At the end of January 2020, the European Network of Transmission System Operators for Electricity, ENTSO-E, opened a public consultation to solicit comments on its proposed methodologies associated with cross-border participation in capacity mechanisms. ENTSO-E is developing the methodologies in response to the requirement set out in the EU regulation on the internal market for electricity to “enable direct cross-border participation of capacity providers located in Member States which are electrical neighbours.”

The Regulatory Assistance Project provided feedback within the consultation process for the first two methodologies on: i) estimating the maximum entry capacity for cross-border participation and ii) for sharing cross-border revenues in capacity mechanisms. We have identified significant gaps in the two methodologies that allow for considerable, subjective interpretation by Member States. We encourage ENTSO-E, therefore, to address them and conduct another public consultation prior to submitting their final proposal to the Agency for the Cooperation of Energy Regulators by July 2020.

Our recommendations focus, among other aspects, on ensuring that:

• The methodology appropriately defines system stress periods when assessing the maximum energy capacity.
• The methodologies ensure a balanced approach for calculating the expected technical and commercial availability of interconnectors.
• The methodology for sharing cross-border revenues does not create unfair competition between domestic and foreign resources and that TSOs are not compensated twice for interconnection capacity through the energy and capacity markets.
• Any transition period for the implementation of the methodologies is consistent with the Clean Energy for All Europeans package. Any delays need to be thoroughly explained and justified, and consulted upon with stakeholders.

With thoughtful and thorough refinement, the methodologies can achieve the desired objective of securing supply at least cost to consumers.