Structure of presentation

2. Structure of presentation • Background • The ETSO/EuroPEX assignment • Consentec report • Implementation issues and challenges • Next steps

3. The assignment from the Florence Forum • The Forum requested ETSO and EuroPEX to write a common discussion paper to address the implementation of regional and inter-regional capacity allocation methods, in particular the governance of the bodies running the system, and to address the technical, legal and commercial challenges implied by the Consentec target model. • Other stakeholders were invited to contribute to the discussion and to take particular account of the work done by EFET so far

4. The target model by Consentec (within region) • Market coupling is the preferred solution for capacity day-ahead allocation, with explicit auctions as an alternative in cases where the prerequisites for market coupling are not yet fulfilled • Flow-based allocation on yearly, monthly, daily and, prospectively, intraday levels • Improvement of commercial conditions for physical forward transmission rights • Secondary market for transmission rights

5. Inter-regional coordination of DA allocation Region 1 Implicit auction Explicit auction Implicit auction Hierarchical coupling Merger Coordination through overlapping country Region 2 Explicit auction Coordination through overlapping country

6. ETSO/EuroPEX report • Implicit auctions for day-ahead timeframe • Options for integrating day-ahead markets • A Unified Pan-European Solution • Horizontal Integration (regions merging or extending) • Dome Coupling (pragmatic approach) • Should it be Top Down or Bottom Up? • Which capacity models? • Forward market and intraday market?

7. Middle step – coordinating explicit auctions • Requirements from the CM Guidelines  regional coordination of congestion management • Development to proceed with coordinated explicit auctions through establishing single auction platforms in various regions (CEE, CSE) • Important to implement the requirements through the projects; they should be completed ASAP • Need for coherent solutions, especially for the overlapping countries

8. Extending implicit auctions – How should day-ahead markets be integrated? • So far market splitting/coupling has been introduced to market areas where explicit auctions have previously been used (TLC, Mibel) or to couple an area applying implicit auctions with an area with explicit auctions (Nord Pool and Germany) • No practical experience of the proposed options • Horizontal integration? • Dome coupling seems to be a practical way if the PXs and their tasks need to remain as intact as possible

9. Challenges • The current legislation (Regulation and CM GL) leaves lot of freedom for practical implementation (explicit and implicit auctions in all timeframes) • What are the right market regions? Implementing implicit auctions does not allow overlapping countries as defined in the present CM Guidelines • Ensuring the compatibility of regional congestion management methods across the regions (coordinated explicit auctions and neighbouring implicit auctions) during middle step

10. Next steps • More detailed evaluation of the three options including governance and complementing the report with analysis on forward markets, intraday and balancing • Top Down and Bottom Up: division of issues into two groups: those requiring Top Down approach and those that can be left to regional subsidiarity subject to European compatibility • A roadmap showing steps for integrating day-ahead markets and regions (e.g. on the basis of cost-benefit analysis on extending implicit auctions)

11. Thank You