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Proposal for the bidding & activation process and balancing energy products for the bid ladder platform

1. Introduction to this document

The goal of the bid ladder project is to set up a platform where Market Players can bid in all available flexibility.

In contrast to the current CIPU-process the new platform should:

Allow bids from flexibility not covered by a CIPU-contract;

Allow bids from load and RES flexibility;

Allow bids from flexibility connected to the distribution grid.

Therefore the new bidding process & platform should:

Be a simple process with low entry barriers;

Break the link between the offered bids and production schedules sent by BRPs (cfr. CIPU);

Anticipate the upcoming evolutions of the future European Network Codes.

This document is describing the design of the bid ladder platform regarding:

Product definition;

Bidding process;

Congestion management process;

Activation & settlement process;

Pre qualification TSO/monitoring products;

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2. Table of content

Contents 1. Introduction to this document .......................................................................................................... 1

2. Table of content ................................................................................................................................ 2

3. Context of the bid ladder platform ................................................................................................... 3

Products which can be offered on the bid ladder platform ................................................................. 3

Belgian Balancing market: context ....................................................................................................... 4

European Balancing market: context .................................................................................................... 6

Balancing platform & competition ........................................................................................................ 9

4. Current bidding process and balancing energy products ............................................................... 10

Introduction ........................................................................................................................................ 10

Overall Bidding Process ....................................................................................................................... 10

Characteristics of intraday & day ahead nominations ........................................................................ 11

Bidding Volumes & Prices ................................................................................................................... 11

Using regulation capacity – activation of free balancing bids ............................................................ 12

5. Survey – Assessment of proposal ................................................................................................... 14

Main characteristics of the initial product proposal ........................................................................... 14

Survey organization ............................................................................................................................ 14

List of questions and summary of answers ......................................................................................... 15

6. Proposal for the design of the new bid ladder platform ................................................................ 19

Balancing Energy Products .................................................................................................................. 19

Bid characteristics ............................................................................................................................... 23

Process for the bid ladder platform .................................................................................................... 27

7. Appendix – Exhaustive answers from all Market Players ............................................................... 35

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3. Context of the bid ladder platform

Products which can be offered on the bid ladder platform

To maintain the balance between generation and consumption in the Belgian control area Elia uses 3

different kind of Ancillary services:

Primary reserves (R1) or Frequency Containment Reserves

Secondary Reserves (R2) or automatic Frequency Restoration Reserves

Tertiary Reserves (R3) or manual Frequency Restoration Reserves

For more information regarding these products please consult the product sheets

http://www.elia.be/en/products-and-services/product-sheets

The manual reserve (R3) enables Elia to cope with a significant or systematic imbalance in the control

area and/or resolve major congestion problems. Unlike the primary and secondary reserves, the tertiary

reserve is activated manually at Elia's request.

There are 2 types of manual reserves:

Pre-contracted reserves or ancillary services; these reserves receive a capacity payment to

compensate them not to participate to the long term, day ahead and intraday electricity

markets. This flexibility is exclusively used by Elia;

Non-contracted reserves or bids; as these reserves don’t receive a capacity fee only the residual

remaining flexibility (after market participation in previous market time frames) will be offered

to the balancing market.

In a first stage the bid ladder platform will only deal with the non-contracted reserves. On

the long run possibly also the bids from pre-contracted reserves shall be offered on the bid

ladder platform.

Non Contracted Reserves/Bids

Con-

tracted

Reserves

s

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Belgian Balancing market: context

In continental Europe there exist several ways how the balancing management is performed by TSOs.

Apart from central dispatch systems we make a distinction between 2 different methodologies;

Pro-active balancing markets; in this market design the TSOs are taking over the balancing

responsibility from the market in an early stage (e.g. 1 hour before delivery time). TSOs are

performing imbalance forecasts and try to anticipate on important imbalances by activating

slow balancing energy products (Replacement Reserves).

Re-active balancing markets; in these kind of markets TSOs incentivize market players to restore

the balance of their perimeter even in real-time. Therefore balancing actions by TSOs consist in

activation of fast reserves with short activation durations. Consequently replacement reserves

are rarely used by TSOs in re-active balancing markets.

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Similar to the Netherlands Elia opted for a re-active market design for the development of the balancing

market as Elia believes this is the most efficient solution. In their final report of the Electricity Balancing

impact assessment study the European Commission acknowledges that re-active market design is the

most efficient solution.1

The balancing actions of a TSO in a re-active balancing market consist of fast reserves with

short activation durations.

1 “Impact Assessment on European Electricity balancing Market”; Final report March 2013; Conclusions 2 & 4 on

page 115

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European Balancing market: context

To date, the arrangements for the procurement and remuneration of balancing services have been

mainly governed by national legislation and regulation. Conversely, the role of European rules has been

largely limited to technical conditions on the definition and provision of system and ancillary services,

such as those stipulated in the UCTE Operation Handbook. This situation will change in the future.

Indeed, the third energy package has introduced the concept of so-called Framework Guidelines (FG)

and Network Codes (NC), which have to be developed by ACER and ENTSO-E, respectively. Whilst the

Framework Guidelines establish a set of general principles, which the Network Codes shall comply with,

the Network Codes themselves will create a comprehensive set of binding rules.

In total, ENTSO-E plans to develop a set of nine different network codes, which are basically matching a

set of corresponding Framework Guidelines. Some of these documents will also impact the balancing

process as well as the procurement and use of operational reserves, such as the Network Code on Load-

Frequency Control and Reserves, the Network Code on Operational Security, or the Network Code on

Operational Planning and Scheduling. For the scope of this bid ladder platform, the Framework

Guidelines on Electricity Balancing (FG Electricity Balancing) and the associated Network Code (NC

Electricity Balancing) are of primary importance.

LFC Code

The recently developed Network Code for Load Frequency Control & Reserves2 (compare chapter 5.2)

has introduced a set of harmonised control processes for load-frequency control for the entire EU. The

NC differentiates between three processes, which are each supported by a dedicated set of operational

reserves. The main purpose of the three different processes and the corresponding reserves are as

follows:

Frequency Containment Reserves (FCR) comprises of operational reserves which are activated to

contain system frequency after an incident inside a pre-defined band. FCR are based on the

automated, decentralised response of the governor controls on individual generators with a full

activation time of 10-30 seconds.

Frequency Restoration Reserves (FRR) are operational reserves used to restore system

frequency to its nominal value and, where applicable, the power balance to the scheduled value.

This process involve of manually-instructed services (manual FRR) as well as automatically-

2 ENTSO-E. Draft Network Code for Load Frequency Control & Reserves. Working Draft. Draft V2. Brussels.

23.01.2013

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instructed services (automatic FRR). The latter are based on the centralised control of particular

generating units (or loads).

Replacement Reserves (RR) replace the activated restoration reserves in order to restore the

available reserves in the system

This definition of frequency control processes and reserves is limited to the first hour after an incident,

whereas it is assumed that market participants will be responsible for balancing possible deviations

themselves through the intra-day market thereafter.

The bid ladder platform is focusing on reserves which belonging to the category of Frequency

Restoration.

Framework Guidelines on Electricity Balancing

The FG Electricity Balancing was developed by ACER in 2011/2012, and a final version was approved by

ACER on 18 September 2012.3 Subsequently, the European Commission formally invited ENTSO-E start

developing the Network Code on Electricity Balancing on 21 December 2012. A first draft of the NC

Electricity Balancing was published by ENTSO-E on 20 February 2013, and the final document has to be

submitted to the Commission in December 2013.

The FG Electricity Balancing principally focus on three main areas, i.e.:

Activation and cross-border exchange of balancing energy,

Procurement and cross-border exchange of contracted reserves,

Imbalance settlement.

In general, the FG Electricity Balancing specify that the TSOs establish an European wide integrated

cross-border balancing market where TSOs balance the system in a coordinated way in order to use the

most efficient balancing resources taking into account cross-border transmission capacities. Besides

promoting cross-border exchange of balancing services, the rules of the NC Electricity Balancing shall

also facilitate the wider participation of demand response and renewable sources of energy.

The TSOs shall be responsible for procuring balancing services from balancing service providers (BSPs)

which are responsible to meet the terms and conditions adopted by the TSO.

In addition, the FG Electricity Balancing also establishes some other requirements, which generally apply

to the procurement and use of balancing services. Among others, the FG Electricity Balancing call for the

3 ACER. Framework Guidelines on Electricity Balancing. FG-2012-E-009. 18 September 2012

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use of standardised balancing products, although TSOs may still use specific local products if standard

products prove to be insufficient.

The stipulations of the Framework Guidelines on balancing and the required developments as a

consequence of the future network code on Electricity Balancing shall directly affect the design of the

bid ladder as this platform shall be the gateway to exchange manual activate reserves with other

countries. Indeed on the long run the bid ladder platform need to communicate with other platforms in

order to share balancing bids, create European Common Merit order lists and guarantee the use of the

most efficient balancing resources.

Because the bid ladder platform shall be used to exchange manual reserves we need to consider that

the product design and processes – as proposed in this document - might be modified in order to stay

compliant with the European standards. Hence the platform should be developed in such a way that the

characteristics of the balancing products can be easily changed in order to respect the future definition

of European Standard Balancing Products. Moreover in order to facilitate the cross-border exchange of

balancing energy it might be required that also bidding and activation processes need to be harmonised

with other countries.

The upcoming years – due to cross-border harmonisation – the bid and activation rules of the bid ladder

platform will be modified in order to stay compliant with the European standards. Hence the platform

will be developed in such a way that it will be possible to perform the required modifications in a flexible

way.

