On 23 November 2017, the EU agreed to pursue a major electricity market reform by adopting the reform package, including a Regulation on the principles of inter-system balancing. The new pan-European instrument regulating the co-operation of balancing markets in the Member States will begin to apply directly within one year of its adoption and entry into force and after the adoption of the framework guidelines for the development and implementation of pan-European platforms for trade with balancing products.
The new Regulation aims to increase competition in the provision of balancing services, harmonization of the balancing products and the principles of defining balancing energy prices. The possibility to optimize balancing costs, which are an element of the final cost of electricity, will be guaranteed.
The implementation of the Regulation in Member States shall require a change in national legislation. For this reason, the Electricity System Operator (ESO) is preparing a proposal for changes to the Electricity Trading Rules, which are expected to be submitted to the Agency of Energy Regulation within the one-year transition period. The necessary steps will be taken to prepare all market participants and stakeholders to implement the requirements of the new legal framework.
How will the balancing market work in the future?
Since the entry into force of the Regulation, new technical, operational and market rules shall be introduced within the Community the purpose of which is to restructure the operation of the balancing electricity markets. On the basis of these new rules, each Member State shall adopt internal rules for the procurement of balancing power and financial settlement by the responsible for the balance persons. This is necessary because, under the new regulation, balancing energy offers will compete on common platforms within the Community and at the same time shall be ensured the efficiency and coordination of the functioning transactions – “day ahead” and “during the day”.
To whom is the regulation applicable?
At this stage of implementation of the guidelines laid down in the Regulation, it is assigned to ESO, on behalf of Bulgaria and all the Electricity Distribution Companies in the country as well as the operators of closed distribution systems to provide the necessary data and to maintain communication with the sites in their network.
The competent regulatory bodies will be (EWRC) Energy and Water Regulatory Commission, (ACER) Agency for the Cooperation of Energy Regulators and (ENTSO-e) European Network of Transmission System Operators for Electricity.
What new will be introduced this year?
For the purpose of inter-system balancing, the new Regulation foresees the allocation of inter-zone transmission capacity, while taking into account the exchange of balancing energy between market areas. This is expected to lead to increased liquidity in short-term markets. Several European platforms are currently being developed – netting system imbalances, exchanging balancing power from automatic and manual triggering of secondary regulation of frequency and substitution reserves. All of these changes provide a basis for intensification of cross-border trade, transparency and more efficient use of existing electricity network, which is a core objective in the activities in relation to balancing energy market.
In turn, the integration of balancing energy markets should facilitate the efficient operation of the market for intraday transactions so as to enable market participants to balance themselves on terms as close as possible to real time. Only imbalances remaining after the end of the market for intraday transactions should be settled through the balancing market. By introducing a harmonized 15-minute imbalance settlement period in Europe, support should be provided for intraday trade and the development of a range of commercial products with the same delivery time intervals should be encouraged.
How the regulation will work?
After receiving information on the current system balance in its zone or zones, each operator for Bulgaria the one is ESO should draw up a timetable, but no later than 30 minutes before the actual time, to include information on the type of product, the duration, proposed quantities and prices.
The objectives of the new Regulation are to introduce uniform rules for all market players, including the most isolated Member States and regions in Europe. Among the measures to be taken by each Member State, it is essential to have a well-functioning internal electricity market and to introduce appropriate incentives for manufacturers to invest in new capacities, including adjustable ones.
Why change the regulation?
As a result of all the efforts made by the Member States, a functioning electricity market within the EU must be achieved and, in particular for balancing purposes, the existing infrastructure of the existing electricity network should be used more efficiently and the rules for balancing should be harmonized.
Market participants should be encouraged not to commit large imbalances and invest in their capacities and cargo management to balance with the agreed position to close a segment of the market within the day. On one hand, the regulation must have direct effect and be mandatory for application after it enters into force, in which sense the requirements and guidelines set by it for the fulfillment of the objectives must be strictly enforced, and this would in practice mean that four new platforms for balancing within the EU market will soon have to be launched. On the other hand, the regulation is a framework legal act as it requires the synchronization of national balancing markets with those of the Community. This means that each Member State has to choose these national mechanisms through which the balancing electricity market will be regulated in domestic legislation in such a way that it is harmonized with the uniform European market.
This article was published in the business newspaper in Bulgaria ‘Kapital’.
Prepared by: Ms. Ralitsa Tihova, Attorney – at – Law
Ralitsa Tihova is a lawyer practicing in Bulgaria with an extensive experience in litigation and negotiation in contract law, labor law, intellectual property law and debt recovery, with more than 300 cases assigned before all court instances. Her goal is to combine innovation and law with the aim of creating positive change and feedback and she is challenged by new concepts that focus on the details.