Implement the
network codes

Working toward a secure, competitive and low-carbon European electricity sector and the Internal Energy Market is an ambitious target, that needs a common set of rules. The European network codes are technical rules, that complement existing legislation by defining a common basis for all stakeholders and market parties to adopt the same practices and business processes across Europe. Between 2009 and March 2017, ENTSO-E has developed, jointly with ACER, policy-makers and stakeholders, eight network codes and guidelines.

To keep network codes up-to-date with market and technological developments, and learn from the implementation experience, the codes may be reviewed.

All codes have entered into force and ENTSO-E is now focussing on their implementation, which is a demanding undertaking for all parties involved.

Implementing the codes requires a specific combination of national, regional and pan-European implementation measures and tools. All market participants, DSOs, TSOs, NEMOs and regulators, at the EU, regional and national levels, are involved in various ways.

With respect to tasks allocated to system operators, the codes define which entity is responsible for each implementation task¹.

Figure 1: Network codes – Entities responsible for pan-European, regional and national tasks

‘All TSOs’ refers to the TSOs of all EU countries (pan-European ‘all TSOs’), or to the TSOs of a specific EU region (regional ‘all TSOs’). Because TSOs have decided that ENTSO-E’s structures are the most suitable vehicle to facilitate the delivery of pan-European tasks and some regional tasks, ENTSO-E facilitates the European implementation process.

For non-EU countries, modalities of implementation of the codes and guidelines depends on the legal framework governing their relationship with the EU:

European Stakeholders Committees help inform the decision-making process for the implementation deliverables, and serve as a platform to discuss issues of EU-wide importance. They include a Market Stakeholders Committee, a Grid Connection Stakeholders Committee and a System Operations Stakeholders Committee, as well as a Balancing Stakeholder Group focusing on the implementation of the Electricity Balancing Guideline.

ENTSO-E supports the committees by facilitating, in conjunction with ACER, the preparation and development of meetings. ENTSO-E also maintains, with the support of ACER, the European Commission, and Committees members, the Issue Logger Tool, where the questions on the codes’ implementation raised by Committees members are centralised and answered in a transparent manner.

Set up in Q3 2018, the TSO – DSO Network Code/Guideline Implementation Group discusses issues of interest to DSOs related to the implementation of network codes.

Launched in October 2018, the E Codes application for smartphones provides easy access to the articles of all eight network codes and guidelines. It makes it possible to track the implementation tasks, access implementation deliverables, and view codes-related public consultations, news and events. The app was downloaded by 1400 users in 2018 and has over 600 daily uses of the app.

In addition, to help stakeholders better understand
network codes, the related challenges and solutions, ENTSO-E and the Florence School of Regulation, have developed an online training on EU electricity network codes. The second training took place in the fall of 2018 and included 166 participants from 28 different countries.

The Capacity Allocation and Congestion Management Regulation

The rules set by the CACM Regulation provide the basis for the implementation of a single energy market across Europe. The CACM Regulation establishes the methods for allocating capacity in day-ahead and intraday timescales, and outlines how capacity will be calculated across the different zones. Putting in place harmonised cross-border markets in all timeframes will lead to a more efficient European market and will benefit customers.

CACM was the first code to enter into force in August 2015 and its implementation is well advanced. All pan-EU methodologies and most of the regional methodologies have been submitted.

Cross-zonal electricity trades and exchanges are organised between bidding zones based on available transfer capacities or a so-called flow-based method calculated by TSOs, while internal trades inside bidding zones are considered to be unrestricted. The definition of bidding zone boundaries is therefore a question of major relevance for efficient congestion management and a well-functioning market. To analyse the robustness of this structure, and whether it is appropriate for future market needs, the CACM Regulation foresees regular assessments and possible review of the existing configuration.

The approach chosen by the participating TSOs was based on a selection of ex ante defined configurations, encompassing a splitting or merging of the existing bidding zones. They include a separation of Austria from Germany / Luxembourg, a split of the ‘big countries’ France and Germany / Luxembourg and Poland, and a further split of France and Germany / Luxembourg into three zones. To also consider the implications of merging zones, the combinations of Belgium with the Netherlands and the Czech Republic with Slovakia have also been considered.

