The Energy Community

Abstract of Chapter 13: The Energy Community

This chapter describes the latest developments which have expanded the European Union’s legal framework to the Energy Community Contracting Parties and enabled their integration into the internal market for electricity, in particular their adherence to the SDAC and the SIDC. This is not only crucial for the Energy Community but also for the European Union and its European Green Deal, the success of which is linked to its neighbours and partners.

The envisaged extension is substantial in size and its implementation requires all involved parties to proceed fully committed and coordinated. Hence, this chapter introduces the Energy Community, its institutional set-up and legal framework, including the Electricity Integration Package. Besides getting to know the electricity markets of the Contracting Parties, the reader is familiarized with important implementation steps and preconditions to successfully enlarge the SDAC and the SIDC across Europe.

13.1 The Energy Community

The Energy Community (EnC, 2024c) is an international organization bringing together the European Union and its Eastern neighbours based on a legally binding framework. It was founded by the Treaty establishing the Energy Community (EnC Treaty, 2005), in force since 2006, and aims at extending the European Union’s acquis to create a single energy market. The founding members were the European Community on the one side and the so-called Contracting Parties on the other, namely Albania, Bulgaria, Bosnia and Herzegovina, Croatia, Kosovo¹ , Montenegro, North Macedonia, Romania and Serbia. Meanwhile, Bulgaria, Croatia and Romania joined the European Union and Moldova (2010), Ukraine (2011) and Georgia (2017) acceded to the EnC Treaty. The European Union is a Party to the EnC Treaty, represented by the European Commission which serves as permanent Vice-President of the organization (Energy Community, 2024c). Armenia, Norway and Türkiye are observers to the Energy Community.

The Energy Community was established to pursue the following key objectives as defined in Article 2 of the EnC Treaty (Energy Community, 2024c):

• establish a stable regulatory and market framework capable of attracting investment in power generation and networks;
• create an integrated energy market allowing for cross-border energy trade and integration with the European Union’s market;
• enhance the security of supply to ensure stable and continuous energy supply that is essential for economic development and social stability;
• improve the environmental situation in relation with energy supply in the region and foster the use of renewable energy and energy efficiency; and
• develop competition at regional level and exploit economies of scale.

13.1.1 Institutional Set-Up of the Energy Community

The Energy Community has different institutions supporting its processes as presented in Fig. 13.1 and described hereafter (Energy Community, 2024c; Karova, 2015b, pp. 30–31). The Ministerial Council,² the highest decision-making body, represents each Contracting Party at ministerial level as well as the European Community and meets once a year. It takes strategic decisions, steering the Energy Community and its development, with its presidency rotating annually. The work of the Ministerial Council is prepared by the Permanent High Level Group³ (PHLG) which meets four times a year. The Energy Community Regulatory Board⁴ (ECRB) is the coordination body of the national regulatory authorities (NRAs). The ECRB advises the Ministerial Council and the PHLG and is entitled to issue recommendations in case of cross-border disputes of two or more NRAs. Further, the ECRB may take legally binding decisions if empowered by the Ministerial Council. The only permanent institution of the Energy Community is the Energy Community Secretariat⁵ based in Vienna. It is responsible for supporting the day-to-day activities of the Energy Community and obliged to monitor and report on the implementation of the EnC Treaty. To that end, the Energy Community Secretariat, upon complaint or on its own motion, may initiate dispute settlement procedures if a Party to the EnC Treaty does not comply with the acquis in force.⁶ Decisions on the existence of a breach by a Party to the EnC Treaty are
to be taken by the Ministerial Council.⁷ Besides, the Parliamentary Plenum⁸ brings together elected representatives of national parliaments and the European Parliament to address shared challenges while different Fora⁹ (e.g. Electricity, Gas, Oil) support and advise the Energy Community.

Fig. 13.1 Institutional set-up of the energy community. Source: Author’s own illustration

13.1.2 Energy Community Acquis

The Contracting Parties committed to adopt parts of the European Union’s legislation in the areas of energy, environment, competition and renewables.¹⁰ New acquis of the Energy Community can be adopted, or existing can be amended, based on the European Union’s legal acts with adaptations to the specific situation of each of the Contracting Parties and the Energy Community’s institutional setup.¹¹ This concept allows the Energy Community acquis to evolve over time and the Contracting Parties to stay aligned with the European Union’s developments. To date, this has brought numerous updates and extensions of the Energy Community acquis to include new sectors or legislation newly adopted in the European Union.

