Channel TSOs proposal for a methodology for splitting long- term cross-zonal capacity in accordance with Article 16 of

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Channel TSOs proposal for a methodology for splitting long- term cross-zonal capacity in accordance with Article 16 of

the Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a Guideline on Forward

Capacity Allocation

20 January 2020

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January 2020 Page 2 of 9 Table of Contents

WHEREAS ... 3

GENERAL PROVISIONS ... 5

Article 1 Subject matter and scope ... 5

Article 2 Definitions ... 5

SPLIT OF LONG-TERM CAPACITY ... 5

Article 3 Coherence with the long-term capacity calculation ... 5

Article 4 Splitting Ranges ... 6

Article 5 Capacity Split Principles ... 6

Article 6 Capacity Split Assessment Process ... 7

Article 7 Reporting ... 7

FINAL PROVISIONS ... 8

Article 8 Implementation ... 8

Article 9 Publication... 8

Article 10 Language ... 8

ANNEX 1 Splitting Ranges ... 9

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January 2020 Page 3 of 9 WHEREAS

(1) This document (hereafter referred to as “Splitting Rules Methodology”) is a common proposal developed by all Transmission System Operators (hereafter referred to as “TSOs”) within the Channel Capacity Calculation Region (hereinafter referred to as the Channel Region), as defined in accordance with Article 15 of Regulation (EU) 2015/1222 establishing a guideline on capacity allocation and congestion management (the “CACM Regulation”), regarding the proposal for a methodology for splitting long-term cross-zonal capacity. This proposal is required by Article 16 of Regulation (EU) 2016/1719 establishing a guideline on forward capacity allocation which entered into force on 26 September 2016 (herein referred to as the “FCA Regulation”).

(2) In accordance with Article 16(1), the common proposal for the Splitting Rules methodology should be developed no later than the submission of the capacity calculation methodology referred to in Article 10 of the FCA Regulation.

(3) In accordance with Article 16(1) the Splitting Rules Methodology shall propose a methodology for splitting long-term cross-zonal capacity in a coordinated manner between different long-term time frames within the respective region.

(4) The common proposal for the Splitting Rules Methodology shall be subject to consultation in accordance with Article 6 of the FCA Regulation, and subject to approval by all regulatory authorities of the Channel Region in accordance with Article 4 of the FCA Regulation.

(5) This Splitting Rules Methodology shall fulfil the conditions set out in Article 16(2) of the FCA Regulation:

a. It shall meet the hedging needs of market participants;

b. It shall be coherent with the capacity calculation methodology;

c. It shall not lead to restrictions in competition, in particular for access to long-term transmission rights.

(6) This Splitting Rules Methodology should contribute to and not in any way hinder the achievement of the aims of Article 3 of the FCA Regulation. This Splitting Rules Methodology:

a. promotes effective long-term cross-zonal trade with long-term cross-zonal hedging opportunities for market participants by allowing flexibility in the splitting of long-term capacity to account for market requirements;

b. does not hinder the optimisation of the calculation and allocation of long-term cross-zonal capacity, since the Splitting Rules shall follow the capacity calculation and account for market requirements;

c. provides non-discriminatory access to long-term cross-zonal capacity by providing a mix of product periods via the use of maximum and minimum splits;

d. ensures fair and non-discriminatory treatment of TSOs, the Agency, regulatory authorities and market participants by applying the same common principles on all Bidding Zone Borders within the Channel Region, and by applying the same range of parameters on all interconnectors within each Bidding Zone Border;

e. respects the need for a fair and orderly forward capacity allocation and orderly price formation;

f. ensures and enhances the transparency and reliability of information on forward capacity allocation through requiring publication of relevant information and, where necessary and beneficial, supporting materials;

g. contributes to the efficient long-term operation and development of the electricity transmission system and electricity sector in the Union, by meeting the conditions of Article 16(2) of the FCA Regulation and providing the flexibility for market requirements to be addressed over the long-term without increasing administrative burden.

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January 2020 Page 4 of 9 (7) This Splitting Rules Methodology shall apply to all capacity made available for allocation within the requirements in Directive 2009/72/EC, Article 32 relating to Third-party access, which are therefore made available for allocation under the conditions in the FCA Regulation.

