Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling)
- Category: Energy Market
Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling), known also under the acronyms: the 'CACM Guideline' or the ‘CACM Regulation’, applies in the European Union as from 14 August 2015.
it is to be noted that the CACM Regulation is not a network code, as referred to by Article 60 of the Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (Electricity Regulation), but a guideline pursuant to Article 61 of the Electricity Regulation.
Initially, the CACM Regulation was envisaged to be adopted as a network code under Article 6 of the, then in force, Regulation (EC) No 714/2009 (the Electricity Regulation's predecessor), which, however, would require a sufficient level of technical and legal detail.
Given that fully harmonised procedures and timings with the said level of detail could not be achieved in the circumstances, ENTSO-E and the ACER proposed that many terms, conditions or methodologies jointly be developed by:
- Transmission System Operators (TSOs), and/or
after the adoption of the CACM Regulation and jointly approved by the regulatory authorities.
As a general rule, the CACM Regulation, which implemented the said Regulation (EC) No 714/2009, could amend only non-essential elements of Regulation (EC) No 14/2009 pursuant to Article 8(5) of that Regulation (principle underlined in the 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).
CACM Regulation objectives
Article 3 of the CACM Regulation defines the objectives of this important piece of the European energy market legislation. According to this provision the CACM Regulation aims at:
(a) promoting effective competition in the generation, trading and supply of electricity;
(b) ensuring optimal use of the transmission infrastructure;
(c) ensuring operational security;
(d) optimising the calculation and allocation of cross-zonal capacity and providing non-discriminatory access thereto,
(e) ensuring fair and non-discriminatory treatment of market participants and:
- Agency for the Cooperation of Energy Regulators (ACER) and other regulatory authorities;
(f) ensuring and enhancing the transparency and reliability of information;
(g) contributing to the efficient long-term operation and development of the electricity transmission system and electricity sector in the Union;
(h) respecting the need for a fair and orderly market and fair and orderly price formation;
(i) creating a level playing field for NEMOs.
Recital 27 to the CACM Regulation underlines, as the objective of the Regulation, the establishment of single day-ahead coupling (SDAC) and single intraday coupling, which "cannot be successfully achieved without a certain set of harmonised rules for capacity calculation, congestion management and trading of electricity."
Recitals 28 and 29 develop this thread accentuating, respectively, that "single day-ahead and intraday coupling should only be implemented stepwise", and that the single day-ahead and intraday coupling require the introduction of harmonised maximum and minimum clearing prices.
An important step for the realisation of the above objectives was the formal start of the Single Intraday Coupling (SIDC) on 12 June 2018.
Binding subsidiary instruments to be developed under the CACM Regulation
The CACM Regulation envisages a number of binding subsidiary instruments to be adopted. According to the CACM Regulation, the adoption of such instruments is entrusted to the National Regulatory Authorities of the European Union Member States (NRAs). In the case of binding subsidiary instruments having a EU-wide scope of application, this requires NRAs to decide unanimously on the adoption of identical legal acts in all national legal systems within a six-month period, after which the responsibility is transferred to the ACER.
The CACM Regulation envisages, in particular, the following tasks to be implemented in the pan-European electricity market:
(a) determination of Capacity Calculation Regions (CCR) - Article 15(1),
(b) determination of Day-Ahead Firmness Deadline (DAFD) - Article 69,
(c) determination of the Intra-Day Cross-Zonal Gate Opening Time (IDCZGOT) - Article 59(1),
(d) determination of the Intra-Day Cross-Zonal Gate Closure Time (IDCZGCT) - Article 59(1),
(e) requirements for price coupling algorithm and requirements for continuous matching algorithm - Article 37(1),
(f) generation and load data provision - Article 16,
(g) the EU-wide Common Grid Model methodology - Article 17,
(h) congestion income distribution methodology - Article 73,
(i) monitoring activities of ENTSO-E - Article 82.
The European Network of Transmission System Operators for Electricity (ENTSO-E) Market Committee meetings are used to discuss the corresponding "all TSOs" decisions in the above fields.
Capacity calculation methods according to the CACM
The target model for capacity calculation as defned in the CACM Regulation specifies that TSOs need to apply a flow-based capacity calculation method. The exception are cases where the electricity networks are not meshed and such a method would not add value compared to a coordinated NTC capacity calculation method.
Both capacity calculation methods should be based on an EU-wide Common Grid Model and need to be applied in a coordinated way within CCRs (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2014, November 2015, p. 153).
The overarching objective is to deliver an integrated EU internal electricity market. Indispensable for this purpose are also the following processes supported by the CACM Regulation:
(a) full coordination and optimisation of capacity calculations performed by TSOs within regions,
(b) definition of appropriate bidding zones, including regular monitoring and reviewing of the efficiency of bidding zone configuration.
Important part of the CACM Regulation is the compensation regime for long-term transmission rights (LTTRs) curtailed after the Day-Ahead Firmness Deadline.
ACER Monitoring report of 30 January 2019 on the implementation of the CACM Regulation and the FCA Regulation (p. 62 - 63) describes the following areas for potential modifications of the CACM Regulation. In the Agency opinion, one of the main problems is the process for the development, operation, governance and financing of the MCO function for the single day-ahead and intraday coupling. Similarly, the design of the single intraday coupling, including the underlying capacity calculation, is not sufficiently clear and detailed in the CACM Regulation and this bears the risk of fragmented and non-harmonised intraday markets across Europe.
In several cases, the CACM Regulation needs improvements with regard to the scope of the methodologies (e.g. scheduled exchanges, maximum and minimum prices, cross-zonal intraday gate opening and gate closure time and intraday capacity pricing methodology).
While the methodologies on capacity calculation and coordinated redispatching and countertrading are still in the process of being approved by the regulatory authorities (and improved by TSOs where requested), the process so far has shown in many regions a large discrepancy between what TSOs are proposing and what stakeholders, the Agency and many regulatory authorities, were expecting. For example, the issue of undue discrimination between internal and cross-zonal exchanges addressed in the Agency’s Recommendation (Recommendation of the Agency for the Cooperation of Energy Regulators No 02/2016) has so far been largely ignored in the TSOs’ proposals.
While there has been some effort to improve the capacity calculation currently applied by the TSOs, the level of improvement does not match the expectations and ambition laid down in the CACM Regulation. In the Agency’s view, the bidding zone review is the biggest failure in the implementation of the CACM Regulation.
It has revealed that the transposition of the electricity market design (i.e. zonal congestion management with an optimal bidding zone configuration and a flow based capacity calculation) into EU legislation has a fundamental flaw and could not deliver any meaningful and conclusive results. The first bidding zone review showed that the legal framework governing this process does not ensure an efficient outcome (i.e. finding and implementing an optimal biding zone configuration). It also showed that TSOs have vested interests in this process and that a large majority of stakeholders are not supporting the bidding zone review, even though they do agree that the current bidding zone configuration is not efficient. The Agency recommends this process not to be repeated until the legal framework governing it is improved and clarified.
It is noteworthy, on 17 December 2021 the ACER published the Recommendation No 02/2021 on reasoned proposals for amendments to the CACM Regulation, which proposes changes to a wide range of topics, including:
• market coupling governance and operations,
• capacity calculation and bidding zone review.
The TSOs' and NEMOs' stance regarding these recommendations has been released on 1 March 2022 (CACM 2.0 Amendment Advocacy Report).
It is noteworthy that in 2021 the CACM Regulation has also become binding for Norway.