The Capacity Allocation and Congestion Management Regulation

The rules set by the CACM Regulation provide the basis for the implementation of a single energy market across Europe. It sets out the methods for allocating capacity in day-ahead and intraday timescales and outlines how capacity will be calculated across the different zones. Implementing harmonised cross-border markets in all timeframes will lead to a more efficient European market and benefit customers.

Single day-ahead and intraday coupling

According to Art. 10 CACM, TSOs cooperate with Nominated Electricity Market Operators (NEMOs) to organise the day-to-day management of the single day-ahead and intraday coupling. ENTSO-E facilitates the discussion. This work helps jointly organise the further development of the market coupling by defining the responsible bodies and classifying the decisions to be taken by each body, as well as helping to define the criteria for prioritising the functionalities to be developed. In this spirit, in January 2020 ACER approved the NEMO’s joint proposal on the Products that can be taken into account in Single Intraday Coupling (SIDC), and also approved in December 2020 the NEMO’s joint proposal on the Products that can be taken into account in Single Day-Ahead Coupling (SDAC). ACER also approved in January 2020 the TSO’s and NEMO’s proposal for the price coupling algorithm and for the continuous trading matching algorithm. Moreover, the market coupling operations of the Greek bidding zone in SDAC were successfully launched on 15 December 2020.

Capacity Calculation Regions

In accordance with Art. 15.1 CACM, in November 2020 all TSOs submitted to ACER the common proposal for the determination of CCRs.

Moreover, in 2020 CCRs delivered, in accordance with the CACM Regulation, robust and timely fallback procedures (Art. 44), day-ahead and intraday capacity calculation methodologies (Art. 20.2), methodologies for coordinated redispatching and countertrading (Art. 35.1), and redispatching and countertrading cost sharing methodology (Art. 74.1).

Implementation monitoring

The CACM Cost Report 2019 submitted to all NRAs in July 2020 in accordance with Art. 80(1) of the CACM Regulation includes the costs of the coordinated activities of all NEMOs and/or all TSOs, and the costs incurred for activities performed by NEMOs or by TSOs and NEMOs in a certain region, in relation to single day-ahead and intraday market coupling. In June 2020, ENTSO-E issued the 6^th edition of the annual report on the progress and potential problems with the implementation of FCA, single day-ahead coupling and single intraday coupling (a “Market Report”) in pursuance of Art. 82(2)(a) CACM and Art. 63(1)(a) FCA.

In 2020, ENTSO-E has also enhanced the Transparency Platform for ACER data provision purposes in accordance with Art. 82.4 CACM and 63.3 FCA.

The Forward Capacity Allocation Regulation

The FCA Regulation, which entered into force on 17 October 2016, sets out rules regarding the type of long-term transmission rights (LTTRs) that can be allocated via explicit auction, and the means by which holders of transmission rights are compensated in the event their right is curtailed.

The overarching goal is to promote the development of liquid and competitive forward markets in a coordinated manner across Europe and provide market participants with the ability to hedge their risk associated with cross-border electricity trading.

FCA Methodologies

Regarding the implementation tasks at the regional level, some CCRs delivered common capacity calculation methodologies for long-term time frames (Art. 10.1 FCA), methodologies for splitting long-term cross-zonal capacity (Art. 16.1 FCA) and the regional design of LTTRs (Art. 31.3 FCA).

In accordance with Art. 31.3 of the FCA Regulation, in June 2020 the relevant NRAs approved the third amendment to the Core TSOs’ regional design of LTTRs that introduces the switch from physical transmission rights with the use-it-or-sell-it principle to financial transmission rights on specific bidding zone borders. Moreover, this third amendment does not change the impact of the previously approved amendment on the objectives of the FCA Regulation.

Finally, ENTSO-E has coordinated the preparation of the All TSOs’ proposal for the methodology for sharing costs incurred to ensure firmness and remuneration of long- term transmission rights pursuant to Art. 61 (FCA). The methodology was approved by ACER in October 2020.

The Electricity Balancing Regulation

Efficient balancing markets, in which all resources are empowered to participate on a level playing field, shall ensure security of supply at the lowest cost and can deliver environmental benefits by reducing the need for back-up generation. The Electricity Balancing Regulation (EB Reg.) sets a framework for common European rules and European platforms for cross-border balancing markets. The balancing processes are organised in the following steps:

1. Frequency containment reserves (FCR)¹, which stabilise the frequency after a disturbance at a steady-state value by a joint action of FCR within the whole synchronous area;
2. Frequency restoration reserves with automatic activation (aFRR) and frequency restoration reserves with manual activation (mFRR): these are activated to control the frequency toward its set point value and replace FCR;
3. Replacement reserves (RR), which replace and/or complement FRR via the activation of RR;
4. Imbalance netting (IN), which reduces the amount of simultaneous and counteracting aFRR activations via imbalance netting power interchange.

Ongoing or planned implementation activities include the development of several methodologies by all TSOs, with ENTSO-E acting as facilitator, as well as the implementation of the European balancing platforms.

The European balancing platforms

The European platform for replacement reserves – Trans-European Replacement Reserves Exchange (TERRE) – was made operational in January 2020 and five² TSOs became Members throughout the same year (Art. 19.5 EB Reg.).