SUBMIT THE FOLLOWING CHANNEL SPLITTING RULES METHODOLOGY PROPOSAL TO NATIONAL REGULATORY AUTHORITIES OF THE CHANNEL REGION

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January 2020 Page 5 of 9 GENERAL PROVISIONS

Article 1

Subject matter and scope

1. As required under Article 16 of the FCA Regulation, each TSO, in coordination with all the other TSOs in the capacity calculation region, shall develop a proposal for the splitting of long-term cross-zonal capacity in a coordinated manner between different long-term time frames within the respective region.

2. This Splitting Rules Methodology is the common proposal of all TSOs of the Channel Region in accordance with Article 16 of the FCA Regulation.

Article 2 Definitions

1. For this proposal, the definitions in Article 2 of Regulation (EU) 2019/943, Article 2 of the FCA Regulation and Article 2 of the Harmonised Allocation Rules (“HAR”) shall apply.

2. In addition, the following definitions shall apply:

a) ‘Capacity Split’ shall mean the specific volumes being made available by the Responsible TSO(s) for allocation on the concerned Interconnector in each long-term timeframe.

b) ‘Interconnector’ shall have the meaning given in Regulation (EU) 2019/943. Multiple Interconnectors can exist on a Bidding Zone Border.

c) ‘Long-Term Capacity Calculation’ means the common coordinated capacity calculation as set out in the capacity calculation methodology in accordance with article 10 of the FCA Regulation.

d) ‘Long-Term Cross-Zonal Capacity’ means, for each Interconnector, the Nominal Capacity less the capacity reserved for daily allocation.

e) ‘Nominal Capacity’ shall mean the ‘maximum HVDC active Power transmission capability’ as defined in Commission Regulation (EU) 2016/1447 and taking account of the losses of the Interconnector.

f) ‘Responsible TSO(s)’ shall mean the Channel Region TSO(s) responsible for the allocation of the cross- zonal capacity of a particular Interconnector.

g) ‘Splitting Range’ shall mean the maximum and minimum percentage of an Interconnector’s Long-Term Cross-Zonal Capacity that shall be made available for allocation in each long-term timeframe, or group of long-term timeframes, for each Interconnector.

SPLIT OF LONG-TERM CAPACITY Article 3

Coherence with the long-term capacity calculation

1. In accordance with FCA Regulation Article 16(2)(b), the Splitting Rules Methodology shall be coherent with the capacity calculation methodology. Consequently, the total volume of Long-Term Cross-Zonal Capacity offered for forward capacity allocation in the Capacity Split cannot exceed the net transmission capacity (“NTC”) as given for that respective time frame, hence:

a) The total volume of Long-Term Cross-Zonal Capacity allocated in the annual time frame cannot exceed the annual NTC as determined by the Long-Term Capacity Calculation. The total volume is equal to the sum of the allocated volumes for;

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January 2020 Page 6 of 9

• all the long-term products with a delivery period greater than a month, defined in the regional design of long-term transmission rights methodology required by the FCA Regulation Article 31;

and

• monthly products, if allocated before the monthly NTC, as determined by the Long-Term Capacity Calculation, is known.

b) The total volume of Long-Term Cross-Zonal Capacity allocated in the monthly time frame cannot exceed the monthly NTC as determined by the Long-Term Capacity Calculation. The total volume is equal to the sum of the allocated volumes for all the long-term products defined in the regional design of long- term transmission rights methodology required by the FCA Regulation Article 31.

2. Once an annual or monthly NTC has been determined by a Long Term Capacity Calculation, any subsequent calculation that results in a lower annual or monthly NTC will result in any allocated capacity above the revised NTC being curtailed by the relevant TSO in accordance with the article 57 of the HAR. No additional Long-Term Cross-Zonal Capacity being made available in the relevant time frame.

Article 4 Splitting Ranges

1. The Splitting Ranges shall be harmonised across all Interconnectors in the Channel Region, and the values are given in the Annex 1 of this Splitting Rules Methodology.

2. The same Splitting Range shall apply to both directions of capacity.

3. Long-term timeframes with a shorter delivery duration than monthly shall be grouped into a single Splitting Range for those timeframes.

4. The Responsible TSO(s) can offer for allocation less than the minimum % range identified in Annex 1 in the following situations:

a) Capacity cannot be offered for allocation due to the Long-Term Capacity Calculation result being less than the minimum percentage.

b) Capacity is not offered for allocation due to an outage that lasts the duration of the timeframe concerned.

c) An Interconnector has been unavailable for an extended period during the calendar year or is yet to begin operations.

