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. They set out the methods for allocating capacity in day-ahead (DA) and intraday (ID) 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 DA and ID 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. NEMOs and TSOs have successfully established the Market Coupling Steering Committee which handles the development and the operation of the DA and ID market coupling.

The TSOs, supported by ENTSO-E, continued the implementation of the 15 minutes products in ID and DA, in accordance with Art. 8.4 of the Electricity Regulation.

All TSOs reviewed the scheduled exchange methodology from the Single Day-Ahead Coupling (SDAC) in line with Art. 43.4 and 56.4 CACM. The SDAC Interim Coupling solution went live in June 2021, allowing for DA cross-zonal capacity (CZC) on 6 new borders⁶. With the inclusion of Bulgaria in SDAC and the launch of market coupling operations for the Bulgarian-Romanian border, the Southeast Europe (SEE) region is now fully integrated in SDAC.

In 2021, Single Intraday Coupling (SIDC) parties confirmed the successful third wave go-live integrating Italy, which joined SIDC in September 2021. ID trading is now extended across 23 countries coupled through SIDC.

Capacity Calculation Regions

In accordance with Art. 15.1 CACM, in May 2021 ACER approved the all TSOs’ proposal on the determination of Capacity Calculation Regions (CCRs)⁷. Following the approval of the CACM Regulation by the Norwegian Parliament in June 2021, the CACM Regulation was made binding in the internal legal order in Norway with entry into force on 1 August 2021. Consequently, ENTSO-E , on behalf of All EU TSOs, consulted with stakeholders in end 2021 on a new proposal for the amendment of the determination of CCRs that allocates the Norwegian bidding zone borders to the relevant CCRs, namely CCR Nordic and CCR Hansa. In addition, in December 2021 ACER approved the all TSOs’ proposal for the amendment of the congestion income distribution methodology (CIDM), in accordance with Art. 19.4 of the Electricity Regulation.

Moreover, in 2021 CCRs delivered, in accordance with the CACM Regulation, robust and timely fallback procedures (Art. 44), DA and ID capacity calculation methodologies (Art. 20.2), and methodologies for coordinated redispatching and countertrading (Art. 35.1).

Implementation monitoring

The CACM Cost Report 2020 submitted to all NRAs in June 2021 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 July 2021, ENTSO-E released two important market monitoring reports: the ENTSO-E Market Report 2021 and the Capacity Calculation and Allocation Report 2021. The ENTSO-E Market Report 2021 examines the progress and potential problems in implementing the DA and ID coupling and FCA. For the second time, the report also covers the implementation of the EB Regulation.

In addition, this is the first time ENTSO-E Market Report 2021 presents an overview of the TSO’s implementation of the CEP’s 70 % minimum capacity target. The Capacity Calculation and Allocation Report 2021, published in accordance with Art. 31(2) of the CACM Regulation and with Art. 26(2) of the FCA Regulation, provides an update of the capacity calculation methodologies implementation that the CACM and FCA Regulations prescribe at the eight CCR, as determined by the recent ACER decision No 04/2021.

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 proposals for common capacity calculation methodologies for long-term time frames (Art. 10.1 FCA). All TSOs have submitted the proposal for harmonised allocation rules for LTTRs (Art. 51.1 and 52.3 FCA). Moreover, ENTSO-E provided views to ACER’s hearing on the all TSOs’ proposal for the methodology for sharing costs incurred to ensure firmness and remuneration of LTTRs pursuant to Art. 61 (FCA) following the appeal from PSE S.A. (the Polish TSO). The amended methodology was approved by ACER in October 2021.

The Electricity Balancing Regulation

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

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.

Slovenia and West Denmark joined the common procurement in the Frequency Containment Reserve (FCR) Cooperation in mid-January 2021, while ČEPS joined the FCR Cooperation as an observer in November 2021.

The European balancing platforms

The European platform for replacement reserves – Trans-European Replacement Reserves Exchange (TERRE) – was made operational in January 2020, and six⁹ TSOs were operational as of April 2021 (Art. 19.5 EB Reg.).

The European platform for imbalance netting – International Grid Control Cooperation (IGCC): in 2021, there were twenty¹⁰ operational members that continued the implementation of the platform (Art. 22.5 EB Reg.); among these, ADMIE became operational in June 2021 and Transelectrica in December 2021. The platform was officially established in June 2021.

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): the implementation of the platforms continued throughout 2021 (Art. 20.6 and 21.6 EB Reg.).

All TSOs and ENTSO-E Methodologies

A public consultation was conducted between June and August 2021 on an amendment of the Pricing Methodology to introduce a significantly lower maximum price for balancing energy than the one set by ACER in the initially approved Pricing Methodology. A public consultation was also conducted on the proposal for the amendment of the mFRR, aFRR and IN Implementation Framework between October and December 2021.

In addition, ENTSOE organised a public consultation on the RCC task facilitating the regional procurement of balancing capacity and for the RCC task of regional sizing of reserve capacity and facilitation of the regional procurement of balancing capacity between December 2021 and January 2022. Furthermore, an all TSOs implementation impact assessment for the Methodology for a Co-Optimised Allocation Process of Cross-Zonal Capacity for the Exchange of Balancing Capacity or Sharing of Reserves was published on 17 December 2021.

Regional Methodologies

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

Further EB Reg. Regional deliverables in 2021

Implementation monitoring

In June 2021, All TSOs published the Electricity Balancing Cost Report 2020, in accordance with Art. 23(1) of EB Regulation, which includes costs (for 2020) and forecasts (for 2021) of establishing, amending and operating the European balancing energy platforms for the exchange of balancing energy from frequency restoration reserves and replacement reserves and for the imbalance netting process. Moreover, in accordance with Art. 59 of EB Regulation, the implementation of the EB Regulation is also part of the content of the Market Report 2021, covering European platforms for the exchange of balancing energy, cross-zonal capacity allocation and balancing capacity cooperation, imbalance settlement harmonisation and the market development indicators 2020.

Transparency of capacity calculation by TSOs

The CEP introduces a new regulatory framework for CZC. 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 the operational security limits of internal and cross-zonal critical network elements and considering contingencies).

Bidding zone Technical Report

The ENTSO-E Bidding Zone Technical Report 2021 report provides transparent and factual information for the whole EU on congestions, flows scheduled outside the market and the costs of these congestions. It also provides indications on the likely evolution of congestions over the next ten years. The ENTSO-E Bidding Zone Technical Report is an important input to an assessment of the efficiency of the current bidding zone configuration performed by ACER every three years. What is new in the 2021 edition is that it also includes the CEP’s 70 % minimum capacity assessment.

Capacity Mechanisms

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 legislation 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 September 2021, ENTSO-E published the ITC Transit Losses Data Report 2020.

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).