Category: European Union Electricity Market Glossary

Published: 06 April 2016

Last Updated: 09 April 2023

 

Forward Capacity Single Allocation Platform (SAP) belongs to the biggest projects arising - at the European level - from the Network Code on Forward Capacity Allocation (FCA).

22 March 2023 ACER Decision No 05/2023 on the TSOs’ proposal for amendments to the requirements for the Single Allocation Platform (SAP) and the SAP cost sharing methodology Annex I Annex II   14 March 2023 Proposal for a Regulation of the European Parliament and the Council amending Regulations (EU) 2019/943 and (EU) 2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to improve the Union’s electricity market design, Article 1(6) 19 July 2022 ACER approves the extension of the application of Forward Capacity Allocation methodologies related to the establishment of a Single Allocation Platform to Fingrid (the Finnish Transmission System Operator (TSO)), allowing the issuing of long-term transmission rights on the Finnish – Estonian bidding zone border. ACER Decision No 09/2022 of 18 July 2022 on the TSOs’ proposal for amendment to the requirements of the Single Allocation Platform and to the methodology for sharing costs of establishing, developing and operating the Single Allocation Platform   1 June 2022 ACER and CEER consult on the EU electricity forward market ACER and CEER, Draft Policy Paper on the Further Development of the EU Electricity Forward Market for Consultation, 1 June 2022

 

The purpose of the SAP is to allocate Long Term Transmission Rights (LTTRs) on the bidding-zone borders where these products are to be offered based on the EU Member States’ National Regulatory Authorities' (NRAs') decisions. The Single Allocation Platform allocates Long Term Transmission Rights to its participants by way of explicit allocation (Article 27(1) of the Forward Capacity Harmonised Allocation Rules (HAR)).

The tasks of the SAP include the simultaneous determination for each forward capacity allocation, at least, the following results for each bidding zone border, direction of utilization and market time period:

a) the volume of allocated Long Term Transmission Rights expressed in MW;

b) the price of Long Term Transmission Rights; and 

c) the execution status of bids.

All Transmission System Operators (TSOs) submitted to all NRAs the proposal for the establishment of the SAP on 7 April 2017 (All TSOs’ proposal for the establishment of a Single Allocation Platform (SAP) in accordance with Article 49 and for the cost sharing methodology in accordance with Article 59 of Commission Regulation (EU) 2016/1719 establishing a Guideline on Forward Capacity Allocation).

On 18 September 2017, all NRAs agreed the position that the SAP proposal and SAP cost sharing methodology fulfil the requirements of the FCA Regulation and can be approved by all NRAs (Approval by All Regulatory Authorities Agreed at the Energy Regulators’ Forum of All TSO Proposal for the Single Allocation Platform, Methodology and SAP Cost Sharing Methodology). The deadline established by the FCA Regulation for the SAP to be operational was 12 months after the all NRAs’ approval (i.e. December 2018). However, the forward capacity allocations on direct current interconnectors is required to take place on the SAP no later than 24 months after the all NRAs’ approval (i.e. by December 2019).

The principal responsibility of the Single Allocation Platform is to perform the forward capacity allocation, and in particular:

a) the registration of market participants;

b) providing a single point of contact to market participants; 

c) the operation of auction procedures;

d) the financial settlement of allocated Long Term Transmission Rights with market participants, including management of collaterals;

e) cooperation with a potential clearing house function;

f) enabling the return of Long Term Transmission Rights;

g) the publication of market information: 

h) providing and operating interfaces for data exchange with market participants;

i) the organization of a fallback procedure;

j) providing a communication platform, on which market participants can indicate to other market participants their interest to transfer or purchase Long Term Transmission Rights which have been initially allocated by allocation platforms and on which market participants can contact each other in order to perform the transfer of Long Term Transmission Rights.

The formal requirement for market participants before being entitled to participate in the auction(s) or perform secondary trading is to register with the Single Allocation Platform and to meet all eligibility requirements under the corresponding allocation rules. SAP is required to publish a list of registered participants eligible to transfer Long‐Term Transmission Rights. Registered participants must notify the SAP in case of any change to the information submitted, at least nine working days before the change comes into effect and, where that is not possible, without delay after the registered participant becomes aware of the change (Article 9(3) of the HAR).

 

Types of auctions and auction products

 

For standard forward capacity allocation timeframes (i.e. yearly and monthly) a provisional auction calendar for each calendar year is to be published no later than 1 December of the preceding year. It must include at least provisional information on the form of the product, product period and bidding period (Article 27(4) of the HAR). The default auction calendar encompasses at least one auction per year for the yearly timeframe and one auction per month for the monthly timeframe. In practice transmission rights are not issued often, the standard forward capacity allocation timeframes are used and LTTRs they are typically auctioned only at specific times (once a year and once a month), which minimises hashing possibilities for cross-zonal forward electricity market.

