text: OJ L158, 14.6.2019, p. 22. Page 1 of 20

text: Recommendation No 01/2023

text: In its Recommendation No 05/2013 on a new regulatory framework for the ITC mechanismACER was of the view that the current infrastructure compensation should be limited to existing infrastructures and the corresponding ITC infrastructure fund should be phased out. https://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Recommendations/ACER%20Recommendation%200 5-2013.pdf

text: Recommendation No 01/2023

text: ACER ITC monitoring report 2019, p. 12, https://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ITC%20Monitoring%20Report%202019. pdf

text: Recommendation No 01/2023

text: ACER ITC monitoring report 2022, https://acer.europa.eu/sites/default/files/documents/Publications/ITC_MR_2022.pdf 5 ITC Transit Losses Data report 2021, https://eepublicdownloads.azureedge.net/clean-documents/mc-documents/ITC_Transit_Losses_Data/entsoe_ITC_Transit_Losses_Data_report_2021_211209.pdf

text: Recommendation No 01/2023

text: Draft ENTSO-E CBA 4.0 https://eepublicdownloads.blob.core.windows.net/public-cdn-container/tyndp-documents/CBA/CBA4/221215_CBA4- Guideline_v1.0_for-public-consultation.pdf 7 Draft ENTSO-E CBA 4.0, p. 64: ‘A calculation over the complete year, with sufficiently small timesteps (typically one hour), should aim to be the closest to reality. The chosen methodology must be representative for the considered period of time, which must be verified within the study (e.g., in the current TYNDP scenarios, this means one complete calendar year). (As a provisional exception, a computation of losses based on definite points in time can be used to approximate year-round losses. In such case, the chosen points in time should be numerous enough to ensure representativeness and weighted in a correct manner.)’ Link: https://eepublicdownloads.blob.core.windows.net/public-cdn-container/tyndp-documents/CBA/CBA4/221215_CBA4- Guideline_v1.0_for-public-consultation.pdf

text: Recommendation No 01/2023

text: In some ITC Party countries, one or more of these values are the same. 9 In 2019, the difference ranged from -16.9 EUR/MWh to 11.6 EUR/MWh, with an average value around -1 EUR/MWh, indicating a slight overestimation of the value used for the ITC mechanism. Next year, the interval broadened a bit, i.e. from - 28.5 EUR/MWh to 6.5 EUR/MWh, with an average value around -10 EUR/MWh, again indicating an average underestimation of the value used for the ITC mechanism. Then a sharp increase occurred in 2021, ranging from -0.7 EUR/MWh to 88.2 EUR/MWh and this time, the ITC-used value was on average underestimated by 36 EUR/MWh.

text: Recommendation No 01/2023

text: ACER ITC monitoring report 2019

text: Recommendation No 01/2023

text: At national level, value of losses is typically set for the purpose of network tariffs. Other purposes of the use of the value of losses may be also possible.

text: Recommendation No 01/2023

text: ACER Policy Paper on the Further Development of the EU Electricity Forward Market (p.3.) indicates that ‘The forward market allows market participants to stabilise and hedge their future cash flows and thereby secure their businesses against

text: the risks of future price changes.’

text: https://acer.europa.eu/sites/default/files/documents/Position%20Papers/Electricity_Forward_Market_PolicyPaper.pdf 13 The prices first decreased due to the demand drop during the pandemic and then increased due to the demand increase and supply disruptions since summer 2021. 14 Cf.

text: Article 58

text: , point (f), of

text: Directive (EU) 2019/944

text: 15 ACER Recommendation 05/2013 on a New Regulatory Framework for the ITC

text: Recommendation No 01/2023

text: Recommendation No 01/2023

text: Recommendation No 01/2023

text: Table 1: The values of losses used for the ITC mechanism, for national purposes (e.g. tariffs) and the value of losses corresponding to actual costs of procurement of energy to cover losses

text: Actual costs of Value used for the ITC Value used for tariffs Is the value procurement of energy mechanism (before reconciliation) used in tariffs to cover losses reconciled ex- [EUR/MWh] [EUR/MWh] post based on [EUR/MWh] ITC Party 2019 2020 2021 2019 2020 2021 actual costs? 2019 2020 2021

text: Austria 47.04 57.54 50.74 47.04 57.54 50.74 yes 47.04 57.54 50.74 44.44 53.84 55.76 44.44 53.84 55.76 yes16 40.75 45.25 76.81

text: Bulgaria 56.18 56.76 58.4 56.18 56.76 58.4 no 55.61 48.99 105.41 56.69 59.02 53.86 56.69 59.02 53.86 yes 62.72 51.63 79.817

text: Czech 18

text: 55.24 55.73 44.3 55.24 55.73 44.3 yes 48.9 47.02 78.44

text: 50.87 46.02 37.48 43.74 41.04 34.94 yes 34 20 7919

text: Estonia 47.57 45.23 42.12 36.002 36.002 36.002 yes 48.69 35.04 93.21 Finland 34.4 34.62 33.46 no data no data no data no data 45.95 40.205 49.473 40.27 45.18 50.01 40.27 42.17 50.01 yes 37.94 45.28 49.8120

text: 36.59 49.32 45.27 36.59 49.32 45.28 yes21 34.28 46.85 44.59

text: Greece 56.7 66.6 54 no value used no value used 65.69 48.22 128.22 49.05 58.09 48.3222 59.37 57.31 51.2423 yes 45.27 52.73 58.54

text: no no Ireland 64.14 59.44 50.61 no value used no value used no data data data Italy 62.96 54.09 41.07 no value used no value used 54.12 41.13 129.25 Latvia 47.9 46.06 41.9 44.43 31.28 36.07 yes 47.58 33.1 96.56 Lithuania 47.25 46.38 39.38 47.25 46.38 39.38 yes 48.08 33.43 95.34 Luxembourg 41.45 51.62 39.81 41.45 51.62 39.81 yes 42.73 54.84 43.76

text: the 24

text: 60.355 49.73 48.74 54.69 56.22 56.62 yes 53.87 41.29 86.19

text: Norway 44.03 39.22 17.43 38.97 36.56 20.66 yes 40.11 10.74 65.94 Poland 56.06 62.85 53.94 56.06 62.85 53.94 no 58.86 55.95 69.74 Portugal 61 57.82 45.03 no value used no value used 47.87 33.99 122.01

text: The Belgian NRA explains the tariffs for the ongoing period compensate the values before reconciliation but the tariffs for the next period will compensate for the difference between the actual costs and the value before reconciliation.

text: Yearly average exchange rates between HRK and EUR: 7.41 in 2019, 7.53 in 2020 and 7.52 in 2021

text: Yearly average exchange rates between CZK and EUR: 25.67 in 2019, 26.44 in 2020 and 25.65 in 2021 (for ‘actual costs of procurement of losses’), 25.10 for 2019, 26.05 for 2020 and 27.00 for 2021 (for ‘values used for the ITC mechanism’ and ‘value used for tariffs’ )

text: Yearly average exchange rates between DKK and EUR: 7.45 in 2019, 2020 and 2021

text: The French NRA explains this value is not definite and will be updated in 2023.

text: The German NRA explains that the ex-ante estimated losses costs are reimbursed via tariffs. The difference between estimated and actual losses costs including a potential bonus or malus are reimbursed ex-post via a regulatory account. 22The Hungarian NRA explains the exchange rate on the last day of the year was considered when providing this value.

text: Yearly average exchange rates between HUF and EUR: 315 in 2019, 335 in 2020 and 375 in 2021

text: The Dutch NRA explains 75% of the difference between the estimated the realized costs (volume*price) is settled ex-post. When the deviation between the estimated costs and realized costs exceeds 20%, all costs above the 20 % threshold are settled.