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Balancing platform & competition

The economic theory states that the following assumptions are important when developing a

competitive market

Assumptions behind a Perfectly Competitive Market

1. Many suppliers each with an insignificant share of the market – this means that each firm is too small relative to the overall market to affect price via a change in its own supply – each individual firm is assumed to be a price taker;

2. An identical output produced by each firm – in other words, the market supplies homogeneous or standardised products that are perfect substitutes for each other. Consumers perceive the products to be identical;

3. Consumers have perfect information about the prices charged by sellers in the market– so if some firms decide to charge a price higher than the ruling market price, there will be a large substitution effect away from this firm;

4. All firms (industry participants and new entrants) are assumed to have equal access to resources (technology, other factor inputs) and improvements in production technologies achieved by one firm can spill-over to all the other suppliers in the market;

5. There are assumed to be no barriers to entry & exit of firms in long run – which means that the market is open to competition from new suppliers – this affects the long run profits made by each firm in the industry. The long run equilibrium for a perfectly competitive market occurs when the marginal firm makes normal profit only in the long term;

6. No externalities in production and consumption so that there is no divergence between private and social costs and benefits;

Source; http://www.tutor2u.net/economics/content/topics/competition/competition.htm

Characteristics which should be considered when developing the bid ladder platform are:

Develop a platform where standardised products are offered by Providers. This enables Elia to compare identical products and activate the most cost-efficient solution.

All offered bids should be published in a transparent way in order to allow Providers to evaluate the position of their bids on the merit order list relative to bids from other Providers.

The process to offer flexibility to the bid ladder platform should be easy with a low entry barrier. Likely a B2B and B2C interface needs to be developed.

The bid ladder platform should allow Providers to offer their flexibility by submitting standard

products to a platform which can easily be accessed. Elia will publish in a transparent way the

available balancing bids and the use of it.

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4. Current bidding process and balancing energy products

Introduction

Currently the volume & price of the non-contracted tertiary reserves (free balancing bids) are

communicated to Elia through the contractual & operational framework of CIPU4, which includes

flexible volumes on mainly the traditional large (spinning) power generation units (>25MW). Only ARP’s

responsible for injection are able to sign a CIPU-contract & offer non-contracted reserves (balancing

bids) on all power plants incorporated in this contract5. A power plant is mandatory to be included in

such a CIPU-contract if one of the following conditions is fulfilled:

If the nominal power of a power plant is larger or equal to 25MVA;

If the power plant is directly connected to the TSO-grid;

If the power plant is connected to the DSO-grid & has a significant impact on the TSO-grid;

If the power plant wishes to deliver ancillary services for contracted reserves.

The objective of the CIPU contract is threefold and describes the information exchanges & means in

order to allow:

Network planification (maintenance & outages management);

Congestion management (preventing & avoiding congestions from Y-1 up until real-time;

calculation of cross-border capacities);

Balancing management (assuring the real-time balance in D of the Belgian control area with

balancing bids (free prices); calculation of contracted reserves);

Overall Bidding Process

Current prequalification consist of the signature of the CIPU contract.

In day ahead before 14pm the ARP must nominate for each CIPU power unit for every quarter

hour of day D the required data in the day-ahead nomination files for Elia to determine the

maximum upward and/or downward volume that can be activated per quarter hour and the

corresponding price for usage in real-time (day D).

From day ahead 18pm & during intraday the day-ahead nominations can be updated per power

plant up until 1 hour prior to delivery during the intraday/exploitation procedure through

IDPCR6

4 CIPU = ‘Coordination of Injection of Power Units’

5 Since 2012 it is possible to offer non-contracted reserves provided by smaller units by means of an Aggregated

PowerPlant (APP) 6 IDPCR = Intraday Production Change Request. This nomination replaces the day-ahead nomination (if existing)

and will serve as the new basis for imbalance tariff calculation if the IDPCR is accepted by Elia

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Elia activates free balancing bids based on a techno-economical ranking as explained in the balancing rules published on the Elia website (http://www.elia.be/en/products-and-services/balance/balancing-mechanism).

Remuneration of the activated energy is based on the nominated prices (pay-as-bid).

Characteristics of intraday & day ahead nominations

Pnominated [MW] for each quarter hour

Pmax_available [MW] for each quarter hour

Pmin_available [MW] for each quarter hour

Upward ramping rate [MW/min] for each quarter hour

Downward ramping rate [MW/min] for each quarter hour

Incremental bid (I-bid) prices [€/MWh] & Decremental bid (D-bid) prices [€/MWh] for each

quarter hour

Separate startup-price [€] & startup-fuel type for the delivery day (not reflected in I-bid prices)

Average Power Plant efficiency as specific fuel consumption (sfc) in [GJ_th/MWh_el] for the

delivery day

Fuel type for the delivery day (in D-1) or for each quarter hour (D) through configurations

Power plant unit type

Electrical zone (locational information)

EAN-code, indicating the TSO-grid access point as well as the specific power unit

Bidding Volumes & Prices

Bidding volumes are derived in an implicit way for each quarter hour & for each power plant by

Elia based on the production schedules (Pnom) and available maximum power (Pmax_available)

and minimum power (Pmin_available). The latter is illustrated in the following figure, in which

all input data was communicated by the ARPs.

All determined volumes are considered divisible.

Because the available margin is determined by Elia based on ex-ante nominations and technical

characteristics it might be possible to have differences between the calculated margin and real

physical available margin. Therefore firmness of these implicit offered balancing bids cannot be

guaranteed by the providers.

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Bidding prices are sent per power unit in D-1 and per power plant in D by the provider and may

be updated until 1 hour prior to delivery time.

Using regulation capacity – activation of free balancing bids

All I-bid- and D-bid-volumes are ranked in a techno-economical merit order. When an activation

of these free balancing bids is required, Elia will start with the activation of the cheapest bid for

I-bids or the most expensive in case of D-bids.

The maximum delivery period is one hour, but in practice volumes are only activated on a

quarter-hour basis & prolonged each quarter if necessary.

The speed of the activation is based on the resp. power plant’s contractual ramping rate

[MW/min]:

Instant activation via a common IT-interface (Probid) for XMW per quarter hour (QH) (red

dashed line) & possible prolonging of previous activations per QH. o In reality the blue curve will be +/- the physical power activated. This blue line will be

determined by the contractual ramping rate or slope of the activation. The energy

delivered, i.e. the surface under the blue curve, will be used in the remuneration and

correction of the ARP’s imbalance perimeter. This concept is called the ‘billable margin’

(BM)

o Remark: this blue curve is not the effective measured power but calculated

contractually for each activation.

Activation remuneration of non-contracted balancing bids

The remuneration for activation is calculated based on the: o Free activation prices offered for intraday balancing I- and D-bids

o The activated energy, calculated according to the billable margin (BM) concept.

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Activation control & penalties

The effective activation of free balancing bids is not verified through a specific activation

control, availability control nor through direct penalties. The ARP’s imbalance perimeter is

corrected with the billable margin. This means that when the energy is not activated, the ARP

supplying the free balancing bids will be in imbalance and has to pay the marginal imbalance

tariff, which is determined by the most expensive activated means of overall regulation capacity

(contracted & non-contracted). The remaining imbalance might even lead to a situation in which

the TSO activates the next (often more expensive) bid on the merit order.

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5. Survey – Assessment of proposal

In order to involve stakeholders in the design of the bid ladder platform a survey was launched. The

survey consisted of an initial proposal by Elia and a set of questions. After consideration of the feedback

of stakeholders a final design proposal has been developed by Elia.

Main characteristics of the initial product proposal

Elia elaborated a first draft proposal of standard products for which some fundamental characteristics

were submitted to Market Players opinion

Portfolio bidding of 15 minutes or 30 minutes standard products

Bid minimum size of 5MW

Divisible bid or not

Availability period

Bid price

Bid direction (i.e. I / D bid)

Type of flexibility and locational information

Conditional bid or not

Survey organization

Elia enforced the following process towards Market Players:

08/05: Survey sent out

29/05: Update of the survey (additional question regarding pricing mechanism)

04/06: Deadline for answers

Week 17/06: 4 additional answers received

The panel of consulted and answering Market Players is the following...

Type Description Consulted Parties Answers

GU Grid Users: Consumer & Aggregator 14 including 1 association 5

BRP Balance Responsible Party & Supplier 7 including 1 association 3 including 1 association

RES Renewable (Wind & CHP) 3 including 2 associations 1

DSO Distribution System Operator 4 0

Exchange Power Exchange 1 1

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List of questions and summary of answers

Question 1:

As explained, the minimum bid size on the bid ladder platform shall be 5MW. Do you agree with this

proposal?

Summary of the received answers

Most of the MP agree with 5MW (including DSM):

Some request a minimum size at 100kW to reduce entry barriers for new entrants while others consider a threshold below 5MW as operational difficult;

Some request that bids offers have 1 decimal after comma.

Elia new proposal

Minimum size at 1MW with every bid in multiples of 0,1MW

Question 2:

In case of divisible products a TSO activates only a part of the total activated volume

In case of indivisible products a TSO can only activate the full offered amount or nothing

Do you think indivisible products are required? Why?

