Electricity capacity markets
According to Article 2(22) of the Regulation (EU) 2019/943 of the European Parliament and of the Council on the internal market for electricity (recast), capacity mechanism is a temporary measure to ensure the achievement of the necessary level of resource adequacy by remunerating resources for their availability not including measures relating to ancillary services and congestion management.
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Annex 2 to the 2020 Report (dated on 14 October 2020) from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the State of the Energy Union pursuant to Regulation (EU) 2018/1999 on Governance of the Energy Union and Climate Action (COM(2020) 950 final - Energy subsidies in the EU) mentions capacity payment mechanisms received in the EU around EUR2.2 billion subsidies in 2018, and were stable at an average level around EUR 2 billion over the last few years. The difference between energy only markets on the one hand and capacity mechanisms on the other is ofen practically illustrated by the fact that profits under the former are derived from kWh sold while under the latter from kWh and kW. Moreover, for typology purposes, the most-commonly used in this context terms: "electricity system adequacy" and "security of supply" should not be confused.
The document Capacity remuneration mechanisms, Workshop in preparation of Commission review of EU Guidelines on State Aid for Environmental Protection proposed the following discriminant between the said notions:
- adequacy means ability of the system to cover total demand at any time,
- security means ability of the system to cope with a sudden disturbance (balancing, stability).
Capacity remuneration mechanisms (CRMs) may be designed in many different variants, including with respect to:
a) differentiation between different kinds of capacity, and demand side participation;
b) how the eligibility to provide capacity is determined, especially in the case of load;
c) how far in the future obligations are contracted;
d) how the level of (adequate) capacity is determined;
e) how availability is documented or certified;
f) how, in the context of a capacity payments scheme, the payment is determined: whether prices are set administratively, according to auctions or in the market (or how the threshold/strike price is determined);
g) how the costs are allocated; and
The ACER provides the summary of design principles of capacity mechanisms in the document of October 2022 (Security of EU electricity supply in 2021: ACER Report on Member States approaches to assess and ensure adequacy). The overarching rule is that, in order to reduce any distortive effects, capacity mechanisms must be designed to address the specific nature and magnitude of the individual adequacy concern, be competitive and not lead to over-procurement or over-compensation.
According to the Regulation (EU) 2019/943 (recast Electricity Market Regulation), strategic reserves, designed so as to minimise interference with the market, should be the first capacity mechanism under consideration. Member States are therefore required to assess whether a strategic reserve is capable of addressing their identified adequacy concerns, before introducing other types of capacity mechanisms (Article 21(3)).
Article 22 of the recast Electricity Market Regulation sets out the design principles for capacity mechanisms. In particular, Article 22(1) stipulates that capacity mechanisms shall be temporary, proportional and not create undue market distortions or limit cross-zonal trade. The procurement selection shall be transparent, non-discriminatory and competitive, while appropriate incentives to be available at times of expected system stress and penalties for non-availability shall be in place. Article 22(2) defines specific characteristics for strategic reserves, in order to ensure that market distortions are minimised and that price signals and incentives remain broadly unaffected. For capacity mechanisms other than strategic reserves, Article 22(3) requires that they ensure proportionality and reduce overcompensation risks, do not affect optimal operations in the short-term and enhance efficiency by enabling transferability of obligations. Furthermore, Article 22(4) aligns capacity mechanisms with the wider EU environmental targets by defining emission limits for capacity that can be remunerated via capacity mechanisms. Lastly, Article 22(5) also requires that existing capacity mechanisms (i.e., in place when the Regulation entered into force) must be adapted to comply with the above provisions.
High-level information reported by the NRAs confirms that in most cases, the existing capacity mechanisms are broadly in line with the relevant design principles set out in the Electricity Regulation. In some cases, capacity mechanisms have not yet been fully adapted to the current framework. For example, the German mechanism does not have an explicit provision for emission limits in place. The same was true for the Finnish mechanism, that ended in 2021. The penalty system of the Irish scheme appears to dampen the pricing signals to market participants. Also, information collected for Sweden suggests that the activation practices of strategic reserves and imbalance settlement in such periods might still need to be adapted to the current legal framework.
According to Article 3(9) of European Commission Guidelines on State aid for environmental protection and energy 2014-2020 (Aid for generation adequacy - prolonged by 2021 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1247) to avoid distortions to the internal energy market the European Commission is conferred the right to approve capacity mechanisms in the EU Member States.
The capacity mechanism is a measure to ensure generation adequacy and security of electricity supply and therefore falls within the scope of Section 3.9 of the EEAG on State aid for generation adequacy.
To assess whether the capacity mechanism can be considered compatible with the internal market, the European Commission assesses whether the design of the measure meets the following criteria listed in paragraph (27) of the EEAG (with more specific details for measures ensuring generation adequacy in Sections 3.9.1 to 3.9.6 of the EEAG):
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(a) contribution to a clearly defined objective of common interest,
(b) need for State intervention,
(c) appropriateness,
(d) incentive effect,
(e) proportionality,
(f) avoidance of undue negative effects on competition and trade,
(g) transparency of the aid.
The EEAG provisions need to be interpreted in the light of relevant further legislation, including the recast Regulation on the internal market for electricity and in particular the requirements regarding CO2 emission limits, which capacity mechanisms need to incorporate and apply, even if they were already in force and had been deemed as compliant with Union state aid rules.
According to Article 22(4) of Regulation (EU) 2019/943 (recast Electricity Market Regulation), capacity mechanisms must apply the following requirements regarding CO2 emission limits:
a) generation capacity emitting more than 550 gr CO2 of fossil fuel origin per kWh of electricity that started commercial production after date of entry into force the recast Electricity Market Regulation (i.e. as from 4 July 2019) must not be committed or receive payments or commitments for future payments under a capacity mechanism as of entry into force at the latest;
b) generation capacity emitting more than 550 gr CO2 of fossil fuel origin per kWh of electricity and more than 350 kg CO2 of fossil fuel origin on average per year per installed kWe that started commercial production before the recast Electricity Market Regulation date of entry into force (i.e. before 4 July 2019) must not be committed or receive payments or commitments for future payments under a capacity mechanism as of 1 July 2025 at the latest;
c) the emission limit of 550 gr CO2 of fossil fuel origin per kWh of electricity and the limit of 350kg CO2 of fossil fuel origin on average per year per installed kW must be calculated based on the design efficiency of the generation unit meaning the net efficiency at nominal capacity under the relevant standard provided by the International Organisation for Standarisation (ISO).