Article 5

Capacity Split Principles

1. The Capacity Split shall contain volumes determined for each long-term timeframe, or group of timeframes, related to each Interconnector, for a period of a whole calendar year (or part thereof).

2. In accordance with Article 17 of Regulation (EU) 2019/943 Channel TSOs reserve a minimum of 10% of the interconnection capacity for daily allocation from the Nominal Capacity. As a result, the Long-Term Cross- Zonal Capacity can be up to 90% of the Nominal Capacity for the Capacity Split.

3. The Capacity Split for each Interconnector shall:

a) Be determined independently for each direction;

b) Respect the Splitting Ranges except in the situations detailed in Article 4; and

c) Be determined solely by the Responsible TSO(s) relating to the Interconnector in question.

4. The Capacity Split shall be determined by the Responsible TSO(s) by conducting analysis based on factors such as;

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January 2020 Page 7 of 9 a) historic allocation results and prices, e.g. number of participants to ensure enough liquidity in any given

auction, the timing of the auction, the volume of the bids against the volume offered;

b) forward energy curves and fuel price forecasts, e.g. indicators of the potential value and price spreads over various timeframes which indicate how market participants value capacity;

c) planned market evolutions, e.g. introduction of new competitors on the border or within the region, new regulatory requirements and market design changes;

d) new technologies; e.g. new technology could change energy demands within the market; and e) direct feedback from market parties e.g. bilateral customer feedback on the capacity offered and

auctions. All the above factors are considered to develop a Capacity Split that facilitates market hedging opportunities across each of the Channel borders.

Article 6

Capacity Split Assessment Process 1. Provisional version of the Capacity Split:

a) The Responsible TSO(s) for each Interconnector shall determine a provisional version of the Capacity Split, at least each year, in accordance with the terms of Article 5, based on the Long-Term Cross-Zonal Capacity.

b) The Responsible TSO(s) shall publish the provisional version of the Capacity Split in accordance with Article 7.

2. Following the first annual Long-Term Capacity Calculation:

a) The Responsible TSO(s) for each Interconnector may amend the Capacity Split to ensure that future allocations can fulfil this Splitting Rules Methodology and meet the requirements of market parties, in accordance with the terms of Article 5, based on the result of the Long-Term Capacity Calculation.

b) The Responsible TSO(s) shall then publish a Capacity Split in accordance with Article 7.

3. Following each subsequent Long-Term Capacity Calculation:

a) The Responsible TSO(s) may reassess the Capacity Split to ensure that future allocations can fulfil this Splitting Rules Methodology and meet the requirements of market parties, in accordance with the terms of Article 5.

b) The Responsible TSO(s) may amend the Capacity Split and publish in accordance with Article 7.

Article 7 Reporting

1. The provisional version of the Capacity Split for each delivery year and the Nominal Capacity shall be published by the Responsible TSO(s) of each Interconnector on the website of the Allocation Platform at the same time as the provisional Auction calendar pursuant to the HAR.

2. The Capacity Split shall be published by the Responsible TSO(s) of each Interconnector on the website of the Allocation Platform:

a) Before the first allocation of capacity relating to that delivery year, following the Long-Term Capacity Calculation; and

b) Following each revision of the Capacity Split in accordance with Article 6 of this Splitting Rules Methodology.

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January 2020 Page 8 of 9 3. In January each year, a report may be published by each Responsible TSO(s) on their website detailing any changes to the Capacity Split resulting from reductions to the Long-Term Cross-Zonal Capacity imposed by the results of the Long-Term Capacity Calculation over the previous calendar year.

FINAL PROVISIONS Article 8 Implementation

Implementation of this Splitting Rules Methodology shall be aligned to the implementation of the Long-Term Capacity Calculation for each Interconnector starting with the first calendar year for which no Long-Term allocation has yet taken place.

Article 9 Publication

This Splitting Rules Methodology shall be published without undue delay after the approval by all relevant regulatory authorities or ACER in accordance with article 4(13) of the FCA Regulation.

Article 10 Language

The reference language for this Splitting Rules Methodology shall be English. For the avoidance of doubt, where TSOs need to translate this Splitting Rules Methodology into their national language(s), in the event of inconsistencies between the English version published by TSOs in accordance with Article 4 (13) of the FCA Regulation and any version in another language the relevant TSOs shall, in accordance with national legislation, provide the relevant national regulatory authorities with an updated translation of the Splitting Rules Methodology.

