ResponsetotheENTSO-Econsultationon “FCRcooperation”potentialmarketdesign evolutions
10February2017
Lange Houtstraat 2
T +31 (0)70 311 43 50
KvK Den Haag 50816179
2511 CW Den Haag
W energie-nederland.nl
IBAN 56 ABNA 060 7444010
Introduction
ThisdocumentgivetheresponseofEnergie-NederlandtothePublicconsultationon“FCR
cooperation”potentialmarketdesignevolutionsissuedbyENTSO-Eon2January2017.EnergieNederlandrepresentsthecommercialplayersintheDutchpower,gasandheatmarket.
Generalquestionstostakeholders
1.CouldyoubrieflypresentyourcompanyorassociationanditsinvolvementintheFCRmarket
Energie-NederlandistheassociationofcommercialenergycompaniesintheNetherlands.We
representcompaniesthathaveapower,gasand/orheatpositionintheDutchmarketinthe
completevaluechainfromretailtogeneration.
2.Doyouhavesomegeneralcommentsonthispublicconsultation?
No
3.Doyouhavesomecommentsregardingtheconsultationprocess?
Consultationthroughawebinterfaceisdifficultforassociationsastheyhavetoconsolidateview
ofallmembers.Italsounclearhowtheinputofassociationsistreatedincomparisonof
individualcompanies.
Questionstostakeholdersregardingauctionfrequencyandtiming
4.Doyoupreferchangingtheauctionfrequencyorkeepingtheweeklyauction?–Pleaseexplain
youranswer.
Energie-Nederlandprefersweeklyauctionsfornow.Theweeklyauctionsprovideagoodbalance
betweentherequiredbiddingprocessatthesideofmarketparticipantsandtheabilityfora
broadnumberofmarketparticipantstoparticipate.Anincreaseinauctionfrequencytowards
dailyauctionswouldimplyasignificantincreaseintheoperationalburden.Inalaterstage,when
theothermeasuresaredeemedinsufficient,themarkethasgainedmoreexperiencewiththe
commonauctionsintheFCRcooperationandinlinewiththeprocurementfrequencyofother
balancingprocesses,anincreaseinauctionfrequencycouldbeconsidered.Shortertermauctions
mayallowmoreparticipantsinthemarket,thuspromotingcompetition.
5.Ifyouprefertoincreasetheauctionfrequency,whatfrequencywouldyouprefer:dailyalldays,
dailyworkingdaysonly,other...?–Pleaseexplainyouranswer
Iftheauctionfrequencywouldbeincreased,wepreferdailyauctions.Inourviewthiswouldbe
themostefficient.Increasingthefrequencyfurtherwouldincreasetheeffortstopreparethe
bidsandcouldhaveadetrimentaleffectontheoverallefficiency.
6.Doyoupreferashortleadtime(GCTD-1orD-2)oralongleadtime(GCTD-3uptoD-6)?–
Pleaseexplainyouranswer
WeareinfavourofcontinuingthecurrentleadtimeoforganizingtheauctionsonTuesday
beforethedeliveryweek.AnimportantelementtokeepinconsiderationisthattheregionalFCR
auctiontakesplaceafterpotentiallocalauctionssuchasinTheNetherlands.Ifdailyauctions
wouldbeimplemented,wepreferthattheytakeplaceintheday-ahead,beforetheenergy
marketauctions.
7.InwhichcasewouldtherebebenefitsofhavingarelativelongperiodbetweentheGOTandthe
GCT?–Pleasedetailyouranswer
Wedonotseeanyadvantageinalongerperiod.Seeanswer6.
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8.Whataretherelevantinterdependencieswithothermarkets?Whatwouldbethecorrect
sequenceaccordingtoyou?–Pleaseexplainyouranswer
BSPsshouldhaveenoughtimebetweenauctionstotakeintoaccounttheresultsoftheprevious
auction/marketinpreparingforthenext.Anysimultaneousauctionswithotherbalancing
capacityproductsshouldalwaysbeavoided,asitdoesnotallowtotakeintoaccountthe
outcomeoftheotherauctions.Theonlywaytodosowouldbebyimplementinglinkedbids
betweendifferentproducts,whichwouldmaketheauctionssignificantlymorecomplex.