The EU Member States applying capacity mechanisms on entry into force of the recast Electricity Market Regulation (4 July 2019) must adapt their mechanisms to comply with the Regulation without prejudice to commitments or contracts, concluded before 31 December 2019. ACER was required to publish by 5 January 2020 an opinion providing technical guidance related to the calculation of the values referred to above. On 24 September 2019 the ACER started the public consultation on CO2 emission limits for participating in capacity mechanisms and the relevant decision has been adopted on 17 December 2019 (ACER Opinion No 22/2019 on the calculation of the values of CO2 emission limits referred to in the first subparagraph of Article 22(4) of Regulation (EU) 2019/943 of 5 June 2019 on the internal market for electricity (recast)).
The CEEAG also addresses design principles of the recast Electricity Market Regulation. It emphasises that any security of supply measure (including interruptibility schemes and network reserves) must be designed to maintain the efficient functioning of markets and preserve efficient operating incentives and price signals (par. 369 of the CEEAG).
European Resource Adequacy Assessment (ERAA)
The Clean Energy Package (CEP) requires that capacity markets are introduced only where adequacy issues are expected to arise and that justifications are provided in case of discrepancies between the national and the pan-European adequacy studies.
The recast Electricity Regulation sets the framework for the assessing mid-term resource adequacy and provides general principles and design rules for capacity markets (framework for seasonal and short term adequacy assessments is defned in the Regulation 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC).
The recast Electricity Regulation in Article 21(4) forbids the EU Member States to introduce capacity mechanisms unless both the European Resource Adequacy Assessment (ERAA) and National Resource Adequacy Assessment (NRAA), or in the NRAA, the ERAA, identify a resource adequacy concern.
According to Article 21(4) of the recast Electricity Regulation, “Member States shall not introduce capacity mechanisms where both the European resource adequacy assessment and the national resource adequacy assessment, or in the absence of a national resource adequacy assessment, the European resource adequacy assessment have not identified a resource adequacy concern”.
Similarly, Article 21(6) states that “Where a Member State applies a capacity mechanism, it shall review that capacity mechanism and shall ensure that no new contracts are concluded under that mechanism where both the European resource adequacy assessment and the national resource adequacy assessment, or in the absence of a national resource adequacy assessment, the European resource adequacy assessment have not identified a resource adequacy concern […]”.
Hence, the application of a capacity mechanisms by the EU Member States is to be justified on the basis of the results of resource adequacy concerns identified in the ERAA and/or NRAA.
Capacity remuneration mechanisms in Europe
ACER/CEER Annual Report on the results of the monitoring the internal electricity markets in 2018 (of 11 November 2019, p. 9 - 11) notes that a “variety of uncoordinated capacity markets remained in operation throughout Europe”.
The said Report of of 11 November 2019 makes, moreover, the following observations as regards developments in European capacity markets:
- in 2018 Lithuania initiated the process of introducing a new market-based capacity markets with a view to replace strategic reserves and aiming for the legal acts introducing the new mechanism to be operational by the end of 2020;
- in 2018, the overall cost of capacity markets across the EU reached 2.5 billion euros, which constitutes a 7% decrease compared to 2017 (nevertheless, costs are expected to be higher in 2019 and beyond, based on the available forecasts and the fact that capacity markets will become operational in various EU Member States in 2019 and 2020);
- the substitution of administratively-set capacity payments with competitive schemes, e.g. following the provisions of the Guidelines on state aid for environmental protection and energy 2014–2020, led to significant overall cost reductions in 2018 in Ireland and Northern Ireland, however, capacity payments still account for a large share of total energy costs in this jurisdiction;
- costs also remain significant in other EU Member States, such as Lithuania, Greece, Great Britain, France, Spain and Bulgaria;
- the ACER was concerned about an increasing impact of capacity markets on consumers’ bills in the light of the ENTSO-E’s 2018 Mid-term Adequacy Forecast (MAF 2018), where “seven EU Member States that have introduced or are planning to introduce a capacity markets, i.e. Germany, Latvia, Lithuania, Poland, Portugal, Spain and Sweden, do not seem to face an adequacy problem in either 2020 or 2025”.
ACER/CEER Annual Report of 22 October 2018 on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017 refers to the European Commission’s approval of six electricity capacity mechanisms to ensure security of supply in Belgium, France, Germany, Greece, Italy and Poland in February 2018, however, it is noted that the six approved capacity mechanisms adopted three different structures:
- for Belgium and Germany, the European Commission authorised strategic reserves (whereby certain generation capacities are kept outside the electricity market for operation only in emergencies),
- for Italy and Poland, the European Commission authorised market-wide capacity mechanisms (whereby companies are offered payments to generate electricity or reduce their electricity consumption),
- in the case of France and Greece, the European Commission authorised demand response schemes, whereby customers are incentivised to reduce their electricity consumption in hours where electricity is scarce.
In other markets (e.g. in Portugal or Spain), the capacity mechanisms were undergoing a revision.
Analogous ACER/CEER Report for year 2019 refers to Germany's the implementation of the first procurement process for strategic reserves in December 2019, to Italy, where the first two auctions for reliability options were carried out in November 2019 and to Greece (the suspension of the transitory flexibility auction approved in 2018, since March 2019, and the proposal for a new capacity mechanism, which was still under development).
More updates as regards the developments of capacity mechanisms in the EU are included in the ACER Report of October 2022 (Security of EU electricity supply in 2021: ACER Report on Member States approaches to assess and ensure adequacy). According to the said Report, in 2021, there were some important developments in relation to national capacity mechanisms. The European Commission approved the Belgian market-wide capacity mechanism in August 2021, and the first auction took place in October 2021. This was the first capacity mechanism approval since the Clean Energy Package came into force. In addition, the Bulgarian and Greek capacity mechanisms were phased out.
As of the end of 2021 there were eight Member States with active capacity mechanisms in Europe, namely: Belgium, Finland, France, Germany, Ireland, Italy, Poland and Sweden. While Portugal and Spain do not have an active capacity mechanism in place, legacy contracts are still valid. Five Member States have market-wide capacity mechanisms and additional three have strategic reserves in place.
All but the Finnish and Swedish capacity mechanisms were approved by the European Commission under the State aid rules. The ACER Report of October 2022 observes additional Member States are currently examining the possibility to introduce a capacity mechanism, while plans for the introduction of a capacity mechanism in some cases have at this time been frozen.
