According to Article 2(2)(c) of the Commission Regulation (EU) 714/2009 on conditions for access to the grid for crossborder exchanges in electricity ‘congestion’ means a situation in which an interconnection linking national transmission networks cannot accommodate all physical flows resulting from international trade requested by market participants, because of a lack of capacity of the interconnectors and/or the national transmission systems concerned.
TSO – DSO Report on an integrated approach to an Active System Management (p. 14, 15) observes that the “concept was generalised afterwards, due to lack of capacity in any element of the grid”, in the Commission Regulation (EU) 2015/1222 establishing a Guideline on Capacity Allocation and Congestion Management (the CACM Regulation).
The CACM Regulation laid down in Article 2 the following definitions:
- ‘market congestion’ - a situation in which the economic surplus for single day-ahead or intraday coupling has been limited by cross-zonal capacity or allocation constraints (Article 2(17));
- ‘physical congestion’ - any network situation where forecasted or realised power flows violate the thermal limits of the elements of the grid and voltage stability or the angle stability limits of the power system (Article 2(18));
- ‘structural congestion’ - congestion in the transmission system that can be unambiguously defined, is predictable, is geographically stable over time and is frequently reoccurring under normal power system conditions (Article 2(19)).
In the European Commission’s Winter Energy Package (Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast, 30.11.2016, COM(2016) 861 final 2016/0379 (COD), Article 2(2)(c)) 'congestion' meant a situation in which all requests from market participants to trade between two bidding zones cannot be accommodated because they would significantly affect the physical flows on network elements which cannot accommodate those flows. Identical definition has been finally included Article 2(4) of the Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast).
The definitive text of the recast Regulation introduced, moreover, in Article 2(6) the definition of ‘structural congestion’, which means congestion in the transmission system that is capable of being unambiguously defined, is predictable, is geographically stable over time, and frequently reoccurs under normal electricity system conditions.
The EU Network Code on System Operation in Article 55(c) lists congestion management services among services provided by third parties, through procurement when applicable, that each Transmission System Operator (TSO) uses for ensuring the operational security of its control area.
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017 Electricity Wholesale Markets Volume October 2018 (p. 8) indicates that where sufficient information is available (e.g. in the CWE region), it confirms that congestion most often relates to intra-zonal critical network elements (CNEs) rather than to interconnectors. ACER/CEER refers to the example, when congestion occurred in the CWE region, internal lines constrained available capacity much more often (86% of occurrences) than cross-zonal lines (14%) in 2017. More than half of these occurrences related to CNEs located inside Germany. According to the ACER/CEER this shows that capacity calculation methodologies often lack rules to avoid internal exchanges being unduly prioritised over cross-zonal ones.
The amount of congestion in European grids is expected to grow over the coming years "in a large part due to the vast increase of renewable energy sources and the ‘70% rule’ on margin available for cross zonal trade, originating from the Clean Energy Package" (ACER REMIT Quarterly Q1/2021, p. 6).
Gas market congestions
Recitals 21 and 22 of the Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks observe that “There is substantial contractual congestion in the gas networks. The congestion-management and capacity-allocation principles for new or newly negotiated contracts are therefore based on the freeing-up of unused capacity by enabling network users to sublet or resell their contracted capacities and the obligation of transmission system operators to offer unused capacity to the market, at least on a day-ahead and interruptible basis. Given the large proportion of existing contracts and the need to create a true level playing field between users of new and existing capacity, those principles should be applied to all contracted capacity, including existing contracts. […] Although physical congestion of networks is, at present, rarely a problem in the Community, it may become one in the future. It is important, therefore, to provide the basic principle for the allocation of congested capacity in such circumstances”.
Gas market congestions are governed by the Commission Guidelines on Congestion Management Procedures (‘CMP GL’) - Commission Decision of 24 August 2012 on amending Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks (2012/490/EU).
The CMP GL Section 2.2 defines four CMP measures to mitigate congestion:
Oversubscription allows TSOs to offer more firm capacity than is technically available at IPs on the assumption that not all the allocated capacity will be actually used by network users. This scheme provides financial incentives for the TSOs and requires basic modelling built on statistical scenarios.
FDA UIOLI brings unused firm capacity back to the market on a day-ahead basis. TSOs are not incentivised financially by this CMP. The network user loses its capacity and provides the additional capacity volumes by being subject to re-nomination restrictions.
