in the process for the network codes development are:

 

- the Agency for the Cooperation of Energy Regulators (ACER)

 

- the European Network of Transmission System Operators (ENTSOs), and

 

- the European Commission.

 

The process of establishing network codes is defined in Article 6 and 8 of the Regulation (EC) 714/2009 (Electricity Regulation) and of the Regulation (EC) 715/2009 (Gas Regulation). 

 

The areas in which network codes can be developed are set out in Article 8(6) of the Electricity Regulation and the Gas Regulation.

 

The details for the procedure for developing network codes are as follows:

 

The European Commission, after consulting ACER, ENTSOs and the other relevant stakeholders, establishes an annual priority list identifying the areas to be included in the development of network codes.

 

The European Commission can then request ACER to submit to it within six months a non-binding framework guideline (framework guideline), setting out clear and objective principles, for the development of network codes relating to the areas identified in the priority list.

 

ENTSO then has twelve months to draft a network code taking into account the objective principles outlined in the non-binding framework guideline. ENTSO then submits the draft network code to ACER for its reasoned opinion.

 

ACER assesses then the network code to ensure it complies with the Framework Guideline (ACER has three months to provide its opinion) and makes a recommendation to the European Commission).

 

Assuming the European Commission agrees with the recommendation, the process of comitology begins to transform the network code into a regulation (see box).

 

The regulation is legally binding on all parties and has direct effect (i.e. it will not need to be transposed into national law). 

 

Winter Energy Package amendments

 

Winter Energy Package proposed by the European Commission on 30 November 2016 makes multiple amendments to the above processes, see in particular:

 

- Article 67 of the Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), 

 

- Articles 54 - 58 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).

 

It provides for the streamlining of the development procedure by clarifying that the ACER has the right to revise draft electricity network codes before submitting them to the Commission (and not only to give an opinion as before - see Recital 41 of the said Proposal and Recital 62 of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast)).

 

What's more important, the Winter Energy Package provides for the adoption of network codes and guidelines by the European Commission as delegated acts - an idea that sparked some opposition (see for example EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 18).

 

In any event, the likely adoption of the Winter Energy Package will likely result in the further amendments of at least several of the network codes that have already been adopted.

 

 

 

Recital 39 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)

 

Increased cooperation and coordination among transmission system operators is required to create network codes for providing and managing effective and transparent access to the transmission networks across borders, and to ensure coordinated and sufficiently forward-looking planning and sound technical evolution of the transmission system in the Union, including the creation of interconnection capacities, with due regard to the environment. Those network codes should be in line with framework guidelines, which are non-binding in nature (framework guidelines) and which are developed by the Agency. The Agency should have a role in reviewing, based on matters of fact, draft network codes, including their compliance with the framework guidelines, and it should be enabled to recommend them for adoption by the Commission. The Agency should assess proposed amendments to the network codes and it should be enabled to recommend them for adoption by the Commission. Transmission system operators should operate their networks in accordance with those network codes.

 

 

 

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)

 

Article 67
Exercise of the delegation


1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.


2. The power to adopt delegated acts referred to in Article 61 and Article 63 shall be conferred on the Commission for an undetermined period of time from the (OP: please insert the date of entry into force).


3. The delegation of power referred to in Article 61 and 63 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated act already in force.


4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016.


5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.


6. A delegated act adopted pursuant to Article 61 and 63 shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

 

 

 

 

Adoption of network codes and guidelines

 

We are worried by the proposed change in the procedure for adopting network codes – from adoption by implementing acts towards use of delegated acts, according to Article 66 of the draft recast Directive and Article 54 of the draft recast Regulation. Covering quite a number of politically sensitive areas by delegated acts may be problematic, as the procedure of adopting delegated acts can never ensure the same transparency and Member States ́ involvement in the legislative process as the ordinary legislative procedure. Therefore we believe that these areas shall be tackled either directly in the text of the regulation / directive, or that network codes shall be adopted as implementing acts.

 

Further, we challenge the intention to dedicate specific network codes or guidelines to some of the subject matter laid out in Article 55.1 of the draft recast Regulation. Indeed, sub-paragraph (n) foresees the adoption of a network code or guideline on demand-response, including aggregation, energy storage, and demand curtailment rules. As highlighted in Section III of this paper, we believe that guaranteeing a level- playing field between all market participants is essential to ensure that consumers have a real choice of how they wish to organise their supply and storage of electricity, and the commercialisation of their demand response potential. As a consequence, the same rules for the organisation of the market should apply to all market participants, be they generators, demand-response providers (including aggregators) and storage operators. Should the current network codes or guidelines be considered discriminatory vis-à-vis certain categories of market participants in terms of market architecture, then they should be reviewed. But creating a separate set of rules for these categories of market participants is bound to distort the level- playing field in the market.

