Capacity Calculations Regions (CCRs) - the key architecture of the EU Internal Electricity Market
What is the 'capacity calculation region' (CCR) and what is its significance for the European Union Internal Electricity Market? Is the CCR something that needs to be bothered with?
An expressive answer to the above questions can be found in the Commission Staff Working Document of 30 November 2016 (accompanying the Final Report of the Sector Inquiry on Capacity Mechanisms, p. 10), which unequivocally underlines that organisation of electricity trading with capacity calculation regions of several EU Member States and harmonised rules for trading in these regions fundamentally change the business models of generators and suppliers alike. Generators and suppliers increasingly need to take into account cross-border flows and hedge their positions long term, for instance by closing long term contracts and/or buying transmission rights, as well as optimize their positions in the day-ahead and increasingly in even shorter term intraday markets.
To explain the CCRs in greater detail it is useful to start with the recollection that capacity calculation for the day-ahead and intraday market timeframes needs to be coordinated at least at the regional level to ensure that capacity calculation is reliable and that optimal capacity is made available to the market.
For this purpose, regions where such coordination is required are defined by all the EU Transmission System Operators (TSOs).
In accordance with Article 2 of CACM Regulation, these delineations are termed 'capacity calculation regions' (CCRs), meaning 'the geographic area in which coordinated capacity calculation is applied'.
Identical CCR's definition is used by the so-called 'Winter Energy Package' (Article 2(2)(t) of the European Commission's Proposal of 30 November 2016 for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), COM(2016) 861 final 2016/0379 (COD)) and Article 2(21) of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast).
The CCR needs to consist of a set of bidding zone borders for which the capacity calculation is coordinated by TSOs in accordance with the CACM Regulation.
Article 15 of the CACM Regulation sets the requirements for the determination of CCRs (see box below). For the determination of CCRs, Article 9(1) and (6)(b) and Article 15(1) of the CACM Regulation require that all TSOs develop a proposal and that the National Regulatory Authorities (NRAs) approve the proposed determination of CCRs. In case the NRAs disagree or upon their joint request, the ACER becomes responsible for deciding on the TSOs’ proposal according to Article 9(11) and (12) of the CACM Regulation. According to Article 9(13) of the CACM Regulation the same process applies if the TSOs propose to amend the approved determination of CCRs. CCR must take into account the general principles and goals set in the CACM Regulation as well as Regulation (EC) No 714/2009.
The goal of CACM Regulation is the coordination and harmonisation of capacity calculation and allocation in the day-ahead and intraday cross-border markets, and it sets requirements for the TSOs to co-operate on the level of CCRs, on a pan-European level and across bidding zone borders.
List of CCRs with assigned bidding zones borders and attributed TSOs is determined in Annex I to the ACER Decision 04/2021.
In particular, based on the CACM Regulation, the following terms and conditions or methodologies need to be developed and approved on a CCR level:
(a) the common capacity calculation methodology (Article 20);
(b) the methodology for coordinated redispatching and countertrading (Article 35(1));
(c) the fallback procedures (Article 44); and
(d) the redispatching or countertrading cost sharing methodology (Article 74(1)).
The obligations and rights related to CCRs as determined in the CACM Regulation remain with the TSOs assigned to the respective CCR. To take into account interdependencies between capacity calculation, security analysis coordination and outage scheduling, TSOs should coordinate with TSOs beyond their respective CCR. For each CCR, a Coordinated Capacity Calculator needs to be established to define cross-zonal capacities for day-ahead, intraday timeframes and long-term timeframes using the European Common Grid Model (CGM) by extracting relevant parts of data from the CGM.
Article 15 of the CACM Regulation
Capacity calculation regions
1. By three months after the entry into force of this Regulation all TSOs shall jointly develop a common proposal regarding the determination of capacity calculation regions. The proposal shall be subject to consultation in accordance with Article 12.
2. The proposal referred to in paragraph 1 shall define the bidding zone borders attributed to TSOs who are members of each capacity calculation region. The following requirements shall be met:
(a) it shall take into consideration the regions specified in point 3(2) of Annex I to Regulation (EC) No 714/2009;
(b) each bidding zone border, or two separate bidding zone borders if applicable, through which interconnection between two bidding zones exists, shall be assigned to one capacity calculation region;
(c) at least those TSOs shall be assigned to all capacity calculation regions in which they have bidding zone borders.
3. Capacity calculation regions applying a flow-based approach shall be merged into one capacity calculation region if the following cumulative conditions are fulfilled:
(a) their transmission systems are directly linked to each other;
(b) they participate in the same single day-ahead or intraday coupling area;
(c) merging them is more efficient than keeping them separate. The competent regulatory authorities may request a joint cost-benefit analysis from the TSOs concerned to assess the efficiency of the merger.
To further ensure coordination of capacity calculation between the CCRs, each Coordinated Capacity Calculator must cooperate with the neighbouring Coordinated Capacity Calculators. Article 20(1) of CACM Regulation stipulates that there must be one common Capacity Calculation Methodology per CCR.