text: Yearly average exchange rates between NOK and EUR: 9.8527 in 2019, 10.7207 in 2020 and 10.1648 in 2021

text: Yearly average exchange rates between PLN and EUR: 4.2980 in 2019, 4.4448 in 2020 and 4.5674 in 2021

text: Recommendation No 01/2023

text: 43.15 57.18 57.26 43.15 57.18 57.26 yes 53.71 53.14 92.0327

text: information not available to Slovakia 45.2687 58.1579 52.286 45.2687 58.1579 52.286 no the NRA Slovenia 46.08 45.8 45.8 46.08 45.8 45.8 yes 51.52 52.32 70.85

text: Spain 57.34 55.48 34.06 no value used no value used 48.24 34.83 112.16 28.45 43.73 33.21 38.3 18.3 56 yes 38.3 18.3 5628

text: Table 2: Country-specific information on the procurement of losses, on determination of the value of losses and on the respective basis

text: Is the value of losses used for the ITC What is the basis for the calculation of losses and How is the basis mechanism How are losses procured? how is the value of losses determined (for the for the valuation of calculated on purpose of the ITC mechanism)? losses defined? the same basis/criteria as for national purposes?

text: The procurement path is confirmed at

text: Power exchange market and tenders

text: the beginning of the Calculation method: Long-term market data, short-term period. The final The TSO procures the market data and tenders value is confirmed energy on the short-term The average price of TSO’s procurement in year Y by the NRA via the yes and long-term market and becomes the value of losses in year Y+2, which is cost audit process

text: organizes tenders. audited and approved by the NRA. This value is also based on the costs used for the ITC monitoring in year y+2. occurred by the procurement of energy to cover losses.

text: Balance Responsible Parties compensate Power exchange market and tenders transmission losses of Long-term market data, short-term market data and Proposed by the voltage level >70 kV ‘in tenders TSO in the tariffs ium kind’ and TSO Valuation of losses is done with the tariffs proposal every proposal and yes compensates at regional four years taking into account historical, present and Belg approved by the level, i.e. between 30kV forward (Cal 1, 2, 3) market values. The value of losses NRA. and 70 kV) by organising used for the purpose of the ITC mechanism are approved monthly, yearly and values in the tariff proposal. quarterly tenders.

text: Power exchange market

text: Long-term market and short-term market data The TSO procures the Prices of futures traded at Power Exchange for the next

text: a regulatory period are multiplied by an adjustment factor energy on the short-term set by the NRA yes and long-term market. reflecting the deviations between the average day-ahead

text: market price for base load for the preceding calendar year and the TSO’s achieved weighted average day-ahead market price for the preceding calendar year.

text: Yearly average exchange rates between LEI and EUR: 4.7793 in 2019, 4.8694 in 2020 and 4.9481 in 2021 Yearly average exchange rates between SEK and EUR: 10.5892 in 2019, 10.4867 in 2020 and 10.1449 in 2021

text: Recommendation No 01/2023

text: Power exchange market and tenders

text: Long-term market data, short-term market data and The TSO sends tenders annually to the NRA The value is usually determined in September for the the document The TSO procures the tia next year. Previous tenders for the planned year are including the value a energy on the short-term considered. For the remaining part, futures contracts on and the yes and long-term market and Cro HUDEX are used and projections using day-ahead prices corresponding organizes tenders. from CROPEX. The ratio of long and short-term calculation method procurement is determined by the TSO for the next year. and the NRA The usual delivery period of the tendered energy is 1 year approves it. or several years and less often 1 quarter or 1 month.

text: Power exchange market and tenders

text: Long-term market data short-term market data and The TSO procures the Valuation of losses tenders energy on the short-term is done in regard Republic Future contracts (BL CAL, BL Q) and day-ahead market yes market and suppliers via with Methodology tenders. data are used. All the tenders already organised are also set by the NRA. considered. Tenders are organised approximately 4 times

text: per year with the delivery period of 3 months or 1 year.

text: The TSO determines the value of losses for the purpose of the ITC without Power exchange market NRA approval, Long-term market data however the NRA rk The TSO procures the assesses whether the Weighted average value of Nasdaq commodities OMX energy on the short-term forward price is used. The price used in year Y is based method defined by yes market. on the forward price from November of year Y-1. Price the TSO meets

text: of the EPAD contracts and balancing costs is also certain high-level included. principles, such as being objective, reasonable, nondiscriminatory and transparent.

text: The value of losses Power exchange market for the purpose of The TSO procures the Short-term market data the ITC mechanism tonia energy on the short-term Day-ahead prices of Nord Poll market are used. in 2021 is yes Es market. 1/2/3/6/12 months average price of the Estonian price determined by the area is used. TSO without NRA approvals.

text: The Danish NRA explains the only difference is that for internal losses, the TSO uses a price based on actual short-term market price per bidding zone with an additional supplement to cover risks.

text: Recommendation No 01/2023

text: Power exchange market

text: Long-term market data The estimated total cost of losses is calculated by grid set by the TSO, losses x (system price+SYS-FI area price whereas the NRA is difference)+half of the estimated losses on the FI-SE The TSO procures the only able to interconnectors x (system price + SYS-SE area price energy on the short-term supervise yes difference) + hedged volume x (hedged price - system Finland market. calculation methods price), where system price, SYS-FI&SYS-SE area price and costs differences are based on Nasdaq’s forward prices at the time of budgeting; SYS-SE price difference = average of of losses ex-post SYS-SE1 and SYS-SE3 prices; hedged price does not include SYS-FI area price difference; resolution is one month and yearly cost is sum of monthly costs.

text: Power exchange market

text: Long-term market data and tenders Future prices from market exchange are used to adjust the historical data about cost of energy and capacity for The basis is set by The TSO procures the losses compensation. For the value in 2021, the prices the NRA in the tariff energy on the short-term published in October 2020 were used. The historical data d’utilisation des used is based on the actual costs of purchases made by yes and long-term market and réseaux publics de France the TSO and on costs from the previous years. The value it organizes tenders. transport of losses for the purpose of the ITC mechanism in 2021 d'électricité. is the cost of losses in 2021 as defined by the tarif d'utilisation des réseaux publics de transport d'électricité (TURPE HTB) deliberation (published January 21st, 2021).

text: The methodology Power exchange market for valuing losses is Long-term market data laid down in the The TSO procures the ny respective TSOs’ energy on the short-term The value of losses is calculated as the weighted average of the base and peak future prices. The future prices are voluntary self- yes erma and long-term market and the mean of the settlement prices over a fixed period (1 commitments on G organizes tenders. July of Y-3 to 30 June of Y-1) and the weighting of the grid losses which is Base and Peak Future prices is based on historical data. approved by the NRA . The NRA approves the basis for the Power exchange market calculation of the value of losses for e Long-term market data The TSO procures the the purpose of the energy on the short-term The annual baseload forward product price (as observed ITC mechanism yes

text: G market. in relevant markets at the time of the submission of the which is the value) is used as a best estimate for the market prices and weighted average the cost of losses in the next year. day-ahead market price and imbalance settlement.

text: The German NRA provides the link to the respective publications: https://www.bundesnetzagentur.de/DE/Beschlusskammern/BK08/BK8_05_EOG/52_Kostenpruefung/522_Verlustenergie/B K8-18-0009-A/BK8-18-0009-A.html

text: Recommendation No 01/2023

text: Power exchange market The method of determination of the Long-term market data and short-term market data value of losses as The TSO procures the For year Y, the average of HUDEX Future Baseload ry well as the criteria a energy on the short-term prices of the first 9 months of year Y-1 and HUPX DAM used for the yes ung and long-term market and prices continuously are taken into account. The prices of valuation of losses is H organizes tenders. tenders substitute the prices on HUDEX, if they are set in the tariff lower, however, there has been no successful tender in methodology issued years. 31 by the NRA.

