Market facilitation

The Elia Group’s grids are part of Europe’s interconnected system, which stretches from Portugal to Bulgaria and from Norway to Italy. The Group thus works closely with European market players on developing projects to boost integration of the European energy market, and in so doing makes clear its desire to look beyond its own borders. There were several key developments in 2015 in terms of the integration of European energy markets.

4,500 MW

IMPORTED BY BELGIUM DURING THE SOLAR ECLIPSE (BETWEEN 6 AND 7 P.M.) ON 22 JUNE

IMPORT CAPACITY DURING ANNUAL PEAK CONSUMPTION THANKS TO FLOW-BASED MARKET COUPLING

+ 35 %

We need to complete the common set of rules for the internal market to ensure remaining regulatory barriers to a well-integrated market are removed. This means engaging with regulators and stakeholders at national and EU level to fully implement and expand the existing legal framework where needed, including rapid adoption of the key network codes.

Miguel Arias Cañete, Commissioner for Climate Action and Energy – Brussels, Conference on EU Energy Policy and Competitiveness, 17 November 2014

TOWARDS A SINGLE MARKET

Making transmission capacity available to market players across international borders is a source of economic added value for the community as a whole. This makes energy markets more accessible and thus more competitive, as there is less focus on national markets. Consumers can access the cheapest energy wherever it is available.

HARMONISING ELECTRICITY MARKET RULES ACROSS EUROPE

2015 saw the adoption of several European network codes drawn up on the basis of proposals by European transmission system operators. Initiated by the European Commission, these network codes are designed to provide the European energy market with a common legislative framework applicable to all Member States. The EU is keen to shore up the strategies in place to make the panEuropean energy market a reliable, competitive and low-carbon sector. Furthermore, each network code forms an integral part of the drive to create a single energy market and to achieve the EU’s 20-20-20 goals. In Belgium, Elia has launched the ENCODE project designed to implement these network codes at national level and, at the request of the federal energy authorities, has initiated consultations with market players via the Elia Users’ Group on the main aspects associated with implementing the codes.

MORE INFORMATION

For further details see http://networkcodes.entsoe.eu. A single European market will enable consumers to access the cheapest energy, wherever it is available.

NEW EUROPEAN TRANSPARENCY PLATFORM LAUNCHED

On 5 January 2015, in partnership with Elia and the 40 other electricity transmission system operators, ENTSO-E launched its new Transparency Platform for the European electricity market. The new platform will be able to provide market players and the general public with three times more data than its predecessor. The new platform has been developed to comply with the requirements set out in Commission Regulation (EU) No. 543/2013 on the submission and publication of data in electricity markets. The new portal provides all users with a range of data on European electricity systems, such as load per country, electricity generation, data on balancing electricity areas, managing congestion and so forth. The data are supplied by transmission system operators and other market players ranging from generators to large-scale consumers.

MORE INFORMATION

Click here to access the platform: https:// transparency.entsoe.eu/

AS A MARKET FACILITATOR, ELIA MAKES INTERCONNECTION CAPACITY AVAILABLE ACROSS THREE DIFFERENT TIMESCALES 49 %

THE HOLDING COMPANY HGRT’S STAKE IN THE EPEX SPOT EXCHANGE

1. LONG-TERM MARKETS (YEAR + MONTH)

Scale: year – month 2. DAY-AHEAD MARKETS

Scale: day 3. INTRADAY MARKETS

Scale: within a day

17 %

ELIA’S STAKE IN THE HOLDING COMPANY HGRT

THREE MARKETS, THREE DIFFERENT TIMESCALES

The European vision of a single electricity market requires the various stakeholders to work together to different schedules to formulate the methods and services needed to achieve a single market. Accordingly, Elia is a market facilitator and makes interconnection capacity available across three different timescales.

