Electricity Balancing Framework Guidelines ACER Workshop Ljubljana, 24 October 2011.

Electricity Balancing Framework Guidelines

ACER Workshop Ljubljana, 24 October 2011

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.Regulation (EC) No 713/2009 establishes an Agency for the Cooperation of Energy Regulators (ACER)

» A community body with legal personality

» Purpose: “[…] to assist the regulatory authorities […] in exercising at Community level the regulatory tasks [...] and to coordinate their actions”

» Fully operational since March 2011

ACER

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.Regulation (EC) No 714/2009 establishes the European Network of Transmission System Operators for Electricity (ENTSO-E)

» “All transmission system operators shall cooperate at Community level through the ENTSO for Electricity, in order to promote the completion and functioning of the internal market in electricity and cross-border trade and to ensure the optimal management, coordinated operation and sound technical evolution of the European electricity transmission network.” (Article 4)

ENTSO-E

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. The Commission shall request ACER to develop a non-binding framework guideline

. Framework guideline to set out clear and objective principles for the development of network codes

. Each framework guideline shall contribute to » non-discrimination » effective competition » efficient functioning of the market

. After the Commission’s request, ACER has 6 months to prepare the framework guideline. The EC may extend that period upon a reasoned request from ACER.

Framework Guideline

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. The Commission shall request the ENTSO-E to submit a network code (which is in line with the relevant framework guideline) to ACER within12 months

. The network codes shall be developed for cross-border network issues and market integration issues, and shall be without prejudice to the Member States’ right to establish national network codes which do not affect cross-border trade

. The network codes are made legally binding through the comitology process

Network codes

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EC defines

priorities for

network codes

6 Months

EC requests Agency to

submit framework guidelines

Agency prepares Framework Guidelines

ENTSO prepares network codes

12 Months

EC requests ENTSO to

submit network code

3 Months

Agency reviews network

codes

CO

MIT

OL

OG

Y

ENTSO submits

network code to Agency

Agency submits

network code to EC when satisfied,

recommending approval via Comitology

Basic timeline

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Process description

. Framework Guidelines (FG) − ACER

. Invitation from the Commission to draft FG

. Public consultation

. Adoption of the FG / Submission to the Commission (6 months)

. Network Codes (NC) − ENTSO-E

. Commission request

. ENTSO-E prepare the NC in line with the FG (12 months)

. ACER reasoned opinion on NC (3 months)

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State of play

.ACER deliverables on FG (2011 Work Programme)

. Electricity Grid Connection (finished)

. Capacity Allocation and Congestion Management (finished)

. System Operation (on-going)

. Balancing (to be delivered in mid 2012)

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Areas for network codes

Grid connection

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. April 2011: launch of the balancing framework guideline project – setting up ACER drafting team (NRAs)

. July / August 2011: publication of an open letter and creation of the expert group

. 24 October 2011: public workshop to get feedback from stakeholders

. December / January 2012: finalisation of the draft IIA and FG and approval procedures within ACER

. February – March 2012: public consultation on draft IIA and FG

. June 2012: final IA and FG and approval procedures within ACER

Project timeline

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Identification of problems

Identification of objectives

Expert Group

Identification / assessment of policy options

Workshop to get a first

feedback from stakeholdersSelection of

options

Draft Framework Guideline

Public consultation

Finalisation of the FG

Sept 2011 - January 2012

February 2012 - June 2012

Process

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. The Impact Assessment procedure envisages the possibility to use ad hoc expert groups

. The goal of the group is to provide expert support to ACER on developing input for Framework Guidelines

. Experts are invited ad personam, not representing companies, but providing their expertise

. The expert group operates in accordance with the Chatham House rules, but also takes into account the need for a high level of transparency (minutes in a summary form to be publicly available)

Role of the Ad-Hoc Expert Group

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Ad-Hoc Expert Group

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Rationale for the drafting of the FG

. Very few XB exchanges currently in place

. A significant amount of remaining capacities

. Highly concentrated markets

. More potential to exercise market power

. Increased and increasing share of intermittent RES (wind)

. Increasing integration of DA and ID markets

. Low participation of demand response

Aim of the FG

Provide an adequate framework to foster an effective balancing markets’ integration

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Policy objectives

. Guarantee / enhance short-term operational security» Does the proposed option make short-term operational

security lower, equal or higher than it currently is? » Does the proposed option improve market signals for

investments and security of supply?

. Competition and economic efficiency» Does the proposed option improve competition?» Are the overall balancing costs reduced? To take into

account potential side-effects on the market, the overall social welfare should be considered.

. Integration of variable generation» Does the proposed option facilitate integration of variable

generation and encourage renewable BRPs to be in balance?

