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Congestion Management Mr Carlo Crea AEEG, Italy The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Congestion Management Structure of Presentation CBT congestion management Long-term objectives Key developments to date Planned developments Focus on the Central-South Region Cross border allocations in 2006 Cross border allocations in 2007 The way forward The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 2 Congestion Management CBT Congestion Management: objectives Electricity Regional Initiative (ERI)’s goal is to create seven electricity Regional Energy Markets (REMs) as an interim stage towards a single European electricity market. Effective market integration requires an efficient mechanism for the allocation of interconnection capacity. Harmonization of congestion management mechanisms: Coordination of long term CB capacity allocations; Flow based market coupling for short-term allocations. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 3 Congestion Management CBT Congestion Management: key developments to date Positive steps, even though integration is proceeding at different paces. Day-ahead market coupling: Central-West REM (France-Belgium-Netherlands); Northern REM (Denmark-Norway-Sweden-Finland); Coordinated explicit auctions: Central-East REM: all borders – five coordinated; Central-South REM: three borders. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 4 Congestion Management CBT Congestion Management: planned developments Planned improvements: Central East REM: flow-based coordinated CM system; France-UK-Ireland REM: removal of the reserve price on capacity auction on the French- UK interconnector; South-West REM: single Iberian spot market. Northern REM: day-ahead market coupling on the Danish-German interconnectors. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 5 Congestion Management Focus on the Central-South REM Key priorities: harmonization of CBT congestion management methods; Inter-TSO coordination (harmonisation of operational and security standards) transparency; integration of intra-day and balancing markets. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 6 Congestion Management Focus on the Central-South REM: Cross border allocations in 2006 Non-coordinated allocation of interconnection capacity (50/50 approach); On the 50% capacity allocated by Italy: short-term: import/export bids to IPEX (implicit auction); long-term: explicit auction of financial rights. Critical issues: - lack of coordination; - partial inefficiency (no market coupling). The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 7 Congestion Management Focus on Central-South REM: Cross Border allocation in 2007 Coordinated allocation of interconnection capacity on three borders (Italy-France, Italy-Austria; Italy-Greece). Each country allocates all the available export capacity: short-term and long term explicit auction of physical transmission rights. Critical issues: bilateral, not regional coordination; no coordination on day-ahead or intraday; partial inefficiency: no opportunity to allocate spare capacity after the daily explicit auction. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 8 Congestion Management Focus on Central-South REM: the way forward Improvement of regional coordination: long and medium term allocation (yearly and monthly): guidelines for coordinated explicit auction of physical transmission rights; short term allocation (daily): guidelines on market coupling. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 9 Congestion Management Conclusions The REMs are a pragmatic approach towards a single European electricity market; In 2006, the REMs made a number of positive steps towards market integration, especially in the area of congestion management; Cooperation among regulatory authorities in the context of ERGEG and CEER is essential to reach such results. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 10 Congestion Management Conclusions/2 Further developments towards a single European Electricity Market require parallel improvements of hardware (interconnection expansions) and software (networks and congestion management harmonisation); To this end, we need: adequate and binding ETSO agreements involving all the necessary parties, including Switzerland (develop ETSOplus); shared solutions to the NIMBY problems; national regulatory authorities with strengthened and harmonised powers together with ERGEGplus. The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 11 Congestion Management Thank You More information on the Central-South Electricity Regional Energy Market is available at www.ergeg.org Become an “Online Subscriber” to automatically receive news from the regions The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 12