Fig. 13.2 Decision-making processes under the different titles of the EnC Treaty. Source: Author’s own illustration based on (EnC Treaty, 2005)

Respective decisions are generally taken by a majority of the votes cast of the Ministerial Council (see Sect. 13.1.1 and Fig. 13.1) based on a European Commission’s proposal (Energy Community, 2024a), with each Party to the EnC Treaty having one vote.¹² However, as summarized in Fig. 13.2, the exact decision-making process¹³ required to adopt a proposal depends on its nature and the Title of the EnC Treaty under which it is proposed (Karova, 2019, pp. 280–286): Decisions under Title II (extension of acquis communautaire) require a proposal by the European Commission, simple majority of the Contracting Parties for adoption and are addressed to the Contracting Parties only, not covering the interface with
Member States. Proposals under Title III (mechanism for operation of network energy markets) can be brought forward by the Energy Community Secretariat or any Party to the EnC Treaty and are accepted if a two-third majority, including a positive vote of the European Community, is in favour of the proposal. Measures under Title III are addressed to both the Contracting Parties and the neighbouring Member States, as defined in Article 27 of the EnC Treaty. The most extensive measures are governed by Title IV (creation of a single energy market), requiring a Party to the EnC Treaty to propose and unanimity of all Parties to decide as resulting in obligations towards the entire Energy Community, i.e. the Contracting Parties and all Member States.

Fig. 13.3 Legal acts incorporated in the energy community acquis by the electricity integration package in 2022. Source: Author’s own illustration based on (Energy Community, 2024b)

13.1.3 Electricity Integration Package

The Ministerial Council Decision 2022/03/MC-EnC, adopted under Title III of the EnC Treaty on 15 December 2022, incorporated missing parts to fully align the Energy Community acquis with the, at that time,¹⁴ applicable legal framework for the electricity sector in the European Union. The so-called Electricity Integration Package includes nine legal acts as described in Fig. 13.3¹⁵ (Energy Community,
2024b).

By the Ministerial Council’s decisions¹⁶, the Contracting Parties committed to bringing into force the laws, regulations and administrative provisions necessary to comply with the new provisions¹⁷ by 31 December 2023. However, the legal deadline has passed and none of the Contracting Parties has transposed the new legal framework into national law (Energy Community Secretariat, 2024, p. 2).

The decision was accompanied by the Ministerial Council Procedural Act¹⁸ 2022/PA/01/MC-EnC, fostering regional market integration and ensuring reciprocity between energy sector stakeholders of the Member States and the Contracting Parties. As a novelty of the Electricity Integration Package, ACER (see also Chap. 15) was entitled to take decisions on cross-border issues concerning both Member States and Contracting Parties, and ENTSO-E (see also Chap. 1) was tasked to assume a similar role for the Contracting Parties as for the Member States (Energy Community Secretariat, 2023b, p. 4). Consequently, the Electricity Integration Package, subject to transposition in the Contracting Parties, enables full market integration of the Contracting Parties into the single European market for electricity including inter alia the SDAC, the SIDC and the European platforms for the exchange of balancing energy and the imbalance netting process.

The European Network Codes and Guidelines in the electricity sector include subsequent terms and conditions or methodologies (TCMs) to be developed by relevant stakeholders such as TSOs and NEMOs (see also Chap. 2). TCMs define more detailed rules on specific topics such as capacity calculation, algorithms for operating the market coupling or products used therein. Their approval in the Energy Community differs, depending on their scope: pan-EU, regional or national. With the adoption of the Electricity Integration Package, the Contracting Parties committed to the following approach with regards to TCMs (Energy Community Secretariat, 2023b, pp. 6, 8). For the pan-EU TCMs, submitted by either all TSOs or all NEMOs in the European Union to ACER for decision, relevant stakeholders of the Contracting Parties need to implement them without adaptations including future amendments thereof. On the contrary, regional TCMs, developed by more than one TSO of Member States and/or Contracting Parties (e.g. within capacity calculation or system operation regions), are submitted to the NRAs concerned, for their approval. In case of disagreement or voluntary action of the relevant NRAs, the decision is referred to ACER in case both Member States and Contracting Parties are concerned. If only Contracting Parties are involved, the ECRB is tasked to issue a decision. National TCMs, concerning only one Contracting Party, are subject to the relevant NRAs’ approval as is the case in the European Union. A high-level overview of the different concepts is provided in Fig. 13.4.

As described in Chap. 16, transparency and integrity are of utmost importance for the well-functioning of electricity markets. Even though not part of the Electricity Integration Package, but due to the strong link with the SDAC and the SIDC, it shall be noted that an adapted version of Regulation (EU) 1227/2011 (EU REMIT) was adopted in the Energy Community in 2018¹⁹ (EnC REMIT). However, there are major differences between the principles of the EU REMIT and the adapted EnC REMIT. Most prominently, the EnC REMIT neither includes centralized data collection nor grants ACER any power related to data collection or surveillance in the Contracting Parties. As described in a guidance on REMIT published by the ECRB (2022, p. 4), at the time of adoption, it was considered more appropriate to amend the EnC REMIT at a later stage when there is clarity on the way forward in particular in relation to market integration between the Contracting Parties and the Member States. To date, even though the Electricity Integration Package was adopted in 2022, no such amendment has been incorporated in the Energy Community acquis.