For the first time, these configurations were analysed and compared over large physical areas using a flow-based methodology. The participating TSOs used detailed grid and market models to simulate market and system operations for the different configurations analysed. Assumptions had to be made regarding the future grid, generation and demand developments, as well as on the future generation cost structures. ENTSO-E played a facilitating role, supporting the participating TSOs in the process.

This first report analysing bidding zone configurations in Europe demonstrated the significant technical, and even more so political, complexity of the task. The participating TSOs considered that the evaluation presented in the first edition of the Bidding Zone Review did not provide sufficient evidence in support of either modifying or maintaining the current bidding zone configuration. Therefore, they recommended that, given the lack of clear evidence, the current bidding zone delimitation be maintained². Further work is ongoing on the TSOs’ side to assess and learn from the current review, so that more concrete recommendations can be made in the future.

The CACM Regulation tasks CCRs with delivering regional methodologies for capacity calculation (Art. 20), methodologies for redispatching and countertrading (Art 35 and 74) and fallback procedures (Art. 44).

Figure 3 provides an overview of the current status of regional methodologies.

 The Forward Capacity Allocation Regulation

The FCA Regulation, which entered into force on 17 October 2016, outlines the rules regarding the type of long-term transmission rights that can be allocated via explicit auction, as well as the way holders of transmission rights are compensated in case their rights are curtailed. The overarching goal is to promote the development of liquid and competitive forward markets in a coordinated manner across Europe and provide market participants with the ability to hedge risks associated with cross-border electricity trading.

The single allocation platform

The Single Allocation Platform (SAP) facilitates the allocation of long-term transmission rights and the transfer of these rights among market participants at the European level. In addition, it should contribute to a transparent and non-discriminatory allocation of long-term transmission rights. FCA Article 48(1) requires TSOs to ensure that the SAP is operational and complies with the functional requirements by December 2018 (one year after the approval of the proposal for the establishment of the SAP).

The first long-term auctions under the SAP cooperation agreement were performed at the beginning of October 2018. The SAP is operated by the Joint Allocation Office (JAO), a joint service company of 20 TSOs from 17 countries, performing the yearly, monthly and daily auctions of transmission rights on 27 borders in Europe.

Congestion income distribution methodology

All TSOs had up to six months after the approval of the CID methodology under CACM, i. e., until July 2018, to jointly develop a proposal for a methodology for sharing congestion income from forward capacity allocation (FCA Article 57). All TSOs submitted their joint proposal in June 2018. All NRAs sent a request for amendment in December 2018 and all TSOs submitted an amended proposal in March 2019.

The Electricity Balancing Guideline

Electricity balancing is the process by which TSOs ensure, in real time, sufficient energy to balance inevitable differences between supply and demand. The Guideline on Electricity Balancing (EBGL) aims to move Europe from electricity balancing performed on a national level, to a situation in which balancing resources available all across Europe are used in the most effective way within the constraints.

The Electricity Balancing Guideline entered into force on 18 December 2017. Implementation began in 2018 even though pilot implementation projects were already ongoing.

The EBGL foresees the implementation of common Euro­pean platforms for each balancing market process: imbalance netting (IN), automatic Frequency Restoration Reserves (aFRR), manual Frequency Restoration.

Reserves (mFRR) and replacement reserves (RR). TSOs are developing these platforms via four implementation projects IGCC, PICASSO, MARI and TERRE.

Further EBGL deliverables in 2018

Figure 4: Further EBGL deliverables in 2018

The System Operation Guideline

The System Operation Guideline (SOGL) establishes harmonised rules on how to operate the grid to ensure the security of supply with increasing renewables. Its implementation entails several challenging tasks for TSOs at pan-European and regional (synchronous area and CCR) levels. Work at the pan-European level, including tasks performed by the Regional Security Coordinators (RSCs), is facilitated by ENTSO-E, while regional activities are decided by TSOs in the respective regional groups within ENTSO-E.

A large part of the implementation of the SOGL is prepared through the rollout of three of the five standard tasks of Regional Security Coordinators. The relevant ‘all TSOs’ deliverables in 2018 are listed in Figure 3.

In addition, all TSOs’ proposal for key organisational requirements, roles and responsibilities in relation to data exchange (KORRR) was developed in accordance with SOGL Article 40(6) (see KORRR proposal version of November 2018 after NRAs request for amendment).