 

EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 18

 

 

 

 

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), Recitals 61 - 62, Articles 58 - 62

 

Recital 61

 

Increased cooperation and coordination among transmission system operators is required to create network codes for providing and managing effective and transparent access to the transmission networks across borders, and to ensure coordinated and sufficiently forward-looking planning and sound technical evolution of the transmission system in the Union, including the creation of interconnection capacities, with due regard to the environment. Those network codes should be in line with non-binding framework guidelines, which are developed by ACER. ACER should have a role in reviewing, based on matters of fact, draft network codes, including their compliance with those framework guidelines, and it should be enabled to recommend them for adoption by the Commission. ACER should assess proposed amendments to the network codes and it should be enabled to recommend them for adoption by the Commission. Transmission system operators should operate their networks in accordance with those network codes.

 

Recital 62

 

Experience with the development and adoption of network codes has shown that it is useful to streamline the development procedure by clarifying that ACER has the right to revise draft electricity network codes before submitting them to the Commission.

 
Article 58
Adoption of network codes and guidelines


1.   The Commission may, subject to the empowerments in Articles 59, 60 and 61, adopt implementing or delegated acts. Such acts may either be adopted as network codes on the basis of text proposals developed by the ENTSO for Electricity, or, where so provided for in the priority list pursuant to Article 59(3), by the EU DSO entity, where relevant in cooperation with the ENTSO for Electricity, and ACER pursuant to the procedure in Article 59, or as guidelines pursuant to the procedure in Article 61.


2.   The network codes and guidelines shall:


(a) ensure that they provide the minimum degree of harmonisation required to achieve the aims of this Regulation;


(b) take into account regional specificities, where appropriate;


(c) not go beyond what is necessary for the purposes of point (a); and


(d) be without prejudice to the Member States' right to establish national network codes which do not affect cross-zonal trade.


Article 59
Establishment of network codes


1.   The Commission is empowered to adopt implementing acts in order to ensure uniform conditions for the implementation of this Regulation by establishing network codes in the following areas:


(a) network security and reliability rules including rules for technical transmission reserve capacity for operational network security as well as interoperability rules implementing Articles 34 to 47 and Article 57 of this Regulation and Article 40 of Directive (EU) 2019/944, including rules on system states, remedial actions and operational security limits, voltage control and reactive power management, short-circuit current management, power flow management, contingency analysis and handling, protection equipment and schemes, data exchange, compliance, training, operational planning and security analysis, regional operational security coordination, outage coordination, availability plans of relevant assets, adequacy analysis, ancillary services, scheduling, and operational planning data environments;


(b) capacity-allocation and congestion-management rules implementing Article 6 of Directive (EU) 2019/944 and Article 7 to 10, Articles 13 to 17 and Articles 35 to 37 of this Regulation, including rules on day-ahead, intraday and forward capacity calculation methodologies and processes, grid models, bidding zone configuration, redispatching and countertrading, trading algorithms, single day-ahead and intraday coupling, the firmness of allocated cross-zonal capacity, congestion income distribution, cross-zonal transmission risk hedging, nomination procedures, and capacity allocation and congestion management cost recovery;


(c) rules implementing Articles 5, 6 and 17 in relation to trading related to technical and operational provision of network access services and system balancing, including rules on network-related reserve power, including functions and responsibilities, platforms for the exchange of balancing energy, gate closure times, requirements for standard and specific balancing products, procurement of balancing services, allocation of cross-zonal capacity for the exchange of balancing services or sharing of reserves, settlement of balancing energy, settlement of exchanges of energy between system operators, imbalance settlement and settlement of balancing capacity, load frequency control, frequency quality defining and target parameters, frequency containment reserves, frequency restoration reserves, replacement reserves, exchange and sharing of reserves, cross-border activation processes of reserves, time-control processes and transparency of information;


(d) rules implementing Articles 36, 40 and 54 of Directive (EU) 2019/944 in relation to non-discriminatory, transparent provision of non-frequency ancillary services,, including rules on steady state voltage control, inertia, fast reactive current injection, inertia for grid stability, short circuit current, black-start capability and island operation capability;


(e) rules implementing Article 57 of this Regulation and Articles 17, 31, 32, 36, 40 and 54 of Directive (EU) 2019/944 in relation to demand response, including rules on aggregation, energy storage, and demand curtailment rules.
Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 67(2).