Cross-border participation in capacity mechanisms
According to the recast Electricity Market Regulation (Article 26) mechanisms other than strategic reserves and where technically feasible, strategic reserves, must be open to direct cross-border participation of capacity providers located in another EU Member State.
In this regard the ACER adopted on 22 December 2020 the Decision No 36/2020 concerning the respective technical specifications (Annex I to the Decision).
It is noteworthy, the said Annex I specifies in particular:
- common rules for identifying foreign capacity eligible for cross-border participation in capacity markets (Articles 26 - 28);
- terms of operation of the registry set up by the ENTSO-E to evidence such capacity providers (Articles 21 - 25).
Practical information on participation in and development of cross border capacity mechanisms can be found in the ACER document of October 2022 (Security of EU electricity supply in 2021: ACER Report on Member States approaches to assess and ensure adequacy) According to ACER such participation is currently limited, yet some progress can be observed. Market-wide capacity mechanisms in Belgium, France, Ireland, Italy and Poland have relevant provisions in place, however, implementation varies. In the Belgian capacity mechanism, foreign capacity can currently participate only in the T-1 auction (T refers to the delivery year; T-4 refers to auctions held four years prior to the delivery year), with the exception of foreign capacity directly connected to the Belgian network that can participate in the T-4 auction as well. No foreign capacity participated in the first T-4 auction held in October 2021. The French capacity mechanism still relies on temporary provisions that enable interconnectors to participate by directly selling the certificates provided by their interconnection's capacity. Foreign capacity was awarded contracts in the Italian capacity mechanism auctions held in 2019.
Obligations and requirements are less stringent for foreign providers compared to domestic ones. For example, the former only have financial obligations while the latter have to prove physical availability by participating in the electricity market. Foreign capacity was contracted for the first time in the T-5 auction of the Polish capacity mechanism held in December 2021. Finally, while the Irish capacity mechanism is currently de-facto exempted from the relevant provisions due to the lack of interconnection with the EU, interconnectors with Great Britain already participate in the capacity mechanism auctions.
For strategic reserves, the regulatory framework stipulates that cross-border participation is mandatory only if technically feasible (Article 26(1) of the Electricity Regulation). None of the strategic reserve schemes in place allow for it at the moment.
To enable cross-border participation, relevant TSOs (and/or capacity mechanism operators if different from TSOs) need to establish effective cooperation between them via bilateral agreements. So far, only the Polish TSO has signed such agreements with its Czech, Lithuanian and Swedish counterparts, while the agreement with the neighbouring German TSO is being finalised. The French TSO is also reportedly in discussions with the Belgian TSO. So far, foreign capacity in the Italian capacity mechanism has solely financial obligations, hence there was no actual need for further agreements between the Italian and the neighbouring TSOs.
Pursuant to Article 26(7) of the Electricity Regulation, regional coordination centres (RCCs) are responsible for calculating the maximum entry capacity available for the participation of foreign capacity providers in a given capacity mechanism and issue a recommendation to the relevant TSOs. The RCC calculation must be consistent with the European Resource Adequacy (ERA) methodology and for this, ENTSO-E must provide the necessary input data used in ERA to the RCCs. The above provisions can only apply once the RCCs are fully operational and ERA results are available. So far, the TSOs have used their own methodologies in order to calculate the relevant maximum entry capacity.
Commission Staff Working Document of 30.11.2016 Accompanying the document Report from the Commission Final Report of the Sector Inquiry on Capacity Mechanisms {COM(2016) 752 final} SWD(2016) 385 final, p. 52
To help determine whether a measure or practice in a Member State qualifies as a capacity mechanism within the scope of this inquiry, the Commission has identified the following indicators. Capacity mechanisms:
- are generally initiated by or with the involvement of governments;
- have the primary objective of contributing to security of supply; and
- provide remuneration to capacity providers in addition to revenues they receive in the electricity market, or instead of revenues they could otherwise have received in the electricity market.
Commission Staff Working Document of 30.11.2016 Accompanying the document Report from the Commission Final Report of the Sector Inquiry on Capacity Mechanisms {COM(2016) 752 final} SWD(2016) 385 final, p. 52, 53
A particular area in which there may be debate about what constitutes a capacity mechanism and what requires State aid approval is in the specification and procurement of ancillary services.
TSOs typically procure frequency (balancing of the system) and non-frequency (voltage control and black-start) ancillary services to ensure the management of the system.
In most cases, they are mandated to do so by a general public service obligation to maintain system stability and security.
Where such ancillary services are procured independently by TSOs, and where in particular the determination of the precise volumes and types of services to be procured is left to the TSOs without Government involvement, there will be a strong indication that the purchase of such services does not involve State aid and that those services are therefore not covered by this inquiry.
Such indication will be strengthened when procurement of such services is performed in a transparent, competitive and non-discriminatory way, thereby excluding undue advantages.
Another element to distinguish ancillary services from capacity mechanisms is the use and purpose of the services: when they are used in small volumes relative to the overall level of capacity in the market and only to provide short term corrections to enable system security, they will more likely be considered ancillary services.
However, where ancillary services appear to be contracted at the request of governments and/or are used to ensure capacity is available to balance the system over longer periods, they can have the same effect as capacity mechanisms.
Such measures may merit attention from the Commission and require State aid approval.
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)
Chapter IV
Resource adequacy
Article 18
Resource adequacy
1. Member States shall monitor resource adequacy within their territory based on the European resource adequacy assessment pursuant to Article 19.
2. Where the European resource adequacy assessment identifies a resource adequacy concern Member States shall identify any regulatory distortions that caused or contributed to the emergence of the concern.
3. Member States shall publish a timeline for adopting measures to eliminate any identified regulatory distortions. When addressing resource adequacy concerns Member States shall in particular consider removing regulatory distortions, enabling scarcity pricing, developing interconnection, energy storage, demand side measures and energy efficiency.
Article 19
European resource adequacy assessment
1. The European resource adequacy assessment shall cover the overall adequacy of the electricity system to supply current and projected demands for electricity for a ten-year period from the date of that assessment, in a yearly resolution.
2. By [OP: six months after entry into force of this Regulation], the ENTSO for Electricity shall submit to the Agency a draft methodology for the European resource adequacy assessment based on the principles provided for in paragraph 4.
3. Transmission system operators shall provide the ENTSO for Electricity with the data it needs to carry out, every year, the European resource adequacy assessment. The ENTSO for Electricity shall carry out the assessment every year.
