The Multiple Shapes of Efficient Regional Cooperation

Dynamic Regions

There are dozens of different organisations and initiatives active at regional levels in the European electricity sector. They organise markets, address regulatory issues, support the operation of the grids or test new solutions. Regionalisation pursues a great variety of objectives and forms a broad range of structures, processes and tools. Some regional projects, such as enhancing cross-border system operation coordination or organising pan-European electricity short term markets, require formal structures. Other initiatives, for instance, infrastructure development cooperation, are based on lighter multilateral cooperation schemes. The definition of regions and therefore their governance will have to remain dynamic. There is not a one-size-fits-all solution, neither for the geographical scope of regions nor for adequate tools and structures. It is necessary that energy regions and the EU at large share common objectives and principles and that regions talk to each other, learn from each other, and interact.

A Set Of Top-down And Bottom-up Approaches

In recent years, regionalisation has gained momentum from two ends: top-down and bottom-up. In some cases, a European view was delivered by organising the joint work of regional groups. In other cases, European countries took joint initiatives that, when successful, could be replicated throughout Europe.

For instance, intra-day and day-ahead market coupling started as regional projects and are now forming a European platform, delivering huge benefits to Europeans.

Top-down approaches guided by a common European view have also proved efficient. The remaining work ahead to fully implement the European Internal Energy Market, in particular through the network codes, will make extensive use of the regional level to enhance European integration. For instance, Member States agreed to develop regional target models as a step towards fully integrated balancing markets, which will save billions of Euro for European consumers each year.

Finding The Right Formula

Regionalisation of selected services related to grid and market operations should be considered process innovation.

The electric power system is characterised by strong interdependencies between countries, markets and operations. Unexpected events in one part of the grid may in extreme situations impact the economies of several European countries. Bringing nationally performed services to the regional level requires careful attention and close collaboration with all stakeholders, including policy-makers who shape national energy strategies.

Transformations need to be conducted in a cost efficient way without putting the security of supply in Europe at risk. This is why service regionalisation may require in-depth feasibility studies, R&D through pilot projects, cost-benefit analysis and mapping of the impacts on grid operation and other market or grid operational services. In some cases, the delicate balance between cost efficiency and system security may also lead to long implementation phases, leaving time for system and market operators to develop tools and processes matching their high reliability standards.

In all cases, transformations can only be achieved with an adequate legal and regulatory framework that allows for appropriate governance.

Enhanced Regional Coordination At Member States’ And Regulators’ Level

Coordination at Member States and regulators’ level is crucial to enable the right investments where they are more cost effective. ENTSO-E sees a need for more regional coordination of Member States and welcomes the existing regional Member State initiatives. Several European countries are teaming up through voluntary inter-governmental approaches such as the Pentalateral Energy Forum. The latter brings together ministries, TSOs, the European Commission, regulatory authorities and a Market Parties Platform of Central Western Europe to improve market integration and security of supply. Other examples are the North Seas Countries’ Offshore Grid Initiative (NSCOGI), the Baltic Energy Market Interconnection Plan (BEMIP) and the regional groups defined in the 2013 Infrastructure Regulation to prioritise Projects of Common Interest.

There is also a need for redeveloped cooperation of national regulatory agencies (NRA) at the regional level, particularly to facilitate the common work with TSOs regional initiatives. Although a new administrative layer should be avoided in addition to the national and European layers, there is a need for structured exchange about the way regional structures blend in national and European regulatory frameworks.