Withthecurrentpracticeofweeklyauctions,theinterdependencywiththeenergymarketisless
relevant.However,ifthedecisionwouldbetakentogotowardsdailyauctions,the
interdependencywiththeDay-aheadmarketbecomesalsoofimportance.Inthatcase,the
auctionoutcomeneedstobepublishedbeforethegateclosuretimeoftheDay-aheadmarket.
Questionstostakeholdersregardingproductduration
9.Whatproductdurationdoyouprefer:weekly,weeklypeak-offpeak,day(24h),4hours,1hour,
other?-Pleaseexplainyouranswer
Thereisaneedtomovetowardsamoregranularproductdurationsoastoallowmoretypesof
assetsorportfoliostoparticipatetotheauction.Agooddifferentiationwouldbebetweenapeak
andoff-peakproductastheyallowdifferenttypesofassetstoparticipatetotheFCRmarket.
Veryshortdurationscouldbesuboptimalbecauseoftheincreasingeffortsitwouldtaketo
preparemanysmallerbids.
10.Ifashorterproductdurationwouldbeimplemented,wouldlinkingofbidsintimeorhaving
multipleproductsbeanimportantfeatureordoyouconsiderthatonlyindependentauctions
shouldbeimplemented?Forwhichproductdurationdoestheintroductionoflinkedbidsintime
makesensetoyou?–Pleaseexplainyouranswer
Linkingofbidsincreasesthecomplexityandthereforthecoststopreparebids.Withasimpleand
transparentprocessBSPscantaketheeffectsofotherauctionsintoaccount.Thereforwethink
thatlinkingofbids/auctionswillbelessefficient.Transparencyoftheauctionoutcomewillalso
decrease.However,Incaseofshorterproductdurationslike4-hourlyblocksorhourlyblocks,the
abilitytolinkintimebecomesincreasinglyimportantandshouldbefurtherassessed.
Questionstostakeholdersregardingindivisible/divisiblebids
11.Doyoupreferdivisiblebidsonlyordivisibleandindivisiblebids?–Pleaseexplainyouranswer
Energie-Nederlandmembershaveadifferentpreferencefordivisibleandindivisiblebids.
Indivisiblebidsareeasiertoprice,buttheissuewithindivisiblebidsisifthemarginalbidusonly
usedpartly.AsthemarketoftheFCRcooperationisfarlargerthananynationalmarket,therisk
ofbeingthemarginalbidissufficientlylimitedastobeacceptable.Moreover,theclearchoice
foronlydivisiblebidscouldalsoresolvethecurrentissueofmarketdecouplingbetween
GermanyandSwitzerlandincaseanindivisiblebidisthemarginalbid.
Ontheotherhand,theissuewiththemarginalbidscouldalsobesolvedbythecontracting
practiceoftheTSOs.InsteadofcontractinganexactamountTSOscouldalsochoosetocontract
thecheapestamountmeetingtheminimumamountofreserves.IftheTSOneedse.g.300MW
theTSOcouldalsochoosetocontractmore(e.g.320MW)thatwouldleadtoahighervolume
(e.g.320MW).TSOshouldbemoreflexibleinprocuringthecheapestbids.
Fromamarketperspectiveacombinationofbothindivisibleanddivisiblebidswouldbepossible.
Wethereforeproposeasystembasedonsuchacombination.
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12.Incaseindivisiblebidsareintroduced,whatshouldbethemaximumbidsize?-Pleaseexplain
youranswer
Incaseofindivisiblebidsinthesystem,themaximumbidsizeshouldnotbesmallerthanwhat
reasonablycouldbedeliveredfromoneproductionunit.Ifnot,thereasonforindivisiblebids
(abilitytosplitmustruncostsofproductionunitsoveralargerdeliveryvolumeofFCR)would
disappear.
QuestionstostakeholdersregardingExclusiveOffers
13.Shouldexclusiveoffersbeallowedornotallowedinthewholecooperation?–Pleaseexplain
youranswer
Exclusivebidsincreasecomplexityandthereforthecoststopreparebids.Withasimpleand
transparentauctioningprocessBSP’scantaketheseeffectsintoaccount.Seealsoanswer10.