2.   The Commission is empowered to adopt delegated acts in accordance with Article 68 supplementing this Regulation with regard to the establishment of network codes in the following areas:


(a) network connection rules including rules on the connection of transmission-connected demand facilities, transmission-connected distribution facilities and distribution systems, connection of demand units used to provide demand response, requirements for grid connection of generators, requirements for high-voltage direct current grid connection, requirements for direct current-connected power park modules and remote-end high-voltage direct current converter stations, and operational notification procedures for grid connection;


(b) data exchange, settlement and transparency rules, including in particular rules on transfer capacities for relevant time horizons, estimates and actual values on the allocation and use of transfer capacities, forecast and actual demand of facilities and aggregation thereof including unavailability of facilities, forecast and actual generation of generation units and aggregation thereof including unavailability of units, availability and use of networks, congestion management measures and balancing market data. Rules should include ways in which the information is published, the timing of publication, the entities responsible for handling;

 

(c) third-party access rules;


(d) operational emergency and restauration procedures in an emergency including system defence plans, restoration plans, market interactions, information exchange and communication and tools and facilities;


(e) sector-specific rules for cyber security aspects of cross-border electricity flows, including rules on common minimum requirements, planning, monitoring, reporting and crisis management.


3.   The Commission shall, after consulting ACER, the ENTSO for Electricity, the EU DSO entity and the other relevant stakeholders, establish a priority list every three years, identifying the areas set out in paragraphs 1 and 2 to be included in the development of network codes.


If the subject matter of the network code is directly related to the operation of the distribution system and not primarily relevant to the transmission system, the Commission may require the EU DSO entity, in cooperation with the ENTSO for Electricity, to convene a drafting committee and submit a proposal for a network code to ACER.


4.   The Commission shall request ACER to submit to it within a reasonable period not exceeding six months of receipt of the Commission's request non-binding framework guidelines setting out clear and objective principles for the development of network codes relating to the areas identified in the priority list (framework guideline). The request of the Commission may include conditions which the framework guideline shall address. Each framework guideline shall contribute to market integration, non-discrimination, effective competition, and the efficient functioning of the market. Upon a reasoned request from ACER, the Commission may extend the period for submitting the guidelines.


5.   ACER shall consult the ENTSO for Electricity, the EU DSO entity, and the other relevant stakeholders in regard to the framework guideline, during a period of no less than two months, in an open and transparent manner.


6.   ACER shall submit a non-binding framework guideline to the Commission where requested to do so under paragraph 4.


7.   If the Commission considers that the framework guideline does not contribute to market integration, non-discrimination, effective competition and the efficient functioning of the market, it may request ACER to review the framework guideline within a reasonable period and resubmit it to the Commission.


8.   If ACER fails to submit or resubmit a framework guideline within the period set by the Commission under paragraph 4 or 7, the Commission shall develop the framework guideline in question.


9.   The Commission shall request the ENTSO for Electricity or, where provided for in the priority list referred to in paragraph 3, the EU DSO entity in cooperation with the ENTSO for Electricity, to submit a proposal for a network code in accordance with the relevant framework guideline, to ACER within a reasonable period, not exceeding 12 months, of receipt of the Commission's request.


10.   The ENTSO for Electricity, or where provided for in the priority list referred to in paragraph 3 the EU DSO entity, in cooperation with the ENTSO for Electricity, shall convene a drafting committee to support it in the network code development process. The drafting committee shall consist of representatives of ACER, the ENTSO for Electricity, where appropriate the EU DSO entity and NEMOs, and a limited number of the main affected stakeholders. The ENTSO for Electricity or where provided for in the priority list pursuant to paragraph 3 the EU DSO entity, in cooperation with the ENTSO for Electricity, shall develop proposals for network codes in the areas referred to in paragraphs 1 and 2 where so requested by the Commission in accordance with paragraph 9.