text: The Transmission Loss Adjustment Factors (TLAFs) are

text: applied to generators to ensure that that the costs of

text: transmission losses are

text: Direct contracts

text: borne by market participants who Losses’ values are calculated based on the average not applicable The basis is set by Directed Contracts (DC) price for the same period. DC (no value is nd cause them. TLAFs are the NRA for the ITC contracts are set by the NRAs quarterly for both Ireland calculated for applied to generators’ mechanism purposes Irela and Northern Ireland. The DC prices are calculated using national outputs so that only. a formula which takes as inputs the prices of gas, coal purposes) their contribution to the and CO2. market is adjusted. The value of

text: TLAFs depends on the generator point of connection to the

text: grid.

text: Power exchange market The basis is set by Suppliers procure the Short-term market data the TSO using the energy by buying ly The volume-weighted average clearing price which basis defined by the additional energy for their yes Ita resulted from the Italian Power exchange (day-ahead NRA for the consumers from the shortmarket) was used. For ITC mechanism in 2021, market procurement of term market. 33 data until October 2020 were used. losses .

text: Power exchange market

text: The basis is set The TSO procures the Short-term market data when the NRA tvia energy on the short-term yes Day-ahead market price forecast provided by an external approves network La market. party (SKM Market predictor) for the Latvian area was tariffs. used.

text: The Hungarian NRA provides the link to the respective publication: http://www.mekh.hu/download/f/a5/11000/MU_2_masodik_modositott_honlapra.pdf Cf. ACER transmission tariff report (2019). The Italian NRA explains that the regulation sets out that the values of national losses depend on market outcomes, because losses are procured directly in the market. The TSO takes into account that the losses are paid directly in the market as extraenergy to be bought by supplier and eventually implicitly charged to consumers at the market price.

text: Recommendation No 01/2023

text: The NRA approves the cost of losses on the national system. Power exchange market The same value is nia The TSO procures the used for the ITC energy on the short-term Long-term market data yes mechanism, market. Electricity future prices on Nasdaq exchange are used. Lithua although the TSO is not obliged by the NRA to use the same value.

text: The legal framework in Luxembourg The TSO organizes obliges the TSO to urg tenders. Differences Tenders organise the between real and ex-ante 3 tenders are organised each year by the TSO to cover procurement of yes embo estimated volumes are sold the losses of the coming year and the winning prices are losses through or bought from the spot used. Quantities are estimated based on past experience. transparent and non-

text: market. discriminatory market-based procedures.

text: The TSO procures the Power exchange market and tenders energy through tenders. Long-term market data and Tenders The settlement is based on a fixed price agreed The value of losses is determined based on the through the tender (half of procurement costs in the reference year. The TSO the estimated tender) and procures 50% of the estimated via tenders and the The method for the the day-ahead price (the remaining part at EPEX Spot DA price, but as the actual valuation of losses is other half of the estimated future price should reflect the average spot price, the set by the TSO yes etherlands volume). calculation of the value is only based on the result of the N without NRA hedging at ICE Endex Baseload Cal-21 futures. The TSO performs this approval. the The result of the tender which is performed once a year settlement with the supplying party from the for the next year is a mark-up for the hedged capacity and tender and is therefore not EPEX Spot DA price, both to be paid to the BRP/supplier active on the day-ahead of grid losses compensation. For 2021, this mark-up market itself. represented about 1.5% of the estimated price.

text: Power exchange market

text: Long-term market data The NRA sets a Nasdaq quarterly forward price is used with some method for adjustments. It is gather around 1 November each year, calculating losses y The TSO procures the depending on the deadline set by the ENTSO-E. A for network tariff rwa energy on the short-term volume-weighted average day-ahead price for previous yes purposes. The TSO No market. years is calculated and compared to the NO1 area price. applies the same The calculated difference for the last 4 years is added to method for the ITC the forward price as a risk premium which can also be 34 mechanism. negative. In addition, 11 Nok is added to the price in order to cover risk and expenses related to losses.

text: The Norwegian NRA explains that due to the reconciliation of the estimation of losses in the revenue cap with actual spot prices at the end of the year, there may be a considerable difference in the respective values depending on the situation in the power markets.

text: Recommendation No 01/2023

text: The basis of calculation of the value of losses is approved during the Power exchange market process of approving Long-term market data the network tariffs. The value of losses for 2021 was calculated on the basis There is no separate The TSO procures the of future contracts for year 2021 traded from January approval of the energy on the short-term nd value of losses used and long-term market and 2018 to October 2020 (BASE_Y and PEAK_Y) at the yes Polish Power Exchange. The value of losses is for the ITC Pola it can also organize determined as a volume-weighted average of traded mechanism, but the tenders. volumes since beginning of contract trading for the given unit price of losses year, applying BASE/PEAK share weight of 89% and included in the 11%. calculation of national tariff is used for the ITC purpose of the ITC mechanism.

text: Rules and principles for the procurement Suppliers procure the Power exchange market of energy and for not applicable

text: a energy by buying Short-term market data losses compensation (no value of additional energy for their Values of losses are calculated based on the weighted- are set by the losses is used consumers from the short- ‘Access to Networks for national Portug average hourly price for day-ahead energy market term market. MIBEL for the whole year for the Portuguese area. and Interconnections purposes) Code’ approved by the NRA.

text: Power exchange market and Bilateral contracts

text: Long-term, short-term market data and bilateral contracts The price is estimated in the reference year of the regulatory period and is established based on historical data available at that time. The calculation is based on the average price achieved by the DSOs and the TSO. The recognized purchase price of electricity to cover losses is the minimum between the price realized by the The TSO and DSOs TSO and a reference price (which is calculated as an The basis is set by procure the energy directly nia average between the prices achieved by DSOs and TSO, the NRA in from producers, from the limiting the imbalances to 5% and eliminating extreme Methodology for yes ma power exchange (long-term values). setting transmission Ro and short term market) or tariffs. through suppliers. The estimated price is corrected annually, so that the costs of losses covered by tariffs are the costs effectively realized by the TSO (in efficient conditions). The value of losses used for the ITC mechanism in 2021 is the approved price available on the date of is communication to the TSO (November 2020) and estimated in the reference year of the regulatory period (2019). Every November, NRA provides to the TSO the value of losses used in the tariff calculation for the next year for the purpose of the ITC mechanism.

text: Recommendation No 01/2023

text: Power exchange market

text: Long-term market data Daily average price of futures contracts traded at Slovakian Power Futures Cal-t (from 1 April of Y-1 to 30 June of Y-1) are used for year Y. PLE(y)=CEPXE(y) x (1+ 0.01 k(y)) + Q(y), where: Methodology to The TSO procures via kia - PLE… price of electricity covering electricity determine the value a long-term markets and v losses during transmission in year y, of losses is defined yes additionally (if needed) on Slo - CEPXE(y)… average value of the daily prices of the in the Slovak NRA short-term market. official forward exchange rate list published by the decree No. 18/2017. PXE exchange (product Futures PXE SK BL Cal-t) for year y, - k(y)… coefficient for year y determined by the price decision, ranging up to 10 %, - Q(y)… the planned costs of the regulated entity for year y to cover deviation related to planned losses in year y;

text: Methodology set by Power exchange market and tenders the NRA is determined in Legal Long-term market data and tenders Act on the The TSO procures the The final price for losses is a combination of the volumes methodology for energy on the short-term already purchased in advance on a long-term basis determining the enia yes v through tenders (only for ‘base load’ product) and of mix and long-term market and regulatory Slo organizes tenders. of ‘base load’ (70%) and ‘peak load’ (30%) futures framework and products on Hungarian Power Exchange. For 2021, network charges for tenders were conducted in 2018, 2019 and 2021 with a the electricity yearly delivery period. distribution system .