Fig. 13.4 Approach towards pan-EU, regional and national TCMs in the energy community. Source: Adapted from Energy Community Secretariat (2023b, p. 6)

13.2 Extension of the SDAC and the SIDC to the Energy Community

As outlined in Sect. 13.1.3, the Electricity Integration Package for the first time enables the integration of the Contracting Parties into the European internal market for electricity. In particular, the adapted and adopted Commission Regulation (EU) 2015/1222²⁰ (EnC CACM) enables the integration into the SDAC and the SIDC.

13.2.1 Importance of Market Coupling for the Energy Community

When compared to the European Union, the electricity markets in the Contracting Parties are not yet as well-functioning. Short-term markets of Contracting Parties partially lack liquidity or are not at all operational, and a share of market segments is price regulated hindering competition to be developed (Energy Community Secretariat, 2023a). In addition, due to the energy crisis and the rise of prices for electricity in 2022, the Contracting Parties intervened in markets with emergency measures, some not yet phased out,²¹ slowing down their development (Energy Community Secretariat, 2022a, p. 7, 2023a, p. 147). In general, public interventions in retail price setting are applied widely in the Energy Community, resulting in average end user prices significantly lower than in the European Union, almost two times for industry and three times for households (Energy Community Secretariat, 2023c, p. 14). Considering the above, short-term markets fail to provide price signals, especially important for the deployment of renewable energy sources and flexibility needed to integrate their generation and react to their intermittency. In addition, most Contracting Parties have no effective carbon pricing mechanisms in place (Energy Community Secretariat, 2023c, p. 5).

In accordance with the European Union’s understanding that its future is linked to its neighbours and partners, the European Commission’s Communication on the European Green Deal (European Commission, 2019) includes the following: “The global challenges of climate change and environmental degradation require a global response. […] The EU will put emphasis on supporting its immediate neighbours. The ecological transition for Europe can only be fully effective if the EU’s immediate
neighbourhood also takes effective action”.

Consequently, the integration of the Contracting Parties into the European Union’s internal electricity market, including into the SDAC and the SIDC, is highly important not only for the Energy Community but also for the European Union. The envisaged integration will provide market participants with access to well-functioning, liquid and competitive electricity markets and will create a stable regulatory framework for further investments in renewable energy sources across Europe. Market coupling is key for decarbonization and the successful implementation of the 2030 targets in the Energy Community22 and, thus, will contribute to the above-mentioned ecological transition in the European Union’s immediate
neighbourhood. Finally, the Contracting Parties’ adherence to the SDAC and the SIDC will ultimately support the creation of an integrated market leveraging synergies across Europe and provide affordable and secure (reliable) energy supply to end consumers enabling the transition to a clean energy system.

Electricity market integration and the European Union’s efforts towards reducing carbon emissions are further linked by (EU, 2023/956) establishing a carbon border adjustment mechanism (CBAM), which was adopted in the European Union to address the so-called “carbon leakage” risk. According to the description of the European Union (2024), such risk occurs if polluting production is transferred to other countries with less stringent climate policies than the European Union or more carbon-intensive imports replace products in the European Union. Therefore, to create a system putting a fair price on carbon emitted during production, the CBAM imposes financial and administrative costs on importers of CBAM goods into the European Union from third countries, including the Contracting Parties. Consequently, the CBAM focuses on goods most at risk of carbon leakage such as cement, iron and steel, aluminium, fertilizer, hydrogen as well as electricity. However, the CBAM Regulation (EU, 2023/956) allows for exemptions with regards to electricity if certain criteria are met. These criteria include inter alia the integration of the third country’s electricity market with the European Union’s (market coupling) and the implementation of an emissions trading system (Energy Community Secretariat, 2023c, p. 3).

13.2.2 Day-Ahead and Intraday Markets and Their Operators in the Energy Community

Any further integration with the European Union’s market coupling requires shortterm markets and their operators to be established—a step which still needs additional efforts in several Contracting Parties. At the beginning of 2024, all Contracting Parties except Bosnia and Herzegovina, Georgia²³ and Moldova have operational day-ahead markets, while only Serbia and Ukraine have established intraday markets (Energy Community Secretariat, 2024, p. 3). Three of the dayahead markets (Albania, Montenegro, North Macedonia) and the Serbian intraday market opened only during 2023 (Energy Community Secretariat, 2023a, pp. 15, 84, 98, 112), and the day-ahead market in Kosovo* at the beginning of 2024²⁴
(ALPEX, 2024).

The respective operating power exchanges are the Albanian Power Exchange (ALPEX) for Albania and Kosovo*,²⁵ the Montenegrin Power Exchange (MEPX) for Montenegro, the national electricity market operator MEMO for North Macedonia, SEEPEX for Serbia and the joint-stock company Market Operator (JSC MO) for Ukraine (Energy Community Secretariat, 2024, p. 3). Bosnia and Herzegovina lacks the legal basis for the establishment of short-term markets (Energy Community Secretariat, 2023c, p. 12) while for Georgia, the opening of the short-term markets, to be operated by the Georgian Energy Exchange (GENEX), was postponed several times, latest to July 2024 (Energy Community Secretariat, 2023a, p. 42). Most recent information indicates that OPEM, a subsidiary of OPCOM,²⁶ will set up short-term markets as electricity market operator in Moldova (Gridina, 2024).