The standard form of the auction product is base product by which a fixed amount of MW throughout the product period is allocated subject to announced reduction periods. Also additional timeframes and/or an additional form of products may be offered.

See also:   Joint Allocation Office   ACER website on Single Allocation Platform   Capacity allocation

According to the ENTSO-E Market Report 2019 of August 2019 (p. 39 - 45) the allocation of LTTRs for the following bidding zone borders, countries and products was moved to the Joint Allocation Office (JAO) on 1 November 2018:

- Bulgaria and Greece - (Y-1) (M-1),
- Bulgaria and Romania - (Y-1) (M-1),
- The Czech Republic and Slovakia - (Y-1) (M-1),
- Estonia and Latvia - (Y-1) (Q-1) (M-1),
- Hungary and Romania - (Y-1) (M-1),
- Spain and Portugal - (Y-1) (Q-1) (M-1). 

At the moment of the said Report SAP was serving TSOs from 26 countries and all long-term capacity offered at EU TSO borders was allocated in the SAP. Further, the ACER Decision No 09/2022 of 18 July 2022 on the TSOs’ proposal for amendment to the requirements of the Single Allocation Platform and to the methodology for sharing costs of establishing, developing and operating the Single Allocation Platform the ACER approved the extension of the application of Forward Capacity Allocation methodologies related to the establishment of a Single Allocation Platform to Fingrid (the Finnish Transmission System Operator (TSO)), allowing the issuing of long-term transmission rights on the Finnish – Estonian bidding zone border.

The SAP allocates both financial transmission rights and physical transmission rights. The IT system used is scalable border per border, allowing for annual, non-calendar annual, half-yearly, quarterly, monthly, weekly, weekend, daily, and intra-day auctions. It is up to the TSOs and NRAs to decide what auctions are performed on individual borders.

 

SAP governance and operational infrastructure

  

According to Article 49 of the FCA Regulation, all TSOs participating in the SAP entered into a SAP cooperation Agreement (SAP CA). The SAP CA entered retroactively into force on 1 October 2018. Pursuant to the ENTSO-E Market Report 2019 of August 2019 the signatory parties of the SAP CA are TSOs as follows: 50Hertz Transmission GmbH, Amprion GmbH, AS “Augstsprieguma tīkls”, Austrian Power Grid AG, BritNed Development Limited, ČEPS a.s., Croatian Transmission System Operator Ltd., EirGrid plc, Electroenergien Sistemen Operator EAD, Elering AS, ELES Ltd., Electricity Transmission System Operator, Elia System Operator SA, Energinet Elsystemansvar A/S, Independent Power Transmission Operator S.A., Mavir Hungarian Independent Transmission Operator Company Ltd., Moyle Interconnector Limited, National Grid Interconnectors Limited plc, National Power Grid Company Transelectrica S.A., Nemo Link Limited, Polskie Sieci Elektroenergetyczne S.A., Red Eléctrica de España S.A.U., REN – Rede Eléctrica Nacional, S.A, RTE Réseau de Transport d’Electricité, Slovenská elektrizačná prenosová sústava, a.s., Statnett SF, TenneT TSO B.V., TenneT TSO GmbH, Terna – Rete Elettrica Nazionale Società per Azioni, SpA, and Transnet BW GmbH. Parties operating DC links with the UK are currently part of the SAP CA. The SAP CA foresees the possibility of an exit of these parties in the case of a no-deal Brexit.

First long-term auctions were held in October, November, and December 2018 for the market period 2019. These auctions were governed by the harmonised allocation rules (HAR). The allocation platform called JAO e-cat is based on a common IT system with a capacity management module and an auction module. The TSOs provide the auction specifications and available transmission capacity per auctioned product to e-cat. These data are also published on the JAO webpage.

The registered market party has a user account to provide, change, and delete bids for open auctions, and once an auction has been performed, it receives its individual auction result. Further, e-cat supports the market party in managing its capacity right portfolio, allowing for following-up the update of capacity rights after auction allocation, auction cancellation, and secondary market and capacity curtailment, and enabling the market party to declare transfer and resale notifications. Upon submission of a bid by a registered market party, the system checks whether the maximum payment obligations connected with that bid exceed the credit limit (credit limit verification – interface with the bank). After each auction, payment information is transferred to the SAP booking and invoicing system for invoicing.

  

Auction specification

 

The content of auction specification is stipulated in Article 29 of the HAR. According to this provision the allocation platform is required to publish auctions specifications in a provisional one and final version:

- for yearly auctions - no later than 1 week before the end of the bidding period of an auction,

- for any other shorter capacity allocation timeframe - no later than two 2 working days before the end of the bidding period of an auction.