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January 2020 Page 9 of 9 ANNEX 1

Splitting Ranges

The following ranges shall apply to each Interconnector on all Channel Region Bidding Zone Borders in both directions.

100% of the Long-Term Cross Zonal Capacity shall be split in accordance with the above table. The reserved capacity for daily allocation is not included in this percentage.

Timeframe Min % of Long-Term Cross-Zonal Capacity

Max % of Long-Term Cross-Zonal Capacity

Annual 5% 95%

Seasonal 0% 90%

Quarterly 0% 90%

Monthly 5% 95%

Sum of all Long-Term timeframes

shorter than monthly 0% 90%

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Explanatory note for:

Channel TSOs proposal for a methodology for splitting long- term cross-zonal capacity in accordance with Article 16 of the Commission Regulation (EU) 2016/1719 of 26 September 2016

establishing a Guideline on Forward Capacity Allocation

20 January 2020

Disclaimer

This explanatory document is submitted by all Channel TSOs to all Channel NRAs for information and clarification purposes only accompanying the “Channel TSOs proposal for a methodology for splitting long- term cross-zonal capacity in accordance with Article 16 of the Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a Guideline on Forward Capacity Allocation”

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Channel Splitting Rules Explanatory note

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Tables of contents

1. Introduction ...3

2. Context for splitting rules within the wider processes ...3

3. Principles ...4

4. Option Analysis ...5

5. Methodology Development ...6

6. Definition for Nominal Capacity ...8

7. New Interconnectors ...9

8. Provisional vs later splits ... 10

9. Day ahead reservation ... 10

10. Explanation on how we use various factors to calculate the split ... 10

11. Process example/walkthrough ... 11

12. Implementation timeline examples (including new interconnector example) ... 14

13. Publication and reporting requirements ... 15

Annex 1 - Responsible TSOs ... 16

Annex 2 - Option Analysis ... 17

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1. Introduction

Article 16 of the Commission Regulation 2016/1719 establishing a guideline on Forward Capacity Allocation (hereinafter referred to as “FCA Regulation”) requires TSOs of the Channel CCR jointly to develop a proposal for a methodology for splitting long-term cross-zonal capacity in a coordinated manner between different long-term time frames within the respective region.

The FCA Regulation states that, in the interests of developing a genuinely integrated electricity market, efficient hedging opportunities should be developed for generators, consumers and retailers to mitigate future price risk in the area in which they operate. A well-functioning market should also provide consumers with adequate measures to promote more efficient use of energy, which presupposes a secure supply of energy.

2. Context for splitting rules within the wider processes

The Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a guideline on forward capacity allocation (FCA) establishes several new regional processes. This includes a long-term capacity calculation methodology (Channel LT CCM) pursuant to FCA Article 10, and a methodology for splitting cross-zonal capacity pursuant to FCA Article 16 (“Channel Splitting Rules”).

FCA lists the types of transmission right that can be offered and in accordance with the Channel regional design of long-term transmission rights pursuant to FCA Article 31, Channel TSOs have previously proposed the; (a) type of long-term transmission rights; (b) forward capacity allocation time frames; (c) form of product (base load, peak load, off-peak load); and (d) the bidding zone borders covered.

Whereas the focus of the Channel LT CCM is to determine the total amount of capacity that can be made available on Channel interconnectors. The Channel Splitting Rules determine how to distribute that total amount of capacity between the various long-term timescales.

FCA Article 31 states that “All TSOs issuing long-term transmission rights shall offer long-term cross- zonal capacity, through the single allocation platform, to market participants for at least annual and monthly time frames.”. As such Channel TSOs have specified a non-zero minimum for the percentages for monthly and annual time frames.

The first aim listed in FCA Article 3 is “promoting effective long-term cross-zonal trade with long-term cross-zonal hedging opportunities for market participants”. Furthermore, FCA Article 16 states that the Channel Splitting Rules; “shall meet the hedging needs of market participants”. Therefore, a fundamental aspect of the Channel Splitting Rules is for Channel TSOs to have the flexibility to respond to the changing requirements of market participants. The Channel Splitting Rules requires a provisional version of the capacity split to be published, at least once a year. This should provide transparency for market participants and provide an opportunity to give feedback on what they would like to see future capacity splits to be.

