Platforms out of balance?

High price spikes and dips are rocking the European balancing platform aFRR (automatic Frequency Restoration Reserves). Although high balancing energy prices are not exactly news, their magnitude and impact on the newcomers have triggered action and raised questions about the underlying aFRR pricing methodology.

For background, since 2022, aFFR balancing energy product is jointly procured by TSOs over the PICASSO platform, using a common merit order list (CMOL). Until now, it has been used by the TSOs from the Czech Republic, Germany, Austria, and most recently Italy, while other European TSOs are legally obliged to join by July 2024.

Italian TSO leaves the platform

Recent price spikes and deep drops in the Italian aFFR market based on the outcomes of the PICASSO platform, alarmed Italian market actors and triggered action from the Italian regulator, ARERA – Autorità di Regolazione per Energia Reti e Ambiente, ultimately instructing the Italian TSO, Terna SpA, to suspend its participation on the platform on March 15th. For the time being, Terna reverted to procuring aFRR locally.

What is next?

Based on European legal obligations, this suspension is temporary. PICASSO and Terna will have to find a way to continue. In the meantime, other TSOs have announced delays in their accession. Likely, similar discussions are expected in MARI, a closely related platform for manual Frequence Restoration Reserves (mFRR). Meanwhile, EU Agency for the Cooperation of Energy Regulators (ACER) launched a consultation procedure on the amendment to the aFFR pricing methodology. Among others, the TSOs proposed to reduce the price floor/cap to +/-15.000€/MWh as well as introduce a provisional price cap of +/-10.000€/MWh for the period until July 2024.

In general, these events raise questions about the needed degree of harmonisation of underlying aFFR procurement before accession to pan-European platforms.