Progress was also achieved for several deliverables at the synchronous area level, most notably, the development of proposals for the methodologies, conditions and values included in the respective synchronous area operational agreements (SAOA) for the Continental Europe, Great Britain, Nordic and Ireland/Northern Ireland synchronous areas (Article 118 SOGL). These SAOA will replace and  supersede in 2019 the existing operational agreements between TSOs, such as the Operation Handbook in Continental Europe.

Through these SAOA, TSOs commit to comply with the SOGL and, at the synchronous area level, agree on a number of topics relevant for load-frequency control and reserve, e.g. load-frequency control structure for the synchronous area, common rules for the operation of load-frequency control in the normal and alert states, frequency quality defining and target parameters, dimensioning rules for frequency containment reserves, limitations on the amount of frequency restoration and replacement reserves exchanged between synchronous areas. For each synchronous area, the commonly proposed methodologies, conditions and values to be approved by regulatory authorities were submitted to public consultation and delivered in 2018 to the concerned regulators (Article 6(3) SOGL). SAOA for CE (SAFA) signature has been completed and the contract entered into force on 14 April 2019.

The Emergency and Restoration Network Code

The Emergency and Restoration Network Code establishes rules on how to effectively handle emergency situations and restore the system as efficiently and as quickly as possible. It entered into force on 18 December 2017 and will be implemented at the national or TSO level.

An expert team supported by ENTSO-E has been drawn from TSO representatives involved in drafting the original Code. ENTSO-E has monitored the national implementation of the network code and supported TSOs in the delivery of their proposals for National Defence and Restoration Plans and the terms and conditions required of service providers by 18 December 2018. The expert team has provided guidance documents and, moreover has developed a coordinated approach for the TSOs to provide the information to RSCs by July 2019, to fulfil their required consistency assessments of system Defence and Restoration Plans by September 2019. Additionally, the expert team has established guidelines for TSOs for situations in which the market activities are suspended and restored. Drafting and implementation of these rules is the responsibility of each TSO and is subject to NRA approval.

The connection codes

Connection codes set the EU-wide conditions for linking all actors safely to the grid, including renewables and smart consumption. They include the technical requirements for generation (Requirement for Generators – RfG code), demand facilities (Demand Connection – DC code) and high-voltage direct current (HVDC code) connections.

2018 was the last year for defining and submitting the proposals i. e. non-exhaustive requirements and boundary thresholds according to national processes. These needed to be submitted by May 2018 for RfG and September 2018 for DC and HVDC.

Although the implementation of the connection codes is the responsibility of each EU member state, ENTSO-E continued to actively support the TSOs and relevant stakeholders by providing the last set of non-binding Implementation Guidance Documents (IGDs) before the end of the implementation. In early 2018 several frequency-related IGDs were published. Soon after this launch, IGDs on Cost Benefit Analysis and HVDC-related aspects were made available.

For all these technical documents, there was a dedicated period for consultation (one month) and, in certain cases, public discussions with stakeholders occurred through ENTSO-E’s technical groups. The results of each consultation and the replies by ENTSO-E can be found here. The Grid Connection European Stakeholder Committee (GC ESC) was also used as a platform for further discussion and communication.

In addition, TSOs are responsible to coordinate, when establishing certain connection codes requirements at the national level. ENTSO-E released a public report on the explicitly required coordination or reasonably undertaken collaboration between TSOs when implementing the connection network codes at the national level, because of the cross-border impact of these specifications mostly at the synchronous area level.

During the second half of 2018, the GC ESC ­established dedicated Expert Groups chaired by ENTSO-E ­addressing topics that require particular attention: ­“Requirements for pump-storage hydro power generation modules (EG PSH)”, “Identification of storage devices (EG STORAGE)” and “Mixed customer sites with generation, demand and storage, and definition of system users (EG MCS)”. ­Outcomes are expected in Q2 2019.

Monitoring the implementation

ENTSO-E is entrusted with monitoring and analysing the implementation of the network codes and guidelines, and their effect on the harmonisation of applicable rules aimed at facilitating market integration (Article 8(8) of Regulation (EC) No 714/2009). This section provides an overview of ENTSO-E’s monitoring activities in 2018.