Summary of the received answers

Market Players confirm the indivisibility is an important parameter to represent the technical and economic specifications of the appliances or sources. Divisible and indivisible bids could over time cohabitate to allow the maximum of flexibility

Elia new proposal

No modification

Question 3:

Flexibility provided by load or production might have a fixed cost each time it is requested. There are

two ways of dealing with these fixed costs:

Allow conditional bids: Providers are allowed for the same unit to send multiple bids in which

the start cost is valuated each time for a different volume of activation. In such a case Elia will

not activate other bids once one of the bids has been activated

Allow to send separate start costs next to an activation price. In such a case Elia need to

perform an optimization in order to put this bid into competition with other bids without fixed

costs.

Elia believes that conditional bids are the most pragmatic solution.

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Do you agree with this?

Summary of the received answers

Conditional bid is also requested to deal with fixed costs through the most pragmatic way. No several remunerations of fixed cost when an activation of bid is prolonged

Elia new proposal

Non-conditional and conditional bids with prolongation price

Question 4:

Elia believes that working with standard balancing energy products is the best solution to develop a

balancing market for manual reserves. Do you support this idea?

Summary of the received answers

All of the MP are in favor of Standard products with no additional technical characteristics But different kind of opinion about activation duration: some MPs state that the focus should be on 15min while others (RES) prefer products with longer duration

Elia new proposal

1 fast standard product (15’)

3 Slow standard products (>15’)

Emergency products Question 5:

There are 2 different ways for sending in bids to a platform:

Sending in a bid per quarter-hour; (current system)

Sending in a bid with an availability period (ex. 06:00 -> 10:45) (current proposal)

Do you have a strong preference for one of the solutions?

Summary of the received answers

Question not understood by all MP however based on the correct received answers, Elia concludes that the platform should offer maximum flexibility for sending bids (96 bids of 15’ or 1 bid of 96x15’)

Elia new proposal

Availability period per quarter-hour

Question 6:

Do you agree with the standard products Elia is proposing? If not, which characteristics should be added

to the product definition? Please explain why?

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Summary of the received answers

New characteristics requested:

to have a maximum activation period with maximum consecutive activations

to authorize linked-bids to deal with start cost

to propose long activation time

Elia new proposal

Maximum activation number

Prolongation price

Slow standard product

Question 7

In our current proposal we are proposing to settle the balancing energy in a pay-as-bid scheme.

However the platform will be developed in order to allow an easy switch to a pay-as-cleared

mechanism.

The final pricing mechanism shall be determined in function of:

the required market design to allow cross-border exchange of balancing energy with

neighbouring TSOs.

the NC on balancing and related harmonisation process (cf. proposition of ENTSOe tbd 1year

after NC on balancing enters into force).

Do you agree with the approach to start with a pay-as-bid mechanism and leave sufficient opening for

future evolutions?

Summary of the received answers

Most of MP are in favor to pay as cleared from the beginning to attract more offers, to favor competitive prices, to be compliant with the NC, to be aligned with the settlement applied on the Dutch market

Elia new proposal

Pay as bid but flexible platform which can be easily switched to pay-as-cleared

Question 8:

Do you have other remarks regarding the proposal of Elia? Please explain the 3 most important issues or

concerns.

Summary of the received answers

Firmness It should be clearly stated that the products will be firm only after the Balancing GCT, as described in the NC Balancing.

Elia comments We will respect the stipulations of the final NC on balancing

Compensation How activations will be considered in the imbalance volume calculation of a BRP.

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model for imbalance settlement

Elia comments As explained further in the note the “block-product” shall be used for the imbalance volume calculation. Hence during ramping-up and ramping-down the provider shall be in imbalance. This is consistent with the fact that will not remunerate the ramping energy due to activation (only offered product).

Compatibility between Balancing and Intraday market

The continuous Intraday market is currently offering 15’ products tradable until 5’ before delivery which is in overlap with the Bid Ladder that allows bid selection as from 1h before delivery. Having this risk of refusal by Elia in the last hour before delivery would clearly put MP in a position where they will have to choose either for ID or the balancing and will be detrimental to the functioning of ID (Cf. situation in NL).

Elia comments Considering that all Fast Standard Products shall be activated close to real-time and that Slow Standard Products shall be rarely activated we don’t expect negative effects on the functioning of ID markets. Nevertheless as liquidity on the intraday markets has the highest priority for Elia, we will closely monitor interactions between the 2 markets in order to avoid detrimental effects. The most optimal solution for avoiding interactions between both markets is the correct time setting of the Intraday and balancing Gate Closure Times.

Non-BRP vs BRP

Deal carefully when developing a proper compensation mechanism for large scale development of activating reserves at distribution level in long term. Some Market Parties ask Elia to develop also a solution that can be reachable for non-BRPs.

Elia comments This solution is currently under analysis

Penalty for load subscription

There should be a compensation/exemption of any penalties linked to off-take subscription. If load needs to include this in their price it means an unacceptable discrimination vs. production.

Elia comments Remark is not relevant for the design of the bid ladder platform. Only affects the level of the bid price

Scope Non-contracted Reserves

Request to integrate also contracted reserves (R3load, R3prod, 3DP) on the bid ladder platform

Elia comments On the long run they shall be part of the bid ladder platform as the NC on balancing is stipulating that all manual reserves need to be shared with other TSOs except specific reserves (like ICH & R3DP). In a first step we will concentrate on the non-contracted reserves.

Aggregation threshold

It is stated by Elia that for all units bigger than 25 MW the prequalification shall be done in a non-aggregated way. This threshold penalizes Aggregators that are mainly aggregating units bigger than 25MW. This threshold could then limit:

The reliability of bid offered on the Bid ladder

The added value of the aggregation

The number of sites eligible for offering on the Bid ladder

Elia comments The limit which is determining an individual technical pre-qualification or not shall be based on the volumes which might be offered on the Bid ladder and not anymore on the total power of the unit

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6. Proposal for the design of the new bid ladder platform

As explained in the introduction, this section shall design all aspects of the bid ladder platform. It will

start with a description of the different products and the bidding process. Later on will be described

other aspects of the platform.

Balancing Energy Products

The bid ladder platform shall allow the submission of 3 different kind of balancing energy products to

Elia:

A fast standard product;

Slow Standard products;

Emergency products.

These 3 different types of balancing product should allow capturing all possible flexibility which might be

used for balancing purposes. Hence all balancing actions shall be performed through the bid ladder

platform while the existing CIPU-process shall only be used for congestion management.

All types of products shall be “block”-products which doesn’t reflect necessary the physical constraints

of resources. Differences between the product and physical reality need to be considered in the price

when offering a product to Elia.

Elia believes that the use of high standardised balancing energy products is a key characteristic of a well-

functioning balancing market as well as a precondition to facilitate international harmonisation. These

product definitions should allow:

Providers to compare the bids they have sent with bids from other providers;

Elia to be transparent in the publication of;

o the available balancing energy bids;

o how the offered balancing energy products were activated;

A fair valuation of bids in a merit order list;

o in our proposal providers needs to price themselves the differences between the

standard product and physical reality in their offered bid price;

o In case of open product specifications it would be Elia’s responsibility to correctly

valuate the offered balancing energy products into a merit order list;

Another important reason why Elia proposes standard balancing energy products is the fact that

currently the Netherlands is also using highly standard products. A step towards this direction would

facilitate a future collaboration between the Dutch and Belgian balancing markets.

The total activation time of standard products is not exceeding one hour. There are 2 reasons for this:

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Article 67 (3) of the Network Code CACM states that the intraday gate closure time should not

be later than 1 hour before real time. Hence hourly balancing energy products can only be

activated on a moment where the cross-border intraday market is still active.

As explained in section 3 a re-active balancing market will rarely use balancing energy products

with long activation duration as it incentivizes market parties to fulfil the replacement role.

Logically on the long run the Gate Closure Time for cross-border intraday markets should gradually move

up closer to real time. As a consequence the slow standard products need to disappear one by one in

order to avoid overlaps with the intraday markets and balancing shall be performed only with fast

standard products. Hence it is utmost important that providers which are having slow flexibility

resources- which currently can only be offered through these slow standard products – take the

necessary steps (contractual, organisational, technical,...) in order to enable these resources for being

offered through the fast standard products as soon as possible.

The 3 product categories can be distinguished by 2 parameters: duration & activation time.

Fast standard product

Fast products are having an activation time of 1*15 min and are having an activation delay of 0*15 Min.

This product is the most important balancing product as it shall be used prior to the other balancing

energy products

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Slow standard products

Slow products are having always an activation delay of 1*15 Min and are having different activation

times. We expect slow products to be transitory as on the long run the Intraday Gate Closure Time shall

move closer to real-time.

There are 3 different slow standard products which might be offered to Elia:

Delay of 1*15 Min and an activation time of 1*15 Min

Delay of 1*15 Min and an activation time of 2*15 Min

Delay of 1*15 Min and an activation time of 3*15 Min

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Activation of slow standard products is exceptional and subject to specific rules (to be decided in the

balancing rules7). At least these products shall be used in case there are no volumes available anymore

of the fast standard product.

Emergency Products

The Grid Code is imposing that all power units with an installed capacity bigger than 75 MW are offering

all remaining flexibility to Elia. Although Elia is focusing on a re-active balancing approach it could be

required for Elia to activate reserves which cannot be offered through standard products in exceptional

circumstances. Therefore Elia is keeping the option to activate other reserves than the standard

products via the bid ladder platform.

In the current balancing process Elia is requesting additional volumes for upwards and downwards

regulation when:

Day ahead analysis is showing a risk for incompressibility (lack of downwards regulating

reserves) or shortness (lack of upwards regulating reserves);

During operation it appears that all available standard reserve products are activated.

In both cases a balancing warning is sent out and published on the website.

