A regulatory experiment is about to be played out in the European electricity market. A minimum capacity threshold of 75% on each bidding zone border is now supported by the European Parliament and the European Council in the Clean Energy Package trilogues. There is no clear definition of the 75% threshold, and no assessment of the consequences has been done. This can jeopardize our market model. Such a threshold will not solve one of the underlying issues which is to build efficient grids, especially from North to South in continental Europe. Forcing an artificial threshold will push the limit for security of supply and substantially increase re-dispatch cost payed by the consumers. This is the message from ENTSO-E, the organization of European Transmission System Operators.
ENTSO-E acknowledges fully the challenge with reduced capacities on vital borders in Europe. We want to increase the capacity on the borders and use the full potential of the network respecting security of supply. But before any new legislation requirements are put forward on capacity allocation, ENTSO-E strongly recommends continuing implementing the Third Energy Package and the relevant network codes, and here in particular CACM, the Capacity Allocation and Congestion Management guideline. Europe is in the middle of this implementation process. TSOs are now working on regional capacity calculation methodologies and setting up five regional coordination centers to improve these processes across European borders developing new sets of IT tools and platforms. The proposed regional capacity calculation methodologies are currently being scrutinized by NRAs, making sure that all concerns on current capacity calculation process are addressed. After implementation, remaining issues should be properly addressed with adequate and proportional measures.
In addition to implementing the CACM the TSOs have decided to develop an ambitious strategy on transparency. The TSOs will take steps to go beyond the legal requirements, improve publication and data quality and better explain how capacities are calculated and optimised. If capacities need to be reduced, transparent explanation of the reasons and measures taken to mitigate contingencies will be presented.
Allocating capacity on borders is an integral part of network operations, seeking to meet and balance a wide range of criteria in order to maximize value to European society. Forcing a minimum capacity of 75% on borders into this equation will do more harm than good. A fixed percentage will be counterproductive as it will reduce incentives to invest in interconnectors, price signals will be weakened and TSO operations will be more costly, adding the cost to the bill of the consumers.
The existing regulation has been thoroughly discussed and assessed. We urge the European Parliament, the European Council and the European Commission to reconsider articles 13 and 14 and come back to provisions of the CACM, while TSOs and ENTSO-E will take steps to go beyond legal requirements on transparency.