Congestion management scheme on the bidding zone
2017-07-07
On 15 May 2017, the national regulatory authorities (NRAs) of Germany[1] (Bundesnetzagentur) and Austria[2] (E-Control) published information regarding conclusion a bilateral agreement on the introduction of a congestion management scheme on the bidding zone border "Germany/Luxembourg - Austria". This scheme will be introduced as from 1 October 2018 and at least 4.9 GW will be offered to market participants as long-term capacity.
Additional cross-border capacity will be offered for short-term trade i.e. Central-West Region (CWE) Flow Based Market Coupling. According to E-Control press release "Poland and the Czech Republic also called for splitting up the German-Austrian electricity market, which they hope will ease congestions in their electricity transmission systems".
Polish Confederation Lewiatan finds the above mentioned information very surprising and is very concerned about the possible results of implementation of bilaterally agreed measures.
Polish Confederation Lewiatan is an umbrella organization of 60 sector and regional associations of employers and represents approximately 4,000 large, medium-sized and small enterprises with over 1,000,000 employees. 100 percent of our members are energy consumers and quite a few also energy producers. We strongly believe that current situation on the Polish - German - Austrian borders hinders a level playing field for trading in Central Europe and gives a long lasting preference of Austrian-German energy trade at the expense of neighbouring European Member States. As a result, the consumers in neighbouring Member States are paying additional costs, via transmission tariffs, related to remedial measures applied by TSOs in order to allow priority and artificially high cross-border trade between Austria and Germany. Higher electricity payments mean also worsen position on the market of industries which have to compete with their products on European and world-wide markets.
Unfortunately Polish Confederation Lewiatan considers that implementation of measures envisaged in bilateral agreement of NRAs from Austria and Germany fails to solve this problem.
For instance, Polish Confederation Lewiatan has to express serious reservations about important particularities of the bilateral agreement and the related process:
· Lack of transparency of the process
As stated in press release, on 28 October 2016 the Bundesnetzagentur had called upon the German transmission system operators to lay down the groundwork for a congestion management scheme at the Austrian-German border. At the same time, the two regulatory authorities entered into negotiations. On 30 March 2017 the Bundesnetzagentur organized a workshop in Bonn to inform the participants on the ongoing work. It shall be underlined that Polish Confederation Lewiatan is very interested in the topic in question as it may have very significant impact on functioning of the electricity market in Poland and Central-Eastern Europe. For instance, Polish Confederation Lewiatan provided its contribution to public consultation performed by the Agency for the Cooperation of Energy Regulators (ACER) regarding creation of Capacity Calculation Regions (CCRs) in June-July 2016 (KL/307/144/ DK/2016 as of 20 June 2016).
Unfortunately Polish Confederation Lewiatan was not invited to this workshop. Nevertheless, some participants informed that no detailed information neither on how the cross-border capacity will be calculated and allocated nor on how the neighbouring Member Stated (NRAs, TSOs, market participants) will be involved in the process was given to participants. Therefore, Polish Confederation Lewiatan is very surprised with the public information published on 15 May 2017 regarding bilateral agreement between E-Control and Bundesnetzagentur.
· Lack of technical analysis
The NRAs from Austria and Germany announced that the cross-border capacity calculation and allocation scheme will be introduced as from 1 October 2018 and at least 4.9 GW will be offered to market participants as long-term capacity. Additional cross-border capacity will be offered for short-term trade i.e. Central-West Region (CWE) Flow Based Market Coupling. In view of Polish Confederation Lewiatan the amount of at least 4.9 GW for long-term capacity allocation sets the artificial minimal limit of cross-border capacity which is not followed by any technical justification.
In spite of that, there are several studies which show that the capacity is much lower than 4.9 GW. For example, the Agency for the Cooperation of Energy Regulators in its Annex IV to Decision No 06/2016[3] states that ‘the network elements between Germany and the main part of Austria amounting to a maximum transfer capacity between these two areas of 3158 MW'(page 10). Another example are, publicly available[4], technical studies of Visegrad four countries (V4) TSOs which indicated that there are significant technical limitations in electricity exchanges between Austria and Germany. Also, the Bundesnetzagentur's experts published a study[5] in which the cross-border capacity at the border Austria - Germany in n-1 condition is much less than 4.9 GW.