Ifhoweveralsoindivisiblebidswouldbeallowed,itcouldbeofbenefittomarketparticipantsto
allowexclusiveoffers.
Questionstostakeholdersregardingsymmetricandasymmetricbids
14.Doyouprefersymmetricbids,asymmetricbidsorthepossibilityforhavingboth?–Please
explainyouranswer
Theenergycomponentshouldberemuneratedinonewayortheother.Ifnotremunerated
explicitly,themostimportantisthattheBSPshouldbeisabletotaketheenergycomponentinto
accountinthepricingofthebid.Energie-Nederlandisnotopposedtoacombinationof
symmetricandasymmetricbids.Weseethatasymmetricbidsontheonehandattractsnew
players,butontheotherhandincreasescomplexity
15.Ifasymmetricbidsarepreferred,shouldthesebeprocuredinseparateauctionsforupward
anddownwardFCRorinoneauctionforbothupward-anddownwardFCR,possiblytogetherwith
symmetricproducts?
Themainprincipleshouldbe:‘keepitsimpleandtransparent’.Sowedonotsupportseparate
auctions.
16.Incaseofseparateauctions-whichauctionshouldbecarriedoutfirst?Orshouldboth
auctionstakeplacesimultaneously?
Themainprincipleshouldbe:‘keepitsimpleandtransparent’.Seeanswer15.
17.Ifasymmetricbidsareintroduced,wouldtheintroductionofenergyremunerationand/orBRP
imbalanceadjustmentbenecessary?
Theenergycomponentshouldberemuneratedinonewayortheother.Ifnotremunerated
explicitly,themostimportantisthattheBSPshouldbeisabletotaketheenergycomponentinto
accountinthepricingofthebid.
Questiontostakeholdersregardingbidsizeandpooling
18.Is1MWminimumbidsizesufficientorwouldalowerbidsizefacilitateyourparticipation?
1MWisalreadyasmallamount.Evenifshorterdurationsareintroducedweprefertokeepthe1
MWminimumbidsize.
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Questionstostakeholdersregardingbiddesign
19.Ifonlyoneofthefollowingthreeoptionswouldbepossible–indivisiblebidscombinedwith
divisiblebids,symmetricbidscombinedwithasymmetricbids,andlinkingbidsintime–what
wouldbemostimportant?
Themostimportantistoallowforthecombinationofsymmetric+asymmetric,sincethe
differenceisrelatedtotechnicalaspects.Theotheroptionshaveonlyeconomicalaspectsthat
canbetakenintoaccountbytheBSPwhenpreparingthebids.
Questiontostakeholdersregardingauctionallocationalgorithm
20.Howdoyouseethepossibilitytocreatedifferentbidstructurecomparedtotheneedfor
easilyunderstandableresults?
Themainprincipleshouldbe:‘keepitsimpleandtransparent’.Seeanswer15.
21.Pleaserankthethreeoptionsindecreasingpreferenceorder–Pleaseexplainyourorder
preference.
Wepreferthebasicpricerankinginoption1:simpleandtransparent,butwedonotseethe
issuewithindivisiblebids(seeanswertoquestion11).Rankingcannotbegiveninthatrespect.
Questionstostakeholdersregardingcrossbordertransferofcapacityobligation
22.Iscrossbordertransferofcapacityobligationanimportantfeature?–Pleaseexplainyour
answer
Ingeneral,XBtradeisveryimportantandforFCRthisisrelativelyeasy.Crossbordercapacityis
notanissuesincethereisalreadyareservationintheTransmissionReserveMargin(TRM)for
FCR.WedonotunderstandtheissuewiththecontrollersettingsforeachTSOwhentheproduct
isharmonizedweexpectthecontrollersettingstobeharmonizedaswell.
23.IncaseyouthinkXBtransferofcapacityobligationisanimportantfeature,doyouthinkits
relevancedecreaseswhenauctionfrequencyincreasesandwhenproductdurationdecreases?Is
thereaspecificbreakpointintermsorauctionfrequencyorproductdurationwhereitwouldnot
bethatimportantanymore?–Pleaseexplainyouranswer
Areductioninproductdurationwouldindeedtheoreticallydecreasesomewhataneedforthe
transferofcapacityobligationsastheperiod–andthustherisk–tobecoveredisreduced.