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4 Furthermore, FCA Article 16 states that the Channel Splitting Rules; “shall be coherent with the capacity calculation methodology”. The Channel Splitting Rules proposal achieves this by amending the capacity split in light of each long-term capacity calculation result. Again, at each stage the capacity split is published so that market participants have full transparency on the impact of the capacity calculation on the split of capacity.

Finally, FCA Article 16 states that the Channel Splitting Rules; “shall not lead to restrictions in competition, in particular for access to long-term transmission rights.”. Therefore, the capacity splits shall be published alongside the Auction calendar pursuant to the HAR, so that all market participants have the same information/opportunity in order to bid for access to long-term transmission rights.

The interconnectors within the Channel region are operated by several different TSOs. Article 2 of the Channel Splitting Rules defines the ‘Responsible TSO(s)’ as “the Channel Region TSO(s) responsible for the allocation of the cross-zonal capacity of that Interconnector”. A list of the Responsible TSO(s) in the Channel region is given in Annex 1 of this explanatory note.

Several new interconnectors are anticipated to join the Channel region in the near future (e.g. ElecLink, IFA2, FABLink). Channel TSOs have been careful to make sure that the methodology will not require amendments to introduce these new interconnectors (for example all references to individual interconnectors have been removed).

For the avoidance of doubt, this Channel Splitting Rules proposal only deals with the distribution of capacity between the different long-term time frames. It does not deal with the calculation of capacity, any associated curtailment events or the reservation of capacity for the day ahead timescale.

3. Principles

Channel TSOs considered some key principles which they applied when drafting the methodology;

1. The developed methodology needs to be flexible enough to not require regular amendment.

2. The methodology shall apply to all long-term capacity as governed by the FCA Regulation 3. The methodology needs to achieve a balance between definition and flexibility to react to the

market.

4. The methodology shall meet the hedging needs of market participants, as per FCA Regulation Article 16.

5. The methodology shall not require the allocation of low/zero value capacity where does not facilitate the principles in FCA Regulation Article 16.

6. The methodology should have an implementation date aligned with the long term capacity calculation methodology.

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5 7. The methodology should aim to allow for different products splits on different interconnectors on the same border, although if the methodology allows TSOs to optimise within boundaries using a transparent methodology, there should be minimal discrepancies.

4. Option Analysis

During the development of the Splitting Rules, the following questions were examined to determine the appropriate set of options to consider in more detail. The primary variables considered by the workgroup were capacity and resolution of Long Term Transmission Rights splitting. This section should be read alongside the table in Annex 2 which shows the matrix of options considered by the Channel TSOs when developing the Splitting Rules.

Capacity

a) Should capacity split be defined for each LTTR timeframe or combined across all LTTR timeframes?

The wording in the FCA Regulation Article 16 states that the methodology developed should split long- term cross-zonal capacity in a coordinated manner between different long-term time frames. This reference to different long-term time frames has been interpreted to mean that capacity needs to be split for each LTTR timeframe rather than having a value that applies to the total long-term capacity.

b) Should capacity be split using percentages, MW values or combination of the two?

This question was examined in the context of deciding that capacity should be split for each LTTR timeframe.

It was agreed that using percentages would offer the most flexibility as they can be easily applied to the varied capacities of each TSO. Using only a MW value was determined to be impractical as any future changes to capacity would require an update to the splitting rules to establish a new MW value for each LTTR timeframe.

Having determined that a percentage was most appropriate, the group discuss if a single figure or a range for each LTTR timeframe should be used for each. The group determined that a range gave TSOs the ability to vary the capacity offered would reduce the likelihood of regular amendment to the splitting rules whilst giving TSOs flexibility to meet the needs of the market.

For Annual and Monthly LTTR timeframes, the group discussed whether a minimum should be established to ensure that capacity is offered for these timeframes. This minimum could be a percentage of the Nominal Capacity. The Capacity Split will be reviewed following any long term capacity calculation to ensure that the capacity allocation is consistent with the NTC values produced by these calculations.

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6 Resolution

c) Should the capacity split apply to the Channel Region as a whole, each Bidding Zone Border within the Channel Region or each TSO within the Channel Region?

This question was examined in the context of determining that long-term capacity would be split between each LTTR timeframe using a percentage range with a defined minimum for Annual and Monthly.

