Harmonised cross-border allocation rules and procedures

Rafał Gawin Department of Markets Development and Consumer Issues Energy Regulatory Office, Poland

ERRA Virtual Meeting, 31 January 2017 Outline

 EC Mini Fora and Electricity Regional Initiatives – cooperation on voluntary basis

 Approval of capacity allocation methods, request for ACER’s opinion – formal proceedings in CEE region

 Cross-border capacity allocation on SwePol Link and LitPol Link Regional cooperation – Mini Fora and Regional Initiatives 2003 – 2004

 Sub-regional discussions aimed to coordinate the cross-border capacity allocation on Polish synchronous borders (DE, CZ, SK) 2005

 Regional Mini Fora launched in the beginning of 2005 - initiative of the European Commission aimed to speed up the development of the regional electricity markets in Europe

 Central Eastern Europe (CEE) Mini Forum decided to follow existing approaches in the region (some level of coordination) and to speed up the work on fully coordinated congestion management mechanism based on real flows in the grid (flow based mechanism) 2006 - ongoing

 Electricity Regional Initiatives (ERIs) launched in March 2006

 Continuation of work initiated by Regional Mini Fora 2015 – ongoing

 Cooperation within the framework established by network codes e.g. CACM GL, FCA GL („all NRAs decisions”) Electricity Regional Initiatives (ERIs)

Northern Europe Baltic Region Electricity Regional Initiatives (ERIs)

FLORENCE FORUM

EU COMMISSION Overall forum for discussing progress in regional initiatives and pan-European consistency

ERGEG (RCC) MEMBER STATES

Comprises regulators from the region; Input into identifying and solving market Has autonomy, adopts its own decision making integration issues – e.g. legislative proposals, process ; chairs Stakeholders Group and Member State to Member State interface Implementation Groups

IMPLEMENTATION GROUP (IG) STAKEHOLDERS GROUP (SG) (Based on mini-fora) Includes TSOs, Market Operators (where Wide participation including market players appropriate) Each SG chaired by RCC and used for consultation This is the ‘do-er’ for each Regional Initiative Chaired by RCC

5 Cross-border capacity allocation – Central Eastern Europe (CEE) 2003

 Preliminary discussion among 4 TSOs: PL, DE, CZ and SK 2004

 Unilateral (not coordinated) monthly auctions conducted on Polish borders with DE, CZ and SK; problem of allocating by DE and CZ higher capacities than available in Polish power system (due to inter- dependency of available capacity on different Polish borders and due to loop flows) 2005

 Coordinated auctions for yearly, monthly and daily cross-border capacity allocation (between borders CZ, DE, PL) 2006

 Two more TSOs – SK (SEPS) and DE (E.ON Netz) – joined Cross-border capacity allocation rules – scope of harmonisation Joint Auction Office (JAO)

 ONE-STOP-SHOP solution - common conditions and terms for bidding and settlement processes

 JAO responsible for cross-border capacity allocation

 TSOs responsible for calculation of available cross-border capacity and acceptance of auction results

Auction Rules

 Methods for acceptance of bids (capacity allocation among bidders) and determination of auction price

 Harmonised deadlines, settlement rules, collaterals

 Firmness regime, compensation rules

 List of borders on which cross-border capacities are allocated

 Still regional/country specific annexes Approval of cross-border auction rules

2011

 Directive 2009/72 („3rd Package”) – NRAs shall be responsible for fixing or approving … at least the methodologies used to calculate or establish the terms and conditions for access to cross-border infrastructures, including the procedures for the allocation of capacity and congestion management

 No explicit requirement for approval of capacity calculation methods – ongoing discussion in CEE region on how to implement Flow Based Method

 Level of loop flows increasing year by year

2013 (September)

 Implementation of 3rd Package into Polish legal framework (new competence of ERO regarding approval of capacity allocation methods)

 Decision to request ACER to issue opinion regarding compliance of Auction Rules (explicit auctions) used by CEE TSOs with EU regulations ERO’s Request for ACER’s opinion paper

Reasons of submission of the request for opinion

 doubts during the national proceeding on the approval of cross-border capacity allocation methods whether CAO’s Auction Rules currently used in the CEE region are compliant with Regulation No 714/2009 (Reg.) and the annexed Guidelines (GLs)

 risk to approve the cross-b0rder capacity allocation methods which are not compliant with Regulation No 714/2009 (Reg.) and the annexed Guidelines (GLs) What the opinion should clarify?

 whether cross-border transmission capacity has to be allocated on every border between Member States in the region, and in particular on the border between Austria and Germany, in light of presented facts and legal provisions

 as a consequence of the above-mentioned, the compliance of the methods of allocation of cross-border transmission capacity prepared by CAO („Auction rules”) and currently used by TSOs in the CEE region with the provisions of the Guidelines annexed to Regulation No 714/2009 and with the provisions of Regulation No 714/2009 itself ACER’s opinion paper (09.2015)

Main conclusions

 DE-AT interconnection needs to be considered as usually unable to accommodate all physical flows resulting from international trade requested by market participants i.e. as usually and structurally congested

 existing mitigation measures (e.g. virtual phase shifter) and currently investigated ones cannot replace transparent, non-discriminatory and market-based congestion management procedures which give efficient economic signals to market participants and the TSOs

 implementation of capacity allocation on DE-AT border is required pursuant to EU regulations – this border should form a constituent part of the CEE region for the application of coordinated capacity calculation, optimization of allocation and secure operation of the network

 current Auctions Rules approved by some NRAs from CEE region do not comply with Art. 16(1) of the Regulation 714/2009 and points 1.2, 1.4 and 3.1 of Annex I to this Regulation New legal framework – network codes (CACM GL, FCA GL)

Relevant processes

 Capacity Calculation Regions (CCRs) – definition of geographical scope and borders on which cross-border capacity shall be calculated (decision already issued by ACER on 17.11.2016)

 Harmonised allocation rules (HAR) related to forward capacity allocation – subject to approval by all NRAs

Interdependence of processes

 Explicit reference to CCRs in FCA GL (HAR on borders defined in CCRs decision)

 No explicit reference to CCRs for short-term capacity allocations (daily, intra-day) Capacity allocation – SwePol Link, LitPol Link

SwePol Link

 „Old merchant line” – originally owned by entities other than TSOs

 Very long discussion among NRAs, TSOs, owners and capacity holders on possible implementation of market-based capacity allocation rules

 Implicit day-ahead auctions (market coupling) based on PCR/MRC solution implemented in December 2010

LitPol Link

 New interconnector originally owned by TSOs – legal obligation to implemented market-based capacity allocation rules

 Implicit day-ahead auctions (market coupling) based on PCR/MRC solution implemented in December 2015 Thank you for your attention

ERRA Virtual Meeting, 31 January 2017