Bidding Zone Review

What is Bidding Zone Review (BZR)?

According to Commission Regulation (EU) 2015/1222 (CACM), bidding zones (BZs) should be defined in such a manner as to ensure efficient congestion management and overall market efficiency. In addition, according to the Commission Regulation (EU) 2019/943 (Electricity Regulation under the Clean Energy Package), bidding zone borders (BZBs) shall be based on long-term, structural congestions in the transmission network. BZs shall not contain such structural congestions unless they have no impact on neighbouring BZs, or unless as a temporary exemption, their impact on neighbouring BZs is mitigated with remedial actions and those structural congestions do not lead to reductions in cross-zonal trading capacity in accordance with the requirements of Article 16 of the Electricity Regulation.

Following the implementation of Commission Regulation (EU) 2019/943 (Electricity Regulation under the Clean Energy Package), all TSOs have to conduct a common study on alternative BZ configurations: the so-called bidding zone review (BZR). It is a 12-month process with the purpose to increase economic efficiency and cross-zonal trading, while maintaining security of supply in the EU.

History of the BZR Process

Article 14 of the Electricity Regulation triggers the BZR process; however, the actions prior to and after the review are outlined below:

  • Action 1 - TSOs’ proposal for the methodology, assumptions and alternative BZ configurations: On behalf of the TSOs, ENTSO-E submitted a proposal concerning the methodology and assumptions to be applied in the BZR process and for alternative bidding zone configurations to be assessed by the relevant National Regulatory Authorities (NRAs) for approval, pursuant to Article 14(5) of Regulation (EU) 2019/943.

  • Action 2 - NRAs’ decision: On 17 December 2019, all NRAs informed all TSOs by letter that they considered the initial TSOs’ proposal incomplete due to the absence of alternative configurations in some bidding zone review regions and requested all TSOs to complete the proposal with proper alternative bidding zone configurations within two months.

    On 18 February 2020, all TSOs have resubmitted the updated proposal: The changes to the methodology include an amended wording related to the years of the scenarios to be used for the Bidding Zone Review. The updated proposal on bidding zone configurations contains the same alternative bidding zone configurations as initially submitted with the exception of the Nordic bidding zone review region which is proposing an additional alternative configuration. The updated BZ package is available here

    Since the NRAs did not agree to approve the proposal, the decision on the methodology, assumptions, and alternative bidding zone configurations to be considered in the BZR process was transferred to the EU Agency for the Cooperation of Energy Regulators (ACER) on 13th July 2020.

  • Action 3 - ACER decision No 29/2020: On 24th November 2020, ACER issued its decision on the methodology and assumptions that are to be used in the BZR process and the alternative BZ configurations to be considered (hereafter: ACER Decision on the BZR Methodology). Additionally, Annex II of the ACER Decision on the BZR Methodology includes a request for TSOs to deliver the results of a European Locational Marginal Pricing (LMP) simulation pursuant to Article 11 of the methodology. The results are intended as input for ACER to define the alternative bidding zone configurations for the BZR process. In addition to Annex II, the BZR Methodology also contains annexes I, Ia, Ib and III

  • Action 4 - LMP simulation: TSOs of Continental Europe and Ireland as well as Nordic Bidding Zone Review Regions (BZRRs) performed the LMP study between 24th November 2020 and 4th March 2022. The results of the study are available in the ENTSO-E LMP Report, available on the ENTSO-E website here

  • Action 5 - ACER’s decision on alternative BZ configurations: The final ACER decision on the alternative BZ configurations is to be adopted by 20th July 2022.

  • Action 6 - BZR: After the final ACER decision is published on 20th July 2022, the formal BZR process starts, and takes 12 months. During the 12-month BZR process, alternative BZ configurations are assessed based on a wide variety of indicators including overall economic efficiency and social welfare, market liquidity, transition costs, and the ability to maintain operational security of the grid.

Main deliverables of the BZR

The main deliverables of the BZR study are:

  • a final report with an assessment of 22 indicators, and
  • a joint recommendation to the governments of the involved Member States for the future configuration.

Decision on adoption of alternative BZ configuration: Following the 12-month BZR process under Article 14(8) of Electricity Regulation, those Member States that have opted to amend the BZ configuration, shall reach a unanimous decision to maintain or amend the BZs in 6 months. In the case the Member States cannot reach a unanimous decision, the European Commission, as the last resort, in consultation with ACER shall adopt a decision in 6 months.

Bidding Zone Review process in a nutshell

The Bidding Zone Review is performed as follows:

  • at an all-TSO level, for the execution of pan-EU studies, general coordination, and stakeholder management, and
  • at regional level, for performing modelling activities, performed by Bidding Zone Review Regions (BZRRs).

This setup was chosen to reduce model complexity and to be able to consider regional specificities and sensitivities, while involving all TSOs.

BZR map

For affected BZRRs, several alternative BZ configurations have to be studied. The target year, which is to be investigated, is the year 2025.