text: The Slovenian NRA provides the link to the respective publication: http://www.pisrs.si/Pis.web/pregledPredpisa?id=AKT_1050

text: Recommendation No 01/2023

text: The calculation of the final electricity

text: Power exchange market

text: price for the demand Short-term market data (same value as Hourly Power Exchange market prices are directly losses) is designed Suppliers procure the applied to national demand to obtain weighted and approved by the energy by buying in estimation of the value. The computation for year Y is NRA after each 37 additional energy for their yes Spa based on data from the rolling year at the time it must month. The NRA consumers from the shortbe reported (September to October of Y-1). also approved that term market. any supplier or The ITC value calculated by the TSO is typically based consumer must buy on the final electricity prices for the last 12 available losses as any other months. part of their energy consumption.

text: Power exchange market

text: Long-term market data The value is based on the average price of purchased The method for the The TSO procures the futures during the year prior the year of delivery. There valuation of losses is energy on the short-term is a mark-up on the ITC price based on volume and set by the TSO yes Sweden market. profile risk, price area risk, imbalance risk, cost for without NRA financial hedging and cost for physical trading. All risks approval . are calculated based on outcome from the last three years.

text: The Spanish NRA provides the links to the relevant publications: https://www.ree.es/sites/default/files/01_ACTIVIDADES/Documentos/ProcedimientosOperacion/BOE-A-2022-4969.pdf https://www.cnmc.es/sites/default/files/2022-05/ComposicionPrecios_desde_abril2022_web.pdf https://www.cnmc.es/sites/default/files/2023-02/Provisionales_2022.zip The Spanish NRA explains losses’ price estimation is also used in incentives schemes for minimising losses for distribution. The Swedish NRA explains the NRA approved the total income, but not specifically the value of losses and that there are regulations and incentives in place to streamline the costs of losses. The Swedish NRA explains the only difference is that for internal losses, the TSO uses a price based on actual short-term market price per bidding zone with an additional supplement to cover risks.

identifier: ACER Recommendation No 01/2023

title: ACER Recommendation 01-2023 on the Treatment of Losses for the Purpose of the ITC Mechanism

text: PUBLIC

text: RECOMMENDATION No 01/2023 OF THE EUROPEAN UNION AGENCY FOR THE COOPERATION OF ENERGY REGULATORS of 13 April 2023 on the Treatment of Losses for the Purpose of the ITC Mechanism

text: THE EUROPEAN UNION AGENCY FOR THE COOPERATION OF ENERGY REGULATORS, Having regard to

text: Regulation (EU) 2019/942

text: of the European Parliament and of the Council of 5 June 2019 establishing a European Union Agency for the Cooperation of Energy Regulators , and, in particular,

text: Article 6(2)

text: thereof, Having regard to the outcome of the consultation with ACER’s Electricity Working Group, Having regard to the favourable opinion of the Board of Regulators of 29 March 2023, delivered pursuant to

text: Article 22(5)

text: (a) of

text: Regulation (EU) 2019/942

text: , Whereas:

text: INTRODUCTION

text: (1) The Inter-Transmission System Operator Compensation (‘ITC’) mechanism scheme is defined in

text: Article 49 of Regulation (EU) 2019/943

text: and by

text: Commission Regulation (EU) No 838/2010

text: on laying down guidelines relating to the ITC mechanism and a common regulatory approach to transmission charging (the ‘ITC Regulation’). (2) In line with the legal provisions set by these regulations, the ITC mechanism provides for compensation for the costs of hosting cross-border flows of electricity including providing cross-border access to the interconnected system. The compensation is financed through a fund, i.e. the ITC Fund, which is established by the European Network of Transmission System Operators for Electricity (‘ENTSO-E’). (3) According to point 1.2 of Annex Part A of the ITC Regulation, the ITC Fund shall provide compensation for:

text:  the costs of losses incurred on national transmission systems as a result of hosting cross-border flows of electricity (‘ITC losses fund’); and  the costs of making infrastructure available to host cross-border flows of electricity (‘ITC infrastructure fund’).

text: (4) While the size of the ITC infrastructure fund is set at 100.000.000 EUR by point 5.4 of Annex Part A of the ITC Regulation, the size of the ITC losses fund depends on the estimated volumes of losses due to transits and the declared values of losses, according to point 4 of Annex Part A of the ITC regulation . More specifically, pursuant to point 4 of Annex Part A of the Regulation, the value of losses incurred by a national transmission system as a result of the cross-border flows of electricity has to be calculated on the same basis as the one approved by the regulatory authority in respect of all losses on the national transmission system.

text: (5) The implementation of the provisions of the ITC Regulation regarding the ITC mechanism and the management of the ITC Fund is carried out by ENTSO-E through the contractual framework of the ITC Clearing and Settlement Multi-Year Agreement (‘ITC Agreement’) concluded on 9 February 2011. The ITC Agreement sets out the duties and entitlements of ENTSO-E and TSO or group of TSOs being treated as a single unit in the ITC mechanism (‘ITC Parties’). It also sets out detailed ITC procedures, including the submission, audit and validation of data, calculation of compensation and contribution amounts, and the clearing and settlement of the ITC Fund.

text: (6) In that context, ACER has the general duty, pursuant to point 1.4 of Annex Part A of the ITC Regulation, to oversee the implementation of the ITC mechanism and report to the Commission each year on the implementation of the ITC mechanism and the management of the ITC fund. With regard to the valuation of losses, ACER has the specific responsibility, pursuant to point 4.4 of Annex Part A of the ITC Regulation, to verify the criteria for the valuation of losses at national level taking particular account that losses are value in a fair and non-discriminatory way.

text: 1. RELEVANT FINDINGS FROM ACER MONITORING ON THE ITC MECHANISM

text: (7) In section 5.2.2.1 of the ACER Report on the implementation of the ITC mechanism in 2021, ACER notes that:  for the second time in a row, the volume of transmission losses due to transits increased significantly, i.e. by 19.6 % in 2021 and by 29.0 % in 2020,  similar sharp changes already occurred several times in the past, however, in absolute terms, the two recent increases stand out significantly,  compared to its amount 10 years ago, the volume of transmission losses due to transits increased by almost 150 %. (8) The criteria for valuing losses in EU/EEA ITC Party countries and Switzerland were presented in section 2.6. of the ACER Report on the implementation of the ITC mechanism in 2018. ACER noted in this report that:  when calculating the value of losses for the ITC mechanism, the assessed ITC Parties in general applied the same basis as the one used for valuing the losses at national level. Differences which were reported lie mainly in the use of historical or estimated prices for the purpose of the ITC mechanism in lack of actual values at the time of calculation or in different time-horizons taken into account for the calculation of each value,  different basis/criteria were in use across countries for losses’ valuation: most of the countries use market-based references (power-exchange prices, pool prices, auctions, tenders), while few applied (fully or partially) bilateral contracts or another basis for assigning a value to losses. (9) The values of losses used for the purpose of the ITC mechanism until 2018 were presented and analysed in section 2.7 of the ACER Report on the implementation of the ITC mechanism in 2018 . In this report, ACER noted that:  the differences of energy prices for different products in different markets and from auctions and bilateral contracts result in a broad range of values of losses for the EU ITC Parties,  the values of losses used for the ITC mechanism appeared to correlate with the evolution of the actual values of national losses with a one-year lag, i.e. the values

text: used for the ITC mechanism tend to increase in the following year if the actual values for losses of the previous year increased, and vice-versa.

