Where Markets End

Markets can still function properly even in situations of prolonged scarcity. Supply and demand balance and grid capacities will, however, be limiting factors when it comes to resolving scarcity situations.

Should the market be suspended, justification is needed, and rules have to be transparent and clear, efficient and protecting Europe’s customers from major supply disruptions. The rules and conditions for market suspension have to be defined at the national level based on the framework provided by the European Network Codes. With regard to emergency situations, the draft network code on Emergency and Restoration sets up the framework for the development of defence and restoration plans and the minimum requirements for their elaboration, including the actions and measures to be taken in emergency situations and the framework for the suspension of market activities in emergency situations.

The rare but possible simultaneous scarcity situations in several neighbouring Member States represent a huge challenge. How to address these efficiently? Multilateral agreements aligning the concerned Member States, regulators and transmission system operators are needed.

There is a need for rules on where to curtail load and to whom, in a transparent and effective manner. Functioning of intraday markets in simultaneous scarcity situations will have to be investigated, but in some situations, it may be necessary to freeze or curtail intraday cross-border trading. TSOs have already developed the so-called multilateral remedial actions (MRAs) which they use to address jointly, throughout a region, such an extreme situation, to the benefits of the customers.

Article 194 of the Lisbon Treaty, refers to ‘a spirit of solidarity’ which should underpin the European Union policy on energy. Solidarity means in the end a seamless interaction between EU Member States for ensuring security of supply for all at least cost and thus through an optimal use of resources. The scope of solidarity should be clearly defined and enhanced between Member States.

When markets end, further governance instruments are needed to ensure that security of supply is preserved. To address such situations, Multilateral Agreements (MLAs) between Member States should include clear divisions of the responsibilities in each case and measures for each situation. MLAs will have to comply with principles of interoperability across different regions and/or Member States and include proper tools to assess scarcity problems at national and regional levels, depending on their geographical scope and the specific challenges. In this context, ENTSO-E’s adequacy assessment methodology can provide a valuable tool for policy-makers to assess scarcity problems at both national and regional levels on the basis of its reliable and comparable system adequacy indicators. These common indicators will allow governments to discuss national adequacy indices in an objective, reliable, and consistent way across Europe. In this way, Member States can better coordinate their energy mix decisions, capacity mechanisms’ needs and RES support schemes relative to each other by taking into account cross-border impacts, and they can coordinate cross-border and regional solutions to ensure adequacy. ENTSO-E’s adequacy assessments can further support the design of MLAs for management of scarcity situations by pointing out the impacts, opportunities and risks of different policy options, and can help Member States better exploit the possibilities for neighbouring countries to contribute to the generation/demand balance in critical situations and to ensure security of supply.

Recommendations

  1. The EC and Member States should adopt the European Network Code on Emergency and Restoration as soon as possible. The code would provide Member States, TSOs, DSOs, and NRAs with a set of common processes to follow in case of emergency.

  2. Member States should prepare their risk preparedness plans and coordinate them with neighboring countries on the basis of the network codes and ENTSOE’s common adequacy methodology indicators.

  3. Multilateral Agreements should be used for management of scarcity situations in close cooperation between Member States, TSOs, and NRAs.