Aligned with the European Union’s framework, the SDAC and the SIDC shall only be organized by market operators designated as NEMOs (see Chap. 2, Sect. 2.2.3), respecting the designation criteria as defined in Article 6 of the EnC CACM, which are the same as in Commission Regulation (EU) 2015/1222 (CACM
Guideline). Article 4(1) of the EnC CACM obliged the Contracting Parties to designate at least one NEMO by six months after entry into force, i.e. 15 June 2023.

Additionally, according to Article 5(1) of the EnC CACM, the Contracting Parties were required to notify the Energy Community Secretariat in case of a legal monopoly for day-ahead and intraday trading²⁷by 15 February 2023. In such case, the competent authorities may refuse the provision of trading services by more than one NEMO in the Contracting Party and by NEMOs designated in other Member
States or Contracting Parties (‘passporting’).

The Energy Community (2024b) publishes and regularly updates a list of the NEMOs in the Energy Community on its webpage based on the Contracting Parties’ information provided. According to this list, at the beginning of 2024, only Albania (ALPEX), Kosovo* (ALPEX), North Macedonia (MEMO) and Serbia
(SEEPEX) have informed about designated NEMOs while the existence of a legal monopoly for day-ahead and intraday trading services was notified for Moldova, Montenegro, North Macedonia, Serbia and Ukraine.²⁸ Nevertheless, a NEMO designation in a Contracting Party should only be considered equivalent to one in the European Union, if the respective Contracting Party has transposed all rights and
obligations of a NEMO, defined in different legal acts of the Electricity Integration Package, into national law. Otherwise, such NEMO, even if compliantly designated based on the same criteria, would not perform its tasks on an equal footing with the NEMOs of Member States, which is particularly relevant in case of competitive NEMOs.

Figure 13.5 provides an overview of day-ahead and intraday markets and their operators in the Contracting Parties.

Fig. 13.5 Day-ahead and intraday markets and their operators in the Energy Community at the
beginning of 2024. Source: Adapted from (Energy Community Secretariat, 2024, p. 3) with flags
reproduced from (Central Intelligence Agency, 2021)

13.2.3 Capacity Calculation Regions and Possibilities for Cross-Zonal Trade in the Energy Community

With regards to cross-zonal capacity, the Ministerial Council Decision 2022/03/ MC-EnC established three capacity calculation regions (CCRs) for the Energy Community (Fig. 13.6): Shadow South-East Europe (Shadow SEE), ItalyMontenegro (ITME) and Eastern Europe (EE). The EnC CCRs are defined by Annex I to the EnC CACM upon entry into force and include both bidding zone borders between Contracting Parties, and bidding zone borders between Contracting Parties and Member States (Energy Community, 2023, pp. 3–4; Energy Community Secretariat, 2023a, p. 10).

According to Articles 3 and 5 of Annex I to the EnC CACM, the TSOs of the Shadow SEE and the EE CCR shall conclude cooperation agreements as a basis for the cooperation between TSOs of Contracting Parties and TSOs of Member States by 15 June 2023. At the same time, TSOs of the EnC CCRs should have submitted coordinated capacity calculation methodologies pursuant to Article 20(2) of the EnC CACM. However, as reported by the (Energy Community Secretariat, 2023a, pp. 10–11), discussions on a possible reconfiguration of the EnC CCRs are delaying their operationalization and neither cooperation agreements were concluded, nor capacity calculation methodologies submitted.

As in the European Union, the determination of CCRs can be amended. Importantly, amendments to the EnC CCRs are subject to an amendment proposal of all TSOs of the European Union pursuant to Article 15 of the CACM Guideline, defining the pan-EU CCR determination (see Chap. 3, Sect. 3.1), in consultation with TSOs of the Contracting Parties and decided upon by ACER as prescribed by Article 1(2) of Annex I to the EnC CACM.

Cross-border trade and effective market coupling further depends on available cross-zonal capacities as recognized by the applicable legal framework. Article 16 of Regulation (EU) 2019/943 (Electricity Regulation) requires certain amounts of cross-zonal capacity to be made available to market participants, commonly referred to as the 70% target (see Chap. 3, Sect. 3.1.7). With the adoption of the adapted Electricity Regulation in the Energy Community,²⁹ the Contracting Parties obliged themselves to make available the same minimum levels of cross-zonal capacity. The results of a study, contracted by the Energy Community Secretariat in 2023, indicate that none of the Western Balkan 6 Contracting Parties³⁰ currently fulfils the 70% target and that the margin available for cross-zonal trade is low for a considerable amount of network elements (EIHP, 2023). Furthermore, the study identifies the lack of coordinated capacity calculation as one of the main reasons and concerns to be addressed and stresses the need to adopt action plans in case of structural congestions to achieve the 70% target by the end of 2027.³¹