In total, 22 indicators grouped into 4 categories have to be assessed in the BZR, as shown below:

Network security

  • 1. Operational security
  • 2. Security of supply
  • 3. Uncertainty in cross-zonal capacity calculation

Market efficiency

  • 4. Economic efficiency
  • 5. Firmness costs
  • 6. Market liquidity & transaction costs
  • 7. Market concentration & market power
  • 8. Effective competition
  • 9. Price signals for building infrastructure
  • 10. Accuracy & robustness of price signals
  • 11. Transition costs
  • 12. Infrastructure costs
  • 13. Market outcomes in comparison to corrective measures
  • 14. Adverse effects of internal transactions on other BZs
  • 15. Impact on operation and efficiency of balancing

Stability & robustness of BZs

  • 16. Stability & robustness of price signals over time
  • 17. Consistency across capacity calculation time frames
  • 18. Assignment of generation and load units to BZs
  • 19. Location and frequency of congestion, market and grid

Energy transition

  • 20. Short-term effects on carbon emissions
  • 21. Short-term effects on RES integration
  • 22. Long-term effects on low-carbon investments

With the output of these 22 indicators, the TSOs will conduct the following evaluation process as established by the BZR Methodology, in order to finally come up with a recommendation for each region on whether to keep the current bidding zone configuration or whether to adjust it.

The steps, as defined in the BZR Methodology, for assessing the output of the 22 indicators, are explained in the figure below:

BZR map

Alternative BZ configurations to be investigated

- ACER content comes here -

Data and Grid Model

Timeline for the BZR

BZR map

*The start of the BZR is triggered by ACER; expected date is 20th July 2022. Once the TSOs receive the official date, the timeline will be updated with exact dates.

Stakeholder interaction

Stakeholder expertise is essential for any discussion of a fundamental market design element such as the BZ configurations. ENTSO-E and the TSOs strive to involve a wide range of stakeholders from the start of the BZR process, with substantial consultation during the review; this includes the Bidding Zone Review Consultative Group (BZR CG), Market European Stakeholder Committee (MESC) as well as public workshops and consultations.

Bidding Zone Review Consultative Group

ENTSO-E, on behalf of all TSOs, created the BZR CG to serve as a platform for relevant stakeholders to interact with ENTSO-E and its members on achieving the objectives of the BZR. The BZR CG does not replace the obligation to organise a public consultation on the BZR but is merely an addition to facilitate additional exchanges with relevant stakeholders.

The BZR CG is composed of representatives from 17 stakeholders, including: European market parties’ associations, national market parties’ associations from BZs of active BZRRs, as well as European research institutes and think-tanks.

The BZR CG was created on the basis of Terms of Reference drafted by ENTSO-E and the TSOs.

Market European Stakeholder Committee

The European Stakeholder Committees (ESCs) have been established to inform and consult stakeholders on the implementation of the European network codes and guidelines. There are three different ESCs, each covering a family of network codes. The Market European Stakeholder Committee (MESC) is chaired by ACER, co-organised by ENTSO-E and the EC is an observer. The MESC participants are the key stakeholders involved in the implementation of European market network codes and guidelines.

ENTSO-E and the TSOs aim to provide regular updates to the MESC participants during the BZR process.

More information on MESC can be found here

Public Workshops

ENTSO-E and the TSOs will be organising regular public workshops with a wide range of stakeholders to provide update on the BZR process.

Public Consultations

According to the BZR Methodology, no later than six months after the start of the BZR, TSOs of a BZRR shall hold a public consultation regarding at least the following aspects:

  • the impacts of alternative BZ configurations on at least the following criteria: ‘Market liquidity and transaction costs’ and ‘Transition costs’;
  • possible measures to mitigate negative impacts of specific alternative BZ configurations with regard to at least the criteria listed in point 4(a) of this article; and
  • the identification of practical considerations which may need to be considered in case of a possible BZ configuration change as set forth in Article 14(10) of the Electricity Regulation, including possible timescales for implementation of alternative BZ configurations.

Once the public consultation is launched, the link to the provided.

Events

To make the information accessible and transparent for stakeholders, key information such as presentation materials, recordings, stakeholder questions & feedbacks is published on this webpage.

Latest developments:
  • 1 October 2019: All TSOs’ proposal for the methodology and assumptions that are to be used in the BZR process and for the alternative BZ configurations
  • 17 December 2019: NRAs communicate a letter to the TSOs on the initial TSOs’ proposal:
    • NRAs informed TSOs the proposal is incomplete due to the absence of alternative configurations in some bidding zone review regions and requested all TSOs to complete the proposal with proper alternative bidding zone configurations within two months.
  • 18 February 2020: BZR methodology, assumptions, and configurations – TSOs proposal resubmitted to NRAs
  • 13 July 2020: Decision on the BZR Methodology transferred to ACER

  • 24 November 2020: ACER Decision on the BZR Methodology
  • 4 March 2022: TSOs submit results of LMP simulation to ACER
Meetings:
Public consultations:
  • Day Month Year: Public Consultation xxx
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