Once the bid ladder platform is active all power units >75 MW need to assure that – after a balancing

warning has been sent out by Elia - all remaining flexibility is sent to the bid ladder platform in order to

be compliant with the Grid Code. In order to facilitate this, Providers are free to choose the delay and

activation time of their bids.

77

Example lasting imbalances anticipated and 30min products are cheaper than 15min products

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Bid characteristics

In this section will be described how the different products – as previously described – might be offered

to the bid ladder platform.

Each bid of balancing energy shall consist of the following characteristics:

Category Characteristics Mandatory Unit Values

Product

Type

Delay Yes 15 Min Integer (0;1;2;3;....)/ multiple of 15 Min

Activation time Yes 15 Min Integer (0;1;2;3;....)/ multiple of 15 Min

Only possible to be>0 in case the delay of the bid >0

Volume

offered

Bid Size Yes MW 1 decimal (5,0; 5,1;5,2;...;6,0;....) Minimum 1,0 MW

Positive value means produce more of consume less

Negative value means produce less or consume

more

Divisibility No NA Yes or No; default value shall be set to Y

Availability Availability

period

Yes Time Start time (xx:xx) & End Time (xx:xx) where the

minutes are multiples of quarter-hours

Maximum

Activation Time

No 15 Min Integer (0;1;2;3;....)/ multiple of 15 Min

max value for availability period

Conditionality No NA Link to other bid n°

Price Activation Price Yes €/MWh Positive or negative with one decimal

Prolongation

Price

No €/MWh Positive or negative with one decimal

Congestion

management

Locational

information

Y/N EAN Mandatory for resources >25MW

Type of flex Yes NA Load, Production or combination

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Product Type

Delay

This parameter is indicating the delay between an activation request and the start of the bid. The

value is considered to be as a multiple of 15 minutes.

Ex. “1” would mean that the bid – in case of activation – will be only considered 15 minutes after

the activation request. “0” would mean that there’s no activation delay (“fast standard

product”).

Activation time

This parameter is indicating the minimum activation duration of a bid once it gets activated. The

value is considered to be a multiple of 15 minutes.

Ex. “1” would mean that the bid must be activated for at least 15 minutes. “2” would mean that

the bid must be activated for at least 30 minutes.

The activation time can only be longer than 15 minutes for “slow standard products”.

Offered Volume

Bid Size

This parameter is indicating the amount of power which is offered through the bid. Each bid shall at

least offer 1,0 MW. The offered volume shall have 1 decimal. A bid can consist of several units less

than 1 MW, i.e. regulating flexibility can be aggregated.

The direction of the bid (+/-) is included in the Bid Size:

o Bid Size with “+” meaning that a Provider wants to produce more or consume less

o Bid Size “–“ meaning that a Provider wants to produce less or consume more

Divisibility

This parameter is indicating whether a bid can be partially activated or not. The default value of this

parameter shall be set to divisible. The option of non-divisibility might lead to a situation in which

Elia skips a bid on the merit order due to technical constraints (e.g. volume mismatch between offer

and request).

Example of divisible and indivisible bids

Bid 10 MW @80 €/MWh

In case indivisibility: Elia is only allowed to activate the full 10MW

In case of divisibility: Elia is allowed to activate 5MW or more up till 10MW (min. activation size 5 MW)

Availability

Availability period

This parameter is indicating the period a bid is valid (ex. 06:00 until 10:45). A period shall always

start and end at a quarter-hour. The maximum availability period is 24 hours.

Maximum activation time

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This parameter is indicating the maximum number of times a bid can be called off during the

availability period. A prolongation of an activated bid is also considered in this limitation, hence

Providers can limit the total activation duration of a bid.

Ex. “3” means that a bid can be activated 3 times during the availability period. In this case this

means also that after the bids gets activated; the activation can be prolonged 2 times.

Conditionality

This parameter gives the possibility to send in exclusive bids; if one bid gets activated the other bids

aren’t activable anymore.

Price

Activation Price

This is the price which will be paid for the activation of a bid

o In case of a positive price the Provider will receive money for an upwards activation and

needs to pay money for a downwards activation;

o In case of a negative price the Provider will pay money for an upwards activation and

will receive money for a downwards activation.

The Prolongation Price

Providers have the option to give – next to the activation price – a prolongation price. In case Elia

requests to activate a bid - which was already activated in the current time frame -in the next time

frame, the Prolongation Price shall be considered if available. This optional price is giving the

opportunity for Providers to consider that all fixed costs only need to be recovered once in the first

activation.

Congestion management

Locational information

In this field Providers have to indicate the locational information of the resources which are

delivering the flexibility of the bid.

In a first stage the obligation to send location information shall be only applicable for units lager

than 25MW. (Units which have signed a CIPU contract).

Example of conditional bids

Flex unit of 100MW with a variable cost of 60 €/MWh & with a fixed cost of 5.000€

The Provider might send in multiple conditional bids (each time the fixed cost is covered by a different volume) ; once one gets activated

the others will not be activable anymore. These bids cannot be combined with each other and thus are exclusive (‘either…or…’):

Bid 1: offer 100 MW @110€/MWh (indivisible)

Bid 2: offer 50 MW @160€/MWh (indivisible)

Bid 3: offer 25 MW @260€/MWh (indivisible)

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The required information for units smaller than 25 MW still needs to be discussed with the DSO. As

long as there’s no conclusion no location information is required for smaller units.

Flex Type

In this fields Provider needs to indicate whether the bid is composed from flexibility provided by

generation, load or both.

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Process for the bid ladder platform

Technical prequalification

All potential resources which might be offered to the bid ladder platform need to pass first a technical prequalification. There shall be a reassessment in case requirements or equipment change and within a time frame of at least five years.

For all units which are individually able to offer more than 25 MW bids to the platform this prequalification shall be done in a non-aggregated way. For units with smaller available bidding volumes the prequalification may be done in an aggregated way.

In the prequalification the following rules need to be respected for all standard products:

A bid shall be based on physical regulation;

Once the physical regulation used for the delivery of a bid is at the requested power level, it

should be capable to maintain the requested delivery at a stable power level;

Once the delivery of a bid is finished, the physical regulation used for the delivery of a bid should

be capable of going back to their normal level within 15 minutes and stay there;

For the fast standard products an additional rule is applicable:

The physical regulation used for the delivery of a bid should be capable of ramping up to its full

offered capacity within 15 minutes from the order;

The figures below give some example of (aggregated) resources which are respecting the criteria (green)

or which aren’t allowed doing this (red):

Fast standard product

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Slow standard products

All Providers need to ensure that each of their bids is able to fulfil the technical requirements of the bids they are offering. In order to enforce compliancy, a liability clause shall be foreseen in the BSP contract.

Also Elia shall perform prequalification tests as follows;

Test the volume of resources which are compliant with the rules regarding standard products; This test shall be done individually for units which are individually able to offer more than 25 MW bids to the platform. For units with smaller available bidding volumes other units the check shall be performed in an aggregated way.

A separate check shall be performed to prequalify the fast standard products. This test shall be done individually for units which are individually able to offer more than 25 MW bids to the platform. For units with smaller available bidding volumes the check shall be performed in an aggregated way.

A Balancing Service Provider is not allowed to offer more balancing energy products than the prequalified volumes and can only use resources which participated in the prequalification process.

A Provider shall ensure that –if required - the monitoring of the bids is possible. Upon Elia’s request, the Provider shall be able to supply real-time measurements of the activated bids and the relevant reference power production or consumption for each providing unit, for each providing group or each providing unit which is individually able to offer more than 25 MW bids to the platform. In case of an aggregated bid the Provider shall be able to provide aggregated/non-aggregated active power data to check the activation of the bid.

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Bidding process

Elia’s proposal is to have the following operational rules for the bidding process:

Providers are allowed to submit bids after 18h00 day ahead;

Bids can be modified, updated & removed up till the Balancing Gate Closure Time which shall:

o be after the Intraday Cross Border Gate Closure Time;

o ensure sufficient time for common processing of Balancing Energy Bids

After the Balancing Gate Closure Time all available bids on the bid ladder platform shall be firm.

This means once Elia requests an activation of a bid, its price and offered volume cannot be

modified anymore. Firmness implies that, irrespective of the physical reality, at the moment of

the activation Elia shall consider the activation of the offered volume in the BRP perimeter by

performing an adjustment.

After the Balancing Gate Closure Time the volume and price of Balancing Energy Bids can only

be changed by providers upon approval of Elia.

In the future, when the bid ladder platform will be integrated with a cross border platform, a

modification of a bid is only valid once the corresponding bid on the cross border platform has

been modified.

Explanation:

Firmness of products offers different advantages:

o It facilitates transparency on the real available volumes. In case of non-firmness there

might be substantial differences between the offered volumes and the real available

volumes;

o Elia needs to perform the balancing in the most cost-efficient way. This is not possible in

case prices aren’t guaranteed;

o Firm volumes are also reducing the number of activation requests by Elia in case an

imbalance occurs. Indeed this allows a faster activation of the required volumes which

are needed to resolve imbalances;

o As the bid ladder platform allows portfolio bidding, Elia believe that firmness shouldn’t

represent an issue for Providers;

Although Elia strongly believes that all non-contracted resources should be first offered & used

on the intraday markets, Elia will still allow the submission of bids on a day ahead basis. The

most important reason for that is that for organisational reasons not all Providers are able to

submit in bids each hour. The freedom to update & modify bids should enable Providers to offer

their flexible resources also on the XB intraday markets.