text: (10) In its latest ITC monitoring report , ACER considers that, in light of recent extreme price volatility and in line with the general tarification principle of cost reflectivity introduced by

text: Regulation (EU) 943/2019

text: , there may be room for improvements regarding the way how, when and/or how often the values of losses are determined for the purpose of the ITC mechanism.

text: (11) In addition to the above, in the last quarter of 2022 and in early 2023, ACER collected from the national regulatory authorities (‘NRAs’) of the EU/EEA ITC Party countries (‘assessed countries’) additional information on the valuation of losses for the purpose of the ITC mechanism in their respective countries. The information is provided in Annex 1 to this Recommendation. The requested information was not provided for Ireland, which is why for Ireland information provided for previous ACER activities was reused.

text: 2. USE OF SNAPSHOTS FOR CALCULATING THE VOLUME OF LOSSES FOR THE ITC MECHANISM

text: (12) Pursuant to points 4.2. and 4.3 of Part A of Annex to the ITC Regulation, ENTSO-E is responsible for the calculation of the amount of losses incurred on a national transmission system by calculating the difference between the amount of losses actually incurred on the transmission system during the relevant period and between the estimated amount of losses which would have been incurred on the system during the relevant period if no transits of electricity had occurred. This calculation may be derived from estimates for a number of points of time during the relevant period. ENTSO-E has to publish the calculation and its method in an appropriate format.

text: (13) As described in more detail in section 1, ACER notes that the volume of transmission losses due to transits calculated by ENTSO-E, has changed significantly from yearto-year in recent years, and compared to its amount 10 years ago, the volume of transmission losses due to transits increased by almost 150 %. As a response to a data request of ACER, ENTSO-E provided some possible reasons for these changes (e.g. impact of renewable energy that can change significantly during the day and between different days, increased transits between bidding zones, new interconnectors and PSTs causing different flows).

text: (14) On 13 December 2022, ENTSO-E published its ITC Transit Losses Data report 2021 . According to this report, the losses caused by transits in each transmission system are

text: determined as the difference between the losses observed in the load flow situation with transit represented on the interconnected system and with transit represented on the disconnected system. For each ITC Party, six monthly snapshots are used (i.e. for rd 3 Wednesdays and preceding Sundays at 3/30, 11.30 and 19.30 CET/CEST) and every hour of the month is attributed to one of the six snapshots, so each snapshot timestamp is given a specific weight. Finally, the overall monthly amount of losses due to transits for each ITC Party is derived by aggregating the weighted transits for the particular hours.

text: (15) According to the ITC Agreement, ENTSO-E may decide to increase the number of snapshots collected in order to improve the settlement accuracy.

text: (16) ACER notes that the estimated volume of losses due to transits directly impacts the size of the ITC losses fund. ACER therefore emphasizes the importance of using an accurate calculation method.

text: (17) While historical reasons and computational constraints could have led to the use of a few snapshots, ACER does not deem the use of six snapshots per month anymore representative or ‘fit-for-purpose’ for the estimation of the overall monthly volume of losses. As indicated by the latest ENTSO-E CBA draft methodology (released for public consultation on 15 December 2022) , today’s state-of-the-art approach regarding the calculation of losses seems an hourly resolution as a default rule .

text: 3. VALUES AND VALUATION OF LOSSES

text: Values of losses

text: (18) Following the procedure laid down in the ITC Agreement, the ITC Parties shall report to ENTSO-E the value of losses for the purpose of the ITC mechanism on a yearly basis in advance, i.e. during the fall of the previous year for the next year.

text: (19) By 15 January of the year for which the value of losses is provided, each ITC Party is asked to confirm the declared value of losses or provide its revised figure to ENTSO-

text: E, along with an explanation on how the value has been determined and with references to the regulatory approval of the value (if any).

text: (20) By 5 February of the year for which the value of losses is provided, an ITC Party may request an explanation from another ITC Party about its value of losses and in case of an insufficient explanation, a document certifying that the value of losses is compliant with the definitions in the ITC Agreement and with the methodology used in the calculation shall be provided by 15 February.

text: (21) As described in Chapter 1 of this Recommendation, ACER noted that the values of losses used for the ITC mechanism appeared to correlate with the evolution of the actual values of national losses with a one-year lag, i.e. the values used for the ITC mechanism tend to increase in the following year if the actual values for losses of the previous year increased, and vice-versa.

text: (22) Table 1 in Annex 1 to this Recommendation shows the values of losses used for the ITC mechanism in 2019, 2020 and 2021 as well as the values of losses used for tariffs and actual values of losses. The values of previous years can be found in Table 7 in the Annex to the ACER Report on the implementation of the ITC mechanism in 2018.

text: (23) ACER compared the values of losses used for the purpose of the ITC mechanism in 2021 which was determined ex-ante, i.e. at the end of 2020, the value of losses used for national purposes (e.g. tariffs, determined ex-ante with or without ex-post reconciliation) and the ‘actual’ value of losses corresponding to the actual costs of the procurement of energy to cover losses usually done by the transmission system operator (‘TSO’) (determined ex-post, i.e. early 2022) . ACER notes an increasing gap between the estimated and actual values, which may be explained to a great extent by recent market price volatility .

text: (24) Based on the above findings, ACER concludes that the ex-ante calculated values may fail to be a good estimation of the actual values. This effect, combined with the higher variation of prices during the last years, could result in unfair contributions and compensations to the ITC, which do not reflect the costs actually incurred.

text: (25) In this respect, ACER underlines that, pursuant to

text: Article 49(3) of Regulation (EU) 2019/943

text: , ex-post adjustments of compensation paid shall be made where necessary, to reflect the costs actually incurred.

text: (26) ACER considers that an ex-post reconciliation of the costs of losses due to transits (i.e. revision of the ITC settlements using actual values of losses for the relevant year)

text: would significantly improve the ITC mechanism’s cost reflectivity, especially during the periods of high market price volatility, when the differences between the ex-ante declared values of losses and their actual values (in the majority of EU countries) are more likely to be high.

text: Valuation of losses

text: (27) Pursuant to point 4 of Annex Part A of the ITC Regulation, the value of losses used for the ITC mechanism shall be calculated on the same basis as the one approved by the NRA in respect of all losses on the national transmission system.

text: (28) ACER’s latest review of the criteria for the valuation of losses at national level was carried out in 2019 when the data from the ITC mechanism for 2018 were considered . In that report, ACER concluded that, in the vast majority of the EU/EEA ITC Party countries, the NRA is responsible for approving the basis for the calculation of the value of losses (implicitly or explicitly) and the basis/criteria are typically market based.

text: (29) NRAs of the following five countries reported a revision or update of the determination of the value of losses in comparison to the process carried out for the ITC mechanism in 2018:

text:  In Bulgaria, a market-based approach was implemented using forecast and historical power exchange market data. Before, the price had been regulated by the NRA and it had corresponded to the price paid to the public supplier for the electricity to cover losses of TSO and DSOs. The regulated price reflected the costs in relation to the public supplier’s portfolio.  In Croatia, the method to determine the value of losses for the purpose of the ITC mechanism was updated, because the TSO became able to procure a bigger share of electricity on short-term market (CROPEX). The new Methodology was issued in September 2020 and first used to determine the value of losses for 2021.  In Greece, the basis for charging losses and therefore the way the value of losses is calculated, changed on 1 November 2020 given the major Greek wholesale electricity market reform which resulted in three separate markets, namely dayahead, intraday and balancing. Before that date, there was only a day ahead market which co-optimised energy and reserves and imbalance settlement, while losses were charged to generators. From November 2020 onwards, the TSO is responsible for the procurement of energy to cover losses and it recovers the cost of losses through a special Uplift Account charged to all suppliers pro rata on their consumption in each settlement period.