The provisional auction specification states, in particular: 

(a) the code identifying the auction in the auction tool;

(b) type of Long Term Transmission Rights;

(c) capacity allocation timeframe (e.g. yearly, monthly or other);

(d) form of product (e.g. base, peak, off‐peak;

(e) identification of the bidding zone border(s) or a subset of the interconnectors on the bidding zone border and direction covered;

(f) deadline for return of the Long Term Transmission Rights allocated in previous auctions for the respective bidding zone border(s);

(g) the product period;

(h) reduction period(s) associated with the product period when applicable;

(i) the bidding period;

(j) the deadline for the publication of the provisional auction results;

(k) the contestation period;

(l) the provisional offered capacity which shall not include cross zonal capacity released via return of Long Term Transmission Rights and cross zonal capacity;

(m) any other relevant information or terms applicable to the product or the auction.

 

Not earlier than four (4) hours after publication of the provisional auction specification, the allocation platform publishes the final auction specification for that auction stating the final offered capacity and any other update of relevant information or terms applicable to the product or the auction. The final offered capacity consists of:

(a) the provisional offered capacity;

(b) the available cross zonal capacity already allocated to registered participants for which a valid request for return of Long Term Transmission Rights has been submitted for this auction; and

(c) the available cross zonal capacity already allocated to registered participants which will be reallocated as a result of suspension or termination.

 

Reduction periods of offered capacity

 

The allocation platform may announce in the auction specification one or more reduction periods. In such a case the duration of the reduction period and the amount of offered capacities are specified. Reduction periods do not apply to already allocated Long Term Transmission Rights and are not be considered for any purpose including compensation as a curtailment.

 

Bids submission

  

Bids are submitted to the allocation platform electronically during the bidding period. Bids are submitted with the use of the Auction Tool. Registered participant are identified by the allocation platform through the EIC code.

Bids submitted to the allocation platform: 

1. identify the bidding zones border and the direction for which the bid is submitted;

2. must state:

- the bid price, exclusive of taxes and levies, in Euros per MW for one hour of the product period, i.e. Euro/MW and hour, expressed to a maximum of two (2) decimal places, and equal to or greater than zero,

- the bid quantity in full MW which must be expressed without decimals, minimum amount of a single bid is one (1) MW.

 

Auction results determination

 

The allocation platform determines the marginal price at each bidding zone border and direction based on the following criteria:

(a) if the total quantity of cross zonal capacity for which valid bids have been submitted is lower than or equal to the relevant offered capacity for the relevant auction, then the marginal price will be zero;

(b) if the total quantity of cross zonal capacity for which valid bids have been submitted exceeds the relevant offered capacity for the relevant auction, the marginal price will be set at the lowest bid(s) price(s) allocated in full or in part using the respective offered capacities.

The Long Term Transmission Rights are deemed to have been allocated to the auction registered participant from the moment the said participant has been informed of the auction results and the contestation period is closed (Article 35(8) of the HAR).

 

Notification of auction results

 

The allocation platform is required to publish on its website the provisional auction results as soon as possible but not later than specified in the final auction specification.

The said publication is required to comprise for each bidding zone border included in the auction at least the following data:

(a) total requested Long Term Transmission Rights in MW;

(b) total allocated Long Term Transmission Rights in MW;
(c) marginal price in Euros/MW per hour;
(d) number of registered participants participating in the auction;
(e) list of names and number of registered participants who placed at least one winning bid in the auction;
(f) list of registered bids without identification of the registered participants (bid curve); and
(g) congestion income per bidding zone.

 

No later than 30 minutes after the publication of the provisional auction results the allocation platform makes available via the Auction Tool to each registered participant who submitted a bid to a specific auction for each bidding zone border included in the auction at least the following data:

(a) allocated Long Term Transmission Rights for each hour of the product period in MW; 

(b) marginal price in Euros/MW per hour;

(c) and due amount for allocated Long Term Transmission Rights in Euro, rounded to two decimal places; and

(d) due amount for one monthly instalment for allocated Long Term Transmission Rights in Euro, rounded to two decimal places, in the event that the product period is longer than one month.

 

Further perspectives - reform of the electricity market design of March 2023 

  

Today, SAP settles long-term auctions income in monthly instalments and remunerates LTTR holders daily at delivery.  However, as the as the ACER and CEER Draft Policy Paper of 1 June 2022 on the Further Development of the EU Electricity Forward Market observes, the SAP could apply daily settlement only, where only the difference between the original auction price and day-ahead market spread would be settled at delivery. This could potentially reduce the level of required collaterals. The ACER and the CEER propose to introduce more frequent auctions, i.e. to organise monthly auctions for yearly products and weekly auctions for monthly and weekly products.