In a perfect functioning balancing market (in a normal system state) it should be possible to

accept modifications of bids close-to-real time. However due to the operational and technical

aspects of balancing markets and the close relationship with grid security Elia cannot exclude

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that, in exceptional circumstances, modifications of bids wouldn’t be accepted. In such a case

Elia shall transparently communicate the underlying reason for this.

Once a cross-border balancing market is active, Elia will transfer bids in a firm way to a cross

border platform. In this context it is important that all firm bids on the cross border platform

correctly reflect the available firm bids on the local platforms. Therefore a Provider can only get

a confirmation of his modification request once this has been correctly considered in the merit

order lists of the cross-border platform.

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Congestion management

When activating bids on the bid ladder platform, Elia shall consider information regarding network

constraints in order to avoid new additional congestions. This approach is compatible with the

Framework Guidelines on Balancing as published on September 2012: ““The Network Code on Electricity

Balancing shall require that locational information of balancing resources is used to further optimize the

balancing of the system and perform security analysis to avoid internal and cross-border congestions”.

Moreover within a couple of years, balancing energy bids will be shared with other TSOs on cross-border

common merit order lists. In this context is not logic to increase locally the congestions costs in order to

decrease the balancing cost of other TSOs.

Based on the locational information and type of flexibility Elia shall perform ex ante an analysis in order

detect if there are bids which might create additional local congestions. As on the bid ladder platform

portfolio bidding is allowed Elia will perform the network analysis by considering the worst case scenario

per bid; e.g. Elia shall consider that bid size can be fully activated at each location in the bid.

Example

In case a bid is set to unavailable the Provider shall be informed and gives him the possibility to send in a

new bid, with the remaining flexibility, resources which aren’t located at a network constraint. In the

example above Bid A1 is set to unavailable as there a network constraint on location B. However the

provider of this bid is allowed to send in a new bid with the flexibility resources on the locations A & C.

Ex post all network constraints which affected bid shall be published in a transparent way.

Received incremental bids

Network constraints

Result

Bid A1 100MW @80 /MWh

Location A, B, C

Bid B1 100MW @70 /MWh

Location A

Bid B2 100MW @60 /MWh

Location D

Network constraint on location B & D

Bid A1 100MW @80 /MWh

Location A, B, C

Bid B1 100MW @70 /MWh

Location A

Bid B2 100MW @60 /MWh

Location D

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In order to guarantee correct locational information a liability clause shall be foreseen. In case of

manifest abuse, Providers might be excluded (partially) for a certain period from the bid ladder

platform.

All actions on the bid ladder platform shouldn’t overlap with the congestion management which is

currently handled through the CIPU-process:

Activation of bids on request of Elia shouldn’t cause congestions as ex ante a network analysis

shall be performed in order to avoid this;

A congestion bid requested by Elia in the CIPU-process on a specific location might affect the

availability of the offered bids for balancing on the bidladder platform. The Provider should have

the possibility to actualize the affected bids on the bid ladder platform, therefore corresponding

bids will not be activated for limited time period (ex. 10 min).

The final solution for all units including those smaller than 25 MW (including flexibility connected to the

DSO-grid) is still under discussion with the concerned parties and shall be communicated to the

Providers at least 1 year before this solution gets into operation. Independent from this solution once

the bid ladder platform goes into operation we shall at least require that all bids which are sourced from

power units larger than 25MW8 shall include the locational information.

8 All power plants larger than 25MW are having the obligation to sign a CIPU contract.

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Activation

Elia’s proposal is to have the following operational rules for the activation process:

For each operational quarter-hour per standard product a regulation curve (merit order) shall be

established for the up-regulating bids using the principle of placing the cheapest bid first, and

for the down-regulating bids using the principle of placing the most expensive bid first.

All lists shall be published ex-ante per quarter-hour with the following restrictions:

o Only consider the maximum activation time once a bid becomes unavailable; a bid shall

be consider as available for each quarter-hour during the availability period

o Only consider the cheapest conditional bid

o Only consider the activation price and not the prolongation price

Ex-post all activated bids shall be published.

Elia shall in principle first activate all fast standard products. Activation of slow standard

products is exceptional and subject to specific rules (to be decided in the balancing rules9).

In case of congestions Elia will use the locational information to filter out those I and/or D bids

that would increase or cause congestions. This information will be published to allow Providers

to alter the composition of their bids (by excluding flexibility located at congested access

points).

Elia can skip individual bids in the regulation curve in case of a mismatch between the required

regulation volume and the offered indivisible bid size (e.g. need for 50 MW of regulation power

whereas the next bid on the curve is an indivisible 200 MW bid).

Activation request shall be requested to start by preference at the beginning of a quarter-hour

(except in case of urgent need due to large imbalances).

The activation notice can be as short as 1 min.

Example; a quarter-hour bid available for 15:00 to 15:15 can still be activated at 14:59

99

Example lasting imbalances anticipated and 30min products are cheaper than 15min products

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Settlement

Our proposal is to have the following rules for the settlement process:

Settlement shall be done by applying a pay-as-bid mechanism; this could be reviewed in the

future depending on NC and related harmonisation process (cf. proposition of ENTSOe tbd 1year

after NC on balancing enters into force). Hence the bid ladder platform shall be developed in

order to allow easily a switch to a different pricing mechanism.

To calculate the delivered energy we shall consider the product which has been offered (i.e.

block product) to and activated by Elia, hence not the physical reality10.

For the imbalance adjustments Elia will also apply the offered products (i.e. block product) when

calculating the imbalance volumes of the corresponding BRP.

10

Hence the concept of billable margin –as explained in chapter 4 – shall disappear.

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7. Appendix – Exhaustive answers from all Market Players

Question 1: As explained, the minimum bid size on the bid ladder platform shall be 5MW. Do you agree with this

proposal?

Company Answer Rationales

ARP_1 No In short term, the development of the market for distributed load and generation to provide ancillary services and the activation of new sources of system flexibility should be the objective. The market should be open for all potential flexibility providers. The minimum bid size could be considered as an entry barrier for BSP/BRP, but also for grid users wanting to offer back-to-back balancing capacity to Elia. In this fase of opening the market, the introduction of entry barriers must be avoided. Therefore it would be beneficial not to enforce a fixed minimum bid size. If the bid ladder product description would require this anyway, a minimum size in the range of 0,1MW up to 1MW would attract more market parties and further activate flexibility from the demand-side or distributed generation. Additionally, smaller bid sizes could result in lower bid prices, better reflecting technical and economic characteristics, which would yield a more efficient activation of reserves by Elia. On the top of this, in case flexibility capacity activation is fully automated, there shouldn’t be any rational to apply a minimum bid size like 5 MW In long term, this bid size could always be reconsidered from an efficiency improvement perspective for Elia.

DSM_1 No As stated in the introduction to this document, there should be no entry barrier to this mechanism. As mentioned by ELIA during the last taskforce meeting, 5MW is a proposition based on the observation of the other European DR markets. We believe it is not a proper benchmark for building a new mechanism as European DR markets are old mechanisms built for production and not for consumption. They are moreover soon to be renewed with the coming European Balancing Code. DSM_1 believes that ELIA ought better take into consideration more mature markets regarding demand side participation such as the American ones where the threshold is often 100kW. In Texas for instance, ISO ERCOT has long built a 100kW threshold mechanism where demand plays a huge role : in 2008 during a large windturbine production forecast error, more than 1GW of demand came into action within 10 min to prevent a severe blackout to happen. In addition, European TSOs are trying hard to lower these thresholds as well (see Denmark, Germany) : they are mainly struggling because of IT related issues, which is why DSM_1 believes that ELIA would be better off building a mechanism with the lowest threshold possible right from the start.

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DSM_1 also believes that 5MW is large enough a threshold to prevent new BSP or even small BRP to provide flexibilities to the system through this mechanism. Of course, it is the role of a BSP to aggregate large volumes of flexibilities, but it is a matter of being allowed to start small and grow. One of the main arguments for a 100kW threshold over a 5MW threshold is the kind of flexibility that ELIA wants to see developed in the medium term. With such an energy only mechanism, flexibilities from diesel engines cannot be offered successfully most of the time because of a marginal price exceeding 250€/MWh. Process flexibilities on the other hand have a lower marginal price and are the only ones able to find value on the mechanism with no fixed premium paid. They are usually automated and widely distributed hence the need for a small threshold like 100kW. Finally, 100kW is also the minimum size of a bid on the SPOT market. We believe that Belpex and EPEX implemented such a minimum lot size because it made sense to trade even such a small amount of power. Choosing this threshold would also help to perform the integration of the different markets (no change of size required between unselected intraday offers and bids on the bid ladder).

ARP_2 Yes ARP_2 is of the opinion that a product with a size of 5 MW is in line with the existing products. By proposing products of 5 MW Elia is going for a pragmatic operational approach - which ARP_2 supports - because precisely activating and controlling volumes of power below 5 MW is operationally difficult. Ideally, and in practice, volumes of 25 MW should be activated at a time.

DSM_2 Yes No motivations

RES_1 Yes We zullen altijd moeten aggregeren om dit vermogen bij elkaar te krijgen. Gemiddeld 3 installaties igv op/af schakeling en minimum 10 installaties igv reduceren. Graag wel de 5 MW als start niveau waarbij vanaf dan 100 kW kan worden aangeboden en verrekend. Normaal zullen het volle eenheden zijn die worden geschakeld. (gaande van 800 kW tot 4000 kW).