Fig. 13.6 Capacity calculation regions (CCRs) in the Energy Community. Source: Adapted from ENTSO-E (2023a, p. 3)

13.2.4 Implementation and Timeline of the Integration of the Contracting Parties into the SDAC and the SIDC

Fig. 13.7 Most important implementation milestones and their respective deadlines according to the EnC CACM.³² Source Energy Community Secretariat (2023b, p. 12)

Figure 13.7 provides an overview of the most important implementation milestones and their respective deadlines according to the EnC CACM. This includes the designation of NEMOs and the first tasks within EnC CCRs until June 2023, as outlined in Sects. 13.2.2 and 13.2.3, as well as the requirement to implement the majority of the pan-EU TCMs by the end of 2023. As described in Chap. 2, Sect. 2.4, these pan-EU TCMs link, for example, to the common grid model with the respective data provision, the intraday cross-zonal gate opening and closure times, the maximum and minimum technical price limits, or the products to be used in the SDAC and the SIDC. Further regional TCMs are to be developed by the TSOs in the EnC CCRs and submitted by April 2024 (coordinated redispatching and countertrading and related cost sharing, fallback). These steps are to be completed to ensure the implementation of the EnC CACM and with that the harmonization required for the integration into the SDAC and the SIDC, whose successful operation is based on common principles and rules.

Most importantly, Article 7(3) of the EnC CACM requires the NEMOs from Contracting Parties and Member States to submit to all NRAs, the ECRB and ACER a plan on the integration of NEMOs from Contracting Parties in the market coupling operator (MCO) functions³³ and in the agreements between NEMOs and with third parties. The plan shall be consistent with the plan drafted in accordance with the CACM Guideline³⁴ and shall include a detailed description and a proposed timescale for implementation as well as a description of the expected impact of such integration on the performance of the MCO functions. According to Article 9(6)(a) of the EnC CACM, the approval is subject to a decision by ACER to be adopted within six months of submission. The deadline for the submission of this so-called MCO integration plan was by one year after entry into force of the EnC CACM, i.e. 15 December 2023.

The MCO integration plan’s preparation requires close cooperation of all NEMOs of the Energy Community and the European Union but also alignment with the respective TSOs. A dedicated joint expert team has been established to facilitate the work of the stakeholders of the European Union and Energy Community to accomplish this challenging task (Energy Community Secretariat, 2023a, p. 148). Nevertheless, upon a joint message shared by the European Commission, the Energy Community Secretariat and ACER, the submission of the MCO integration plan was postponed with a newly envisaged submission date of 15 June 2024 (Energy Community Secretariat, 2024, p. 4; NEMO Committee, 2023). The postponement was recommended due to the delayed transposition in the Contracting Parties and is linked to the consideration that a NEMO designation is only valid if the respective Contracting Party has compliantly transposed the legal requirements for the SDAC and the SIDC, including the exhaustive definition of rights and obligations of NEMOs (Energy Community Secretariat, 2024, p. 4).

The final approved MCO integration plan should outline the process for the adherence of NEMOs of Contracting Parties to relevant contracts and required steps for the extension of the SDAC and the SIDC to the Contracting Parties in the upcoming years. This will serve as the basis for the inclusion of bidding zone borders into the SDAC and the SIDC, grouped in so-called local implementation projects (LIPs), as was the case for already completed extension projects in the European Union.

In practical terms, the adherence of the Contracting Parties to the SDAC and the SIDC requires, as for all extension projects, different steps to be completed.³⁵ Besides the required transposition of legal acts related to market coupling, the NEMOs and TSOs of the Contracting Parties need to adhere to the contractual framework in place. This includes contracts between NEMOs, between TSOs, joint NEMO-TSO contracts as well as contracts with third party service providers as further detailed in Chap. 14. Even prior to this, all parties involved need to sign the Single Day-Ahead and Intraday Coupling Observership and Non-Disclosure Agreement (CACM Global NDA, cf. Section 14.2.1) to protect the exchange of confidential information of NEMOs and TSOs when fulfilling their obligations. This preparatory step has not yet been completed for all Contracting Parties (ENTSO-E, 2023b, pp. 33–35).

From a technical perspective, the implementation of the EnC CACM and the different LIPs’ readiness has to be ensured. This requires intensive regional cooperation and joint work streams within the LIPs dedicated to design and develop inter alia IT solutions and operational processes, including for pre- and post-coupling³⁶ activities (see Chap. 2, Sect. 2.3.1). Resulting requests for change towards the common pan-EU systems are to be submitted well in advance. In this regard, the NEMOs and TSOs of the Member States announced further assessments of the requirements and possible timelines for such requests for change and proposed a first SDAC go-live window for the Energy Community at the end of 2025 (MCSC, 2024, pp. 2, 4). Finally, as also described in Chap. 14, Sect. 14.4, the actual go-live is to be approved by the Market Coupling Steering Committee (MCSC) after successfully completed testing phases and involved parties having complied with all legal and technical requirements.³⁷

