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

2. ACER
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

3. ENTSO-E
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)

4. Framework Guideline
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.

5. Network codes
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

6. Basic timeline COMITOLOGY 6 Months 12 Months 3 Months
Agency prepares Framework Guidelines
ENTSO prepares network codes
Agency reviews network codes
EC requests Agency to submit framework guidelines
EC requests ENTSO to submit network code
ENTSO submits network code to Agency
Agency submits network code to EC when satisfied, recommending approval via Comitology
EC defines priorities for network codes

7. 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)

8. 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)

9. Areas for network codes
Network security and reliability rules
Network connection rules
Third-party access rules
Data exchange and settlement rules
Interoperability rules
Operational procedures in emergency
Capacity allocation and congestion management rules
Rules for trading
Transparency rules
Balancing rules
Rules regarding harmonised transmission tariff structures, ITC
Energy efficiency regarding electricity networks
Grid connection

10. Project timeline
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

11. Process Sept 2011 - January 2012 February 2012 - June 2012
Identification of problems
Expert Group
Identification of objectives
Identification / assessment of policy options
Sept January 2012
Workshop to get a first feedback from stakeholders
Selection of options
Draft Framework Guideline
February June 2012
Public consultation
Finalisation of the FG

12. Role of the Ad-Hoc Expert Group
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)

13. Academics / consultants
Ad-Hoc Expert Group
Industry
Javier Alonso Perez
Christopher Proudfoot
Nigel T.Hawkins
Susane Dornick
William Chan (consumer side)
TSOs
José Ignacio de la Fuente
Yves Harmand
Emeline Spire
Lasse Sundahl
Academics / consultants
Goran Strbac
Gerard Doorman
Rudi Hakvoort
Christian Hewicker

14. 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

15. Your opinion on these objectives?
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?

16. 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

17. Scope: topics and options
1. No EU action
No requirement to enable cross-border exchanges between control areas
2. No exchanges of reserves
No transmission capacity reservation and no exchange of reserves
Balancing reserves
3. Intermediate step
Harmonisation of minimum-required balancing variables allowing X-border
exchanges of balancing energy (GCT, technical characteristics, etc.)
4. Full integration
Common provision of automatic reserves
1. No EU action
2. TSO-BSP model
Balancing energy
3. TSO-TSO without CMO model
4. TSO-TSO with CMO
1. No requirements
Balancing responsibility & imbalance settlement
2. Minimum harmonisation
3. High harmonisation

18. Input to the discussion
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?

19. Input to the discussion
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. 

20. 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
Transitional arrangements (TSO-TSO w/o CMO)?
How to ensure cross-regional harmonization?

21. 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?

22. Balancing energy – harmonization issues
Transitional Target Model
Final
Target Model
Gate-closure times
Essential vs desired?
Market time-unit (1h vs. 15min)
Imbalance pricing and settlement
Balance responsibility
Merging balancing and redispatching markets
Mandatory participation
Netting of Area Control Error (ACE)

23. Input to the discussion
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?  

24. Input to the discussion
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?

25. Balancing reserve – harmonization issues
Transitional Target Model
Final
Target Model
Possibility for reservation of XB capacities
Essential vs desired?
Reserve products (within FG SO)
Common reserve dimensioning and requirements
Common procurement
Procurement time-frames
Others?

26. Input to the discussion
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?

27. Thank you for your attention
Is it the right ACER’s address?