The European platform for imbalance netting – International Grid Control Cooperation (IGCC): in 2020, there were nineteen³ operational members that continued the implementation of the platform (Art. 22.5 EB Reg.); among these, six⁴ member TSOs became operational throughout 2020. In June 2020, ACER adopted the implementation framework of the European platform for the imbalance netting process (Art. 22.1 EB Reg.).

European platform for the exchange of mFRR and aFRR energy – Manually Activated Reserves Initiative (MARI) and Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation (PICASSO): In accordance with the submission by all TSOs of the methodology proposals for implementation frameworks, pricing and activation purposes of balancing energy bids and TSO–TSO settlement of exchanges of balancing energy and the IN process, the implementation of the platforms continued throughout 2020 (Art. 20.6 and 21.6 EB Reg.). In January 2020, ACER adopted the implementation framework of the European platform for the exchange of mFRR (Art. 20.1 EB Reg.)⁵ and of the European platform for the exchange of aFRR (Art. 21.1 EB Reg.)⁶. Moreover, in August 2020, all TSOs designated their proposed balancing entities entrusted with operating the MARI and PICASSO platforms (Art. 20.4 and 21.4 EB Reg.).

CCR Methodologies

Regarding the implementation tasks at the regional level, some CCRs delivered on a voluntary basis methodologies for market-based cross-zonal capacity (CZC) allocation (Art. 41.1 EB Reg.) and for the allocation of CZC based on an economic efficiency analysis (Art. 42.1 EB Reg.).

Further EB Reg. deliverables in 2020

Implementation monitoring

In accordance with Art. 63.2 EB Reg., ENTSO-E submitted to ACER the Balancing Report 2020. This publication focuses on the technical aspects of the implementation at the European, regional and national levels of the Electricity Balancing Regulation and is the first of its kind. It summarises the developments that have occurred since the EB regulation entered into force (i. e. 18 December 2017) until 18 December 2019.

Transparency of capacity calculation by TSOs

The CEP introduces a new regulatory framework for cross-zonal capacity calculation. Specifically, Article 16.8 of the EU Electricity Regulation demands that at least 70 % of the interconnection capacity shall be made available for cross-zonal electricity trading (respecting operational security limits of internal and cross-zonal critical network elements and considering contingencies). The remaining 30 % of the total capacity of each critical network element can be used for the reliability margins, loop flows and internal flows.

In response to the “ACER Report on the Result of Monitoring the Margin Available for Cross-Zonal Electricity Trade in the EU in the First Semester of 2020”, ENTSO-E published in December 2020 its technical comments highlighting a series of aspects related to the implementation of the 70 % rule.

Bidding zone review

In accordance with Art. 14.5 of the EU Electricity Regulation (2019/943), all TSOs submitted in February 2020 an updated proposal⁷ for the methodology and assumptions to be used in the bidding zone review process and for the alternative bidding zone configurations to be considered. The updated proposal contains the same alternative bidding zone configurations as initially submitted, with the exception of the Nordic bidding zone review region, which is proposing an additional alternative configuration.

Following the all-NRAs’ request for decision of July 2020, ACER approved the proposal in November 2020.

Capacity Mechanisms

As required by Art. 26.11 of the Electricity Regulation, ENTSO-E submitted to ACER in July 2020 technical specifications for cross-border participation in capacity mechanisms. ACER approved these in December 2020.

Use of Congestion Income

In accordance with art. 19.4 of the Electricity Regulation, ACER approved in December 2020 the methodology for the use of congestion income.

Inter Transmission System Operator Compensation

The Inter Transmission System Operator Compensation (ITC) Agreement is a multiparty agreement concluded between ENTSO-E, on the one hand, and ENTSO-E members and TSOs that comply with the Union law in the field of electricity or with the previous agreement on ITC, also referred to in this context as “ITC Parties” on the other. It offers a single framework wherein European TSOs compensate each other for costs associated with hosting transit flows (i. e. facilitating the transfer of electricity between two countries). This mechanism aims to incentivise the hosting of cross-border flows and thereby facilitate an effectively competitive pan-European electricity market.

The ITC mechanism is governed by Art. 49 of Reg. (EU) 943/2019. The ITC mechanism is further specified by Reg. (EU) 838/2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging.

The ITC Agreement provides for an annual process in which the parties are required to provide and check the values for the calculation of the annual perimeter fee. Based on the preliminary data, the transit flows, also including the perimeter flows, are calculated (i. e. imports and exports of electricity to and from third countries).

According to Reg. (EU) 838/2010, ENTSO-E is mandated to determine the amount of losses incurred on national transmission systems by calculating the difference between: (1) the amount of losses actually incurred on the transmission system during the relevant period; and (2) the estimated amount of losses on the transmission system which would have been incurred on the system during the relevant period if no transit of electricity had occurred. In October 2020, ENTSO-E published the ITC Transit Losses Data Report 2019.

ACER publishes an annual monitoring report on ITC. To this end, ENTSO-E provides ACER with information on both quantitative data (preliminary and final data) and descriptive information (e. g. explanations for capacities not allocated according to Guidelines).