Network Codes:internal electricity market implementing tool

Martin Šik

Energy Regulatory Officemartin.sik@eru.cz

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NETWORKCODES

TARGETMODEL

Why network codes?

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Until now, the harmonization of detailed rules governing the technical and market aspects of electricity market functioning, has took place on a voluntary basis

e.g. ETSO operational handbooks

An integrated market needs harmonized rulesBinding rules elaborated on EU levelNetwork Codes

Competition increase – entry barriers lowering, better liquidity

Energy security of supply boost –better coordination and cooperation between PPS

Basic information

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Regulation 714/2009 (3. energy package)Art. 6 and art. 7 – adoption and amendmentsArt. 8 para. 6 – subject-matter and scope

Technical rules for the functioning of the electricity internal market

Drafted in collaboration with the EC, ACER, and ENTSO-E

In consultation with relevant stakeholders –European associations mainly

IFIEC, Eurelectric, Europex, Efet, etc.

Network Codes adoption steps

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Comitology – legal act (EC and Member States)Review and modification of

draft NC No time limit Adoption of a legally binding language

ACER RecommendationWhen NC is in compliance

with FG No time limit Recommendation to EC for adoption (with amendments)

Reasoned opinion (ACER)After NC is presented to the

Agency max. 3 months Evaluation of alignment NC to FG

Network Codes (ENTSO)Launched at request by the EC

after the approval of FG max. 12 months Articles wording

Framework Guidelines (ACER)Launched at request by the

EC max. 6 months Setting out clear and objective principles regarding NC

Network Codes vs. EC guidelines

EC’s legal services came to the conclusion that some Network Codes are not sufficiently concrete for being adopted under art. 6

There are more like „cookbooks“ they specify the process, which is going to be used to finalize subsequent directives in form of methodologies and rules, which are going to be prepared by ENTSO-E/TSOs

They are going to be adopted following art. 18 „EC guidelines“ There is no significant difference in practice directly applicable, in both cases There is a main difference in the amendment processin case of codes (art. 7), official participation of ENTSO-E, ACER and of stakeholders is foreseen 6

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Scope and subject-matter

10 Network Codes are now being prepared in 3 major areas

Market1. Capacity allocation and congestion

management (day-ahead and intraday) -CACM

2. Long-term capacity allocation - FCA3. System balancing - EB

Connection4. Requirements for Generators - RfG5. Demand Connection Code - DCC6. HVDC

Operation7. Operational Security- OS8. Operational Planning & Scheduling - OPS9. Network Code on Load Frequency Control

& Reserves - LFCR 10.Emergency and Restoration

Most of the market and operational codes will have the form of an EC guideline

Possible timeline of Network Codes adoption

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CACM FCA EB RfG DCC OS OPS LFCR

Framework Guidelines VII.11 VII.11 IX.12 VI.11 VI.11 XII.11 XII.11 XII.11

Submission of Code IX. 12 X.13 XII.13 VII. 12 I. 13 II. 13 III.13 VI. 13

Reasoned opinion XII.12 XII.13 III.14 X.12 III.13 V.13 VI.13 IX.13

ACER recommendation

III.13 V.14 Q2.15 III.13 III.13 XI.13 XI.13 IX.13

ComitologyXII.14 Q4.15 Q4.15 Q2.15 Q2.15 Q3.15 Q3.15 Q3.15

Entry into force VII.15 Q3.16 Q3.16 Q1.16 Q1.16 Q2.16 Q2.16 Q2.16

Guideline on Capacity Allocation and Congestion Management

The Code was approved by the comitology committee in December 2014First Code/guideline to be approvedThe entry into force is planned for July 2015 – the various individual provisions will apply progressivelyObject of the Directive:

„cross-zonal capacity allocation and congestion management in the day-ahead and intraday markets“ (market coupling), „establishment of common methodologies for determining the volumes of capacity simultaneously available between bidding zones“ (flow-based method)„assessement of efficiency and a review process for defining bidding zones “ (bidding zone review)

Some new concepts:Nominated electricity market operator (NEMO)Capacity calculation regionsCapacity calculation – flow-based approachBidding zone reconfigurationRe-dispatching and countertrading

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ImplementationThe Codes have the form of a EC regulation DirectlyapplicablePrimarilily binding on TSOs, but other entities are also concerned

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Transposition:Amendments to ordonnances is going to be needed (Contents of grid codes, Market rules etc.)Amendments to TSO and DSO rules of operation modification of the existing concept?

Intrastate and cross-border operation rules

Amendments to Energy Act may be needed – mostly the procedure

ERO‘s RoleReview of ordonnances issued by EROParticipation in the review of other legislationApproval of exemptions, rules and methodologies adopted based on the CodesEnforcement of the Codes (§ 18/1/c EZ)

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More cooperation between NRAsMostly „market“ codes most of the detailed rules are going to be adopted as methodologies and rules at the level of:

the entire EU (all NRA and all PPS), regions (e.g. Capacity calculation regions)Concerned regulatory administrations

In case of lack of agreement ACER makes a decision (art. 8 regulation no. 713/2009)

NRAs

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NETWORK CODES

TARGET MODEL

TradingTrading1. Capacity allocation and congestion

management (day-ahead and intraday)

2. Long-term capacity allocation3. System balancing

Connection4. Requirements for Generators - RfG5. Demand Connection Code - DCC6. HVDC

Operation7. Operational Security- OS8. Operational Planning & Scheduling - OPS9. Network Code on Load Frequency Control &

Reserves - LFCR 10. Emergency and Restoration

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TARGET MODEL

2011 2012 2013 20152014

Target model

IN

TE

RN

AL

MA

RK

ET

Capacity calculation

Flow-based method

Balancing marketCommon merit order list

Intraday marketContinuous implicit allocationDay-ahead market

market coupling –implicit auction

Long-term capacitiesExplicit allocation – financial transmission rights 14

Day market interconnection

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NWE MC4M MCExplicit allocation

NWE market coupling launched on 04/02/2014 4M MC launch (CZ-SK-HU-RO)19/11/2014

Use of PCR solution (NWE-compatible)

CEE Flow-based market couplingMemorandum of Understanding signed in February 2014There is a need for a solution for DE-AT offer zone and loopflows –operational security and compensation for the decrease in capacitiesThe the project management has been now set up and a preliminary budget has been agreed.

Thank you for your attention!