text:  In Hungary, the basis of the calculation of the forecast and an ex-post settlement have been changed for the regulatory period 2021-2024.  In Spain, legal powers regarding the treatment of losses in the electricity power system have been transferred from the Ministry to the NRA.

text: (30) Table 2 in Annex presents country-specific information about the basis for the calculation of losses, strategies of procurement of energy to cover losses and on the same basis being used or not for national purposes and the ITC mechanism. ACER also finds that, in the vast majority of the assessed countries, the basis/criteria applied for the valuation of losses for the ITC mechanism is/are the same as for national purposes. The two exemptions are Ireland and Portugal where no value of losses is applied for national purposes . In the vast majority of the countries, the costs for transmission grid losses are at least partially recovered via network tariffs. In the remaining countries (GR, IE, IT, PT, ES), such costs are borne by producers (‘in kind’) or by suppliers.

text: (31) ACER notes that, in all countries, strategies of procurement of energy to cover losses and the prices used for the calculation of the value of losses for the ITC mechanism are fully consistent or there are only slight variations, due to an exclusion of a certain approach of procurement of energy to cover losses in the calculation of the value or considering forward market prices as the best estimate for future short-term market prices. ACER notes that strategies of procurement of energy to cover losses are to a great extent in line with the calculation method for the valuation of losses for the purpose of the ITC mechanism, e.g. both calculation of the values and the procurement of losses is based on the power exchange markets.

text: (32) ACER notes that, in the vast majority of the assessed countries, the determination of the values of losses is market based. More specifically, in more than one third of the assessed countries (DE, DK, FI, GR, LT, NO, PL, SK, SE), the value of losses for the purpose of the ITC mechanism is calculated using mainly energy prices from the longterm markets; in about 20%, (EE, ES, IT, LV, PT) mainly prices from the short-term markets are used; in two countries (BG, HU), a combination of the long-term and short-term market data is used; in four (AT, BE, HR, CZ), results of tenders are considered in addition to the long-term and short-term market prices; in three countries (FR, NL, SI) it is calculated based on the long-term market data and tenders and in one country (LU), only results of tenders are taken into account (while the values from tenders are based on long-term market prices). In one country (Ireland), the value of losses is calculated based on the average price of Directed Contracts and in one (Romania), a combination of the prices from long-term and short-term market as well as from bilateral contracts is used.

text: (33) Based on the above findings and differences presented in section 3.1, the assessed countries that use the data from the short-term markets in order to determine the value of losses for the ITC mechanism, are facing the largest differences between the actual values of losses and values of losses used for the ITC mechanism. On the contrary, lower differences occur in countries, where the value of losses for the purpose of ITC is determined based on long-term market data or tenders. Moreover, ACER noted in its policy paper that forward markets forecast day-ahead market prices .

text: (34) ACER considers that the approach of using historical market prices was not heavily inappropriate as long as the energy prices were relatively stable. However, in recent years featuring high volatility of the energy prices historical prices failed to realistically forecast market prices for the subsequent year.

text: (35) Ex-post reconciliation of the costs of losses due to transits applied in the ITC agreement would overcome the potential distortions coming from less accurate forecasts, while regulatory frameworks should ensure that system operators and system users are granted appropriate incentives, in both the short and the long term, to increase efficiencies , including with regard to the procurement of the energy to cover losses. ACER also sees room to improve the estimations, mainly by using appropriate input data for the calculation of the value of losses or by increasing the frequency of providing the value of losses for the purpose of the ITC mechanism.

text: 4. SHARING GOOD PRACTICES

text: (36) Pursuant to

text: Article 6(2) of Regulation (EU) 2019/942

text: , ‘ACER may, in accordance with its work programme, at the request of the Commission or on its own initiative, make recommendations to assist regulatory authorities and market participants in sharing good practices’.

text: (37) In 2013, ACER issued a recommendation to the European Commission for a reform of the ITC mechanism, including a phase out of the ITC infrastructure fund . This recommendation is still valid.

text: (38) In the present Recommendation, ACER focuses on addressing the lack of cost reflectivity flagged in its recent monitoring report on the implementation of the ITC mechanism, with measures which may be implemented without amendments of

text: Regulation (EU) 2019/943

text: and without amendments of

text: Regulation (EU) No 838/2010

text: (39) In its recent monitoring report on the implementation of the ITC mechanism and in the assessment provided in Sections 1–3 above, ACER identified some shortcomings in the implementation of the ITC mechanism regarding the treatment of losses, which merit recommendations on how to improve the ITC mechanism, in particular regarding the use of snapshots for calculating the volume of losses as well as how and when (how often) the values of losses are determined for the purpose of the ITC mechanism.

text: (40) To overcome these shortcomings, ACER deems it appropriate and necessary to assist regulatory authorities and market participants in sharing good practices and provide recommendations. These recommendations concern (1) the number of snapshots used for the estimation of the volume of losses due to transits for the purpose of the ITC mechanism, (2) the ex-post reconciliation of the costs of losses due to transits, and (3) the determination of the relevant components of the value of losses for the purpose of the ITC mechanism; they are specified in detail below and are without prejudice to applicable legal requirements. In order not to discriminate regarding the treatment of ITC Parties as set out in Annex Part A of

text: Regulation (EU) No 838/2010

text: , the recommended practices should be applied not only to EU ITC Parties, but to all parties participating in the ITC mechanism,

text: HAS ADOPTED THIS RECOMMENDATION:

text: 1. As soon as possible, ideally for the implementation of the ITC mechanism in 2023, but not later than for the implementation of the ITC mechanism in 2024, it is recommended that ENTSO-E and TSOs amend the ITC agreement by increasing the number of snapshots used for the estimation of the volume of losses due to transits for the purpose of the ITC mechanism, to an extent which ensures representativeness of the snapshots, aiming - as swiftly as possible – ideally at an hourly resolution.

text: 2. From the implementation of the ITC mechanism in 2023 or, in case such timeline is not feasible for duly justified reasons, from implementation of the ITC mechanism in 2024, it is recommended that ENTSO-E and TSOs amend the ITC agreement by applying an ex-post reconciliation of the costs of losses due to transits, to reflect the costs actually incurred and audited/approved by NRAs, where relevant, in each ITC Party country. The ITC settlement would therefore consist of an initial process, in which the ex-ante set values of losses are provided (e.g. for the purpose of estimating the ITC economic impacts and their implications on national tariffs), and a final settlement (ex-post reconciliation of the values of losses, subject to ENTSO-E internal audits) as described above.

text: 3. At least until an ex-post reconciliation of the costs of losses due to transits (recommended under point 2) is applied in the ITC mechanism, it is recommended that where procurement of energy to cover losses is done from the power exchange markets

text: and the valuation of losses (including for national purposes) is market based, TSOs determine the relevant components of the value of losses for the purpose of the ITC mechanism by considering liquid forward-market prices instead of historical prices. At the time of calculation, the most recent forward price should be taken into account to the extent feasible. In absence of a liquid forward-market, price evolution in non-liquid markets complemented with prices of long-term transmission rights between the nonliquid market and a liquid market may be considered. Where a TSO’s decision to act in accordance with the recommendation under the first subparagraph is subject to oversight or approval by an NRA, it is recommended that also the concerned NRA follows this recommendation.