4. The European resource adequacy assessment shall be based on a methodology which shall ensure that the assessment:
(a) is carried out on bidding zone level covering at least all Member States;
(b) is based on appropriate scenarios of projected demand and supply including an economic assessment of the likelihood of retirement, new-build of generation assets and measures to reach energy efficiency targets and appropriate sensitivities on wholesale prices and carbon price developments;
(c) appropriately takes account of the contribution of all resources including existing and future generation, energy storage, demand response, and import and export possibilities and their contribution to flexible system operation;
(d) anticipates the likely impact of the measures referred in Article 18(3);
(e) includes scenarios without existing or planned capacity mechanisms;
(f) is based on a market model using, where applicable, the flow-based approach;
(g) applies probabilistic calculations;
(h) applies at least the following indicators:
– "expected energy not served", and
– "loss of load expectation";
(i) identifies the sources of possible resource adequacy concerns, in particular whether it is a network or a resource constraint, or both.
5. By [OP: six months after entry into force of this Regulation], the ENTSO for Electricity shall submit to the Agency a draft methodology for calculating:
(a) the value of lost load;
(b) the "cost of new entry" for generation, or demand response; and
(c) the reliability standard expressed as "expected energy not served" and the "loss of load expectation".
6. The proposals under paragraphs 2 and 5 and the results of the European resource adequacy assessment under paragraph 3 shall be subject to prior consultation and approval by the Agency under the procedure set out in Article 22.
Article 20
Reliability standard
1. When applying capacity mechanisms Member States shall have a reliability standard in place indicating their desired level of security of supply in a transparent manner.
2. The reliability standard shall be set by the national regulatory authority based on the methodology pursuant to Article 19(5).
3. The reliability standard shall be calculated using the value of lost load and the cost of new entry over a given timeframe.
4. The parameters determining the amount of capacity procured in the capacity mechanism shall be approved by the national regulatory authority.
Article 21
Cross-border participation in capacity mechanisms
1. Mechanisms other than strategic reserves shall be open to direct participation of capacity providers located in another Member State provided there is a network connection between that Member State and the bidding zone applying the mechanism.
2. Member States shall ensure that foreign capacity capable of providing equivalent technical performance to domestic capacities has the opportunity to participate in the same competitive process as domestic capacity.
3. Member States shall not restrict capacity which is located in their territory from participating in capacity mechanisms of other Member States.
4. Cross-border participation in market-wide capacity mechanisms shall not change, alter or otherwise impact cross-zonal schedules and physical flows between Member States which shall be determined solely by the outcome of capacity allocation pursuant to Article 14.
5. Capacity providers shall be able to participate in more than one mechanism for the same delivery period. They shall be subject to non-availability payments in case of non-availability, and subject to two or more non-availability payments where there is concurrent scarcity in two or more bidding zones where the capacity provider is contracted.
6. Regional operational centres established pursuant to Article 32 shall annually calculate the maximum entry capacity available for the participation of foreign capacity taking into account the expected availability of interconnection and the likely concurrence of system stress between the system where the mechanism is applied and the system in which the foreign capacity is located. A calculation is required for each bidding zone border.
7. Member States shall ensure that the entry capacity referred to in paragraph 6 is allocated to eligible capacity providers in a transparent, non-discriminatory and market-based manner.
8. Any difference in the cost of foreign capacity and domestic capacity arising through the allocation referred to in paragraph 7 shall accrue to transmission system operators and be shared between them according to the methodology referred in point (b) of paragraph 10. Transmission system operators shall use such revenues for the purposes set out in Article 17(2).
9. The transmission system operator where the foreign capacity is located shall:
(a) establish whether interested capacity providers can provide the technical performance as required by the capacity mechanism in which the capacity provider intends to participate and register the capacity provider in the registry as eligible capacity providers.
(b) carry out availability checks as appropriate.
10. By [OP: twelve months after entry into force of this Regulation] the ENTSO for Electricity shall submit to the Agency:
(a) a methodology for calculating the maximum entry capacity for cross-border participation as referred to in paragraph 6;
(b) a methodology for sharing the revenues referred to in paragraph 8;
(c) common rules to carry out availability checks referred to in point (b) of paragraph 9;
(d) common rules to determine when a non-availability payment is due;
(e) terms of the operation of the registry as referred to in point (a) of paragraph 9;
(f) common rules to identify capacity eligible to participate as referred to in point (a) of paragraph 9.
The proposal shall be subject to prior consultation and approval by the Agency under the procedure set out in Article 22.
11. The Agency shall verify whether the capacities have been calculated in line with the methodology as referred to in point (a) of paragraph 10.
12. National regulatory authorities shall ensure that cross-border participation in capacity mechanisms is organised in an effective and non-discriminatory manner. They shall in particular provide for adequate administrative arrangements for the enforcement of non-availability payments across borders.
13. Allocated capacities as referred to in paragraph 7 shall be transferable between eligible capacity providers. Eligible capacity providers shall notify any transfer to the registry as referred to in point (a) of paragraph 9.
14. No later than [OP: two years after the entry into force of this Regulation] the ENTSO for Electricity shall set up and operate the registry as referred to in point (a) of paragraph 9. The registry shall be open to all eligible capacity providers, the systems applying the mechanisms and their transmission system operators.
Article 22
Approval procedure
1. Where reference is made to this Article, the procedure set out in paragraphs 2 to 4 shall be applicable to the approval of a proposal submitted by the ENTSO for Electricity.
2. Prior to submitting the proposal, the ENTSO for Electricity shall conduct a consultation process involving all relevant stakeholders, national regulatory authorities and other national authorities.
3. Within three months from the date of receipt, the Agency shall either approve the proposal or amend it. In the latter case, the Agency shall consult the ENTSO for Electricity before adopting the amended proposal. The adopted proposal shall be published on the Agency's website at the latest three months after the date of receipt of the proposed documents.
4. The Agency may request changes to the approved proposal at any time. Within six months from the request, the ENTSO for Electricity shall submit to the Agency a draft of the proposed changes. Within a period of three months from the date of receipt of the draft, the Agency shall amend or approve the changes and publish it on its website.
Article 23
Design principles for capacity mechanisms
1. To address residual concerns that cannot be eliminated by the measures pursuant to Article 18(3), Member States may introduce capacity mechanisms, subject to the provisions of this Article and to the Union State aid rules.
2. Where a Member State wishes to implement a capacity mechanism, it shall consult on the proposed mechanism at least with its electrically connected neighbouring Member States.