11.   ACER shall revise the proposed network code to ensure that the network code to be adopted complies with the relevant framework guidelines and contributes to market integration, non-discrimination, effective competition, and the efficient functioning of the market and, submit the revised network code to the Commission within six months of receipt of the proposal. In the proposal submitted to the Commission, ACER shall take into account the views provided by all involved parties during the drafting of the proposal led by the ENTSO for Electricity or the EU DSO entity and shall consult the relevant stakeholders on the version to be submitted to the Commission.


12.   Where the ENTSO for Electricity or the EU DSO entity have failed to develop a network code within the period set by the Commission under paragraph 9, the Commission may request ACER to prepare a draft network code on the basis of the relevant framework guideline. ACER may launch a further consultation in the course of preparing a draft network code under this paragraph. ACER shall submit a draft network code prepared under this paragraph to the Commission and may recommend that it be adopted.


13.   The Commission may adopt, on its own initiative, where the ENTSO for Electricity or the EU DSO entity have failed to develop a network code, or ACER has failed to develop a draft network code as referred to in paragraph 12, or upon the proposal of ACER under paragraph 11, one or more network codes in the areas listed in paragraphs 1 and 2.


14.   Where the Commission proposes to adopt a network code on its own initiative, the Commission shall consult ACER, the ENTSO for Electricity and all relevant stakeholders in regard to the draft network code during a period of no less than two months.


15.   This Article shall be without prejudice to the Commission's right to adopt and amend the guidelines as laid down in Article 61. It shall be without prejudice to the possibility for the ENTSO for Electricity to develop non-binding guidance in the areas set out in paragraphs 1 and 2 where such guidance does not relate to areas covered by a request addressed to the ENTSO for Electricity by the Commission. The ENTSO for Electricity shall submit any such guidance to ACER for an opinion and shall duly take that opinion into account.


Article 60
Amendments of network codes


1.   The Commission is empowered to amend the network codes within the areas listed in Article 59(1) and (2) in accordance with the relevant procedure set out in that Article. ACER may also propose amendments to the networks codes in accordance with paragraphs 2 and 3 of this Article.


2.   Persons who are likely to have an interest in any network code adopted under Article 59, including the ENTSO for Electricity, the EU DSO entity, regulatory authorities, transmission system operators, distribution system operators, system users and consumers, may propose draft amendments to that network code to ACER. ACER may also propose amendments on its own initiative.


3.   ACER may make reasoned proposals to the Commission for amendments, explaining how such proposals are consistent with the objectives of the network codes set out in Article 59(3) of this Regulation. Where it considers an amendment proposal to be admissible and where it proposes amendments on its own initiative, ACER shall consult all stakeholders in accordance with Article 14 of Regulation (EU) 2019/942.


Article 61
Guidelines


1.   The Commission is empowered to adopt binding guidelines in the areas listed in this Article.


2.   The Commission is empowered to adopt guidelines in the areas where such acts could also be developed under the network code procedure pursuant to Article 59(1) and (2). Those guidelines shall be adopted in the form of delegated or implementing acts, depending on the relevant empowerment provided for in this Regulation.


3.   The Commission is empowered to adopt delegated acts in accordance with Article 68 supplementing this Regulation by setting out guidelines relating to the inter-transmission system operator compensation mechanism. Those guidelines shall specify, in accordance with the principles set out in Articles 18 and 49:


(a) details of the procedure for determining which transmission system operators are liable to pay compensation for cross-border flows including as regards the split between the operators of national transmission systems from which cross-border flows originate and the systems where those flows end, in accordance with Article 49(2);


(b) details of the payment procedure to be followed, including the determination of the first period for which compensation is to be paid, in accordance with the second subparagraph of Article 49(3);


(c) details of methodologies for determining the cross-border flows hosted for which compensation is to be paid under Article 49, in terms of both quantity and type of flows, and the designation of the magnitudes of such flows as originating or ending in transmission systems of individual Member States, in accordance with Article 49(5);


(d) details of the methodology for determining the costs and benefits incurred as a result of hosting cross-border flows, in accordance with Article 49(6);


(e) details of the treatment of electricity flows originating or ending in countries outside the European Economic Area in the context of the inter-transmission system operator compensation mechanism; and


(f) arrangements for the participation of national systems which are interconnected through direct current lines, in accordance with Article 49.


4.   Where appropriate, the Commission may adopt implementing acts setting out guidelines providing the minimum degree of harmonisation required to achieve the aim of this Regulation. Those guidelines may specify:


(a) details of rules for the trading of electricity implementing Article 6 of Directive (EU) 2019/944 and Articles 5 to 10, 13 to 17, 35, 36 and 37 of this Regulation;


(b) details of investment incentive rules for interconnector capacity including locational signals implementing Article 19.
Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 67(2).


