nemo_committee

The NEMOs cooperating within the Single day-ahead coupling (SDAC) are launching a coordinated consultation, related to the potential removal of the so-called Second Auctions.

Background:

The Second Auctions are a procedure established in line with the Day-ahead operational Agreement (DAOA), specifically, the operational procedure SDAC_SPE_01. This procedure is applied during the Market Coupling process in case the prices of one or several concerned areas reach or exceed the predefined thresholds.

The process consists of reopening the NEMOs order books for 15 minutes, to give the Market Participants the opportunity to modify their bids in order to improve the market situation. All SDAC NEMOs have the right, but not the obligation to reopen their order books to their Market Participants.

After the closing of the order books, a second calculation takes place and the publication of the Market Coupling Results will be considered delayed.

In case the concerned prices still reach the thresholds even after the second calculation, no additional Second Auction is triggered.

There are two main reasons why the NEMOs contemplate the removal of the Second Auctions:

1. Although the original idea of the whole process was to improve the market situation in affected market areas in case of crossing the defined price threshold, the Second Auctions have over the past few years led to an increase in operational risks and simultaneously they have not delivered their expected benefits (I.e. the improvement to the market situation). This has been demonstrated by the results of the Second Auctions over the last couple of years, in the best cases, the strike prices in the second auctions improved by a few Euros, whereas in other instances the outcome of the second auction was actually worse that the outcome of the first one.

2. The removal of the Second Auctions is recommended in terms of the optimization of the market coupling process in preparation for the launch of the 15-minute products. This is related to an extension of calculation time from the current 17 minutes, with the expectation being that the new length of the calculation time will be 30 minutes. As a consequence, the removal of the Second auctions, which have not demonstrated their benefits, as explained in Point 1, the whole operational process of the SDAC would benefit from more contingency in the daily operational process.

The Second Auctions are organized according to local/regional processes in case the prices reach or exceed the predefined thresholds in the concerned countries/bidding areas, and are the local responsibility of respective NEMOs to run such Second auction in these countries/bidding areas. Nevertheless, it should be noted, that the Second auctions are part of the mutually coordinated SDAC Operational procedures for operational reasons.

The list of the countries/bidding areas, where Second auctions are currently organized, is the following:

Austria, Belgium, Croatia, Czech Republic, Estonia, France, Germany, Greece, Hungary, Latvia, Lithuania, Netherlands, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia and Spain.

While the Second Auctions are organized only in the countries/bidding areas listed above, the NEMOs decided to launch this coordinated consultation, because the removal of the Second Auctions would only be effective in terms of preserving operational reliability of the SDAC if there is a coordinated removal of the Second Auctions across all of the concerned countries/bidding areas.

Taking into account the explanation and reasoning provided above, the NEMOs are seeking opinions on the removal of the Second Auctions from relevant stakeholders.

The outcome of this consultation will be carefully assessed and will contribute to defining a coordinated position of all NEMOs in regards to the Second Auctions and their possible removal.

The eventual removal of the Second Auctions is nevertheless also subject to regulatory approvals by relevant NRAs in some of the concerned countries and/or changes in specific NEMO market rules applicable in several concerned countries where the Second Auctions are organized.

Why are we consulting:

The NEMOs are seeking opinions on the removal of the Second Auctions. This is a voluntary consultation by the NEMOs, not mandated by any specific EU regulation, since the Second Auctions are a procedure established according to the DAOA.

It follows and complements a similar consultation, held by the Agency for the Cooperations of Energy Regulators (ACER) in March of 2023, as well as certain consultations organized on a national level in countries where Second Auctions are organized.

Expected Audience: Market Participants, TSOs, NRAs and ACER

Interests: Operational/organizational aspects of the SDAC

Results of the public consultation

Consultation report

FAQs document on Second Auctions

Feedback received:

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