3. Capacity mechanisms shall not create unnecessary market distortions and not limit cross-border trade. The amount of capacity committed in the mechanism shall not go beyond what is necessary to address the concern.
4. Generation capacity for which a final investment decision has been made after [OP: entry into force] shall only be eligible to participate in a capacity mechanism if its emissions are below 550 gr CO2/kWh. Generation capacity emitting 550 gr CO2/kWh or more shall not be committed in capacity mechanisms 5 years after the entry into force of this Regulation.
5. Where the European resource adequacy assessment has not identified a resource adequacy concern, Member States shall not apply capacity mechanisms.
Article 24
Existing mechanisms
Member States applying capacity mechanisms on [OP: entry into force of this Regulation] shall adapt their mechanisms to comply with Articles 18, 21 and 23 of this Regulation.
EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 19, 20
We welcome the intention of the European Commission to establish rules in European legislation on capacity mechanisms. We support the provisions of Article 18 and 19 of the draft recast Regulation mandating Member States to perform a coordinated resource adequacy assessment at European level that should be the basis of any possible establishment of a capacity mechanism according to Article 23.5 of the draft recast Regulation. We also support Article 23.3 of the draft recast Regulation, which foresees that capacity mechanisms shall not create unnecessary market distortions and not limit cross-border trade and that the amount of capacity committed in the mechanism shall not go beyond what is necessary to address the capacity adequacy concern.
However, we believe that the final report of the sector inquiry on capacity mechanisms and the draft recast Electricity Regulation are quite a disappointment in terms of how capacity mechanism should or should not be designed, where they are deemed needed. We see no significant addition compared to the earlier publications of the European Commission on the subject since 2012. We were notably expecting a real “blue print” guidance for Member States in Article 23 of the draft recast Regulation to avoid the patchwork situation we are in at the moment with capacity mechanisms. This “blue print” guidance should include at least the following elements: all capacity mechanisms shall be open to cross-border participation; all capacities – all types of generation, demand or storage, existing or new – should be treated equally; mechanisms shall be designed to phase-out in case they are no longer necessary; the regulation should clearly state a deadline for compliance of existing mechanisms with the new rules.
A major novelty, and the only binding design criterion for capacity mechanisms that the European Commission has seen fit to include in the Clean Energy Package is a on greenhouse gas (GHG) emission standard in Article 23.4 of the draft recast Regulation. EFET rejects this concept as it contradicts the core principles of non- discrimination, effective competition and the efficient functioning of the market. A capacity mechanism needs to ensure security of supply – it is not a tool for promoting decarbonisation. The most efficient way to bring about decarbonisation is to internalise the externality of carbon emissions by putting a price on carbon. This is what the EU ETS seeks to do. Picking winners and losers through emissions limits is likely to introduce inefficient market distortions. To exclude specific technologies in this way may result in these technologies exiting the market and hence creating a requirement for costly new investment in (other) conventional power plants. Hence this measure is likely to bring no additional benefit in terms of emissions reductions while imposing higher costs on consumers. The measure will have the detrimental effect of weakening the carbon price in the EU ETS, which in itself undermines GHG reduction targets in the long-term. It will not reduce GHG emissions in the traded sector, since these are set by the EU ETS cap.
Somehow worrisome in the whole discussion on capacity adequacy is the lack of importance given to the relation between scarcity pricing and competition. Energy prices should be allowed to reflect the true value of scarcity during times of system stress and high demand for power; similarly, when energy is in abundance prices should be allowed to reflect the value of displacing that generation and even go negative. To this end we believe there should be no price caps or floors imposed on the market unless they are set at the value of lost load, as foreseen in Article 9.1 of the draft recast Regulation, without exception4. Making the market more efficient will result in a more efficient use of capacities and therefore translate into lower prices overall, which better reflect the match between supply and demand. We reiterate that assessments of capacity adequacy – to be performed at pan-European, or at least regional level – will remain inaccurate if the market framework in a specific country or region does not allow the free formation of prices.
Capacity remuneration mechanisms' taxonomy
pursuant to ACER's anaysis of of 30 July 2013 "Capacity remuneration mechanisms and the internal market for electricity"
Strategic Reserve
In a Strategic Reserve scheme, some generation capacity is set aside to ensure security of supply in exceptional circumstances, which can be signalled by prices in the day-ahead, intra-day or balancing markets increasing above a certain threshold level. An independent body, for example the Transmission System Operator ("TSO"), determines the amount of capacity to be set aside to achieve the desired degree of adequacy and dispatches it whenever due. The capacity to be set-aside is procured and the payments to this capacity determined through a (typically year-ahead) tender and the costs are borne by the network users.
Strategic or ring-fenced Reserves are essentially generating units that are kept exclusively available for emergencies (e.g. when the market is not able to cover demand) and are called upon by an independent body (e.g. the TSO).
The Strategic Reserve is intended to operate only when the market does not provide sufficient capacity and should therefore be dispatched at a price above a reference level signalling scarcity. In theory, the reserve should only be dispatched at a price close to VoLL in order not to interfere with the market even in tight conditions. In this case the natural price formation on the market is not affected and generators receive the same investment incentive as if there were no strategic reserve.
Capacity for Strategic Reserves is procured through a tendering procedure for a specified amount of capacity (in MW), for example on a year-to-year basis. The Strategic Reserve may consist of existing or - provided the auction takes place well in advance of when the contracted capacity should be available - new generation built for the purpose of reserve capacity and may include demand resources. The latter are normally obliged to reduce electricity consumption sufficiently fast to a specified level when called upon. The specification of the amount and type of capacity (e.g. peak units) or demand resources may be based on a so-called reliability study.
The compensation schemes for the providers of Strategic Reserves are specified in the tendering documents and may vary from case to case. These schemes may involve direct payments, payments in the form of an option or mixed forms. Strategic Reserve contracts contain also provisions for notification time, duration of activation, etc.
The costs of the Strategic Reserve schemes are typically covered through system charges included in the transmission tariff. Hence, they are passed on to consumers of electricity. In theory, the revenues, when dispatching the strategic reserves, should cover the costs.