5.   The Commission may adopt implementing acts setting out guidelines on operational coordination between transmission system operators at Union level. Those guidelines shall be consistent with and build upon the network codes referred to in Article 59 and shall build upon the adopted specifications referred to in point (i) of Article 30(1). When adopting those guidelines, the Commission shall take into account differing regional and national operational requirements.

Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 67(2).


6.   When adopting or amending guidelines, the Commission shall consult ACER, the ENTSO for Electricity, the EU DSO entity and, where relevant, other stakeholders.


Article 62
Right of Member States to provide for more detailed measures


This Regulation shall be without prejudice to the rights of Member States to maintain or introduce measures that contain more detailed provisions than those set out in this Regulation, in the guidelines referred to in Article 61 or in the network codes referred to in Article 59, provided that those measures are compatible with Union law.

 

 

 

Target model for the EU Internal Electricity Market

 

 

With respect to the Internal Electricity Market target model different timeframes must be considered.

 

quote

 Commission Staff Working Document, Impact Assessment of 23.11.2017 accompanying the document Commission Regulation establishing a guideline on electricity balancing ({SWD(2017) 383 final}, p. 13 

 

The EU Target Model for electricity trading consists notably of the following elements:

 

- For longer timeframes (i.e., longer than day-ahead), a single European platform for the explicit allocation of cross-border transmission capacities. Physical transmission rights ('PTRs') and/or financial transmission rights ('FTRs') on cross-border interconnections are to be auctioned by TSOs in case a relevant liquid forward derivatives market does not exist;

 

- For the day-ahead timeframe, the implicit allocation of cross-border transmission capacities through a single European price coupling process, replacing explicit auctions. Implicit market coupling implies that all order books from power exchanges (all bids and offers) are to be aggregated and optimized in one algorithm that calculates prices and flows, subject to the available transmission capacity between market areas. Price differences can still occur due to bottlenecks between different market areas (congestion on interconnections);

 

- For the intraday timeframe, a single platform where electricity and the corresponding cross-border capacities are traded in one (i.e., implicit capacity allocation) on a continued basis;

 

- For the balancing timeframe, European-wide balancing platforms where all TSOs would have access to different types of balancing products while taking into account the available transmission capacity between market areas.

 

Supporting document to the ENTSO-E Draft Network Code on Forward Capacity Allocation of 28 March 2013 provided in that regard the following comments.

 

For day ahead and intraday timeframes target model allows for the following capacity calculations methods:

 

- the flow based approach or

 

- the coordinated NTC (net transmission capacities) approach.

 

However, for the Forward Capacity Allocation timeframe, which refers to timeframes prior to day-ahead (e.g. monthly, quarterly, yearly, multi-yearly periods), the coordinated NTC approach is preferable, although the flow based approach is acceptable provided there is evidence that it can deliver higher efficiency. 

 

Regarding the forward market, the target model generally prescribes that transmission capacity should be allocated in explicit auctions:

 

- via Physical Transmission Rights (PTRs) with the use-it-or-sell-it (uiosi) principle or

 

- via Financial Transmission Rights (FTRs).

 

The target model for the day ahead market is based on implicit auctions, which means that cross-zonal capacity is allocated implicitly with the matching of the most competitive energy bids and offers. This process is commonly known as market coupling.

 

More in detail, it was agreed that the target model should be based on a single price coupling EU algorithm.

 

In the intraday market, where market participants trade energy to adjust their positions after the day-ahead market phase and before the balancing market, the target model also prescribes implicit allocation of capacity. 

 

However, unlike the day-ahead market, this should be based on continuous trading rather than auctions. Reliable pricing of scarce capacity complements the target model, while regional auctions can be implemented where appropriate.

 

In respect of the balancing market, while the long term solution foresees a TSO-TSO model with a Common Merit Order (CMO) list, its features and interim models were initially part of the ongoing discussions around the Framework Guidelines on Balancing, published by ACER on 20 September 2012.

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015 (p. 148) concludes that the target model for the EU electricity market is intended to remove the remaining cross-border barriers to market integration, as it envisages:

 

(i) a single day-ahead market coupling with implicit auctions of cross-border capacity, which should replace explicit auctions;

 

(ii) a single intra-day market coupling with continuous implicit allocation of cross-border capacity;

 

(iii) a single European platform for allocating long-term transmission rights;

 

(iv) a flow-based capacity allocation method in highly meshed networks; and

 

(v) for balancing, a TSO-TSO model with a Common Merit Order (CMO) list for cross-border exchanges of balancing energy and harmonising key aspects of national balancing mechanisms.