1. LONG-TERM MARKET New rules governing allocation of long-term cross-border capacity

Following a pilot project to implement network codes, new rules on allocating long-term cross-border capacity rights, the EU Harmonised Allocation Rules (EU HAR1), have been drawn up based on the version of the Network Code on Forward Capacity Allocation (NC FCA2) of 2 April 2014. These new rules were approved by the relevant national regulators within the CWE region and entered into force on 1 January 2016. The replacement of Physical Transmission Rights (PTRs) by Financial Transmission Rights (FTR) Options is a significant change to these new allocation rules for Belgium’s borders. The PTRs enable market players to choose whether to use transmission capacity themselves, while with the FTR Options transmission capacity is allocated via day-ahead market coupling. The FTR Options displaying a positive price difference between the importing and exporting electricity exchanges will receive compensation based on the price difference and the volume of cross-border capacity allocated. This arrangement is designed to improve liquidity and transparency on the day-ahead market.

1 European Harmonized Allocation Rules. 2 Network Code on Forward Capacity Allocation. New era in setting up auction offices

2015 saw the merger of the two auction offices previously responsible for allocating daily, monthly and annual capacity rights on many European borders: the Capacity Allocation Service Company (CASC.EU) and the Central Allocation Office (CAO). Following the merger, the Joint Allocation Office (JAO) was established on 1 September 2015. From early 2016, the JAO has served as the single auction office allocating long-term rights among others primarily on all borders in the Central West Europe and Central East Europe regions. As such, the JAO serves 20 European transmission system operators in 17 countries, including Elia and 50Hertz.

2. DAY-AHEAD MARKET Flow-based market coupling goes live

On 20 May 2015, Elia and its seven project partners announced the successful launch of the new flow-based methodology designed to optimise the efficiency of the cross-border electricity market for Central West Europe (CWE). The system marks a significant step towards creating an integrated electricity market and is governed by the guidelines contained in the Network Code on Capacity Allocation and Congestion Management, which entered into force in August 2015. Up to that point, international electricity exchanges in the CWE region had been governed by the transmission capacity available at each border.

The new flow-based model has been devised on the basis of a more detailed simulation of network components and enables capacity to be allocated by high-voltage connection rather than by border. This more complex but more accurate system provides market players with the most detailed information possible and offers them a wider range of import and export options.

To achieve this, the flow-based model has the advantage of being able to factor in the physical distribution of energy flows due to international exchanges and their impact on grid components. As such, more energy can be exchanged on a daily basis. Since May 2015, the price of electricity on the Belgian wholesale market has dropped. Prices in the CWE region have also largely converged. Elia and the other project partners are continuing to work to ensure that the current solution improves on an ongoing basis.

Record imports thanks to the flow-based method

On 22 June 2015, Belgium imported 4,500 MW between 6 and 7 p.m.: this was approximately 42% of the total load recorded during that time period and set a new record. This exceptionally high import volume was made possible by the new flow-based market coupling mechanism. Despite flow levels coming very close to the grid’s limits, the situation remained safe thanks to the preparations and coordination work by Elia’s National Control Centre, Coreso (the technical coordination centre for electricity systems in the CWE region) and neighbouring system operators. Since the flow-based market coupling mechanism was launched in the CWE region, Belgium has regularly been able to import 4,500 MW – subject to the situation in neighbouring countries – which is 35% of annual peak consumption (estimated at approximately 13,000 MW). 3. INTRADAY MARKET

Intraday markets are growing, not least due to the rising proportion of variable energy sources (wind and solar power), since they enable suppliers to adjust their portfolios in near-real time in line with actual real-time changes. The European Commission has set a target for this intraday market based on ongoing energy trading where transmission capacity between areas is allocated via an implicit allocation.

Cross-border intraday market

Energy exchanges and system operators are working together to put in place a joint system which will form part of the single intraday market.

The aim is to give market players access to a transparent and efficient intraday-market environment enabling them to exchange their intraday positions easily; the market will thus benefit from the liquidity available not only nationally but also across borders. To achieve this, the system operators need to make their interconnection capacity available and harmonise mechanisms on the various borders.

Integrating European energy exchanges

In 2015 the activities of the APX group (including the Belgian electricity exchange Belpex) and EPEX Spot were merged thereby establishing an electricity exchange operating throughout the Central West Europe region and the United Kingdom. The move will provide market players with a harmonised set of rules and tools to facilitate transactions anywhere in the region. The holding company HGRT, in which Elia owns a 17% stake, is consequently a 49% shareholder in the EPEX Spot exchange.

The new flow-based methodology aims to optimise cross-border electricity market efficiency in Central West Europe.