These drawbacks are further analysed in the ACER’s policy paper od 6 February 2023 on the further development of the EU electricity forward market. In this document ACER observes existing cross-border hedging products (i.e. LTTRs) are not very useful for basis risk hedging. This is because proxy hedging and basis risk hedging requires continuous access to hedging products. However, LTTRs are auctioned only at specific times (i.e. once a year and once a month) and no secondary market exists, where market participants could buy LTTRs at the time when they settle a new trade, which exposes their position. While the single allocation platform allows market participants to transfer the ownership of LTTRs anytime, this feature is very rarely used.

Drawing on this input, the European Commission presented on 14 March 2023 the reform of the EU electricity market design “to boost renewables, better protect consumers and enhance industrial competitiveness”. The package of measures covered, inter alia, the Proposal for a Regulation of the European Parliament and the Council amending Regulations (EU) 2019/943 and (EU) 2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to improve the Union’s electricity market design, which in Article 1(6) replaces the wording of Article 9 of the Regulation (EU) 2019/943. The legislative proposal builds on the zone-to-hub construct and the establishment of regional virtual hubs for the forward market, whereby the single allocation platform plays an important role to:

(a) offer trading of long-term transmission rights between each bidding zone and virtual hub; where a bidding zone is not part of a virtual hub it may issue financial long-term transmission rights to a virtual hub or to other bidding zones that are part of the same capacity calculation region; 

(b) allocate long-term cross-zonal capacity on a regular basis and in a transparent, marketbased and non-discriminatory manner; the frequency of allocation of the long-term cross-zonal capacity shall support the efficient functioning of the forward market; and  

(c) offer trading of financial transmission rights that shall allow holders of these financial transmission rights to remove exposure to positive and negative price spreads, and with frequent maturities of up to at least three years ahead. 

European Commission Proposal of 14 March 2023 for a Regulation of the European Parliament and the Council amending Regulations (EU) 2019/943 and (EU) 2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to improve the Union’s electricity market design, Article 1(6)

Amendments to Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity

Regulation (EU) 2019/943 is amended as follows:
Article 9 of the Regulation (EU) 2019/943 is replaced by the following:

“Article 9 
1. By 1 December 2024 the ENTSO for Electricity shall submit to ACER, after having consulted ESMA, a proposal for the establishment of regional virtual hubs for the forward market. The proposal shall: 
(a) define the geographical scope of the virtual hubs for the forward market, including the bidding zones constituting these hubs, aiming to maximise the price correlation between the reference prices and the prices of the bidding zones constituting virtual hubs; 
(b) include a methodology for the calculation of the reference prices for the virtual hubs for the forward market, aiming to maximise the correlations between the reference price and the prices of the bidding zones constituting a virtual hub; such methodology shall be applicable to all virtual hubs and based on predefined objective criteria; 
(c) include a definition of financial long-term transmission rights from bidding zones to the virtual hubs for the forward market; 
(d) maximise the trading opportunities for hedging products referencing the virtual hubs for the forward market as well as for long term transmission rights from bidding zones to virtual hubs. 
2. Within six months of receipt of the proposal on the establishment of the regional virtual hubs for the forward market, ACER shall evaluate it and either approve or amend it. In the latter case, ACER shall consult the ENTSO for Electricity before adopting the amendments. The adopted proposal shall be published on ACER's website. 
3. The single allocation platform established in accordance with Regulation (EU) 2016/1719 shall have a legal form as referred to in Annex II to Directive (EU) 2017/1132 of the European Parliament and of the Council. 
4. The single allocation platform shall: 
(a) offer trading of long-term transmission rights between each bidding zone and virtual hub; where a bidding zone is not part of a virtual hub it may issue financial long-term transmission rights to a virtual hub or to other bidding zones that are part of the same capacity calculation region; 
(b) allocate long-term cross-zonal capacity on a regular basis and in a transparent, marketbased and non-discriminatory manner; the frequency of allocation of the long-term cross-zonal capacity shall support the efficient functioning of the forward market; 
(c) offer trading of financial transmission rights that shall allow holders of these financial transmission rights to remove exposure to positive and negative price spreads, and with frequent maturities of up to at least three years ahead. 
5. Where a regulatory authority considers that there are insufficient hedging opportunities available for market participants, and after consultation of relevant financial market competent authorities in case the forward markets concern financial instruments as defined under Article 4(1)(15), it may require power exchanges or transmission system operators to implement additional measures, such as market-making activities, to improve the liquidity of the forward market. Subject to compliance with Union competition law and with Directive (EU) 2014/65 and Regulations (EU) 648/2012 and 600/2014, market operators shall be free to develop forward hedging products, including long-term forward hedging products, to provide market participants, including owners of power-generating facilities using renewable energy sources, with appropriate possibilities for hedging financial risks against price fluctuations. Member States shall not require that such hedging activity may be limited to trades within a Member State or bidding zone”.

 

 

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