 

As regards short-term markets, efficient, liquid and integrated balancing and intra-day will facilitate the integration in the system of energy produced from renewable energy sources, and liquidity could be strengthened by increasingly exposing these generators to the same commitment and balancing responsibilities as conventional ones.

 

 

Legal efects of adoption of European Electricity and Gas Network Codes

 

 

As was said above, European Electricity and Gas Network Codes apply directly to all addressees and, as regulations, apply directly to the EU Member States without being transposed into national laws or regulatory frameworks.

 

Another significant fact is European regulations in the legal hierarchy of laws take precedence over the EU Member State's domestic law.

 

It means that if a domestic law is incompatible with a European Electricity or Gas Network Code, it is the European law which takes precedence.

 

The EU Member State that does not comply with a European regulation can face infraction proceedings, which involve substantial fines.

 

Each network code sets a series of rights and obligations on various market players, most often TSOs.

 

In many cases, network codes also require actions to be taken or parameters to be specified in order to implement that code.

 

For example, the connection codes require about 40 provisions to be set at national level (essentially more detailed specifications of subjects that could not be specified within the code itself) to be developed.

 

The EU network codes implementing provisions to be set at national level can be categorised considering their mandatory/non-mandatory and exhaustive/non-exhaustive character.

 

Mutual interdependences between these mandatory/non-mandatory and exhaustive/non-exhaustive requirements can be depicted in the graph (source: www.entsoe.eu).

 

 

network codes mandatory and exhaustive requirements

 

 

Each EU Member States and other country, which implements connection network codes can make a decision whether to introduce a non-mandatory requirement either in general on national level or as a site-specific choice.

 

Such a leeway is not granted when it comes to mandatory requirements, which must be applied in all EU Members States and other countries, which implement connection network codes.

 

Exhaustive requirements need no further national specifications (e.g. parameters) for its entire application.

 

In turn, non-exhaustive requirements are those for which the European level network codes do not contain all the information or parameters necessary to apply the requirements immediately and need further national specifications for its entire application in general on national level or as a site-specific choice.

 

These requirements are typically described in the CNC as "TSO / relevant system operator shall define" or "defined by / determined by / in coordination with the TSO / relevant TSO".

 

Some of them need a choice at national level, but wider sharing and in some cases collaboration on the criteria can be necessary (see: Making non-mandatory requirements at European level mandatory at national level, ENTSO-E Guidance document for national implementation for network codes on grid connection, Draft for consultation 1 July - 15 August 2016, 30 June 2016, and Parameters of Non-exhaustive requirements, ENTSO-E Guidance document for national implementation for network codes on grid connection, Draft for consultation 1 July -15 August 2016, 22 June 2016).

 

 

 

 

 

 

IMG 0744

    Documentation    

 

 

 

 

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), Recitals 42, 61 - 62

 

Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Article 67

 

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), Articles 54 - 58, Recital 39

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity Markets in 2015, September 2016

 

ACER/CEER, Annual Report on the Results of Monitoring the Internal Natural Gas Markets in 2015, September 2016

 

EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 18

 

ACER Report on the implementation of the Balancing Network Code, Second edition, Volume I, 16 November 2017

 

ACER Report on the implementation of the Balancing Network Code, Second edition, Volume II, 16 November 2017

 

ENTSO-E draft Work Programme 2015 through December 2016

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015, p. 148

 

European Commission, Public Consultation Paper, Establishment of the annual priority lists for the development of network codes and guidelines for 2016 and beyond

 

The EU electricity network codes, Technical report, Leonardo Meeus, Tim Schittekatte, European University Institute, Badia Fiesolana, February 2018

 

Introduction to network tariffs and network codes for consumers, prosumers and energy communities, Technical Report, Leonardo Meeus, Tim Schittekatte, European University Institute, Badia Fiesolana, July 2018

 

 

 

 

 

 

 

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    Links    

 

 

 

 

 

 

ENTSO-E website on Electricity Network Codes

 

DG Energy website on Electricity Network Codes

 

 

 

 

 

 

 

Last Updated on Wednesday, 06 November 2019 22:45
 

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