EFET calls for active TSO role in selling forward electricity capacity

European grid operators should become more active participants in the forward capacity markets to boost liquidity in the wholesale electricity markets, Europe’s largest energy trading association EFET said on Tuesday.

The sentiment chimes with concerns from traders across centralwest Europe that the flow-based market coupling (FBMC) model for trading cross-border electricity in the day-ahead market is too complex and sometimes provides counter-intuitive results due to changes in the grid model by transmission system operators (TSOs).

EFET wants grid operators to look beyond the day-ahead market and provide more transparency on expected weekly, monthly and yearly available cross-border capacity products.

“The TSOs should take a step further ahead to provide information on available cross-border capacity and sell [long-term transmission contracts] on a forward basis,” said Peter Styles, the chair of the trading association’s electricity committee at the industry event EMART in Amsterdam.

“If the grid operators feel they have miscalculated, in each case they can buy back capacity on the secondary market,” he added.

Conservatism

EFET acknowledged it was difficult to get grid operators to listen, and highlighted conservatism and internal disagreement within the TSOs as well as a lack of permission from national energy regulators as barriers to progress.

“We never see reverse capacity, they [the TSOs] only talk about curtailment,” said Styles.

He added: “Most energy regulators haven’t given permission [to the TSOs] to do it…they should be given the commercial right to it. Regulators should help them”.

Scarcity

The European Commission published in September 2016 a framework for long-term transmission rights, called the Guideline on the Forward Capacity Allocation (FCA) electricity network code.

This opens the door to TSOs to sell forward capacity between borders via explicit auctions.

EFET said it had been in dialogue with national grid operators and ENTSO-E for years about this issue, but said there was currently no change in perception.

Most recently, the Estonian and Latvian energy regulators said there was no need for issuing long-term transmission contracts (click here to read story).

Secretary general Laurent Schmitt at ENTSO-E said on Tuesday at the same industry event that he wanted an open dialogue on what is the future of capacity pricing in grids given what he called the scarcity situation.

But he added that markets participants should not ignore the complexity of ensuring security of supply. herman.moestue@icis.com