Network Code on Forward Capacity Allocation
Article 8 Capacity calculation regions
For the purposes of this Regulation the capacity calculation regions shall be those established pursuant to Article 15 of Commission Regulation (EU) 2015/1222.
Article 9 Capacity calculation timeframes
All TSOs in each capacity calculation region shall ensure that long-term cross-zonal capacity is calculated for each forward capacity allocation and at least on annual and monthly timeframes.
Evolution of European CCRs
The propositions with respect to CCR design were initially set out in the All TSOs' draft proposal for Capacity Calculation Regions (CCRs) - Draft Version 1.0 (see the map below).
Diagram's source: https://consultations.entsoe.eu/system-operations/capacity-calculation-regions/consult_view
As a second step TSOs submitted a more comprehensive and detailed CCRs proposal on 29 October 2015, the relevant documentation involved:
- All TSOs' proposal for Capacity Calculation Regions (CCRs) in accordance with Article 15(1) of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management of 29 October 2015,
- Explanatory document to all TSOs' proposal for Capacity Calculation Regions (CCRs) in accordance with Article 15(1) of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management of 29 October 2015.
As the above documents expressly underlined, they represented an important step on the roadmap towards a long-term target of the CACM Regulation i.e. the harmonisation of the capacity calculation methodology within the CCRs and merging of CCRs when efficiency reasons justify doing so. Pursuant to ENTSO-E, the above CCRs proposal contributed, moreover, to the objective of promoting effective competition in generation, trading and supply of electricity (Article 3(a)) of the CACM Regulation) because it took into account market specificities on bidding zone borders by allowing optimally configured CCRs to be established. The underlying assumption of the above design was that each existing bidding zone border, where CACM obligations were in force, had been assigned only to one CCR in accordance with Article 15 of CACM Regulation.
In addition, some bidding zone borders to be created by construction of new interconnections foreseen to be commissioned by the end of 2018 and to be operated by TSOs certified at the moment of submission of the said proposal were also proposed to be included in the respective CCRs so as to receive the EU Member State's energy regulatory authority approval.
Decision of the Agency for the Cooperation of Energy Regulators No 06/2016 of 17 November 2016 on the electricity transmission system operators' proposal for the determination of the capacity calculation regions assessed the above TSOs' CCRs proposal of 29 October 2015 as not compliant with the Regulation No 714/2009 and the CACM Regulation to the extent where it did not merge the CWE (Central-West Europe) CCR and the CEE (Central Eastern Europe) CCR into one CCR. Pursuant to the ACER, the CWE CCR and the CEE CCR, as described in Articles 5 and 8 of the CCRs Proposal, had to be merged. Therefore ACER approved the aforementioned CCRs proposal subject to the amendments related to the merger of the CWE CCR and the CEE CCR into one CCR - the CORE CCR.
Annex I to the said ACER Decision No 06/2016 of 17 November 2016 determined the CCR definition applying in the European Union Internal Electricity Market as approved by the EU Agency including the above amendments.
The CCRs according to the said ACER Decision No 06/2016 of 17 November 2016 covered the following:
a) all existing bidding zones within and between Member States, to which CACM Regulation applies,
b) future bidding zone borders due to interconnections operated by legal entities certified as TSOs which are under construction at the time of the ACER's Decision and planned to be commissioned before 2018, and
c) the Germany/Luxembourg - Austria bidding zone border (DE/LU - AT).
Finally, the said ACER's Decision of 17 November 2016 defines 10 CCRs (instead of earlier 11 CCRs proposed by the TSOs):
Capacity Calculation Regions - ENTSO-E website
Firmness of allocated cross-zonal capacity
CACM Regulation, Article 2, 9, 15
Electricity Balancing Network Code, Article 5(3)
Network Code on Forward Capacity Allocation, Article 8, 9
- Capacity Calculation Region 1: 'Nordic',
- Capacity Calculation Region 2: 'Hansa',
- Capacity Calculation Region 3: Core (merged 'Central Eastern Europe (CEE)' and 'Central-West Europe (CWE)'),
- Capacity Calculation Region 4: 'Italy North',
- Capacity Calculation Region 5: 'Greece-Italy (GRIT)',
- Capacity Calculation Region 6: 'South-West Europe (SWE)',
- Capacity Calculation Region 7: 'Ireland and United Kingdom (IU)',
- Capacity Calculation Region 8: 'Channel',
- Capacity Calculation Region 9: 'Baltic', and
- Capacity Calculation Region 10: South-east Europe (SEE).
The first determination of CCRs has been amended on two occasions since the adoption of ACER Decision 06/2016.
On 30 June 2017, in accordance with Article 9(13) of the CACM Regulation, all TSOs submitted to all NRAs the first proposal for amendment of the Annex I of the ACER’s CCR Decision No 06/2016 in order to assign the new Belgium - Great Britain bidding zone border to the Channel CCR.
On 18 September 2017, all NRAs agreed to approve the first proposal for amendment of the Annex I of the CCR Decision and subsequently adopted decisions to approve the proposed amendment. On the same date the first amendment of the CCR Decision came into effect.
