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Reserve sharing and energy market coupling create opportunities to improve the performance of electricity markets by providing cost-efficient options for trading reserves, increasing liquidity and competition in the energy market, and ensuring long-term reliability and transparency to attract investments. For these reasons and more, they have great potential benefits in the Europe and Eurasia (E&E) region to improve regional cooperation and increase trade volumes.
With this in mind, the National Regulatory Authorities (NRAs) of the E&E region are actively working to improve the performance of electricity markets. As most of these countries are contracting parties to the Energy Community, their transmission system operators (TSOs) are obliged to regularly assess long-term generation adequacy and prepare long-term network development plans in each individual country in line with the applicable rules set out by the European Union (EU). The NRAs have the responsibility to monitor this process, and, in most cases, review and approve the corresponding plans or assessments. The NRAs are also involved in promoting the development of functioning electricity markets and the regional integration of national markets.
While the benefits of market coupling are clear, moving forward with the process can be technically challenging. It is therefore paramount that NRAs, TSOs, and other industry stakeholders have an open dialogue, and that NRAs must be able to critically review and assess the long-term development plans put forward by TSOs and other network operators. Similarly, NRAs must have a robust understanding of the benefits and challenges that market coupling can bring.
With the support of the United States Agency for International Development (USAID), NARUC launched an electricity market performance initiative in 2020 to assist NRAs in transitioning to the formation of competitive and transparent markets. At the time of the launch, the initiative focused on helping participating NRAs recognize the value proposition of implementing different market coupling scenarios and advocate for its benefits to decision-makers as well as to the public at large. Currently, NARUC activities under the initiative are designed to empower NRAs to create or improve electricity wholesale market designs, identify market performance parameters and gaps in market formation/evolution, and seek ways to safeguard market participants’ interests and increase their knowledge in the benefits of competitive markets.
Southeast Europe Electricity Market Coupling (SEE-MC) Initiative
Under the USAID SEE-MC Initiative, NARUC is partnering with the Greek Regulatory Authority for Energy (RAE) and will initially focus on Albania, Kosovo, and North Macedonia by improving their readiness to couple energy markets with their neighbors and advancing internal market development and operations. SEE-MC will also support these countries in establishing collaboration and commitment among government officials, NRAs, power exchanges (PXs), and system operators to achieve this objective. In 2022, NARUC conducted a workshop with the representatives of NRAs from the three countries as well as the Greek TSO (IPTO) and PX (EnEx) to initiate targeted dialogue, enhance cooperation, and promote information sharing among stakeholders.
Market Transparency
Market transparency plays an essential role in ensuring that markets are fair, competitive, and properly functioning. In 2021, NARUC held a regional activity on market transparency and establishing transparency platforms. As NRAs are seeking closer integration with the EU and closer coordination with the European Network of Transmission System Operators for Electricity (ENTSO-E), discussions revolved heavily around the EU’s Transparency Regulation (Regulation No 1227/2011) and Regulation on Wholesale Energy Market Integrity and Transparency (Regulation No 543/2013). By prohibiting any trading based on inside information and deterring market manipulation, the Transparency Regulation helps to promote increased market transparency and integrity.[1]
Meanwhile, the Regulation on Wholesale Energy Market Integrity and Transparency lays down the minimum common set of data relating to the generation, transportation, and consumption of electricity that is available to market participants.[2] As E&E countries are moving toward transposing REMIT and the EU Transparency Regulation to their own distinct contexts, the 2021 activity gave participants an opportunity to learn about practical ways of implementing EU regulations by examining the scope and objectives of market transparency and which data platform structures are relevant.
Conducting Dry Runs
A dry run process is an important step prior to market launch to ensure that all parties are prepared and properly equipped for their role in the new market system. It allows regulators to test both market design and market participants’ understanding and ability of the system without compromising its overall financial wellbeing. In 2021, NARUC held an activity on the regulator’s role in designing and implementing an effective dry run process. It outlined an overview of the dry run process as well as its purpose and importance with the objective of equipping NRAs with the necessary knowledge to understand, govern, and supervise an effective dry run process.
During the activity, the Georgian National Energy and Water Regulatory Commission (GNERC) shared its experiences conducting a dry run with the Armenian Public Services Regulatory Commission (PSRC), which had just begun conducting its own. Through this discussion, the PSRC learned about the data and platforms GNERC has access to and how it is involved in the overall process, which helped to inform the PSRC’s approach. Subsequently, to further benefit E&E NRAs, in 2022 NARUC developed the Electricity Market Development: Dry Run Process Model for Energy Regulators. This publication provides best practices and recommendations on timing and key issues to be considered prior to initiating live operations of a new market structure as well as guidelines on how to evaluate different available options throughout the dry run process.
Market Analysis Tools
In 2020, NARUC conducted an online workshop and a training series focused on market coupling, reserve sharing, and load flow analyses. Through feedback received during these activities, NARUC developed two deliverables, each of which are described below.
Focused on load flow simulations for transmission planning and market analysis, this publication covers the basic rationale, structure and features of load flow tools, as well as input data requirements, interpretation and assessment of results, and the role of the regulator throughout the process. It also equips regulators with an understanding of how load flow studies fit into the overall structure of transmission planning and market analysis.
Market simulations can be conducted for different purposes, including generation expansion planning and simulating the daily operation of electricity markets, generation dispatch, and cross-border exchanges. However, their review and assessment require regulatory staff to be able to understand the principles, drivers, and functioning of market simulation models as well as their limitations. This publication covers the fundamentals and common tools available for market simulations, input data requirements, scenario development and analysis, and interpreting and assessing results.
Developing Competitive and Integrated Energy Markets
In 2020, NARUC provided GNERC/Georgia with targeted support based on its needs related to further developing competitive and integrated markets by holding a series of trainings with representatives from GNERC and Georgian energy sector stakeholders on a variety of market-related topics, including price caps, market transparency, and collateral management. As a result, GNERC reported reevaluating and updating price caps for day-ahead markets, updating collateral management for day-ahead and balancing markets, and drafting bilateral market rules. Similarly, in 2021 NARUC conducted a series of trainings with the PSRC/Armenia to discuss bilateral/over-the-counter markets, imbalance pricing, and market transparency. This knowledge transfer helped to inform the PSRC as it finalized new market rules and prepared for partial live market operations that took place in 2022.
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Photo Credit: © peshkov / Adobe Stock
Project Dates: 2020- Present
Primary Partners:
The Energy Regulatory Commission of the Republic of North Macedonia
National Energy and Utilities Regulatory Commission of Ukraine
State Electricity Regulatory Commission in Federation of Bosnia and Herzegovina
Energy Regulatory Authority of Albania
The National Agency for Energy Regulation of the Republic of Moldova
Kosovo’s Energy Regulatory Office
Georgian National Energy and Water Supply Regulatory Commission
Regulatory Commission for Energy in Federation of Bosnia and Herzegovina
Armenian Public Services Regulatory Commission
Regulatory Commission for Energy of Republika Srpska in Federation of Bosnia and Herzegovina
The Energy and Water Regulatory Authority of Montenegro
[1] “About REMIT.” ACER. https://www.acer.europa.eu/remit/about-remit
[2] “COMMISSION REGULATION (EU) No 543/2013 of 14 June 2013COMMISSION REGULATION (EU) No 543/2013 of 14 June 2013.” Official Journal of the European Union. https://eurlex.europa.eu/LexUriServ/LexUriServ.douri=OJ:L:2013:163:0001:0012:EN:PDF#:~:text=This%20Regulation%20lays%20down%20the,and%20publication%20of%20the%20data.