ARP_3 Yes No motivations

Power Exchange_1

N/A No answers

DSM_3 & DSM_4

No A 1 MW threshold would be better for those consumers that would want to offer directly to Elia. Now all these consumers with less than 5 MW will need to go via the aggregators which limits the numbers of bidding parties for Elia.

Does 5 MW minimum means that that is for ELIA the minimum divisibility. If a block is activated by ELIA: always at least 5 MW?

What is main reason for limiting to min. 5 MW?

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Question 2:

In case of divisible products a TSO activates only a part of the total activated volume

In case of indivisible products a TSO can only activate the full offered amount or nothing

Do you think indivisible products are required? Why?

Company Answer Rationales

ARP_1 Yes It is important that flexibility providers can include the additional elements to their bids representing the technical and economic specifications of the appliances or sources offering the flexibility. The operation of both distributed generation, e.g., CHPs, and flexible load, e.g., cooling or water pumping, are characterized by temporal aspects. It is important that these seasonal as well as intraday requirements can be reflected by entering indivisible bids.

DSM_1 Yes Indivisible products are quite often encountered in demand side management where you curtail or enhance ON/OFF processes. Even with aggregated flexibilities from demand, say of 15MW, you cannot always guarantee that your portfolio can provide 1 or 2 or…or 14MW if required by ELIA. This might be achievable with very large aggregates but not in the short term. Indivisible products are necessary to get demand to participate to the process. Divisibility issues only occur with marginal price setter flexibilities. DSM_1 would understand that should this happen, divisible products are activated although more expensive in €/MWh than an indivisible one. For instance, if only 5MW are needed at some point, and ELIA has an 8MW indivisible product at 80€/MWh and a 10MW divisible offer at 120€/MWh at its disposal, DSM_1 considers that the divisible offer should be selected by ELIA. If, all other things being equal, the 10MW divisible offer was at 140€/MWh, DSM_1 considers that the 8MW indivisible offer should be activated.

ARP_2 Yes First of all ARP_2 is convinced that most value will be captured by the introduction of the bid ladder itself. The design of this bid ladder should – as general rule – be as lean and transparent as possible. In theory divisible products can be useful in order to more accurately optimize in function of the TSO’s needs and the physical assets’ characteristics. At the same time it leads to a more complex market: it will be difficult for market participants to interpret the bid ladder as an optimization will be necessary to determine which marginal price applies at which call-up size. This trade-off (transparency versus optimization) will need to be made. Furthermore, ARP_2 wants to point out that:

some pragmatism will be needed in order to have the characteristics of the physical assets reflected in indivisible products: bid size, …;

one should prevent that bids, which are set as indivisible for pricing reasons, would not be activated while in practice these bids could be divided;

some types of bids are really considered as AON (All Or None) because of the price submitted or the technology associated; this is the case for

38 | P a g e

example for: o bids linked with a start cost; o for technical limitation (non-stable running mode below Pmin); o for technical reasons (shut down of some technology – ex:

windmills, industrial processes). ARP_2 believes that indivisible bids are necessary but that both types of bids – divisible and non-divisible – could over time cohabitate to allow the maximum of flexibility to be offered to Elia via the bid ladder. Anyhow ARP_2 is of the opinion that bids have to be activated by a minimum of 5 MW: divisibility below this level should not be made possible.

DSM_2 Yes For many industrial consumers, it is sub-optimal to run their equipment at levels other than maximum or minimum capacity. This implies a preference for full curtailment of power of running machinery, rather than partial curtailment. To capture all potential of power flexibility on the demand-side, we believe it hence would be useful to have indivisible products.

RES_1 Yes Kans op activeren van half motorvermogen vermijden. Motoren worden vooral bekeken als aan/uit installaties. Op/af-regelen (reduceren) is op dit ogenblik op een beperkt aantal installatie voorhanden.

ARP_3 Yes In case of indivisible products offered divisibly, if partially activated by the TSO, the full activation will take place because of technical reasons. Normally, the corrected BRP portfolio will go in imbalance in the 'good' direction. The imbalance price for this quarter hour will be either his bid price, or better. However, the alfa coefficient might interfere, and make the resulting price uneconomically for the bidder. The BRP will always be on the wrong side of the alfa-coefficient, meaning that he will be long @ the positive price (while negative price will be set by him), and the other way around. Hence, you could offer indivisible products only, but then the alfa should be corrected as well. In case you offer divisible products, you should integrate them in to one bid ladder, but the last order should always be divisible (which will complicate the publication process, not the calculation).

Power Exchange_1

N/A No answers

DSM_3 & DSM_4

Yes Industrial consumers will sometimes need to know upfront what the potential consequences of an activation will be as certain flexibility in the process might be a fixed nr. of MWs. Eg. If Elia would only activate 3 out of the 5 MW offered it means that the industrial client will shutdown 5 MW as it is fixed but will only be remunerated for 3 MW. It is hence also necessary for a correct valuation of the bids (in part of the offers

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Question 3:

Flexibility provided by load or production might have a fixed cost each time it is requested. There are

two ways of dealing with these fixed costs:

Allow conditional bids: Providers are allowed for the same unit to send multiple bids in which

the start cost is valuated each time for a different volume of activation. In such a case Elia will

not activate other bids once one of the bids has been activated

Allow to send separate start costs next to an activation price. In such a case Elia need to

perform an optimization in order to put this bid into competition with other bids without fixed

costs.

Elia believes that conditional bids are the most pragmatic solution.

Do you agree with this?

Company Answer Rationales

ARP_1 Yes Conditional bids are indeed the most programmatic way to deal with fixed costs. Conditional bids valuating fixed costs are also more transparent than the introduction of separate offers for start-up costs. Elia should also consider condition bids between quarter hour, in order to take into consideration maximum activation time per day, or start and stop costs of the flexibility units.

DSM_1 Yes DSM_1 agrees with this approach. On top of the greatest simplicity compared to the suggested alternative, this solution can enable a load aggregator to bid in different combinations of its portfolio without penalizing neither cheap nor expensive offers. If for instance an aggregator has 5MW available at 80€/MWh (typical process curtailment price) and 5MW available at 250€/MWh (typical diesel engine marginal price without margins), the aggregator can bid in 5MW at 80€/MWh and 10MW at 165€/MWh through the use of conditional offers.

ARP_2 Yes ARP_2 believes that Elia is the best placed party to determine which volume of power is needed for balancing the country while market parties are the best placed to calculate the costs associated to their bids. If the time period is fixed and only the volume can vary to integrate the start cost, the option of conditional bids is indeed the best option. This is the reason why ARP_2 agrees with the proposal of Elia to include mutual exclusive conditional bids. Nevertheless ARP_2 urges Elia to analyze the implications of this proposal further in detail, especially paying attention to the following:

market participants may want to use conditional bids to reflect non-monotonous marginal cost curves etc. potentially leading to a large number of conditional bids possibly in combination with the option of divisibility - resulting in complicated interdependencies;

this rather complex option should not lead to the exclusion of some volumes of the bid ladder;

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the way the different bids are presented on the screens should be carefully assessed as a MW can appear in several conditional bids.

DSM_2 Yes DSM_2 fully endorses this proposal

RES_1 Yes Igv motoren zal activatiekost verlagen als langer kan gedraaid worden. Minimum activatietijd hebben de leden toch liefst op minimum op 90 min.

ARP_3 Yes No motivations

Power Exchange_1

N/A Pragmatic aspect of it will be highly dependent of the solution implemented for the Bid ladder. We support that for market parties conditional bids make a lot of sense and represent an attractive solution. However depending on the solution this type of bid will generate implementation challenge with regards to the visibility for the TSO’s and market parties as well as any matching algorithm.

DSM_3 & DSM_4

No It might be the most pragmatic solution but from a cost perspective point of view it is probably not the most suitable option. Eg. if a bid for a 15 min. period is selected and the same unit is selected for the consecutive 15-min. periods, the unit will see its start-up costs being remunerated several times. In full market functioning, you should have sufficient ‘other’ bids that are lowered priced from units that do not have start-up costs anymore, but when activating such an expensive bid, it means the market is already tight and the probability to prolong it is quite high (overpaying in consecutive hours). It would interesting to do an impact analysis on what is the most cost-efficient solution:

Conditional bids incl. start-up costs

Bids with separate start-up costs

Conditional bids but for longer products (1h, multiple hours) incl. start-up costs and activate on both sides when needed.

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Question 4:

Elia believes that working with standard balancing energy products is the best solution to develop a

balancing market for manual reserves. Do you support this idea?

Company Answer Rationals

ARP_1 Yes In order to activate the most sources of flexibility in the most efficient way, two aspects must be balanced:

Standardization of balancing energy products: Working with standardized balancing energy products is indeed the best solution to develop a well-functioning, open and transparent market for reserves. This will also facilitate the reserves activation process by Elia.

Products realistically reflecting the techno/economic characteristics: When certain elements, inherent to the operation of flexibility cannot be included when offering balancing energy products, it could restrict some sources of flexibility from participating to that market.

Therefore we support the idea of having standard balancing energy products, as long as indivisible and conditional bids are allowed and as long as Elia is willing to extend these standard balancing products to new market evolution along the time.

DSM_1 Yes DSM_1 believes that ELIA’s approach is correct. There is a need for standard products in order to provide liquidity and to enable real time transparent technico-economical ranking of the offers. However, careful definition of the products is required so as to enable both consumption and production flexibility to participate to the bid ladder. Standard products are also critical to send a clear and lasting signal to the market so as to enable investment in demand side management technologies.