Capacity Obligations
A Capacity Obligation scheme is a decentralised scheme where obligations are imposed on large consumers and on load serving entities ("LSE", further referred to as "suppliers"), to contract a certain level of capacity linked to their self-assessed future (e.g. three years ahead) consumption or supply obligations, respectively. The capacity to be contracted is typically higher, by a reserve margin determined by an independent body, than the level of expected future consumption or supply obligations. The obligated parties can fulfil their obligation through ownership of plants, contracting with generators/consumers and/or buying tradable capacity certificates (issued to capacity providers). Contracted generators/consumers are required to make the contracted capacity available to the market in periods of shortages, defined administratively or by market prices rising above a threshold level. Failure to do so may result in penalties. A (secondary) market for capacity certificates may be established, to promote the efficient exchange of these certificates between generators/consumers providing capacity and the obligated parties or between obligated parties.
The Capacity Obligation creates 'demand' and 'supply' for capacity guarantees. Large consumers and suppliers contract generation capacity corresponding to a certain margin above the volume of their expected consumption or supply obligations, respectively. The margin is applied on top of the consumers' or suppliers' own assessment future consumption/supply obligations. An independent body may set some assessment rules and determines the (reliability) margin.
Large consumers and suppliers can meet their Capacity Obligations by owning generation capacity, by obtaining bilateral contracts with - for instance - generators and/or buying capacity certificates. These capacity certificates are essentially contracts that specify the required availability of an electricity generating plant or part of an electricity generating plant (duration, notification time, etc.). Generators may sell capacity contracts up to the volume of generation capacity that they have reliably available, which is determined by an independent body. Also, demand side resources may be included as interruptible load contracts.
Capacity certificates offer flexibility in the way that large consumers and suppliers comply with their capacity obligation and, if they are standardised, they can be traded on a bilateral basis or in an organised market/auction. In the latter case, the certificate price is determined by the supply and demand in the market/auction.
Capacity providers are paid for the capacity certificates (or bilateral contract) issued; the suppliers pass on the costs of these certificates to their consumers.
Capacity contracted under capacity obligations is expected to be offered into the wholesale market and, in particular, in scarcity situations. Failure to make capacity available results in a penalty.
Capacity Auctions
A Capacity Auction scheme is a centralised scheme in which the total required capacity is set (several years) in advance of supply and procured through an auction by an independent body. The price is set by the forward auction and paid to all participants who are successful in the auction. The costs are charged to the suppliers who charge end consumers. Contracted capacity should be available according to the terms of the contract.
Capacity Auctions are similar to a Capacity Obligation scheme, though the capacity procurement process is centralised and an independent body acts on behalf of total demand. It calculates how much generation (interruptible load) capacity consumers/suppliers require based on the expected total peak demand. The calculations require reliability assessments, i.e. estimates of the total need for capacity including forecasts of peak demand and reserve margins.
Generators may sell capacity contracts up to the volume of generation capacity that they have reliably available, which is determined by an independent body. Capacity certificates can be traded. Suppliers include the cost of purchasing capacity credits in the price they charge to final consumers for electricity e.g. according to their off-take or off-take profile.
Capacity Auction schemes may allow generators and suppliers to procure capacity directly, as under a Capacity Obligation scheme, by means of owning generation, bilaterally contracting capacity. In this case they inform the independent body about their direct procurements outside the auction.
Reliability Options
Reliability Options are instruments similar to call options, whereby contracted capacity providers (typically generators) are required to pay the difference between the wholesale market price (e.g. the spot price) and a pre-set reference price (i.e. the "strike price"), whenever this difference is positive, i.e. the option is exercised. In exchange they receive a fixed fee, thus benefitting from a more stable and predictable income stream. Under a Reliability Options scheme, the incentive for the contracted generator to be available (at times of scarcity) arises from the high market price and from the fact that, if not available and therefore not dispatched, it will have to meet the payments under the Reliability Options without receiving any revenue from the market.
The holders of Reliability Options effectively cap their electricity purchase price at the level of the strike price, since whenever the market price increases above this level, the excess will be "reimbursed" through the payment made under the Reliability Options. A scheme based on Reliability Options usually rests on an obligation imposed on large consumers and on suppliers to acquire a certain amount of Reliability Options, linked to their (self-assessed) future consumption or supply obligations, respectively.
Different Reliability Options variants can be designed, depending on whether the scheme is purely financial or also involves an obligation to have and make capacity available when the option is exercised (or otherwise face a penalty). In this latter case the Reliability Options scheme becomes similar to a scheme based on Capacity Obligations.
The key idea of Reliability Options is to rely mainly on the financial incentives to ensure that capacity is bid into the market at times of scarcity.
In this mechanism, consumers - or an independent body on their behalf - buy Reliability Options. Contracted generators, who have issued Reliability Options, pay to the holders of such options an amount, for each unit of energy covered by the option, equal to the difference between the market price and a strike price, set administratively (e.g. by the independent body), whenever this difference is positive. In exchange they receive fixed revenues from the options issued and benefit from a more stable and predictable income. The mechanism may be purely financial, as just described, or a physical element may be included, by requiring contracted generators to make capacity available to the market when the market price exceeds the strike price. In this case a penalty (pen) may be payable, on top of the difference between the market price and the strike price, if the requirement is not met.
Consumers who hold Reliability Options 'implicitly insure' themselves against future electricity extreme purchasing prices (above the strike price). In fact, whenever the wholesale market price exceeds the strike price level, consumers effectively pay only the strike price, as the excess is compensated by the payment received from generators under the Reliability Options.
The volume of the contracts, the strike price and the penalty, if applied, are typically determined by the independent body. The volume of Reliability Options should be equal to the forecasted peak load plus a reserve margin, similar to the case of a Capacity Obligation mechanism. The strike price should be set well above the highest operating (marginal) cost of all units (reflecting a "near rationing" level) in order not to discourage any generator from producing. The level of remuneration for the availability of capacity to generators is in fact the price of the Reliability Options, which is determined on the market. Additionally, the time horizon (for example 7-10 years) needs to be set during which the seller may be required to make the committed capacity available when the market price exceeds the strike price.
Capacity Payments
Capacity Payments represent a fixed price paid to generators/consumers for available capacity. The amount is determined by an independent body. The quantity supplied is then independently determined by the actions of market participants.
The simplest type of capacity mechanism is to provide direct Capacity Payments. A direct Capacity Payment scheme encourages generators to invest in new or maintain old capacity by complementing the revenues that generators receive from the sale of electricity on the wholesale energy market.
The Capacity Payment is defined and controlled by an independent body. There are different methods of calculating the level of payments and how to target them. For example, the Capacity Payment may apply to all capacity or to existing generation plants only, to new plants, or to specific plant types. Alternatively, it can be differentiated between types of capacity, e.g. between base-load and peak capacity, existing and new capacity, etc.. Demand side resources are typically not eligible to capacity payments.