13.3 The Energy Community’s Electricity Markets and Their Characteristics

Five Contracting Parties are relatively small with electricity consumption lower than 10 TWh per year, while Bosnia and Herzegovina and Georgia range around 13 TWh (IEA, 2023). Serbia, with approximately 35 TWh per year (IEA, 2023), is roughly double in size, and Ukraine, by far the largest market, had around 150 TWh of electricity consumption in 2021 before the war of aggression of the Russian Federation against Ukraine started³⁸ (Energy Community Secretariat, 2023c, p. 6). In general, electricity consumption in the Energy Community increased by approximately 7% between 2020 and 2021 (Energy Community Secretariat, 2022b, p. 5) and decreased slightly for 2022 (Energy Community Secretariat, 2023c, p. 7).

Fig. 13.8 a Installed electricity generation capacities from renewable energy sources (excluding large hydro) [MW], b Difference in production 2022 to average 2018–2022 for Energy Community (excl. Ukraine) [GWh]. Source Energy Community Secretariat (2023c, p. 7).

13.3.1 Generation Mix in the Energy Community

With regards to the generation mix in the Energy Community, as presented by the Energy Community Secretariat (2023c, p. 7), the following can be observed. The installed capacities in coal-fired plants remained unchanged with their share in total installed capacity decreasing slowly to approximately 35% in 2022, while coal-based electricity production covered close to 50% of total production in the same year.³⁹ However, the generation capacities of renewable energy sources (RES) were steadily growing over the last years as indicated in Fig. 13.8a (left). Solar, wind and biofuels increased from a share of 1% in 2017 to 5% of total installed capacities in 2022. Despite the stable electricity production from fossilfuelled thermal power plants, the difference in production in 2022 compared to a five-year average (2018–2022), as presented in Fig. 13.8b (right), shows significant decline of electricity generation from coal, whereas production from natural gas, fuel oil and non-hydro renewable sources increased. Furthermore, generation is sensitive to hydrology due to the considerable amount of hydropower plants in the Contracting Parties, one of the reasons for a five-year record production in the Energy Community in 2021, followed by a five-year minimum in 2022.⁴⁰

13.3.2 Day-Ahead Market Prices in the Energy Community

As described in Sect. 13.2.2, only Serbia (day-ahead) and Ukraine (day-ahead and intraday) had operational short-term electricity markets throughout 2022 and 2023. Albania, Montenegro and North Macedonia launched day-ahead markets only in the Electricity Integration Package and increase their efforts to proceed with the required reforms of their national electricity markets.

As the projects in the European Union have shown, regional cooperation among key stakeholders is essential. This aspect of the Electricity Integration Package needs to be strengthened in the Energy Community. Regional governance structures to cope with the newly assigned tasks must be set up urgently, even more so considering that more than one year has passed without notable progress in this regard. It is recommended to use the structures established in the European Union as blueprints to avoid lengthy discussions and further delays jeopardizing the implementation of the EnC CACM.

Furthermore, the Electricity Integration Package for the first time expanded the concept of TCMs to the Energy Community, a complex system which is based on direct applicability of ACER’s individual decisions on pan-EU, and, if applicable, regional TCMs in the European Union. When transposing, the Contracting Parties are demanded to mirror this concept and ensure that relevant ACER decisions are
applicable as part of their national legislation without time lags. In addition, the ECRB is newly mandated to take decisions on regional TCMs in case of nonagreement or referral of Contracting Parties’ NRAs (without Member States being affected). Different from ACER, a permanent Agency of the European Union, the ECRB has no staff itself but is composed of representatives of the NRAs, supported by the Energy Community Secretariat, and may therefore face challenges when implementing the Electricity Integration Package. The Contracting Parties and respective NRAs need to acknowledge that additional human resources and new expertise are required due to the new competences and address this by
respective measures. As mentioned above, the Contracting Parties and in particular the TSOs and the NRAs need to increase their cooperation to develop, submit or approve regional TCMs such as the capacity calculation methodologies. Importantly, this partly involves the neighbouring Member States and their stakeholders which are expected to take a lead based on their already acquired knowledge and experience.

With regards to one of the main prerequisites for market coupling—available cross-zonal capacity—it is recommended to accelerate the EnC CCRs’ operationalisation and to introduce a coordinated approach for calculating cross-zonal capacities for all timeframes without further delay. This requires the TSOs of the Contracting Parties and the neighbouring Member States to submit joint proposals to their respective NRAs and to improve cooperation to allow for a better usage of existing infrastructure. Additionally, the Contracting Parties are obliged to tackle (structural) congestion to increase cross-zonal capacities and, hence, ensure sufficient possibilities for trade. In this regard, the Contracting Parties should follow up
on the study conducted by the Energy Community Secretariat and perform detailed assessments to conclude on their status quo and, if needed, define respective measures to achieve the 70% target.

