ENTSO-E mulls electricity bidding zone splits in France and Poland

A potential split of the single power price zones in France and Poland is being studied as part of a review of bidding areas across the EU, ICIS understands.

The bidding zone review being carried out by the European Network of Transmission System Operators for Electricity (ENTSO-E) includes a “big countries split scenario”, under which the pros and cons of splitting both France and Poland is being considered, as well as a split of the joint Germany-Austria zone.

Much of the market’s focus has been on the question of the Germany-Austria split, which has been proposed by the Agency for the Cooperation for Energy Regulators (ACER) (see EDEM 3 April 2017) and seems certain to go ahead.

However it has been confirmed to ICIS that ENTSO-E is also looking at whether it would make sense to split two more of Europe’s largest price zones.

The potential for smaller countries’ zones to merge is also being studied.

As part of its review, ENTSO-E has involved stakeholders, which have been informed of the different scenarios under study, the group said.

A final report could be published as soon as this September, although the official deadline is March 2018.

Enforcement

ENTSO-E cannot enforce its own recommendations. Instead if it considered that a reconfiguration of bidding zones would improve the functioning of the energy market, this would feed into policy maker’s and regulator’s decisions.

There is a lack of legislative clarity in the relationship between ENSTO-E and ACER in this matter, which has led to calls for decision making to fall within the remit of the European Commission, according to the commission’s head of wholesale electricity markets Florian Ermacora (see EDEM 3 April 2017).

The process of reviewing bidding zone borders is laid out in the network code on capacity allocation and congestion management, which came into force in 2015. The code says bidding zones can be “modified by splitting, merging or adjusting the zone borders” to ensure “more efficient bidding zone delineation”.

Implementation issues

Any recommendation on ENTSO-E’s part to break up the existing French or Polish bidding zones would be highly controversial.

ACER’s proposal to break the single German-Austrian area has been fiercely contested by Austria but is expected to go ahead if backed by ENTSO-E (see ICIS briefing on the potential German-Austria split).

The European Energy Exchange (EEX) has also defended the existing zone which is important to its operations. However on Tuesday EEX moved to protect its position in the German futures market with the launch of electricity derivatives for a single bidding zone covering Germany alone (see separate story).

Germany’s eastern neighbours have called for the single bidding zone with Austria to be split to ease loop flows of electricity which congest the networks of Poland and the Czech Republic.

Loop flows have occurred because of a mismatch in Germany between strong renewable supply in the north and the demand-heavy industrial south, and a lack of transmission capacity linking the two.

Mismatch?

Similar mismatches could be expected in any large country as more renewable power is built, because the infrastructure is positioned where resources are best and, generally, where populations are less dense.

So the logic that looks set to split the German-Austrian single zone could be applied to Poland or France – both large countries with coastal resources suitable for large-scale renewable power production.

However liquidity in Poland is considerably lower than in Germany, so a split market could suffer more from the resulting division of traded products.

And in the case of France any split seems unlikely in light of the evolving situation with the country’s gas market. France is separated into two gas hubs: the northern PEG Nord area, and the southern TRS zone. But the two are due to merge by November 2018, so forcing through a split of the existing single power market into two, and preventing power and gas market designs from being compatible with each other just as they are about to become compatible, would make little sense. jon.stibbs@icis.com