Generators who receive Capacity Payments for their plants sell their electricity on the wholesale market (i.e. electricity exchanges or bilateral contracts).
Capacity Payments may refer only to the present, but may also apply (exclusively) to new capacity. In the latter case, the payment is explicitly aimed at amplifying the investment incentives for new capacity.
The costs of Capacity Payments are covered by levies collected by suppliers. The fee is typically proportional to the amount of electricity supplied, usually in the form of an uplift charge on energy purchased.
Capacity remuneration mechanisms' taxonomy
pursuant to the European Commission's consultation document on generation adequacy, capacity mechanisms and the internal market in electricitygeneration adequacy, capacity mechanisms and the internal market in electricity (consultations ended on 07.02.2013)
Strategic reserves
The most basic capacity mechanism is a strategic reserve. Here capacity is procured, but kept for deployment in emergency situations generally by the transmission system operator. Often this reserve is made up of old plants which would otherwise be retired as uneconomical. The strategic reserve is withheld from the market or only bid into the market at extremely high prices. When it is dispatched by the transmission system operator during times of extreme scarcity it then also becomes the price setting plant meaning the strategic reserve effectively acts as a price cap in the market. Strategic reserves do not affect the market during normal periods and, because they are easily reversible, can be useful for supporting the transition away from fossil fuel based systems or facilitating nuclear phase outs.
Strategic reserves have interacted well with energy only markets where they have been used in Sweden and Finland, causing a minimum of distortion. Nonetheless, it is important that they be properly implemented – there must be clear rules as to when they can be deployed, in particular they should not be used to keep prices low, which could result in high emissions from inefficient old plants and discourage the development and deployment of new and more efficient technologies, including storage and demand side response. It is also important that such strategic reserves not be established in such a way that they reinforce the position of incumbents.
Capacity payments and markets
Other capacity mechanisms target generation capacity which continues to participate in the normal energy market. There are several varieties of such mechanisms:
(1) a capacity payment which is a fixed price paid for available capacity or
(2) a capacity market where either: (a) the required quantity is centrally fixed and procured, for example by the transmission system operator, or (b) based on their customer profile, suppliers are obliged to buy an administratively determined quantity of certified capacity from generators on a market parallel to the normal energy market.
Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), Articles 21, 22, 26
Article 21
General principles for capacity mechanisms
1.To eliminate residual resource adequacy concerns, Member States may, as a last resort while implementing the measures referred to in Article 20(3) of this Regulation in accordance with Article 107, 108 and 109 of the TFEU, introduce capacity mechanisms.
2.Before introducing capacity mechanisms, the Member States concerned shall conduct a comprehensive study of the possible effects of such mechanisms on the neighbouring Member States by consulting at least its neighbouring Member States to which they have a direct network connection and the stakeholders of those Member States.
3.Member States shall assess whether a capacity mechanism in the form of strategic reserve is capable of addressing the resource adequacy concerns. Where this is not the case, Member States may implement a different type of capacity mechanism.
4.Member States shall not introduce capacity mechanisms where both the European resource adequacy assessment and the national resource adequacy assessment, or in the absence of a national resource adequacy assessment, the European resource adequacy assessment have not identified a resource adequacy concern.
5.Member States shall not introduce capacity mechanisms before the implementation plan as referred to in Article 20(3) has received an opinion by the Commission as referred to in Article 20(5).
6.Where a Member State applies a capacity mechanism, it shall review that capacity mechanism and shall ensure that no new contracts are concluded under that mechanism where both the European resource adequacy assessment and the national resource adequacy assessment, or in the absence of a national resource adequacy assessment, the European resource adequacy assessment have not identified a resource adequacy concern or the implementation plan as referred to in Article 20(3) has not received an opinion by the Commission as referred to in Article 20(5).
7.When designing capacity mechanisms Member States shall include a provision allowing for an efficient administrative phase-out of the capacity mechanism where no new contracts are concluded under paragraph 6 during three consecutive years.
8. Capacity mechanisms shall be temporary. They shall be approved by the Commission for no longer than 10 years. They shall be phased out or the amount of the committed capacities shall be reduced on the basis of the implementation plans referred to in Article 20. Member States shall continue to apply the implementation plan after the introduction of the capacity mechanism.
Article 22
Design principles for capacity mechanisms
1.Any capacity mechanism shall:
(a) be temporary;
(b) not create undue market distortions and not limit cross-zonal trade;
(c) not go beyond what is necessary to address the adequacy concerns referred to in Article 20;
(d) select capacity providers by means of a transparent, non-discriminatory and competitive process;
(e) provide incentives for capacity providers to be available in times of expected system stress;
(f) ensure that the remuneration is determined through the competitive process;
(g) set out the technical conditions for the participation of capacity providers in advance of the selection process;
(h) be open to participation of all resources that are capable of providing the required technical performance, including energy storage and demand side management;
(i) apply appropriate penalties to capacity providers that are not available in times of system stress.
2.The design of strategic reserves shall meet the following requirements:
(a) where a capacity mechanism has been designed as a strategic reserve, the resources thereof are to be dispatched only if the transmission system operators are likely to exhaust their balancing resources to establish an equilibrium between demand and supply;
(b) during imbalance settlement periods where resources in the strategic reserve are dispatched, imbalances in the market are to be settled at least at the value of lost load or at a higher value than the intraday technical price limit as referred in Article 10(1), whichever is higher;
(c) the output of the strategic reserve following dispatch is to be attributed to balance responsible parties through the imbalance settlement mechanism;
(d) the resources taking part in the strategic reserve are not to receive remuneration from the wholesale electricity markets or from the balancing markets;
(e) the resources in the strategic reserve are to be held outside the market for at least the duration of the contractual period.
The requirement referred to in point (a) of the first subparagraph shall be without prejudice to the activation of resources before actual dispatch in order to respect the ramping constraints and operating requirements of the resources. The output of the strategic reserve during activation shall not be attributed to balance groups through wholesale markets and shall not change their imbalances.
3.In addition to the requirements laid down in paragraph 1, capacity mechanisms other than strategic reserves shall:
(a) be constructed so as to ensure that the price paid for availability automatically tends to zero when the level of capacity supplied is expected to be adequate to meet the level of capacity demanded;
(b) remunerate the participating resources only for their availability and ensure that the remuneration does not affect decisions of the capacity provider on whether or not to generate;
(c) ensure that capacity obligations are transferable between eligible capacity providers.
