The fight over power networks in the EU: will national TSOs become subordinate to regional organisations?

The EU is discussing how far and how fast it can take regional cooperation among Transmission System Operators (TSOs). The European Commission and Parliament want to give entities for regional cooperation more independence and power, while Member States and TSOs want ultimate power to remain at national level. An upcoming conference on 16 October led by ENTSO-E (representing European TSOs) and Coreso (a regional entity) – and supported by Energy Post – will explore the next phase in network cooperation in the EU.

European transmission system operators (TSOs) are no strangers to cooperation: they have worked together for decades to keep Europe’s electricity system up and running. Nevertheless, there is always room for improvement. 4 November 2006 proved a turning point: on this day, a Saturday, Europe suffered a major blackout. Millions of people across the continent were left without power after what was meant to be the routine disconnection of a power line in northwest Germany.

It was in direct response to this that TSOs set up the first regional grid cooperation entities, Coreso (based in Brussels) and TSC (Munich), in 2008. They have since been joined by SCC (Belgrade, 2015), a Nordic RSC (Copenhagen, 2016) and a Baltic RSC (Tallinn, 2016).

Jean-François Gahungu, CEO of Coreso, tells Energy Post in an interview that 4 November 2006 taught TSOs two important lessons. One, there was a need for more proactive coordination – “It’s necessary to exchange some information throughout the 24-hour day” – and two, TSOs needed a regional vision of the European network.

The latter is particularly important with the push for a single European power market and the rise of renewables, Gahungu emphasised; variable renewables such as wind and solar bring new uncertainties for the grid, with consequences over the border.

Network codes: the big challenge

Coreso and its sisters were called Regional Security Coordination Initiatives (RSCIs), later simplified to Regional Security Coordinators (RSCs). Why “security”? “[Because] RSCs are contributing to the security of the grid by organising coordinated activities between TSOs,” explains Gahungu.

The European Commission loved the idea. So much so, that it decided to incorporate an operating framework for the new entities into its network codes, a series of legally binding rules to govern the operation of European power markets. The significance of this is that it transformed the RSCs from voluntary to mandatory structures, effectively requiring all TSOs to cooperate for the first time.

In theory, that’s all the Commission did – it did not set out to change the RSCs’ objectives or their organisation. In practice, Gahungu says that the biggest challenge that RSCs face today is implementing these new rules. “The big challenge for TSOs in the short-term is not the Clean Energy Package [and its power market design proposals]. It’s the implementation of the network codes.”

To really take regional cooperation to the next level requires more cooperation not only among TSOs but also between TSOs, regulators and policymakers. To this end, ENTSO-E has proposed the creation of Regional Energy Forums

There are two network codes directly relevant to RSCs: one on capacity allocation and congestion management and one on system operations. The first – the CACM guideline – sets out methods for calculating how much space market participants can use on cross-border lines without endangering system security.

The second – the SO guideline – specifies what TSOs should do in managing their grid, including making regional coordination a legal requirement. The guidelines require the development of new, regionally relevant methodologies defining coordination processes that need to be approved by regulators and then implemented. The deadline for all this is 2022.

“It’s a big challenge because the network codes really go into a lot of detail,” Gahungu says. The new rules impose a formal pan-European framework on what has until now grown in an organic way. The energy transition complicates matters. “The IT capacities and the data – even the processes to create that data – to model wind availability for example, do not necessarily exist [among the TSOs],” he explains. The enormity of the IT challenge is one reason why it has a dedicated session at the 16 October conference.

Clean Energy Package: ROCS, RSCs or RCCs?

At the same time, the EU is in the middle of negotiations on a new power market design, part of which is deciding on the next step in TSO cooperation. “This is actually the first issue we are tackling [in the market design talks],” a representative of the Austrian EU Presidency tells Energy Post. It was on the agenda of negotiators when they met on 11 September and will be again at their next meeting on 18 October.

The power market reform is part of the EU’s Clean Energy Package. Austria hopes to broker a deal on this by the end of the year.

There are two big parts to the debate over how to take regional cooperation to the next level. One is tasks – which new tasks should regional entities take on? – and the other is governance – how much of an independent authority should the regional entities become?

The #PowerCoordinationEurope conference on 16 October will explore the next phase in regional cooperation among TSOs in Europe. It is being organised by ENTSO-E and Coreso in conjunction with the Austrian EU Presidency, the Florence of Regulation and Energy Post. It is the second edition of a conference created last year to study TSO cooperation.

