EU's ACER to decide on power bidding zones to review by Oct 8

Brussels — EU energy regulatory agency ACER is to decide which of Europe's power bidding zone need reviewing, as well as the methodology for reviewing them, by October 8, coronavirus virus constraints permitting, it said on July 14.

Changing power bidding zones -- whether by merging to make larger or splitting to make smaller -- is a politically sensitive issue, as it affects prices within the zone and power flows between zones.

ACER's decision will determine how formal EU power transmission system operators' body Entso-e carries out the bidding zone review required by the EU's power market regulation. This is part of the EU's clean energy legislation package adopted in 2019.

Entso-e has to produce the review within 12 months of ACER's decision, i.e. by October 2021.

If that review identifies "structural congestion," the national governments involved are required by the EU's power market regulation to either change the bidding zone configuration or make a plan to reduce this congestion by other means.

"This review is one of the key instruments of the [EU's] clean energy package legislation to address network congestions in an efficient manner," ACER said.

ACER has to take the decision as the EU's national regulators failed to reach a unanimous decision on Entso-e's proposals, even after making Entso-e revise and re-submit them in February 2020.

Discord over Germany

Entso-e's proposals did not include any recommendations for the Central Europe region, after the TSOs involved failed to agree a common approach.

The TSOs looked at merging the Austrian and German-Luxembourgish zones, and three possible splits for the German-Luxembourgish zone into either two or three bidding zones.

They also looked at splitting the Dutch bidding zone into three zones.

TSOs against a merged German-Austrian zone argued that it would increase loop flows -- unscheduled power flows through other bidding zones.

This would make it more difficult for the other bidding zones to comply with the requirement under the EU's power market regulation to make 70% of cross-border capacity available for trading.

Some TSOs also thought that it was not the right time to look at alternative bidding zone configurations as national governments are working on action plans to tackle structural congestion, as required by the EU power market regulation.

These would have "a severe but yet unknown impact on the future electricity grid and electricity market," Entso-e said in its February proposals.

Chance to save billions

ACER slammed Entso-e's first bidding zone review, published in 2018, which reached inconclusive results on whether and which zones needed changes.

"The TSOs' failure to come up with meaningful conclusions is the natural outcome of obvious methodological and governance-related flaws," ACER said in February 2019.

It estimated in 2018 that the EU could achieve gross social welfare benefits of up to Eur5 billion ($5.7 billion) a year by changing its power bidding zones to improve market integration and increase cross-border trading.