Surrender is a CMP measure that allows network users to return their capacity to the TSO. The TSO will again offer this capacity in the primary market (by an auction on a booking platform). Capacity returned by network users will only be sold after the TSO has sold its own available capacity. During the auction, the capacity given back by a network user will not be distinguished from the TSO capacity, and it will be offered based on the standard volume and price units applied in the auctions. The ACER remarks that users could sell their capacity on the secondary market, which might be a faster option in liquid secondary markets, than triggering surrender.
Long Term (LT) UIOLI is described in Point 2.2.5 of the CMP GL. This mechanism aims at deterring capacity hoarding over the longer term and may not serve as an immediate tool for congestion per the criteria (a) to (d) of Point 2.2.3(1) of the CMP GL. LT UIOLI, nevertheless, plays an important role in the optimal management of transport capacities and dictates that NRAs require their TSOs to fully or partially withdraw systematically underutilised capacity if certain criteria are met. The process could trigger the release of yearly capacity products.
Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast)
General principles of capacity allocation and congestion management
1.Network congestion problems shall be addressed with non-discriminatory market-based solutions which give efficient economic signals to the market participants and transmission system operators involved. Network congestion problems shall be solved by means of non-transaction-based methods, namely methods that do not involve a selection between the contracts of individual market participants. When taking operational measures to ensure that its transmission system remains in the normal state, the transmission system operator shall take into account the effect of those measures on neighbouring control areas and coordinate such measures with other affected transmission system operators as provided for in Regulation (EU) 2015/1222.
2.Transaction curtailment procedures shall be used only in emergency situations, namely where the transmission system operator must act in an expeditious manner and redispatching or countertrading is not possible. Any such procedure shall be applied in a non-discriminatory manner. Except in cases of force majeure, market participants that have been allocated capacity shall be compensated for any such curtailment.
3.Regional coordination centres shall carry out coordinated capacity calculation in accordance with paragraphs 4 and 8 of this Article, as provided for in point (a) of Article 37(1) and in Article 42(1).
Regional coordination centres shall calculate cross-zonal capacities respecting operational security limits using data from transmission system operators including data on the technical availability of remedial actions, not including load shedding. Where regional coordination centres conclude that those available remedial actions in the capacity calculation region or between capacity calculation regions are not sufficient to reach the linear trajectory pursuant to Article 15(2) or the minimum capacities provided for in paragraph 8 of this Article while respecting operational security limits, they may, as a measure of last resort, set out coordinated actions reducing the cross-zonal capacities accordingly. Transmission system operators may deviate from coordinated actions in respect of coordinated capacity calculation and coordinated security analysis only in accordance with Article 42(2).
By 3 months after the entry into operation of the regional coordination centres pursuant to Article 35(2) of this Regulation and every three months thereafter, the regional coordination centres shall submit a report to the relevant regulatory authorities and to ACER on any reduction of capacity or deviation from coordinated actions pursuant to the second subparagraph and shall assess the incidences and make recommendations, if necessary, on how to avoid such deviations in the future. If ACER concludes that the prerequisites for a deviation pursuant to this paragraph are not fulfilled or are of a structural nature, ACER shall submit an opinion to the relevant regulatory authorities and to the Commission. The competent regulatory authorities shall take appropriate action against transmission system operators or regional coordination centres pursuant to Article 59 or 62 of Directive (EU) 2019/944 if the prerequisites for a deviation pursuant to this paragraph were not fulfilled. Deviations of a structural nature shall be addressed in an action plan referred to in Article 14(7) or in an update of an existing action plan.
4.The maximum level of capacity of the interconnections and the transmission networks affected by cross-border capacity shall be made available to market participants complying with the safety standards of secure network operation. Counter-trading and redispatch, including cross-border redispatch, shall be used to maximise available capacities to reach the minimum capacity provided for in paragraph 8. A coordinated and non-discriminatory process for cross-border remedial actions shall be applied to enable such maximisation, following the implementation of a redispatching and counter-trading cost-sharing methodology.
5.Capacity shall be allocated by means of explicit capacity auctions or implicit auctions including both capacity and energy. Both methods may coexist on the same interconnection. For intraday trade, continuous trading, which may be complemented by auctions, shall be used.
6.In the case of congestion, the valid highest value bids for network capacity, whether implicit or explicit, offering the highest value for the scarce transmission capacity in a given timeframe, shall be successful. Other than in the case of new interconnectors which benefit from an exemption under Article 7 of Regulation (EC) No 1228/2003, Article 17 of Regulation (EC) No 714/2009 or Article 63 of this Regulation, establishing reserve prices in capacity-allocation methods shall be prohibited.