On the other hand, the stakeholders of the European Union can support this process by sharing knowledge and are required to prepare for the Contracting Parties’ adherence in their planning and processes based on experience gained with already completed extension projects. In this context, the submission of the MCO integration plan by 15 December 2023 should have been a first important milestone and a key tool to ensure predictability and joint commitment as a basis for both sides’ planning and development. Unfortunately, due to the delayed transposition, which resulted in a lack of alignment of the Contracting Parties’ national legislation with the legal framework for market coupling, the MCO integration plan has not yet been submitted. Consequently, not only the transposition of relevant legal acts related to the SDAC and the SIDC but also the designation of at least one NEMO in each Contracting Party has to be completed urgently.

With regards to market transparency and integrity, the differences in REMIT principles in the European Union and the Energy Community, as described in Sect. 13.1.3, should be addressed by means of an amendment to the EnC REMIT to allow for centralized data collection and surveillance by ACER for the entire future scope of the SDAC and the SIDC. In addition, due to the electricity market design reform in the European Union, also addressing market integrity and transparency, any amendments of the EnC REMIT should be aligned with the to be adopted recast of the EU REMIT. It is further worth noting that the Energy Community acquis is sector specific and, hence, does not cover tax legislation. This will require additional effort in some of the Contracting Parties to address the challenges that arise for post-coupling processes, for example, due to non-aligned VAT rules.

The experience in the European Union shows that the implementation of the legal framework and to achieve technical readiness for both NEMOs and TSOs on a national and regional level is challenging even where markets and associated operators are already established. However, the Contracting Parties can build on experience, already existing solutions and partly on established governance structures in the European Union. Nevertheless, the implementation of this extension project is dependent on both sides’ commitment and effort. Thus, for the upcoming years, it will be crucial that all involved parties proceed fully coordinated to successfully enlarge the SDAC and the SIDC across Europe.

About the Author

Lisa-Marie Mohr is a Managing Consultant at Magnus Energy. She holds a master’s degree in Technical Mathematics from the Vienna University of Technology. Previously, as an Electricity Market Expert at the Energy Community Secretariat in Vienna, she focused on the assistance to Contracting Parties during the transposition and implementation of the Energy Community acquis related to electricity. Before joining the Energy Community Secretariat, she worked as a Technical Expert for the German regulatory authority Bundesnetzagentur, where she was tasked with projects related to electricity markets and cross-border issues, in particular the implementation of the CACM and Electricity Regulation. During a secondment to ACER, she contributed to ACER’s Recommendation on reasoned amendments to the CACM Regulation. Having acquired both experience in the European Union and the Energy Community, she is dedicated to facilitating the further integration of the European internal market for electricity.

About the editors

Dr. André Estermann has more than 20 years of experience in energy sector and currently leads at the German TSO 50Hertz Transmission GmbH a team in system operations responsible for cross-border activities. Furthermore, he is the TSO Chairman of the Market Coupling (MCSC), in the Single Day-Ahead Coupling (SDAC) and Single Intraday Coupling (SIDC) Steering Committees. André holds a Ph.D. in economics at the European University Viadrina Frankfurt, Oder and received an MBA at the University of Southampton, UK. Moreover, he holds a degree in international politics from the University of Potsdam.

Marius Schrade is an Expert in European Market Coupling projects at 50Hertz Transmission GmbH, one of the four transmission system operators in Germany, within the System Operations Concepts and Analytics department since 2019. At 50Hertz, he started his career as project lead for the integration of the German–Czech and German–Polish border into Single Day-Ahead Coupling, which was completed in 2021. Since then, he focuses on cooperation between TSOs and NEMOs in the Market Coupling Steering Committee where he also lead a task force on day-ahead simulation software. Marius holds a Double Degree in European Economics from the Universities of Maastricht in The Netherlands and
Louvain-La-Neuve in Belgium.

Louise Anderson currently works with Hitachi Energy as an Assistant Vice President in the Government and Institutional Relations department. Previously, Louise spent 5 years managing the World Economic Forum’s Electricity Industry Community, while also launching the WEF’s global initiative on Accelerating Industrial Clusters. Louise started her career working in a power plant before moving to work for EirGrid, Ireland’s Transmission System Operator, managing high voltage asset outage planning until 2014. Louise also spent some time in Belgium working for ENTSO-E on different aspects of the implementation of the CACM Guideline. Louise has a bachelor’s degree in Mechatronics and an MBA specializing in International Business.