ARP_2 Yes ARP_2 fully supports this idea.

DSM_2 Yes Yes; will result in liquidity & transparency

RES_1 Yes Ja, op standard producten maar het maakt het niet eenvoudig om met substantieel vermogen deel te nemen in de onbalansregeling wanneer slechts voor 15 – 30 min geschakeld wordt. Er zal mijn inziens geopteerd worden om de geschakelde posities 90-120 min aan te houden. Mijn vermoeden is groot dat hier voor weinig interesse gaat zijn bij de tuinders om hierop te schakelen. Kunnen we een goed reduceer systeem uitrollen dan bestaat de kans dat we +10 MW (op/af) bij elkaar krijgen.

ARP_3 Yes No motivations

Power Exchange_1

Yes This is absolutely vital to guarantee liquidity and facilitate transparency. We however don’t support the proposition to have 15 minutes and 30 minutes products. We understand that the reason why Elia is proposing 30 minutes product is to better reflect the costs for such product that will probably be cheaper. We believe that this measure will not work in favor of the liquidity of the 15 minutes products. So either 30 minutes will cannibalize 15 minutes product or 30 minutes product will not exist. Rather we would propose to think about linked 15 min product that is priced

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differently if 2 linked 15 minutes products are activated consequently by the TSO’s.

DSM_3 & DSM_4

Yes In general we support the idea of working with standard products as this is the most transparent and also quite simple. However we firmly believe that longer time products will be necessary in order to attract industrial demand. Being activated for only 15 min. will for a lot processes not be possible. Especially if the ramping up/down periods are not compensated in the BRP unbalance invoice, however this is not clear in the explanation. This together with the min. 5MW threshold makes the product not very attractive. Further to this:

Making products too standard might force all consumers to go via aggregators which will reduce the nr. of bidding parties

Make sure that the product requirements are not stricter to what the grid really needs

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Question 5:

There are 2 different ways for sending in bids to a platform:

Sending in a bid per quarter-hour; (current system)

Sending in a bid with an availability period (ex. 06:00 -> 10:45) (current proposal)

Do you have a strong preference for one of the solutions?

Company Answer Rationales

ARP_1 No It is important that the way for sending in bids to the bid ladder platform is not restricting from participating to the platform or to include specific characteristics of some sources of flexibility. Furthermore, it should be considered that the way of sending in bids can easily be implemented in an automated way.

DSM_1 Yes DSM_1 strongly believes that the best solution lies with the current system of a bid per quarter hour. It is more flexible than the current proposal, and there are a few points to also consider:

During the last taskforce meeting, we have heard arguments against the current system of a bid per 15 min timestep because stakeholders needed to fill in 96 values a day. This cannot be a valid reason for choosing the other model when information technologies are so easily accessible to all stakeholders no matter their size.

It is very hard to change from an availability period based structure to a 15min based one. Stakeholders in France for instance would like to move from a period based model to an hourly or half-hourly based model to better stick to SPOT market prices dynamics while dispatchers at RTE would like to keep the availability periods to stick with the dynamics of the national load curve.

It is better for the development of demand side management that bids can be offered and modified as close to real-time as possible. Availability period model are a barrier to the development of offers from demand site whose flexibility might not be present during a full availability period. In addition, if a problem occurs on site, the aggregator should be granted the possibility to remove offers quickly so as not to default in case of an activation by ELIA, and to offer the bids again when the situation is back to normal on site. An availability period model prevents offers to be made available after the beginning of a period.

Finally, DSM_1 believes that a 15min based model suits more an energy only mechanism than an availability period based model. With the latter often comes the need to pay an availability fee, which implies a need for a D-1 gate closure. This is too far away from real-time to enable fast DR from load to get developed.

ARP_2 Yes Although this shouldn’t be a stumble block, it makes sense to keep the quarter-hourly nominations as this makes the transition for existing market participants

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easier because no changes to existing systems necessary. For new market entrants the cost of implementing one or the other should be the same.

DSM_2 No But, bid in availability window allows aggregators & industrial consumers to reduce the amount of time they have to spend on submitting bids.

RES_1 No No motivations

ARP_3 Yes We would be sending bids per quarter-hour. It is the market standard, which allows for a good combination of the systems we operate in day-ahead, intraday,... the rest of the market.

Power Exchange_1

N/A Question: In this case can this product be activated for multiple periods?

DSM_3 & DSM_4

Yes No strict preference. Bit more in favor of current proposal

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Question 6:

Do you agree with the standard products Elia is proposing? If not, which characteristics should be added

to the product definition? Please explain why?

Company Answer Rationales

ARP_1 No We suggest to consider other characteristics, as listed below: Generation/load shifting aspects: Some types of generation or load have a minimum or maximum (scheduled) number of operating hours per day. Upward or downward activation of these types of flexibility will create intraday shifting effects. This is especially the case with the new sources of flexibility that will be offered on the bid ladder platform. It would be interesting for Elia to schedule these load shifting effects in order to avoid to create new imbalances in the upcoming hours. Temporal conditional aspects: Conditional offers are now suggested for increasing the volume (expressed in MW) offered during one quarter and correspondingly reducing the activation prices. This condition only affects one period. It would be interesting to allow temporal conditional offers for increasing the period of activation (expressed in quarters) keeping the activated volume (expressed in MW) constant. This would be realistic when the cost of keeping the activated volume online in the upcoming quarter is different from the cost in the previous quarter. Exclusive bids/maximum activation period/maximum consecutive activations: Some types of generation or load have a minimum or maximum (scheduled) number of operating hours per day. This means that upward or downward regulation can only be activated during a limited period, e.g., 2 hours per day or 4 quarters consecutively. It would be interesting if flexibility providers could indicate how often, or how long it can be activated.

DSM_1 No In line with the answers to the previous questions, DSM_1 believes that to get demand to participate massively to the bid ladder, there is a need for simpler and more flexible products. If 15 to 30min mobilization times are a good thing, the minimum size of the products should be of a 100kW with every bid in multiples of 100kW. There should not be an availability period for a bid but the aggregators should be allowed to nominate a 15min based program which is more flexible and sticks more to the reality of on-site constraints.

ARP_2 No ARP_2 is clearly in favor of 15 minutes blocks. The half-hourly product has limited upside potential and would add complexity to the market and make additional optimizations necessary to correctly interpret the bid ladder. A more useful option would be to have linked bids: these bids would only become active when a previous bid has been selected. This could be useful for a prolongation of a power plant: when a power plant has been started in a previous quarter, the price for the following quarter will be lower. It is obvious that a clear and transparent selection procedure has to apply. On top of that ARP_2 still has some questions with regard to the proposed product:

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As the activation time is 1 minute for both products, isn’t Elia excluding certain technologies or even R3 reserves?

Elia defends in this document the reason why hourly products are not withheld in the standard products as it concerns mainly a reactive balancing. But could a situation occur in case of a structural incompressibility (for example) where certain products with a block - period longer than half-hour due to the technology would be called in a pro-active way (as they are structural and substantial)? Will the proposed restriction not exclude an important part of the flexibility, also outside the Elia balancing zone?

How could one integrate in these 2 products a maximum activation period? Ex. 2 hours activation per day?

Elia refers to the cross border platforms, but current cross border intra-day doesn’t allow quarter hourly products (although available in Germany). Is the idea to evolve towards quarter hourly exchange cross border. Potentially the 15 minutes bids of Elia could be arbitraged against hourly cross border bids.

DSM_2 Yes Simple, transparent products have been proposed by ELIA. We endorse this.

RES_1 N/A Ik zou geven dat een block-bid (cfr belpex & intraday) interessant kan zijn voor ons (minimale runtime) maar op dat moment komen we buiten de re-active balancing market en zullen jullie ons doorverwijzen naar de intradaymarket.

ARP_3 Yes No motivations

Power Exchange_1

No NO –Cf. our answer at question 4.

DSM_3 & DSM_4

N/A As already mentioned : A longer time product will be needed (1 – 4h) and take the risk of having to do bi-directional activation given current sometimes very long same NRV – direction system imbalance. Furthermore there should also be a compensation/exemption of any penalties linked to offtake subscription. If load needs to include this in their price it means an unacceptable discrimination vs. production. Some additional elements to focus on:

cross border alignment: Nl alignment is nice but as Tennet is first netting Germany, it doesn’t bring the expected results to Belgium

Focus more on pushing GRD’s on correctly allocating solar to perimeters.

Having experience with the German feed now (50 hz), why not push towards feed-in (for system stability)…

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Question 7

In our current proposal we are proposing to settle the balancing energy in a pay-as-bid scheme.

However the platform will be developed in order to allow an easy switch to a pay-as-cleared

mechanism.

The final pricing mechanism shall be determined in function of:

the required market design to allow cross-border exchange of balancing energy with

neighbouring TSOs.

the NC on balancing and related harmonisation process (cf. proposition of ENTSOe tbd 1year

after NC on balancing enters into force).

Do you agree with the approach to start with a pay-as-bid mechanism and leave sufficient opening for

future evolutions?

Company Answer Rationales

ARP_1 N/A No answers

DSM_1 Yes DSM_1 agrees with such a pragmatic approach, which enables the development of a new mechanism without waiting for a final version of the NC.

ARP_2 No The proposed settlement mechanism is pay-as-bid, while the NC ‘Balancing’ (article 22) is clearly in favor of marginal pricing (pay-as-cleared). While ELIA recognizes that it could have to be reviewed in the future, the current wording of the proposal seems to underestimate the clear preference in the NC ‘Balancing’ for marginal pricing. It would thus be a missed opportunity not to bring the settlement process in line with practices on European level. Moreover, since this proposal has the explicit goal of converging the Belgian and Dutch reserve markets (page 11 §1), it should be pointed out that Tennet currently uses marginal pricing for its settlement process.