· Lack of required regional coordination
The negotiations leading to bilateral agreement have not follow procedural standards laid down in the EU legislation. For instance, Regulation (EC) No 714/2009[6] stipulates that "...where commercial exchanges between two countries are expected to affect physical flow conditions in any third-country significantly, congestion-management methods shall be coordinated between all the TSOs so affected through a common congestion-management procedure...". The Capacity Allocation and Congestion Management (CACM GL)[7] and Forward Capacity Allocation (FCA GL)[8] regulations elaborate on the rules laid down in Regulation (EC) No 714/2009 and further harmonize capacity allocation procedures with a view to making the EU internal electricity market possible. Since the entry into force of these regulations, the capacity calculation and allocation procedures have to be devised by an unanimous agreement of all NRAs of the respective capacity calculation region on all EU bidding zone borders established in ACER's Decision No 06/2016[9] (decision establishing Capacity Calculation Regions).
Polish Confederation Lewiatan regrets that the above mentioned limit of 4.9 GW has been set without applying the common capacity calculation methodology required by the FCA GL. The bilateral agreement seems to disregard the disproportionately high impact the exchanges between Germany and Austria have on certain structurally congested interconnectors in the former CEE region found by the Agency for the Cooperation of Energy Regulators (ACER) in its Opinion No 09/2015 and confirmed in ACER Decision No 06/2016. The bilateral agreement provides no guaranties that the most affected network elements, namely those east of the bidding zone border "Germany/Luxembourg - Austria", will be in any way considered in the capacity calculation process. Therefore, in opinion of Polish Confederation Lewiatan, such an approach is in contradiction with one of the basic principles in the EU internal electricity market i.e. that of coordination.
· Possible impact on national market in Poland
According to information published by E-Control and Bundesnetzagentur at least 4.9 GW will be offered to market participants as long-term capacity. In addition, E-Control says that "Poland and the Czech Republic also called for splitting up the German-Austrian electricity market, which they hope will ease congestions in their electricity transmission systems.".
Polish Confederation Lewiatan considers that implementation of measures envisaged in bilateral agreement of NRAs from Austria and Germany will fail to provide a level playing field for trading in Central Europe and to bring an end to long lasting preference of Austrian-German energy trade at the expense of neighbouring European Member States. As such, the market participants and consumers from neighbouring Member States will still have no equal access to cross-border capacity and electricity from Germany as market participants from Austria do. Moreover, the consumers in neighbouring Member States will still have to pay additional costs, via transmission tariffs, related to remedial measures applied by TSOs in order to allow priority and artificially high cross-border trade between Austria and Germany. Higher electricity payments mean also worsen position on the market of industries which have to compete with their products on European and world-wide markets. As such, Polish Confederation Lewiatan regrets that E-Control published a misleading information about the reasons behind the expectation of Polish market participants regarding splitting up the German-Austrian electricity market.
Concluding, Polish Confederation Lewiatan underlines the importance of timely implementation of fair capacity calculation and allocation methods in CORE Region, in line with respective EU regulations and ACER Decision No 06/2016. For instance, Polish Confederation Lewiatan calls upon E-control and Bundesnetzagentur to take the necessary measures in order to comply with the relevant EU legislation and the technical limits of the interconnected transmission network and refrain from neglecting coordination with affected fellow EU Member States.
[1] See Bundesnetzagentur's press release: https://www.bundesnetzagentur.de/SharedDocs/Pressemitteilungen/EN/2017/15052017_DE_AU.html?nn=404422.
[2] See E-Control's press release:
http://press.e-control.at/News_Detail.aspx?id=49445&menueid=1884 and https://www.e-control.at/web/website/konsumenten/news/-/journal_content/56_INSTANCE_DNDW9BGT1uXs/20903/764677.
[3] See: http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/ANNEXES_CCR_DECISION/Annex%20IV.pdf page 10.
[4] See: http://www.pse.pl/index.php?dzid=32&did=1083 and http://www.pse.pl/index.php?dzid=32&did=1308
[5] See: https://emagazin.et-energie-online.de/de/profiles/cb1a7fd451c4/editions/5d23f25fcde4d901f41e
[6] Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (OJ L 211, 14.08.2009, p. 15).
[7] Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management (OJ L 197, 25.7.2015 p. 24).
[8] Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a guideline on forward capacity allocation (OJ L 259, 27.9.2016, p. 42).
[9] http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/ANNEXES_CCR_DECISION/Annex%20IV.pdf