Further, on 1 April 2019 the ACER adopted the Decision No 04/2019 on electricity transmission system operators’ proposal for amendments of determination of capacity calcution regions (the second amendment of the CCR Decision).
The second amendment assigned a newly established DK1-NL bidding zone border to the Hansa CCR on a temporary basis and set out a process for evaluating and identifying an optimal determination of the Hansa and Channel CCRs, by October 2020.
ACER Decision 04/2019 also approved changes to the Greece-Italy (GRIT) CCR resulting from the Italian bidding zone review. The consolidated list of CCRs with assigned bidding zones borders and attributed TSOs, after the second amendment of the CCR Decision, was determined in the Annex III to the said ACER Decision 04/2019 of 1 April 2019.
ACER Decision No 04/2021 of 7 May 2021 on the determination of capacity calculation regions replaces the ACER Decision 06/2016 and its subsequent two amendments. List of CCRs with assigned bidding zones borders and attributed TSOs as of 7 May 2021 is determined in Annex I to the said ACER Decision 04/2021.
Article 5(3) of the Electricity Balancing Network Code
The proposals for the following terms and conditions or methodologies shall be subject to approval by all regulatory authorities of the concerned region:
(a) the framework, for the geographical area concerning all TSOs performing the reserve replacement process pursuant to Part IV of Commission Regulation (EU) 2017/000 [SO], for the establishment of the European platform for replacement reserves pursuant to Article 19(1);
(b) for the geographical area concerning two or more TSOs exchanging or mutually willing to exchange balancing capacity, the establishment of common and harmonised rules and process for the exchange and procurement of balancing capacity pursuant to Article 33(1);
(c) for the geographical area covering TSOs exchanging balancing capacity, the methodology for calculating the probability of available cross-zonal capacity after intraday cross-zonal gate closure time pursuant to Article 33(6);
(d) the exemption, for the geographical area in which the procurement of balancing capacity has taken place, for not allowing balancing service providers to transfer their obligations to provide balancing capacity pursuant to Article 34(1);
(e) the application of a TSO-BSP model, in a geographical area comprising two or more TSOs, pursuant to Article 35 (1);
(f) the cross-zonal capacity calculation methodology for each capacity calculation region pursuant to Article 37(3);
(g) in a geographical area comprising two or more TSOs, the application of the allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves pursuant to Article 38(1) ;
(h) for each capacity calculation region, the methodology for a market-based allocation process of cross-zonal capacity pursuant to Article 41(1);
(i) for each capacity calculation region, the methodology for an allocation process of cross-zonal capacity based on an economic efficiency analysis and the list of each individual allocation of cross-zonal capacity based on an economic efficiency analysis pursuant to paragraphs 1 and 4 of Article 42;
(j) for the geographical area comprising all TSOs intentionally exchanging energy within a synchronous area, the TSO-TSO settlement rules for the intended exchange of energy pursuant to Article 50(3);
(k) for the geographical area comprising all asynchronously connected TSOs intentionally exchanging energy, the TSO-TSO settlement rules for the intended exchange of energy pursuant to Article 50(4);
(l) for each synchronous area, the TSO-TSO settlement rules for the unintended exchange of energy pursuant to Article 51(1);
(m) for the geographical area comprising all asynchronously connected TSOs, the TSO-TSO settlement rules for the unintended exchange of energy pursuant to Article 51(2);
(n) the exemption, at synchronous area level, to the harmonisation of the imbalance settlement periods pursuant to Article 53(2);
(o) for the geographical area comprising two or more TSOs exchanging balancing capacity, the principles for balancing algorithms pursuant to Article 58(3);
on which a Member State may provide an opinion to the concerned regulatory authority.
As of November 2022 there are 8 CCRs in Europe: Nordic, Hansa, Core, Italy North, Greece-Italy (GRIT), South-west Europe (SWE), Baltic and South-east Europe (SEE). The motives of the said ACER's Decision of 17 November 2016 contain, however, the Agency’s opinion that the framework will progressively evolve towards a smaller number of CCRs. In the Annex II to the ACER Decision No 04/2019 of 1 April 2019 (Evaluation of responses to the public consultation on the amendments of the proposal for amendment on the determination of capacity calculation regions) the ACER goes even further and says that “the Agency does support the gradual merger of CCRs in the future”. Among the key factors influencing the speed and the scale of the said process are such as the intensity of loop flows (LFs) or unscheduled allocated flows (UAFs) on the existing bidding zone borders.
In the said Annex II to the ACER Decision No 04/2019 of 1 April 2019 ACER observes that “[t]he Agency agrees that significant amounts of unscheduled allocated flows on a bidding zone border are not compliant with Regulation (EC) 714/2009”.
The more general consequence of the above regulatory developments will be, among others, that the key EU methodologies influencing electricity market fundamentals, like common capacity calculation, coordinated redispatching and countertrading (cost sharing including), and the fallback procedures will be governed at increasingly higher level, and the role of single TSOs will be gradually diminished. This process must, inevitably, be aligned with the evolving framework governing the responsibility for energy security on the electricity market (adequacy isssues, etc.).