Electricity market design – Europex positions on the Electricity Regulation, Electricity Directive and the ACER Regulation

Brussels, 11 October 2018 | The trilogue negotiations for the electricity market design files (the draft recasts of the Electricity Regulation, Electricity Directive and ACER Regulation) are well under way. At this stage it is crucial that all parties can agree on workable solutions grounded in market realities. Overall, this is an opportunity to ensure that wholesale markets are efficient, accessible and are ready to meet the challenges of the energy transition. This paper raises five aspects emerging from the negotiations so far which we believe are necessary to address or maintain. A comparison of the positions of the Commission, Parliament and Council, as well as our amendment proposals can be found in annex.

Electricity Regulation

1. Regulatory changes must also consider the impact on long-term markets: Article 3(1); Article 8

Long-term derivatives markets are vital to allow electricity market participants to effectively manage their risk. While short-term markets allow for physical optimisation, long-term futures markets provide important opportunities to secure prices and hedge positions. There is close interplay between these physical and financial markets. Europex therefore welcomes the recognition in the compromise proposal that any regulatory changes must take into account effects on both short-term and long-term derivatives markets and products.

2. Definition of imbalance price areas: Article 5(6)a

We support the compromise text which modifies the European Commission’s definition of bidding zone and highlights that imbalance price areas shall be equal to bidding zones, and not the other way round. This wording should be preserved.

3. No need to set minimum bid-sizes on day-ahead and intraday markets: Art. 7(3)

There is no reason to stipulate the minimum or, for that matter, maximum size of bids in day- ahead or intraday markets. Currently at least ranges between 0.1 and 1.0 MWh/h are used. The minimum limits should be freely adaptable based on the evolution of the markets, while respecting any technical limits that may apply to handle the price formation.

Electricity Directive

4. Definition of ‘interconnector’: Art. 2(33)

The Presidency’s compromise proposal on the definition of an ‘interconnector’ excludes equipment within a Member State. It also defines an interconnector as equipment that only links transmission systems. This definition raises concerns as to how existing interconnectors within Member States will be impacted (for example multiple zones in Sweden and Italy or the interconnector between Great Britain and Northern Ireland). This definition also introduces uncertainty around any changes to bidding zones borders which differ from Member State borders. Configurations which cover more than one Member State, for example the Germany-Luxembourg bidding zone, must also be considered in any definition. For these reasons, we support the definition identified in the Council’s general approach.

ACER Regulation

5. Network codes and guidelines – adopting terms and conditions or methodologies: Art. 5(2)

Any revision by ACER of terms and conditions or methodologies developed according to the Network Codes and Guidelines should be conditional on a consultation of all affected stakeholders having been carried out. It is also vital to avoid the creation of parallel processes when adopting terms and conditions or methodologies. This Article should therefore ensure consistency with the processes currently in place for the network codes and guidelines, and in particular the Electricity Balancing and the CACM Guidelines.