However,thebenefitoftheabilitytotransferremainspresentinalmostalltime-horizonsasit
stillcontinuestodecreasetherisksforBSPsandallowsforeconomicre-optimization,
irrespectiveoftheproductduration.Assuch,wedonotseeaspecificbreakingpointwherethe
cross-bordertransferofcapacityobligationswouldberedundant.
24.Incaseofimplementationwouldyousupportasimplemechanismsuchasfirstcomefirst
served?–Pleaseexplainyouranswer
Seeanswer22:Energie-Nederlanddoesnotseeacrossbordercapacityallocationissue.Thefirst
comefirstservedprinciplewouldbeanacceptablestartingpointforthecross-bordertransferof
obligations,asitissimpleandeasytoimplement.Anevaluationofthemechanismandpossible
alternativescouldbeperformedaftersomeexperienceofsuchtransfersisgained.
25.Incaseofimplementationcouldyoupleasecommentontheexampleproposalmade?
Theproposalcouldwork.
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QuestiontostakeholdersregardingTSO-BSPsettlement
26.Doyoupreferpay-as-bidormarginalpricing?–Pleaseexplainyouranswer.
Weprefermarginalpricing,sinceitislesssensitivetostrategicbehavior.Marginalpricingalso
givesbetterincentivestonewentrants,becausepay-as-bidcalculationaremorecomplexfor
newinnovativetechnologies.
Questionstostakeholdersregardingthelevelplayingfieldandthelevelofharmonisationof
thenationalmarketrules
27.AreyousatisfiedwiththedegreeofharmonisationofthecommonFCRmarket(satisfied,
mixed,notsatisfied)?-Pleaseexplainyouranswer.
Notsatisfiedyet:onthecommonFCRmarketweseeroomforimprovement(seeanswer28),
andthelevelplayingfieldisalsoinfluencedbydifferencesonothermarkets(intra-day,different
balancingrules,etc.).
28.Doyouconsideranyoftheexistingdifferencesascriticalconcerninglevelplayingfield?Ifyes,
pleaselistthemostcriticaldifferencesfromyourpointofviewandgiveanexplanationwhythisis
relevantconcerninglevelplayingfield.
Anydifferenceincontracts,pre-qualificationrequirementsandmonitoringresultindifferentrisk
profiles.Alsothedifferencesinpenaltyregime(TenneT=10xElia),EnergyAvailability
Requirementsandbackuprulesareobstaclesforareallevelplayingfield.Differentriskprofiles
leadtodifferentbidding.TSOsshouldnotincreasetheircooperationwithoutharmonizingthese
differencesfirst.
29.Pleaselistandsortthe3mostimportantmarketrulesharmonization(asdescribedinchapter
7oftheconsultationdocument)prioritiesforyourcompany
Thepriorityissuesforharmonizationare:
- thesplitofthecurrentproductintotwoproducts(apeakandanoff-peakone);
- thechangeofthecurrentPay-as-bidsettlementtoPay-as-Cleared;and
- thecrossbordertransferofcapacityobligationbetweenBSPs.
30.Couldyoulistandsortthe3mostimportanttopicsthatshouldbeaddressedforyour
company
ConceptuallyEnergie-NederlandhasthefollowingprioritiesregardingintegrationoftheFCR
market:
1. HarmonisationofallaspectsoftheFCRmarketisthemostimportantaspectofthe
integrationofthismarketinordertocreateatruelevelplayingfield.
2. Efficiencyshouldbethekeyfactor.ThatdoesnotmeanthatthecostsforTSOsarethe
lowest,butthatthetotalcostsforsociety(includingthecostsforBSPsandBRPs)arethe
lowest
3. theauctioningsystemshouldsimpleandtheoutcomeshouldbetransparent,
understandableandpredictableformarketpartiesinordertoprovideeasyaccesstothat
market
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31.DoyouhaveanyothercommentsregardingFCR?
TheFCRcooperationofAustria,Belgium,Germany,SwitzerlandandtheNetherlandshas
providedmanyexperiencesthatshouldbetakenintoaccount.Ingeneralthecooperationhas
proventobeasuccessandshowstheimportanceofharmonisingevensmallerdifferencesinthe
differentcountries.
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