Based on the above, it was determined that applying the capacity split at the Channel Region level was impractical because each Bidding Zone Border has different LTTR timeframes. It was noted that if LTTR Proposal was amended so the all LTTR timeframes were offered on all borders, it would be worth revisiting harmonisation in splitting rules at the Channel Region level.

It is possible to apply the capacity split at the Bidding Zone Border or TSO level.

d) Should the capacity split be defined per direction or be identical for both directions?

It was determined that applied the split per direction or both directions was possible.

5. Methodology Development

The capacity is split over a calendar year. For Seasonal and all products shorter than Monthly, there is the possibility of the capacity split going into a subsequent year as the end date of the auctioned product may not be on or before 31 December. The end date could be applied for a few days in the case of within Month products but for Winter Seasonal it will apply to up to 31 March of the following year.

Once it was agreed to use ranges, the group investigated how these ranges could be determined. The long term products available on each border within the Channel Region are:

BE-GB FR-GB NL-GB

Annual ✓ ✓ ✓

Seasonal ✓ ✓ ✓

Quarterly ✓ ✓ ✓

Monthly ✓ ✓ ✓

Weekly ✓  ✓

Easter Weekend   ✓

Long Weekend   ✓

Weekend ✓ ✓ ✓

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7 Weekly, Easter, Long and Weekend are all products that carve up a 7 day period. It is easier for market participants to understand the split by applying one range to all products shorter than monthly.

Weekday Weekend

Mon Tue Wed Thu Fri Sat Sun

Annual ✓ ✓ ✓ ✓ ✓ ✓ ✓

Seasonal ✓ ✓ ✓ ✓ ✓ ✓ ✓

Quarterly ✓ ✓ ✓ ✓ ✓ ✓ ✓

Monthly ✓ ✓ ✓ ✓ ✓ ✓ ✓

Weekly ✓ ✓ ✓ ✓ ✓  

Easter Weekend ✓    ✓ ✓ ✓

Long Weekend ✓     ✓ ✓

Weekend      ✓ ✓

There is little value in applying ranges individually to each product if shorter than monthly. It is difficult to apply ranges to products that are shorter than monthly. For example, a Weekend product could have a range of 5-10%, for a 1000MW interconnector that is 50-100MW that could be offered across weekend auctions for a year

Ranges

Min Max

Annual 5% 95%

Seasonal 0% 90%

Quarterly 0% 90%

Monthly 5% 95%

Within Month 0% 90%

Article 31(2) of the FCA Regulation requires that TSOs shall offer transmissions rights for at least annual and monthly timeframes. The group has interpreted this as there cannot be a value of 0% for the minimum range. All other timeframes are considered additional timeframes and therefore do not have a required minimum value.

By having a required minimum for annual and monthly, it is possible to determine the maximum permissible for non-mandatory timeframes.

100% – (Min Annual + Min Monthly) = Maximum for non-mandatory timeframes

i.e. 100% - (5% + 5%) = 90% (Maximum permissible for Seasonal, Quarterly, or Within Month)

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6. Definition for Nominal Capacity

Channel interconnectors have two potential capabilities: a long term or continuous capability and also a shorter-term dynamic rating. This shorter-term dynamic rating has resulted in grid entry capacities being agreed with connected network TSO’s at levels higher than the continuous rating of the interconnector. Any dynamic capacity (and hence capability the level of the grid entry capacity) can only be confirmed as available in short term timeframes (usually day-ahead) and so cannot be considered by the Splitting Rules to be sold in the Long-Term timeframes. This, as well as inconsistencies in the level of dynamic capability between interconnectors, results in the Splitting Rules being unable to use the grid entry capacity as a measure on which to base the capacity to be split. The region has therefore developed a new definition which defines the interconnector capacity on which to base the proportion considered by the Splitting Rules:

‘Nominal Capacity’ shall mean the ‘maximum HVDC active Power transmission capability’ as defined in Commission Regulation (EU) 2016/1447 and taking account of the losses of the Interconnector.

This definition for Nominal capacity refers to a definition in the HVDC Code and adds consideration for losses of the interconnector. This addition is required as Channel interconnectors make long term capacity available at a fictitious point half way between the two AC grid connection points rather than at the grid connection points. The DC losses on the interconnector can then be taken into account in order to maximise the capacity made available on the interconnector.

