S.12. Winter Package


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EU bodies consider supporting 75% minimum capacity threshold for bidding zones

Thursday, July 5, 2018

During the latest trilogues on the files of the “Clean Energy for All Europeans” Package, the EP’s Committee on Industry, Research and Energy (ITRE) and the Council of the EU considered supporting a minimum capacity allocation threshold of 75% on all electricity market bidding zone borders by 2025, in accordance with the framework guidelines proposed under EC Regulation (EU) 1222/2015, which includes those on Capacity Allocation and Congestion Management (CACM).

According to ITRE’s and Council positions on the proposed Regulation, capacity mechanisms should be used only as a last resort to ensure a level-playing field within the European market for electricity and that prices are based on competition. The trilogue negotiators further emphasised that bidding zones should be stable over time and as large as possible, taking into account system congestion.

The EU bodies’ support for the proposal was met with considerable criticism from ENTSO-E, the European Federation of Energy Traders, Eurelectric, and the Market Parties Platform who issued a joint statement suggesting that the decision amounts to “a regulatory experiment played out in the European electricity market”, and recommending amendments to articles 13 and 14 of the proposal which address definition of bidding zones and principles of capacity allocation and congestion management, respectively. TSOs are still in the process of implementing the CACM network code, which is part of the Third Energy Package (Regulation (EC) No 714/2009).

Optimal use of the available transmission infrastructure is seen as a general objective of capacity calculation and the definition of bidding zones. TSOs are currently working to establish five regional coordination centres (ROCs) to optimise the processes involved in calculating capacity allocation, developing new methodologies, data tools and transparency measures to this  end. National Regulatory Authorities (NRAs) are also in the process of scrutinising preliminary proposals.

Critics of the decision argue that, while policy-makers may mean well, the uniform implementation of such an ambitious threshold is likely to “do more harm than good” and that relying on an arbitrary “one-size fits all approach for all EU borders would ignore the value created by cross-border trade, the reality of the system and the specificities of regional and national markets”.

Moreover, they argue that a fixed capacity threshold percentage will reduce incentives for investment in interconnectors, weaken price signals thus making operations for TSOs more costly, and ultimately add to electricity bills for consumers.