text: This Recommendation is addressed to ENTSO-E, TSOs and NRAs.

text: Done at Ljubljana, on 13 April 2023.

text: - SIGNED -

text: Fоr the Agency The Director

text: C. ZINGLERSEN

text: Annex: Annex I – Country specific data on the value and valuation of losses

text: Annex 1: Country specific data on the value and valuation of losses


text: OJ L158, 14.6.2019, p. 22. 2 OJ L 158, 14.6.2019, p. 54–124 3 OJ L 112, 24.4.2016 Page 1 of 7

text: Recommendation No 01/2024

text: OJ L 223,18.8.2016 5 OJL 241, 8.9.2016

text: Recommendation No 01/2024

text: Recommendation No 01/2024

text: Due to the numerous and extensive amendments, ACER proposes that the HVDC Regulation is repealed.

text: Recommendation No 01/2024

text: Recommendation No 01/2024

text: Recommendation No 01/2024

identifier: ACER Recommendation No 01/2024

publisher: Europeiska unionens byrå för samarbete mellan energitillsynsmyndigheter

sprak: en

title: ACER Recommendation 01-2024 on reasoned proposals for amendments to the network code on requirements for grid connection of high voltage direct current systems and direct current-connected power park modules

serie: rekommendationer

text: RECOMMENDATION No 01/2024 OF THE EUROPEAN UNION AGENCY FOR THE COOPERATION OF ENERGY REGULATORS of 19 December 2024 on reasoned proposals for amendments to

text: Commission Regulation (EU) 2016/1447 of 26 August 2016

type: rubrik

text: THE EUROPEAN UNION AGENCY FOR THE COOPERATION OF ENERGY REGULATORS, Having regard to

text: Regulation (EU) 2019/942

text: of the European Parliament and of the Council of 5 June 2019 establishing a European Union Agency for the Cooperation of Energy Regulators , and, in particular,

text: Article 3(1)

text: thereof, Having regard to

text: Regulation (EU) 2019/943

text: on the internal market for electricity , and, in particular,

text: Articles 59(2)

text: (a) and 60(3) thereof, Having regard to the outcome of the public consultation, Having regard to the outcome of the consultation with ACER’s Electricity Working Group, Having regard to the favourable opinion of the Board of Regulators of 18 December 2024, delivered pursuant to

text: Article 22(5)

text: (a) of

text: Regulation (EU) 2019/942

text: , Whereas:

type: stycke

text: I. INTRODUCTION

text: (1) During the Grid Connection Stakeholders Committee meeting in September 2022, the European Commission invited ACER to initiate the process to prepare reasoned proposals for amendments to the grid connection network codes, namely

text: Commission Regulation (EU) 2016/631 of 14 April 2016

text: establishing a network code on requirements for grid connection of generators (hereinafter: the RfG Regulation) ,

text: Commission Regulation (EU) 2016/1388 of 17 August 2016

text: establishing a network

text: code on Demand Connection (hereinafter: the DC Regulation) and

text: establishing a network code on requirements for grid connection of high voltage direct current systems and direct current-connected power park modules (hereinafter: the HVDC Regulation) .

text: (2) On 19 December 2023, ACER issued Recommendation No 03/2023 on reasoned proposals for amendments to

text: Commission Regulation (EU) 2016/631 of 24 April 2016

text: establishing a network code on requirements for grid connection of generators and

text: establishing a network code on demand connection (hereinafter: ACER Recommendation 2023).

text: (3) The amendment of the HVDC Regulation is justified on two grounds. Firstly, it aims to ensure an overall consistent approach to requirements for grid connection resulting from ACER Recommendation 2023. Secondly, it is mandated by the high penetration of HVDC systems as well as converter-based Power Park Modules (PPMs), creating new system needs. More specifically, substantial growth in generation capacity of isolated offshore Alternating Current (AC) networks (hereinafter: the AC hubs) expected in the near future should not be ignored as these AC hubs will connect large scale offshore wind power generation and large-scale industrial demand (electrolysers) along with electricity storage and other demand facilities. In this framework, system security, reliability and cost-effective system design and system operation involve also HVDC systems and offshore PPMs.

text: II. PROCEDURE

text: (4) In accordance with

text: Article 60(3) of Regulation (EU) 2019/943

text: on the internal market for electricity (hereinafter: the Electricity Regulation) and

text: Article 14 of Regulation (EU) 2019/942

text: , ACER conducted a public consultation from 17 June until 8 September 2024 to gather stakeholders’ views on the ACER draft amendment proposals on the HVDC Regulation. The evaluation of responses to the public consultation is detailed in Annex 3 to this Recommendation.

text: (5) In addition to the public consultation, ACER held one public webinar with stakeholders (24 June 2024), with the purpose to present the proposed amendments and assist stakeholders in providing informed feedback to the public consultation. The webinar focused on the specific new amendments, namely regarding: the introduction of new system users and corresponding technical requirements, significant modernisation, rateof-change-of-frequency withstand capability, grid forming capability, simulation models and voltage and frequency ranges.

text: (6) Throughout the procedure, ACER engaged with interested stakeholders in the review of the amendments in order to ensure that they had sufficient opportunity to express their views and concerns. Further, ACER proactively engaged with representatives of

text: the relevant European stakeholders’ associations, on the proposed amendment concerning system passivity of HVDC systems.

text: (7) ACER’s Electricity Working Group (hereinafter: AEWG) was consulted from 20 November to 28 November 2024 and provided its advice on 2 December 2024.

text: (8) In its advice, the AEWG endorsed the draft ACER Recommendation on reasoned proposals for amendments to

text: establishing a network code on requirements for grid connection of high voltage direct current Systems and direct current connected power park modules.

text: (9) On 18 December 2024, ACER’s Board of Regulators issued a favourable opinion, pursuant to

text: Article 22(5)

text: (a) of

text: Regulation (EU) 2019/942

text: , on the proposed HVDC Regulation.

text: III. LEGAL GROUNDS FOR THE PRESENT RECOMMENDATION

text: (10) In the framework of the Grid Connection Stakeholders Committee in September 2022, the Commission invited ACER to initiate the process to prepare reasoned proposals for amendments to the grid connection network codes.

text: (11) The HVDC Regulation (like the RfG Regulation and the DC Regulation) is a network code, relating to the area of ‘network connection rules’ under

text: Article 59(2)

text: (a) of the Electricity Regulation, whose scope is specified as including rules on the connection of transmission-connected demand facilities, transmission-connected distribution facilities and distribution systems, connection of demand units used to provide demand response, requirements for grid connection of generators, requirements for high-voltage direct current grid connection, requirements for direct current-connected power park modules and remote-end high-voltage direct current converter stations, and operational notification procedures for grid connection.

text: (12) Article 60 of the Electricity Regulation defines a process for the amendment of network codes within the areas listed in

text: Article 59(1)

text: thereof, with ACER having a formal role for the proposal of such amendments.

text: (13) According to the first sentence of Article 60(3) of the Electricity Regulation, ACER may make reasoned proposals to the Commission for amendments, explaining how such proposals are consistent with the objectives of the network codes set out in Article 59(3) of the same Regulation. Article 59(3) of the Electricity Regulation does not refer explicitly to objectives and states that the Commission should establish a priority list every three years, identifying the areas to be included in the development of network codes. Instead, subsequently,

text: Article 59(4)

text: and (11) of the Electricity Regulation do define objectives for the development of network codes, namely contribution to market integration, non-discrimination, effective competition, and the efficient functioning of the market. Accordingly, the reference in Article 60(3) of the Electricity Regulation to the objectives of Article 59(3) of that Regulation should be read together with

text: Article 59(4)

text: and (11) of the same Regulation and in light of the objectives listed therein.