4. Capacity mechanisms shall incorporate the following requirements regarding CO2 emission limits:
(a) from 4 July 2019 at the latest, generation capacity that started commercial production on or after that date and that emits more than 550 g of CO2 of fossil fuel origin per kWh of electricity shall not be committed or to receive payments or commitments for future payments under a capacity mechanism;
(b) from 1 July 2025 at the latest, generation capacity that started commercial production before 4 July 2019 and that emits more than 550 g of CO2 of fossil fuel origin per kWh of electricity and more than 350 kg CO2 of fossil fuel origin on average per year per installed kWe shall not be committed or receive payments or commitments for future payments under a capacity mechanism.
The emission limit of 550 g CO2 of fossil fuel origin per kWh of electricity and the limit of 350 kg CO2 of fossil fuel origin on average per year per installed kWe referred to in points (a) and (b) of the first subparagraph shall be calculated on the basis of the design efficiency of the generation unit meaning the net efficiency at nominal capacity under the relevant standards provided for by the International Organization for Standardization.
By 5 January 2020, ACER shall publish an opinion providing technical guidance related to the calculation of the values referred in the first subparagraph.
5.Member States that apply capacity mechanisms on 4 July 2019 shall adapt their mechanisms to comply with Chapter 4 without prejudice to commitments or contracts concluded by 31 December 2019.
Article 26
Cross-border participation in capacity mechanisms
1. Capacity mechanisms other than strategic reserves and where technically feasible, strategic reserves shall be open to direct cross-border participation of capacity providers located in another Member State, subject to the conditions laid down in this Article.
2. Member States shall ensure that foreign capacity capable of providing equivalent technical performance to domestic capacities has the opportunity to participate in the same competitive process as domestic capacity. In the case of capacity mechanisms in operation on 4 July 2019, Member States may allow interconnectors to participate directly in the same competitive process as foreign capacity for a maximum of four years from 4 July 2019 or two years after the date of approval of the methodologies referred to in paragraph 11, whichever is earlier.
Member States may require foreign capacity to be located in a Member State that has a direct network connection with the Member State applying the mechanism.
3. Member States shall not prevent capacity which is located in their territory from participating in capacity mechanisms of other Member States.
4. Cross-border participation in capacity mechanisms shall not change, alter or otherwise affect cross-zonal schedules or physical flows between Member States. Those schedules and flows shall be determined solely by the outcome of capacity allocation pursuant to Article 16.
5. Capacity providers shall be able to participate in more than one capacity mechanism.
Where capacity providers participate in more than one capacity mechanism for the same delivery period, they shall participate up to the expected availability of interconnection and the likely concurrence of system stress between the system where the mechanism is applied and the system in which the foreign capacity is located, in accordance with the methodology referred to in point (a) of paragraph 11.
6. Capacity providers shall be required to make non-availability payments where their capacity is not available.
Where capacity providers participate in more than one capacity mechanism for the same delivery period, they shall be required to make multiple non-availability payments where they are unable to fulfil multiple commitments.
7. For the purposes of providing a recommendation to transmission system operators, regional coordination centres established pursuant to Article 35 shall calculate on an annual basis the maximum entry capacity available for the participation of foreign capacity. That calculation shall take into account the expected availability of interconnection and the likely concurrence of system stress in the system where the mechanism is applied and the system in which the foreign capacity is located. Such a calculation shall be required for each bidding zone border.
Transmission system operators shall set the maximum entry capacity available for the participation of foreign capacity based on the recommendation of the regional coordination centre on an annual basis.
8. Member States shall ensure that the entry capacity referred to in paragraph 7 is allocated to eligible capacity providers in a transparent, non-discriminatory and market-based manner.
9. Where capacity mechanisms allow for cross-border participation in two neighbouring Member States, any revenues arising through the allocation referred to in paragraph 8 shall accrue to the transmission system operators concerned and shall be shared between them in accordance with the methodology referred in point (b) of paragraph 11 of this Article or in accordance with a common methodology approved by both relevant regulatory authorities. If the neighbouring Member State does not apply a capacity mechanism or applies a capacity mechanism which is not open to cross-border participation, the share of revenues shall be approved by the competent national authority of the Member State in which the capacity mechanism is implemented after having sought the opinion of the regulatory authorities of the neighbouring Member States. Transmission system operators shall use such revenues for the purposes set out in Article 19(2).
10. The transmission system operator where the foreign capacity is located shall:
(a) establish whether interested capacity providers can provide the technical performance as required by the capacity mechanism in which the capacity provider intends to participate, and register that capacity provider as an eligible capacity provider in a registry set up for that purpose;
(b) carry out availability checks;
(c) notify the transmission system operator in the Member State applying the capacity mechanism of the information it acquires under points (a) and (b) of this subparagraph and the second subparagraph.
The relevant capacity provider shall notify the transmission system operator of its participation in a foreign capacity mechanism without delay.
11. By 5 July 2020 the ENTSO for Electricity shall submit to ACER:
(a) a methodology for calculating the maximum entry capacity for cross-border participation as referred to in paragraph 7;
(b) a methodology for sharing the revenues referred to in paragraph 9;
(c) common rules for the carrying out of availability checks referred to in point (b) of paragraph 10;
(d) common rules for determining when a non-availability payment is due;
(e) terms of the operation of the registry as referred to in point (a) of paragraph 10;
(f) common rules for identifying capacity eligible to participate in the capacity mechanism as referred to in point (a) of paragraph 10.
The proposal shall be subject to prior consultation and approval by ACER in accordance with Article 27.
12. The regulatory authorities concerned shall verify whether the capacities have been calculated in accordance with the methodology referred to in point (a) of paragraph 11.
13. Regulatory authorities shall ensure that cross-border participation in capacity mechanisms is organised in an effective and non-discriminatory manner. They shall in particular provide for adequate administrative arrangements for the enforcement of non-availability payments across borders.
14. The capacities allocated in accordance with paragraph 8 shall be transferable between eligible capacity providers. Eligible capacity providers shall notify the registry as referred to in point (a) of paragraph 10 of any such transfer.
15. By 5 July 2021 the ENTSO for Electricity shall set up and operate the registry referred to in point (a) of paragraph 10. The registry shall be open to all eligible capacity providers, the systems implementing capacity mechanisms and their transmission system operators.
Regulatory chronicle