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Notes

1. This Designation Is Without Prejudice to Positions On Status, and Is in Line With UNSC 1244
   and the ICJ Opinion On the Kosovo Declaration of Independence.
2. Article 47-52 EnC Treaty.
3. Article 53-57 EnC Treaty
4. Article 58-62 EnC Treaty.
5. Article 67-72 EnC Treaty.
6. Article 90 EnC Treaty.
7. Article 91 EnC Treaty.
8. Ministerial Council Procedural Act 2015/05/MC-EnC.
9. Article 63-66 EnC Treaty.
10. Article 3(a) EnC Treaty.
11. Article 5 EnC Treaty.
12. Article 77 EnC Treaty.
13. Article 76-85 EnC Treaty
14. Having in mind the electricity market design reform and the discussions with regards to future amendments of Network Codes and Guidelines in the European Union, it is important to note that, as explained in Sect. 13.1.2, newly adopted legislation in the European Union is not automatically incorporated in the Energy Community acquis.
15. Directive (EU) 2019/944 and Regulation (EU) 2019/941 were already incorporated by the Ministerial Council Decision 2021/13/MC-EnC. However, the Ministerial Council Decision 2022/03/MC-EnC amended parts thereof to reflect and include references to Regulation (EU) 2019/943 (‘recast’).
16. Article 2(1) Ministerial Council Decision 2021/13/MC-EnC and Article 2(1) Ministerial Council Decision 2022/03/MC-EnC.
17. Different to the European Union, both Directives and Regulations incorporated in the Energy Community acquis need to be transposed into national law of the Contracting Parties (Karova, 2015a, p. 4).
18. Besides recommendations and decisions, procedural acts are one of the measures the Energy Community can take, having binding force on the institutions of the Energy Community, and, if provided, on the Parties to the EnC Treaty (Article 86-88 EnC Treaty).
19. Ministerial Council Decision 2018/10/MC-EnC.
20. Commission Regulation (EU) 2015/1222 as adapted and adopted in the Energy Community by Ministerial Council Decision 2022/03/MC-EnC
21. According to (Energy Community Secretariat, 2023a), not yet phased out and concerning measures are, for example, Albania’s non-market-based procurement of electricity for network losses or the so-called equity fee imposed on all customers in Moldova that would like to switch their supplier.
22. With Ministerial Council Decision 2022/02/MC-EnC, the Energy Community adopted the 2030 targets for greenhouse gas emissions, energy efficiency and renewable energy.
23. Due to missing interconnection with any other Party to the EnC Treaty, Georgia is exempted from obligations under the EnC CACM in accordance with its Article 1(2). Therefore, the obligations explained in the following text only refer to the other eight Contracting Parties.
24. The day-ahead markets were launched in April 2023 in Albania and Montenegro, in May 2023 in North Macedonia and in February 2024 in Kosovo.
25. The intraday market in Serbia opened in July 2023. 25 The day-ahead markets of Albania and Kosovo are coupled as of the start of operations in Kosovo*.
26. OPCOM is the electricity (and gas) market operator (OPCOM, 2024) and one of the designated NEMOs (ACER, 2023) in Romania
27. According to Article 5(2) of the EnC CACM, a national legal monopoly is deemed to exist where national law expressly provides that no more than one entity can carry out day-ahead and intraday trading services.
28. According to the list, all Contracting Parties which have notified about a monopoly status missed the legal deadline.
29. Regulation (EU) 2019/943 as adapted and adopted in the Energy Community by MinisterialCouncil Decision 2022/03/MC-EnC.
30. The analysis for Ukraine and Moldova was simplified and focused only on the future timeframe (2028), while Georgia, due to the missing interconnections with other Contracting Parties or Member States, was not covered by the study.
31. According to Article 15(2) of Regulation (EU) 2019/943 as adapted and adopted in the Energy Community by Ministerial Council Decision 2022/03/MC-EnC, Contracting Parties applying an action plan shall ensure that the minimum capacity as defined in Article 16(8) is reached by 31 December 2027
32. In the figure, the articles refer to the EnC CACM and the abbreviations to the following: capacity calculation (CC), Contracting Party (CP), day-ahead (DA), Energy Community Secretariat (ECS), intraday (ID), Ministerial Council (MC), redispatching & countertrading (RD&CT).
33. According to Article 2(30) of the EnC CACM and the CACM Guideline, “market coupling operator (MCO) function” means “the task of matching orders from the day-ahead and intraday markets for different bidding zones and simultaneously allocating cross-zonal capacities”.
34. Article 7(3) of the EnC CACM refers to Article 7(3) of the CACM Guideline according to which the NEMOs in the Member States had to submit the so-called MCO plan. The MCO plan was approved by all EU NRAs in 2017 and not amended since then.
35. It is not necessary to join both the SDAC and the SIDC at the same time. Instead, it can be done one after the other, for example, starting with day-ahead and later joining the intraday project.
36. The clearing and settlement (post-coupling), as described in Chap. 9, poses challenges beyond the required harmonization of the electricity sector, for example, in case of non-alignment with the European Union’s Value-Added-Tax (VAT) legislation.
37. Even though the MCO integration plan is a NEMO-only TCM, the roadmaps for further developments of the SDAC/SIDC and decisions on go-live are approved by the MCSC, including NEMOs and TSOs, both being tasked with the day-to-day management of the SDAC/SIDC according to Article 10 of the CACM Guideline.
38. Due to the ongoing war, the electricity consumption in Ukraine dropped significantly in 2022.
39. The figures are for eight Contracting Parties only, excluding Ukraine.
40. In 2022, the electricity production in Ukraine and Moldova fell due to the ongoing war.