Keynote speakers include EU Climate and Energy Commissioner Miguel Arias Ca ñ ete as well as the President of ENTSO-E, Ben Voorhorst, and CEO of Coreso, Jean-François Gahungu. Individual sessions will delve into a day in the life of an RSC, the link between markets and operations, and potential new services, innovations and the transformative power of digitalisation. See the full programme and register here: https://www.powercoordinationeurope.eu/

On both issues, the Council of Ministers (i.e. Member States) – and TSOs – are arguing for an “evolutionary” approach. The European Commission and Parliament would like to see a more radical shift – although the Parliament too has backed away from the Commission’s more far-reaching proposals.

The Commission raised hackles with its original plans. They called for Regional Operational Centres (ROCs) to be created. The idea was reportedly that these would be bigger, better RSCs, but many interpreted it as a proposal to sideline the existing RSCs. Certainly the new acronym didn’t help, since system “operation” is really the core of what TSOs do. The ROCs proposal could have been seen as a first step towards independent regional system operators.

Instead, the Council wants to retain “RSCs” while the Parliament proposes to rename them Regional Coordination Centres (RCCs). That’s because they will cooperate on issues that that go beyond security of supply, MEPs say.

Authority vs service provider

There are two tasks where Member States feel strongly that national TSOs should retain the lead: crisis management and balancing responsibility (including both the size and procurement of balancing reserves – this is about renewables integration). On the former, Member States argue that national governments and TSOs ultimately remain responsible for security of supply. Moreover if there is a crisis, the response would be bottom-up.

Where the Council is ready to move towards MEPs is on a bigger role for regional entities in identifying additional transmission capacity needs. MEPs – like the Commission – tend to see a relatively stronger role for the RSCs across the board.

On governance, the Council rejects the notion that “the regional entity would almost be like a legal authority that gives out orders to TSOs,” in the words of the Austrian EU Presidency representative. Rather, they see TSOs and RSCs working together in a “spirit of mutual problem-solving.” What this means is that – as has been the case so far – RSCs can make suggestions but TSOs call the shots. “We recommend and the TSOs decide,” explains Gahungu.

“An RSC seeks to give the most neutral, objective advice,” he continues. “[But] we do not have the local expertise on what exactly can be done in the field. RSCs should remain advisory because TSOs have the data and the responsibility for security of supply.” The Coreso CEO concludes: “If TSOs used the full potential of RSCs as innovation incubators, definitely we could reach another level of efficiency.”

“We want to create new entities with new statutes and new decision-making procedures, that are truly independent from the national TSOs”

The Commission and Parliament take a different view: “So far, RSCs are commercial entities working as service providers to the TSOs,” explains Florent Marcellesi, the Spanish Green MEP who is part of the Parliament’s team leading work on the issue (he took over responsibility for market design after fellow Green Claude Turmes left to join Luxembourg’s government). “That’s far from the logic we’d like to see. We’d like to see them distinct from national TSOs in their governance structure. We’d like to see them issue recommendations and decisions, and those decisions would be binding over national TSOs even if not in their national interest.”

“It’s very clear that the regional entity needs to have some degree of independence from the TSO and its interests. It has to make recommendations which take into account the entire region,” the Austrian EU Presidency representative acknowledges. “But the expertise and knowledge of TSOs has to be taken into account.”

Regional Energy Forums

Whatever compromise Commission, Council and Parliament reach, the Clean Energy Package will take the institutional framework for regional cooperation to the next level. “The overall objectives and target we are moving towards are not so different,” insists the Austrian EU Presidency representative. “The difference is in the speed with which we’re approaching them.”

Both Council and Parliament are looking into the possibility of giving regional entities additional new responsibilities further down the line, to cope with ever greater levels of interconnection and renewables.

MEP Marcellesi however, insists that there is quite a fundamental difference in the current talks: “We want to create new entities with new statutes and new decision-making procedures, that are truly independent from the national TSOs. That’s the most important step change. And that’s what Council doesn’t want: it wants to keep the existing RSCs.”

TSOs argue that to really take regional cooperation to the next level requires more cooperation not only among TSOs but also between TSOs, regulators and policymakers. To this end, ENTSO-E has proposed the creation of Regional Energy Forums.

EU policymakers say they’re an interesting idea for the future, but could be a challenge to implement. Some were suspicious of the proposal’s timing, suggesting that it was meant to bury the discussion on RSCs by focusing on new structures to increase cooperation between regulators and politicians instead.

In any case, in the Clean Energy Package, the Commission has already proposed to enhance cooperation among regulators and give them more direct oversight over RSCs. In parallel, there was an attempt to increase political cooperation through a new governance regulation in the Clean Energy Package – finalised in June – but this was fiercely resisted by Member States. “What we have in the end is very loose and minimalistic,” says Marcellesi. “Member States didn’t want regional cooperation at the political level.”