7.Capacity shall be freely tradable on a secondary basis, provided that the transmission system operator is informed sufficiently in advance. Where a transmission system operator refuses any secondary trade (transaction), this shall be clearly and transparently communicated and explained to all the market participants by that transmission system operator and notified to the regulatory authority.
8.Transmission system operators shall not limit the volume of interconnection capacity to be made available to market participants as a means of solving congestion inside their own bidding zone or as a means of managing flows resulting from transactions internal to bidding zones. Without prejudice to the application of the derogations under paragraphs 3 and 9 of this Article and to the application of Article 15(2), this paragraph shall be considered to be complied with where the following minimum levels of available capacity for cross-zonal trade are reached:
(a) for borders using a coordinated net transmission capacity approach, the minimum capacity shall be 70 % of the transmission capacity respecting operational security limits after deduction of contingencies, as determined in accordance with the capacity allocation and congestion management guideline adopted on the basis of Article 18(5) of Regulation (EC) No 714/2009;
(b) for borders using a flow-based approach, the minimum capacity shall be a margin set in the capacity calculation process as available for flows induced by cross-zonal exchange. The margin shall be 70 % of the capacity respecting operational security limits of internal and cross-zonal critical network elements, taking into account contingencies, as determined in accordance with the capacity allocation and congestion management guideline adopted on the basis of Article 18(5) of Regulation (EC) No 714/2009. The total amount of 30 % can be used for the reliability margins, loop flows and internal flows on each critical network element.
9.At the request of the transmission system operators in a capacity calculation region, the relevant regulatory authorities may grant a derogation from paragraph 8 on foreseeable grounds where necessary for maintaining operational security. Such derogations, which shall not relate to the curtailment of capacities already allocated pursuant to paragraph 2, shall be granted for no more than one-year at a time, or, provided that the extent of the derogation decreases significantly after the first year, up to a maximum of two years. The extent of such derogations shall be strictly limited to what is necessary to maintain operational security and they shall avoid discrimination between internal and cross-zonal exchanges.
Before granting a derogation, the relevant regulatory authority shall consult the regulatory authorities of other Member States forming part of the affected capacity calculation regions. Where a regulatory authority disagrees with the proposed derogation, ACER shall decide whether it should be granted pursuant to point (a) of Article 6(10) of Regulation (EU) 2019/942. The justification and reasons for the derogation shall be published.
Where a derogation is granted, the relevant transmission system operators shall develop and publish a methodology and projects that shall provide a long-term solution to the issue that the derogation seeks to address. The derogation shall expire when the time limit for the derogation is reached or when the solution is applied, whichever is earlier.
10.Market participants shall inform the transmission system operators concerned within a reasonable period in advance of the relevant operational period whether they intend to use allocated capacity. Any allocated capacity that is not going to be used shall be made available again to the market, in an open, transparent and non-discriminatory manner.
11.As far as technically possible, transmission system operators shall net the capacity requirements of any power flows in opposite directions over the congested interconnection line in order to use that line to its maximum capacity. Having full regard to network security, transactions that relieve the congestion shall not be refused.
12.The financial consequences of a failure to honour obligations associated with the allocation of capacity shall be attributed to the transmission system operators or NEMOs who are responsible for such a failure. Where market participants fail to use the capacity that they have committed to use, or, in the case of explicitly auctioned capacity, fail to trade capacity on a secondary basis or give the capacity back in due time, those market participants shall lose the rights to such capacity and shall pay a cost-reflective charge. Any cost-reflective charges for the failure to use capacity shall be justified and proportionate. If a transmission system operator does not fulfil its obligation of providing firm transmission capacity, it shall be liable to compensate the market participant for the loss of capacity rights. Consequential losses shall not be taken into account for that purpose. The key concepts and methods for the determination of liabilities that accrue upon failure to honour obligations shall be set out in advance in respect of the financial consequences, and shall be subject to review by the relevant regulatory authority.
13.When allocating costs of remedial actions between transmission system operators, regulatory authorities shall analyse to what extent flows resulting from transactions internal to bidding zones contribute to the congestion between two bidding zones observed, and allocate the costs based on the contribution to the congestion to the transmission system operators of the bidding zones creating such flows except for costs induced by flows resulting from transactions internal to bidding zones that are below the level that could be expected without structural congestion in a bidding zone. That level shall be jointly analysed and defined by all transmission system operators in a capacity calculation region for each individual bidding zone border, and shall be subject to the approval of all regulatory authorities in the capacity calculation region.