The full description of how losses are taken into account is given within the proposal for nomination rules for Physical Transmission Rights for the bidding zone borders of the Channel region in accordance with Article 36 of Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a Guideline on Forward Capacity Allocation.

The following is an example of how the Nominal Capacity relates to the interconnector capability (This example considers a 1000MW interconnector with 2% DC losses):

1000MW import

capability 1020MW export

capability Nominal

Capacity 1010MW

Mid-point

1% Losses 1% Losses

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7. New Interconnectors

New interconnectors that are yet to begin operations are able to offer less than the minimum % range as stipulated in the Splitting Rules (Art 4(5.3)). This is required as it is unlikely that new interconnectors will be able to fulfil the minimum requirements over all time frames in the year in which there become commercially available for the first time.

There are three distinct stages at the end of a construction period in order for an interconnector to be fully proven:

Period Interconnector availability

Commissioning

This period normally lasts between one and three months and is the initial period of testing on the interconnector.

No cross-border capacity is offered commercially and flow test power requirements are bought specifically for the test.

Trial Operations

This is a period normally lasting between 30 and 60 days following completion of the commissioning period.

The interconnector is made available to the market but is not fully proven and not ‘taken over’ by the interconnector owner.

During this period the potential for a fault on the interconnector is higher than an interconnector that has been in operation for some time. It is therefore expected that an interconnector will not make long term capacity available during this time due to avoid providing less certain capacity to the market and ensuring flexibility of availability if required.

Fully commissioned

Fully commissioned is achieved once the trial operations period has been successfully completed.

At this time the interconnector will be ‘taken over’ by the owners and it is expected that the capability will be considered within the LT CCM and receive an NTC in order to sell the next possible timescale. However, depending on the date of an interconnector being ‘fully commissioned’

and the timing of annual auctions it may not be possible to fully comply with the Splitting Rules until the 2^nd full calendar year of operation.

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8. Provisional vs later splits

Before any Long-Term Capacity Calculation, the Responsible TSO(s) will calculate a provisional split based on the Long Term Cross Zonal Capacity of the Interconnector. This aims at giving a first indication to market participants of the value of the splitting ratios which will be applied to the results of the Long- Term Capacity Calculation.

As no Long-Term Capacity Calculation is run at the time of the provisional split, the Long Term Cross Zonal Capacity of each Interconnector is used as a basis for the split. The Nominal Capacity of each Interconnector will be published alongside the provisional split.

At any time, including following each Long-Term Capacity Calculation, the split may be reassessed. The splitting ratios will be updated to take into account new information from the market and the grid, e.g.

a change in the bidding behaviour of the market participants, or an outage which was previously unplanned.

For the avoidance of doubt, there shall not be curtailment due to changes of the capacity split. There may be curtailment due to capacity calculation which is described in separate methodologies.

9. Day ahead reservation

In accordance with Article 17 of Regulation (EU) 2019/943 Channel TSOs shall define an appropriate structure for the allocation of capacity between different timeframes. Pursuant to Regulation (EU) 2019/943 when drawing up this proposal Channel TSOs have considered the characteristics of the markets. Channel TSOs note that in accordance with the regional design of long-term transmission rights pursuant to Article 31, all Channel bidding zone border currently offer Physical Transmission Rights.

Therefore, to ensure the availability of cross border capacity for the day ahead timeframe, Channel TSOs propose to reserve interconnection capacity for daily allocation.

Based on reservation, Channel TSOs have defined the ‘Long-Term Cross-Zonal Capacity’ as the Nominal Capacity less any capacity reserved for daily allocation.

For the avoidance of doubt, Channel TSOs will ensure that all available capacity (subject to the results of capacity calculation) is made available to the market.

10. Explanation on how we use various factors to calculate the split

The Channel Region is comprised of multiple interconnectors, operated by TSOs, with a variety of regulatory and ownership arrangements. As a result, the process that TSOs use to set their capacity split and the products offered each year will vary between TSOs and is used as a differentiating factor from their competitors. The Splitting Rules methodology purposely doesn’t attempt to detail the exact process a TSO will follow to determine their capacity split. Whilst the methodology doesn’t detail an exact process, factors that the TSOs may consider include:

• Historic and forecast prices for power, fuels and carbon across each Channel Region border

• Performance of previous auctions across each timeframe including the number of participants, spread percentage and the total demand

• Auction schedules

• Feedback from market parties through surveys and bilateral discussions

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• Planned outages for interconnectors in the Channel Region

• Industry reports for price analysis, relevant news, markets evolutions and technological improvements

• Individual TSO business strategy

Each TSO will consider the above information and determine a capacity split that will maximise the hedging opportunities of market parties. Due to the difficulty in accurately predicting the market demands, interconnectors will monitor the auctions results closely and may need to refine the capacity split throughout the year to optimise the remaining planned auctions.