text: Therefore, these objectives are also relevant for the amendments proposed in this Recommendation (as detailed in the reasons provided in Annex 2).

text: (14) According to the second sentence of Article 60(3) of the Electricity Regulation, where ACER considers an amendment proposal to be admissible and where it proposes amendments on its own initiative, ACER should consult all stakeholders in accordance with

text: Article 14 of Regulation (EU) 2019/942

text: . Pursuant to

text: Article 14(1) of Regulation (EU) 2019/942

text: , ACER, in the process of proposing amendments of network codes under Article 60 of the Electricity Regulation, has to ‘extensively consult at an early stage market participants, transmission system operators, consumers, end-users and, where relevant, competition authorities, without prejudice to their respective competence, in an open and transparent manner, in particular when its tasks concern transmission system operators’.

text: (15) Finally, according to

text: Article 3(1) of Regulation (EU) 2019/942

text: , ACER may, upon a request of the European Parliament, the Council or the Commission, or on its own initiative, provide an opinion or a recommendation to the European Parliament, the Council and the Commission on any of the issues relating to the purpose for which it has been established.

text: (16) As indicated by

text: Articles 59(2)

text: (a) and 60(3) of the Electricity Regulation, ACER’s contribution to the amendment of network codes concerns issues relating to a purpose for which ACER has been established.

text: IV. MAIN FINDINGS

text: (17) ACER found that amendments to the HVDC Regulation would be required in the areas set out in paragraphs (18) to (29). In line with the Commission’s request to prepare reasoned proposals for amendments to the grid connection network codes and taking into account the outcome of the consultation with the relevant stakeholders, ACER has proposed those amendments in Annex 1 to this Recommendation for the reasons detailed in Annex 2 to this Recommendation explaining how such proposals are consistent with the objectives in Article 59(4) of the Electricity Regulation .

text: Amendments to the HVDC Regulation

text: (18) For the general provisions, ACER proposes amendments to definitions, the inclusion of new definitions, the replacement of the term ‘DC connected PPMs’ with ‘asynchronously connected PPMs’ and the expansion of scope of application to asynchronously connected demand facilities, asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules. ACER proposes amendments to the regulatory aspects, including the introduction of the possibility to establish different topology dependent requirements of general application for HVDC systems with more than two alternating current (AC) buses and more than two HVDC converter stations where HVDC converter stations are connected to

text: different voltage levels or geographical locations. By introducing the notion of the ‘isolated AC network’, ACER proposes that the Member States have the flexibility to apply some or all of the requirements of the HVDC Regulation to HVDC systems, asynchronously connected power park modules, asynchronously connected demand facilities, asynchronously connected power-to-gas demand units or asynchronously connected electricity storage modules, connected to the transmission system and distribution systems or to parts of the transmission system, or distribution systems, of islands of Member States the systems of which are not operated synchronously with either the Continental Europe, Nordic, Ireland and Northern Ireland or Baltic synchronous area, following the procedure provided in national rules. ACER also proposed the introduction of the criteria constituting a ‘significant modernisation’.

text: (19) For the general requirements for HVDC connections, ACER proposes amendments to general requirements for the rate-of-change-of-frequency withstand capability at the connection point, the introduction of voltage phase angle jump withstand capability, a requirement for passivity of HVDC systems and grid forming capability, amendments to fast frequency control capability, frequency control, short circuit contribution during faults, fault ride through capability, HVDC system robustness, priority ranking of protection and control and changes to protection and control schemes and settings.

text: (20) For requirements for asynchronously connected PPMs and remote-end HVDC converter stations, ACER proposes the expansion of the requirements to asynchronously connected demand facilities, asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules.

text: (21) More specifically, ACER proposes the frequency stability requirements, reactive power and voltage requirements to apply to asynchronously connected power park modules, asynchronously connected demand facilities, asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules. ACER also proposes the introduction of new articles on fault-ride-through capability and overvoltage ride through capability of power-to-gas demand units and grid forming capability of asynchronously connected PPMs and asynchronously connected electricity storage modules. ACER proposes amendments to control requirements, network characteristics, protection requirements, power quality and general system management requirements applicable to asynchronously connected power park modules, asynchronously connected electricity storage modules and asynchronously connected demand facilities. ACER also proposes amendments to frequency stability requirements, reactive power and voltage requirements, network characteristics and power quality for remote-end HVDC converter stations.

text: (22) Regarding information exchange and coordination, ACER proposes amendments to the operation of HVDC systems, parameters and settings and simulation models.

text: (23) For operational notification procedure for connection, ACER proposes the expansion of the relevant provisions to new asynchronously connected demand facilities, new

text: asynchronously connected power-to-gas demand units and new asynchronously connected electricity storage modules.

text: (24) For compliance monitoring, ACER proposes amendments to common provisions for compliance testing and for compliance simulation to apply to asynchronously connected demand facilities, asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules. ACER recommends amendments so that the responsibility to comply with the requirements of the HVDC Regulation applies also to asynchronously connected demand facility owners, asynchronously connected power-to-gas demand unit owners and asynchronously connected electricity storage module owners. ACER finds it necessary to amend the tasks of the relevant system operator to apply also to asynchronously connected demand facility, asynchronously connected power-to-gas demand unit and asynchronously connected electricity storage module and to their respective owners, as appropriate.

text: (25) For compliance testing, ACER proposes the expansion of the relevant provisions to asynchronously connected demand facilities, asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules. Further, ACER proposes the introduction of a new provision to cover compliance testing with regard to Limited Frequency Sensitive Mode - Underfrequency Consumption (LFSM- UC) of an asynchronously connected power-to-gas demand unit.

text: (26) For compliance simulations, new provisions are introduced to cover compliance simulations for HVDC systems with regard to grid forming capability, fast frequency control capability, rate-of-change-of-frequency capability, fast recovery from DC faults, voltage phase angle jump capability and HVDC system passivity. ACER proposes the expansion of the relevant provisions to asynchronously connected power-to-gas demand units and asynchronously connected electricity storage modules. ACER also proposes adjustments for alignment purposes with RfG 2.0. Further, new provisions are introduced to cover compliance simulations with regard to post fault active power recovery and fault-ride-through capability of an asynchronously connected power-togas demand unit and grid forming capability of an asynchronously connected power park module and asynchronously connected electricity storage module.

text: (27) For the monitoring of implementation, ACER proposes amendments to update the monitoring process in accordance with the Electricity Regulation.

text: (28) ACER proposes the introduction of new final provisions.

text: (29) ACER proposes amendments to Annexes I to VIII,

text: HAS ADOPTED THIS RECOMMENDATION:

text: ACER recommends to amend

text: establishing a network code on requirements for grid connection of high voltage direct current systems and direct current-connected power park modules for the reasons explained in Annex 2. This Recommendation is addressed to the European Commission. Done at Ljubljana, on 19 December 2024.

text: - SIGNED –

text: Fоr the Agency

text: The Director

text: C. ZINGLERSEN

text: Annexes: Annex 1 – Proposed amended HVDC Regulation Annex 1a – Proposed amended HVDC Regulation in tracked changes as compared to the current HVDC Regulation Annex 2 – Reasons for the proposed amendments to the HVDC Regulation Annex 3 – Evaluation of responses to the public consultation

type: vagledning

utgivare: acer