Monitoring activities entail the elaboration of monitoring plans and monitoring reports, as well as the collection of data (so-called ‘Lists of information’), including the identification of data to be collected and the design and implementation of interfaces for data collection.

In 2018, ENTSO-E has been preparing the monitoring of the implementation of the Electricity Balancing Guideline, System Operation Guideline and Emergency and Restoration Network Code. The EBGL Monitoring Plan was submitted to ACER on 6 June 2018. Regarding SOGL, the list of relevant information to be communicated by ENTSO-E to ACER will be developed over the course of 2019.

1^st Joint report on the progress and potential problems with the implementation of intraday and day-ahead coupling, as well as forward capacity allocation.

The report provides an account of the current state-of-play and challenges in the implementation of single day-ahead and intraday coupling in terms of all TSOs and all NEMOs deliverables. The report also takes stock of the progress achieved thus far in the coupling of electricity markets, by the Multi-Regional Coupling project (MRC) and the Czech-Slovak-Hungarian-Romanian Market Coupling project (4M MC) for day-ahead, and the intraday market coupling project (XBID). The ‘go-live’ of continuous cross-zonal trading of XBID/SIDC in 14 European countries was the highlight of 2018. The SIDC is expected to extend, with up to five local implementation projects in preparation to ‘go-live’ in 2019.

Regarding the single day-ahead coupling (SDAC), the report notes that both the MRC and the 4M MC project experienced no incidents of partial or full decoupling in 2017/2018. TSOs and NEMOs are progressing towards the signature of a DAOA setting their respective rights and obligations, in respect to the implementation of the SDAC.

The report also takes stock of the status of the implementation deliverables under the FCA Regulation. The Single Allocation Platform was expected to effectively allocate forward capacity well in advance of the legal deadline of December 2018.

ENTSO-E’s first Biennial report on forward capacity calculation and allocation was delivered to ACER on 14 August 2018, as per Article 63(1) (c) of the FCA Regulation. The FCA Regulation specifies ACER must decide whether to publish the report.

As previously mentioned, monitoring activities include the collection of data from TSOs or other entities, and subsequently providing these data to ACER for its monitoring tasks. In 2018, the documentation for the list of information to be provided based on the CACM Regulation was prepared in close cooperation with ACER. The IT project to support the data collection and provision kicked off and will be deployed in 2019. In the meantime, the discussion on the list of information stemming from the FCA Regulation continues.

As a yearly deliverable, according to Article 15 of the SOGL, ENTSO-E’s incident classification scale annual report provides a detailed review of any incident on the network operated by ENTSO-E’s members. It aims at identifying needed improvements to support sustainable and long-term operational security, including improvements related to network operation tools, real-time operation and operational planning.

Based on the 2017 report, a total of 1072 incidents reported by TSOs over the year, of which 680 were classified as a 0 according to the incident classification scale, 390 were classified as a 1, and 2 were classified as a 2, both in isolated systems. No incident of scale 3 was reported. All synchronous areas reported incidents on transmission network elements. Incidents pertaining to the power generating facilities at scale 1 occurred only in isolated systems.

ENTSO-E updated its incident classification scale methodology in 2018, so that it is compliant with the SOGL.

ENTSO-E is tasked with monitoring the implementation of the three connection codes, looking in particular at divergences in the national implementation and whether the choice of values and ranges in the requirements specified in each regulation continue to be valid (Article 76, HVDC; Article 57, DC; Article 59, RfG).

Striving for more transparency, ENTSO-E continued its efforts to monitor the national implementation processes and provide updated information regarding the status of the selected proposals for all non-exhaustive requirements throughout 2018.

To collect all relevant information necessary to monitor their implementation, ENTSO-E continued using and upgrading the so-called ‘Active library’, which compiles relevant information and documents from each country.

In 2018, ENTSO-E worked on improving the monitoring excel file – developed in 2017 – wherein all non-exhaustive requirements (values, ranges and status) are incorporated as soon as they become available. This table aims to provide a high-level view of any possible divergences among the TSOs. This activity is still ongoing and will be completed by Q3 2019 – at which point all approved proposals for all three connection codes are expected.

Monitoring the implementation of the connection codes has proven to be a challenge, due to the multiple national implementation processes. Thus, retrieving information is a continuous effort.