DSM_2 N/A No answers

RES_1 N/A No comments

ARP_3 Yes It is ok to start with a pay-as-bid scenario. However, as liquidity increases, a switch to a pay-as-cleared mechanism should follow (if allowed for by the NC etc...).

Power Exchange_1

N/A No answers

DSM_3 & DSM_4

N/A We believe that it would be good to perform an impact analysis on the effect of moving to a pay-as-cleared system for the bid ladder/free reserves. In case the additional cost of it is relatively limited we believe moving to pay-as-cleared would have following advantages:

easier for consumers to bid in – now they will need to perform an analysis of the /gamble on the expected price the others will bid in at. Energy companies can more easily perform this analysis than consumers due to info asymmetry (more feeling with intraday OTC trade, modelling, ...)

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risk of destroying welfare by bids that are not competitive although their underlying cost is cheaper than the most expensive bid selected (effect of bad bid price analysis –see a))

discrimination between system imbalance priced marginally vs. bids price pay-as-bid. This will create an additional complexity for bidding as one need to choose between not bidding to the bid ladder (or at very high price) and go in imbalance as the remuneration on the imbalance market is expected to be higher. So this might reduce volumes again.

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Question 8:

Do you have other remarks regarding the proposal of Elia? Please explain the 3 most important issues or

concerns.

Company Issues

ARP_1 Issue 1 Communication requirements and protocols: The different phases in the CIPU framework long ahead of real-time should indeed be avoided to simplify the bidding procedure and related IT requirements. However, the development of entirely new IT requirements should be avoided. Issue 2 We welcome the current concern at Elia level and expressed during the task force regarding the “Vol d’énergie”. This issue should be carefully dealt with and a proper compensation mechanism should be set up supporting large scale development of activating reserves at distribution level in long term.

DSM_1 Issue 1 The question of the separation between BSP and BRP is not treated. It is however a critical point if ELIA wants BSPs to actively participate to the balancing of the grid. France has implemented this system back in 2003 and is going one step further with the new NEBEF rules that are currently submitted to remarks from the stakeholders. We believe that demand side management is not the field of expertise of electricity suppliers and that ELIA would greatly benefit from giving BSP an official status. Nowadays, suppliers do not seem to see the value in demand side management and hence do not try and sign agreements with BSPs to exploit the flexibilities within their portfolio. This situation of monopoly is what prevents demand side management to grow properly and quickly. Issue 2 The pricing of an offer on the proposed architecture of the bid ladder is difficult, nearly impossible without taking a risk on the price. Even under the hypothesis of an activation only at multiples of 15min, there are uncertainties associated with the determination of the price of an offer that needs to be deposited until one hour before possible activation. The bidder is not in position to know an hour in advance the negative imbalance price nor the positive imbalance price that he needs to incorporate back into his bid price to break even. This is also a good reason to consider again the relationship between BSP and BRP because this pricing issue and the separation question are somehow related.

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ARP_2 ARP_2 wants to put forward following issues and concerns:

Elia foresees the option to spread the starting cost (if any) over a variable volume via the conditional bids, but how will Elia allow to take into account the starting costs on consecutive products linked to the same asset? In this case, not the volume but the time is a variable parameter to define the offer. As offers could vary from quarter-hour to quarter-hour, the merit order could change and activation of assets could also change every quarter-hour.

The goal of the bid ladder is to include a bigger volume of flexibility from the market which is currently not included in the CIPU, did Elia make the analysis if all assets under the CIPU will be conform the proposed standardized products?

Regarding the firmness of the bids (page 13) the proposal is a bit fuzzy about when exactly a bid is firm. On the one hand, ‘All bids sent on the bid ladder platform shall be firm’, however, ‘Bids can be modified, updated & removed up till 1 hour before real time’. It should be more clearly stated that the balancing products shall be firm only after Balancing Gate Closure Time, again in line with the NC ‘Balancing’ (article 17.1).

The first remark concerns the overlap with the intraday market. As it’s possible to trade until 5 minutes before the real time on the Continuous Intraday Market and the bids are ‘blocked’ 1 hour ahead by Elia on the balancing market, coordination is needed. ARP_2 would recommend to sit together with Elia, Belpex and Market Parties to see how the market design should look like with regard to this important overlap. ARP_2 pleads for no overlap on the two markets.

Elia must ensure that use of type and locational information (page 11) does not result in discriminatory behavior. Deviating from the economically optimal call-up should be an exception and subject to proper publication, reporting and regulatory supervision.

DSM_2 Issue 1 We would appreciate a pilot with DSO connected load, to check feasibility in parallel to operational roll-out for TSO connected load.

RES_1 No issues

ARP_3 Issue 1 reserved capacity (R3 production and R3 dynamic load) should be allowed to participate in the bid ladder process. It allows them to recover variable costs at the time of activation, instead of at the time of auctioning the reserve capacity, which allows for lower reservation prices (better for society in general through the tariffs).

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Elia remains certain of its reserves, for this capacity is still offered in the balancing market (so prohibited from participating to the free market). Issue 2 A B2C interface for this kind of work seems unnecessary to me. From a practical point of view, no one will be using it. However, the B2B should be kept as simple as possible.

Power Exchange_1

Issue 1 Power Exchange_1 has major concerns with regards to the operational rules proposed in page 13:

Opening of Bid Ladder in Day Ahead 18.00 can only be conceived if an integration exists with ID platform (Cf. discussion in bilateral meeting and reaction of the MP in the Bid ladder TF in March)

It looks odd to freeze the bid ladder (no new entry and update) if the activation time of the bid offered is =< 15 minutes. 20 minutes seems more reasonable and would let the opportunity to solve the imbalance observed via ID market. In your proposition implicitly you stop the ID market 1 hour before delivery where today it is 5 minutes before delivery

Issue 2 It is not clear in the proposal when the firmness should be guaranteed. By deduction we understand that firmness can only be guaranteed an hour before delivery for 2 reasons: 1.

firmness guaranteed before that 2. Elia will not activate bid prior to an hour before delivery Having this risk of refusal by Elia in the last hour before deliverywould clearly put MP in a position where they will have to choose either for ID or the balancing and will be detrimental to the functioning of ID (Cf. situation in NL) Should Elia go in this direction, you are implicitly stopping the ID option an hour before delivery (cf. above). Market parties will not take the risk. We see this behavior already today with the IDPCR. (Given the fact that deviation might be refused after an hour.) Issue 3 The proposal described in this document looks very similar to the solution developed by Tennet in 2000. Is there a willingness to be as close as possible to Tennet model to have quickly a cross border market? We would have thought that the TF would have been used to develop a new Bid ladder concept aiming to achieve the objective set by the TSO’s (this including an efficient interaction with the intraday market to limit reactive balancing actions). As expressed earlier to Elia bilaterally and in the TF we believe that the model as currently develop by Tennet is not well functioning with the intraday market (Cf. presentation attached to the mail and presented during our last bilateral meeting) We would also like to point out that Tennet expressed their willingness to discuss this issue with us (cf. minutes of our meeting with Tennet in September sent earlier) in the framework of the cross border initiative

DSM_3 & DSM_4

Issue 1 Longer time products might be required for following reasons:

If an industrial process needs a min. of 2h at a given level in order to stabilize.

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With a 15-min. product it would mean that he would be 1h 45 in positive imbalance and hence the spread between belpex and positive imbalance price should be taken into account in the bid which is difficult. Also as the BRP is corrected he will have an impact which might complicate BSP/consumer & BRP relationship.

Solve the issue of start-up costs being remunerated several times in case of prolonged activation of the same unit

Issue 2 The issue of compensating/exemption of the penalty linked to offtake subscription is important. Other practical points:

18h00 why not allow earlier introduction ? (that is then on your screens only activated after 18:00 hrs?

Direction of the bid : it would perhaps be less confusing for load and still understandable for generation if the convention would be “sell” iso “+” and “buy” iso “-“

Type of flexibility : We do not see what additional value this information brings to congestion management if you already have the locational information.

Provide real-time measurement of bid activation, reference consumption: iso putting the threshold at 25 MW of active power output we would prefer that you need to perform this in case you intend to put bids of more than 25MW on the platform

in case of XB-platform I do not really see why having at this moment still a local and XB-platform ? Why not bid in directly to the XB-platform. Which would avoid the delays in terms of confirmation of changes to bids.

Article 67 (3) of the Network Code CACM states that the intraday gate closure time should not be earlier than 1 hour before real time. Hence hourly balancing energy products can only be activated on a moment where the cross-border intraday market is still active.

DSM_5 Issue 1 It is stated by Elia that for all units bigger than 25 MW the prequalification shall be done in a non-aggregated way. This threshold penalizes Aggregators that are mainly aggregating units bigger than 25MW. This threshold could then limit:

The reliability of bid offered on the Bid ladder

The added value of the aggregation

The number of sites eligible for offering on the Bid ladder Issue 2 Concerning the products:

we are in favor of having long activation time (slow standard products);

About emergency product, is it possible to have an activation delay upper than 15min? or an activation time upper than 45min?

Issue 3 We would like to have a consultation in order to discuss several topics about non-BRPs becoming active on the Bid Ladder:

Mechanism to control actual activation

Mechanism to deal with the “vol d’énergie”

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Aggregation modalities