The European Target Model
With the aim of the integration of the European Markets, the Agency for the Cooperation of Energy Regulators (ACER) has proposed the single European market model, known also as the Target Model. The Target Model achieves optimisation in the use of the Transmission System capacity through coordinated practices by System Operators, achieving reliable prices and liquidity in the allocation of the capacity of interconnections for the day-ahead market, the efficient operation of the forward markets and the efficient design of the intraday markets for the allocation of the capacity of interconnections.
The European model is based on the Framework Guidelines issued by ACER and the Network Codes issued by the European Network of Transmission System Operators for Electricity (ENTSO-E) and are approved by the European Commission, with the purpose of having harmonised rules in place for cross-border electricity exchanges and for the operation of the wholesale electricity markets.
The five key characteristics of the European Model, in the electricity market’s time frame are:
- Capacity calculation methodology: The Target Model gives National Regulatory Authorities the option of revising and approving the volume of annual capacity rights, as well as the principles governing the allocation of capacity at different periods of time. The European Model allows two alternative methodologies for the calculation of transmission capacity between different zones, the Available Transfer Capacity (ATC) or the Flow Based (FB) method.
- Long-term transmission rights: The European Model defines the development of cross-border markets based on harmonized long-term rights for access to the capacity of interconnections.
- Day-ahead price coupling: Price coupling is achieved through implicit auctions, where energy flows are calculated by taking into consideration, other than the price, also the interconnection capacity. According to the coupling method of electricity prices, prices across borders will converge when there is adequate cross-border capacity. Application of the European Price Coupling (EPC) mechanism across Europe aims at maximising the total performance of electricity markets, providing electricity flows from low-price regions to high-price regions.
- Continuous intraday trading: The design of Intraday markets for allocation of interconnection capacity is based on the creation of a single European platform for intraday markets. This platform will determine, through continuous implicit trading, the pricing method for interconnection capacity will be determined, to reflect their congestion on the price. The intraday market allows participants to buy or sell energy to optimise their positions by minimizing their imbalances in real time.
- Electricity balancing: Electricity balancing includes three main elements: assurance of reserves, activation of balancing energy and arrangement of the imbalance of energy balances. The European Model supports a greater allocation of the balancing resources between Transmission System Operators, who must push forward the harmonisation of the balancing products and reserve products, taking into consideration local technical particularities.
The transformation of the Greek electricity market
The current model of the Greek electricity is compliant to the European Target Model. The rationalisation and liberalization of the domestic electricity market aim at improving the competition conditions and creating a stable and predictable market model, with incentives for the entry of new participants in the market and the attraction of new investments, primarily to the benefit of the Greek consumer and the national economy. The minimisation of the cost and time for adjustment to the Target Model require restructuring actions and structural changes to the current organisation and operation of the wholesale market and additional regulatory measures and reforms, which are expected to go forward essentially under the creative pressure already exerted by the rapidly integrated European energy market, through the coupling of national and regional markets under way.
Law 4512/2018 defined the following markets:
- Wholesale market of forward electricity products (renamed energy financial market): This market allows participants to conclude electricity purchase and sale contracts, with physical delivery obligation, as they will be set out in the relevant market code and to trade in energy financial instruments.
- Day ahead market: This market allows participants to submit electricity transaction orders with obligation of physical delivery on the next day. In the day ahead market, the energy quantities committed through the conduct of forward product transactions are also declared, which were realised either through the forward products wholesale market or outside it. At the same time, there will be implicit allocation of the transmission capacity at interconnections, through the coupling of the day ahead markets of European countries.
- Intraday market: This market allows participants to place transaction orders for physical delivery on the date of fulfilment of the physical delivery, after the expiry of the deadline for placing transaction orders at the day ahead market, taking into consideration the energy quantities committed through the conduct of transactions in forward electricity products which they have realised, the day ahead market results, as well as any limitations emerging from the balancing market. Participants may carry out transactions to minimise the imbalance of their net position arising from transactions in all markets, from the quantities sold/purchased in real time.
- Balancing Market: The balancing market includes the balancing capacity market, the balancing energy market and the imbalance settlement process. Participants are required to submit bid with a physical delivery obligation for their total available capacity, both in the balancing energy market and the balancing capacity market.
The operation of the three first markets is to the Hellenic Energy Exchange, whereas the Balancing Market is the exclusive responsibility of IPTO. The Hellenic Energy Exchange will serve as the Nominated Electricity Market Operator (NEMO) for the coupling of the day ahead market and the coupling of the single intraday electricity market, in accordance with the Minister’s decision No. ΠΕΝ ΑΠΕΗΛ/Γ/Φ1/οικ.184866.