Magnus Energy Insights

Our November edition is here, and our experts shed some light on the European energy landscape, touching upon the latest developments in European Capacity Calculation Methodologies and changing hedging opportunities at the bidding zone border between The Netherlands and Norway. Plus, we talked to Glenn Janssen, who will be heading the Ciratum team.

Between a fjord and a hard place

by Tom van Oosterhout

At the bidding zone border (BZB) between the Netherlands and Norway, the National Regulatory Authority (NRA) of the Netherlands requested guidance from ACER (the European Agency for the Cooperation of Energy Regulators, ed.) on addressing the limited risk hedging opportunities. What does risk hedging involve? And what happens next? Let’s find out.

What does risk hedging involve?

Risk hedging allows businesses to reduce their exposure to price volatility. In cross-border energy trades, there are unpredictable price fluctuations between Bidding Zones. Long-Term Transmission Rights (LTTRs) are options issued by TSOs to market participants as a means of securing prices or favourable payment terms to mitigate such price shifts. This helps stabilise revenues and supports future investment planning.

LTTRs are divided into two categories:

1. Physical Transmission Rights (PTRs) - These grant holders the physical right to use a specific volume of cross-border transmission capacity, i.e. they can actually ship electricity between Bidding Zones over a designated period.

2. Financial Transmission Rights (FTRs) - These do not guarantee physical access to the transmission line but offer financial compensation based on congestion prices, which reflect the price differences between Bidding Zones. FTR holders are paid the difference in market prices between two zones, serving as a financial instrument to hedge against price volatility and limited cross-zonal capacity.

The case in question: The Netherlands & Norway

Assessments by the Dutch and Norwegian NRAs identified insufficient hedging opportunities at the BZB between the two countries. Their respective NRAs subsequently had the option to either request their TSO to issue LTTRs or to ensure the availability of other long-term cross-zonal hedging products (such as Electricity Price Area Differentials – EPADs). However, the NRAs could not reach an agreement. As a result, the matter was escalated to ACER and the EFTA (European Free Trade Association) Surveillance Authority—a separate authority ensuring alignment between the regulation of EEA countries not in the EU (such as Norway) and EU energy standards.

What’s next?

To support its decision, ACER will conduct a public consultation—a formal process to gather feedback from relevant stakeholders—until 22 November 2024. ACER will decide on behalf of the Dutch NRA by 17 February 2025, while the EFTA Surveillance Authority will decide for Norway.

A similar issue arose at the Finland-Sweden BZB. In that case, ACER directed the respective TSOs to submit proposals for EPAD coupling to their NRAs. EPAD coupling involves allocating cross-zonal capacity between relevant bidding zones by matching hedging demand and supply. Rather than focusing on price differences between two BZs, Nordic BZ prices are compared to a reference system price. More details about EPADs are available on the Nord Pool website.

If you want to know more

• Read the public notice from ACER [ACER]

• Take a look at the EFTA agreement in the EEA [EFTA]

• Go back in time to a similar case between Finland and Sweden in 2022 [ACER]

• For more details on LTTRs [EUETS]

Central Europe Day-Ahead Capacity Calculation Methodology under consultation

by Iacopo Bertelli

On 17 October 2024, the public consultation on the Day-Ahead Capacity Calculation methodology for the newly formed Central Europe Capacity Calculation Region (CCR) was launched. What is the Central Europe CCR again? Why is another CCR being formed? And what does the public consultation process entail? Let’s bring some clarity!

What’s going on?

On 19 March 2024, ACER approved the all-TSO amendment for the determination of CCRs, defining the new Central Europe CCR as the merger of Core CCR (including Ireland) and Italy North CCR (ACER Decision 04/2024). This means that, over time, Central Europe (CE) will replace the Core and Italy North CCRs.

Why? Northern Italy and Switzerland have grids that are meshed and strongly interconnected with their neighbours. Including their grids in the flow-based calculation taking place in Core should make cross-zonal capacity calculation and allocation much more efficient. As Switzerland is not officially part of the Central Europe CCR, how will it participate in the capacity calculation process? You can read all about it the capacity calculation methodology.

Some important background

The ACER decision specified that the CE CCR is established only for the day-ahead timeframe. Why? While the Core and Italy North (IN) CCRs have live capacity calculation processes for the day ahead, Core is still implementing its intraday capacity calculation (IDCC) processes. IDCC (a)-(b) went live in June 2024, while IDCC (c)-(d) are expected in 2025/26. Attempting to merge processes while they go live did not seem a good idea!

The Capacity Allocation and Congestion Management (CACM – Article 20) guideline requires TSOs of each CCR to submit a proposal for a capacity calculation methodology no later than 10 months after the determination of a CCR. This sets the submission deadline to 19 January 2025.

The public consultation

CACM Article 12 mandates a public consultation (PC) whenever TSOs submit proposals for Terms and Conditions or Methodologies (TCMs). Stakeholders, including NRAs, must be consulted, and the PC must last “not less than one month.” Working backwards from the January 2025 submission deadline, it was essential to start the PC in October to allow sufficient time to finalise the Capacity Calculation Methodology (CCM) after incorporating feedback from stakeholders.

What’s next?

The public consultation closed on 17 November. The clock is now ticking for Central Europe CCR TSOs to submit the final version of the CCM by 19 January 2025.

Want to further into capacity calculation methods?

Check out our academy services here:

Glenn Janssen on joining Magnus Energy and the Ciratum team

This month, we welcomed Glenn Janssen, an experienced consultant and programme manager in the energy transition sector. Glenn will lead the Ciratum team following Magnus Energy’s recent acquisition of the company. Let’s find out more about him and his plans.

Glenn, could you share a bit about your background?

After graduating as an industrial engineer from the Technical University of Eindhoven, I began my consulting career at Accenture in 2006 and later joined Valcon in 2021. My main focus has always been projects at the intersection of business and IT. I’ve worked on numerous projects within the energy sector.

What are your expectations for leading the recently joined Ciratum team?

I'm eager to continue to grow, enjoy our work, and succeed as a team. I aim to further guide our growth trajectory while also managing the collaboration between Ciratum and Magnus Energy. There are many exciting opportunities ahead of us!

What can clients expect from you?

I’m passionate about working alongside our clients every day to help them achieve their goals. The collaboration between Ciratum and Magnus Energy brings together our joint expertise and skills, enabling us to deliver even greater value.

How have you found your first month with the company?

I have been warmly welcomed by the team and have already had the chance to spend time with many of my colleagues. At the moment, we are developing our plans for the coming years on how we can best provide value to our clients and further develop our team. We’ve already had our first success, serving one of our clients through a joint project team of Ciratum and Magnus Energy colleagues.

Join our team

The Magnus Energy team is a mixed team with high ambitions. We work on large international projects. Do you want to be part of our top-notch team? Check out our vacancies here.

Please subscribe and join us for our next newsletter!

All the best,

The team of Magnus Energy