» Does the proposed option limit or increase entry barriers for variable generation?

Your opinion on these objectives?

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Evaluation criteria

. Key criteria:

» Effectiveness (achieve the objectives)

» Time of implementation (pragmatically feasible, when?)

» Efficiency (least cost and highest benefit)

» Coherency (trade-offs across the economic, social and environmental domain)

» Sustainability (adaptability in case of major external changes)

Criteria Option 1 Option 2

Effectiveness

Security of supply

Competition and

economic

Renewables

Time of implementation

Efficiency

Coherency

Sustainability

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Scope: topics and options

Balancing reserves

Balancing energy

1. No EU action

2. No exchanges of reserves

Common provision of automatic reserves

No transmission capacity reservation and no exchange of reserves

No requirement to enable cross-border exchanges between control areas

3. Intermediate step

4. Full integration

3. TSO-TSO without CMO model

4. TSO-TSO with CMO

2. TSO-BSP model

1. No EU action

Balancing responsibility &

imbalance settlement

2. Minimum harmonisation

3. High harmonisation

1. No requirements

Harmonisation of minimum-required balancing variables allowing X-border exchanges of balancing energy (GCT, technical characteristics, etc.)

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. It is widely considered that one of the main challenges of introducing an EU-wide cross border balancing mechanism is the wide variety of existing arrangements adopted at national level.

» Shall the Balancing FG define a common target model, as it is done for CACM? Are interim solutions acceptable, allowing for a step-by-step approach?

» Should the Balancing FG describe the roles and responsibilities of BRPs?

» What level of harmonization is required to allow for an efficient exchange of balancing resources to be introduced?

Input to the discussion

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.Existing balancing rules often assume that only generation sources can provide balancing energy and capacity. .Demand response is essential to achieve higher energy efficiency..How to achieve higher participation of demand response in electricity balancing?

» The target model should enable participation of demand in the balancing market on equal grounds.

» The minimum standards for participating in the balancing market should not hamper participation of demand response.


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Balancing energy – Target model

. Should the FG define the EU target model?

. What should be the final target model?

1. TSO-TSO model without Common Merit Order list

» Implementation deadline?

2. TSO-TSO model with Common Merit Order list

» Implementation deadline?

» Transitional arrangements (TSO-TSO w/o CMO)?

» How to ensure cross-regional harmonization?

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Market & Settlement

.Should the FG define the EU target model for how the

TSO “sell” balancing energy?

.How should the final target model look like:

»No requirements?

»Minimum harmonisation?

»High / full harmonisation?

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Balancing energy – harmonization issues

Harmonization Transitional Target Model

Final Target Model

Gate-closure timesEssential vs

desired?Essential vs

desired?

Market time-unit (1h vs. 15min)Essential vs


desired?

Imbalance pricing and settlementEssential vs


desired?

Balance responsibilityEssential vs


desired?

Merging balancing and redispatching markets

Essential vs desired?


Mandatory participationEssential vs


desired?

Netting of Area Control Error (ACE)Essential vs


desired?

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. In the case of cross border exchange of reserves, transmission capacity may need to be reserved. Recent ENTSO-E’s position paper advises to leave the possibility to reserve interconnection capacity open in case an increase of social welfare is demonstrated.

» Should the FG foresee the possibility to reserve interconnection capacity (subtracting it from day ahead or intraday allocations)?

» Is it feasible to produce reliable cost/benefit analysis to demonstrate the gain of social welfare?

» With balancing being linked to system security, how will TSOs guarantee that these reserved transmission capacities will be fully firm?


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. There are currently different products are used to balance the system, some systems rely mainly on secondary regulation (automatically activated reserve), while others mainly on tertiary (manually activated reserves).

» Should the scope of this FG cover exchanges of balancing energy only or reserves (e.g. primary, secondary, tertiary) as well?


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Balancing reserve – harmonization issues

Harmonization Transitional Target Model

Final Target Model

Possibility for reservation of XB capacitiesEssential vs


desired?

Reserve products (within FG SO)Essential vs


desired?

Common reserve dimensioning and requirements



Common procurementEssential vs


desired?

Procurement time-framesEssential vs


desired?

Others?

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.Reserve capacity is procured by European TSOs in many different ways: on the basis of long term contracts (up to 3 years) or a few hours before real time on the basis of bids and offers submitted by the BSPs.

» Are the different procurement timeframes constituting an obstacle for the integration process? Can they distort the market operation once the resources are exchanged cross border?


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Thank you for your attention

www.acer.europa.eu

Electricity Balancing Framework Guidelines ACER Workshop Ljubljana, 24 October 2011.

Documents

network codes nc entso

network security

acer slide

development of network

national network codes

framework guideline

framework guidelines

entsoe slide