11. Process example/walkthrough

Consider the example of a 1000MW interconnector within the Channel region allocating long-term transmission rights for the calendar year 2030.

By December 2028, the TSO(s) are considering the provisional capacity split for the calendar year 2030.

They will do this considering analysis based on factors such as historic allocation results and prices, forward energy curves, energy and fuel price forecasts, planned market evolutions, new technologies and direct feedback from market parties. (See section 10).

The TSO(s) have determined that they should offer 900MW in Long Term products and 100MW in day ahead (see section 9 for day ahead reservation). 100% (900MW) of the Long-Term Cross Zonal Capacity shall be split respecting the splitting ranges in Table 1 (Annex 1 of the Channel Splitting Rules):

Timeframe Min % of Long Term Cross Zonal Capacity

Max % of Long Term Cross Zonal Capacity

Annual 5% 95%

Seasonal 0% 90%

Quarterly 0% 90%

Monthly 5% 95%

Sum of all Long-Term timeframes shorter than

monthly

0% 90%

Table 1; Splitting Ranges – taken from Annex 1 of the Channel Splitting Rules.

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12 The TSO(s) then publishes a provisional capacity split (See Table 2 and Figure 1).

Timeframe Example provisional Capacity Split Direction 1

Annual 500MW

Seasonal 0

Quarterly 0

Monthly 400MW

shorter than Monthly 0

Table 2; Example provisional Capacity Split for a 1000MW interconnector that respects the splitting ranges.

Figure 1; Example provisional Capacity Split for a 1000MW interconnector that respects the splitting ranges.

However, in February 2029, the Channel TSO(s) run a long-term capacity calculation. The result determines that capacity will be significantly reduced (reduced to 200MW) during July - September 2030 and reduced to 0MW during June 2030.

Considering this new information, the TSO(s) reassess the Capacity Split. They again do this considering analysis based on factors such as historic allocation results and prices, forward energy curves, energy and fuel price forecasts, planned market evolutions, new technologies and direct feedback from market parties. The Channel TSO(s) publish a revised capacity split (see Table 4 and Figure 2).

0 100 200 300 400 500 600 700 800 900 1000

MW

Annual Monthly NTC

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13

Timeframe Example Capacity Split

Direction 1

Annual 200MW (with June 2030 defined as a restriction period)

Seasonal 0

Quarterly 0

Monthly

700MW (Jan – May 2030), (October – December 2030)

0 MW (June - September 2030)

shorter than Monthly 0

Table 4; Example Capacity Split for a 1000MW interconnector following the long-term capacity calculation

Figure 2; Example Capacity Split for a 1000MW interconnector following the long-term capacity calculation

Note that in this example it was necessary to reduce the total volume of capacity allocated in the long term time frame. It was also necessary to define a restriction period (in accordance with the HAR) for the month of June 2030 in order to allocate in the annual time frame. This restriction period will be defined in advance of any annual capacity being allocated.

In the months June - September 2030, the Long-Term Capacity Calculation result is equal or less than 200MW. As 200MW has already been allocated in the annual time frame it is not possible to allocate in the monthly time frame.

Before the first allocation of capacity for 2030, the TSO(s) shall publish the Capacity Split. Throughout the year the Capacity Split may need to be re-published following any unplanned outages. Following any revision TSO(s) will publish the revised Capacity Split.

0 100 200 300 400 500 600 700 800 900 1000

MW

Annual Monthly NTC

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14

12. Implementation timeline examples (including new interconnector example)

Article 8 of the Channel Splitting Rules sets out the implementation approach. As the split of capacity will be applied to the calculated capacity (as determined in the Channel LT CCM) the Channel Splitting Rules implementation is aligned to the LT CCM implementation.

To take into account new interconnectors joining the Channel region, and to allow for a transition period, this will start with the first calendar year for which no Long-Term allocation has yet taken place.

The following examples highlight why these aspects are important;

Example 1

Example 2

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15 Example 3

13. Publication and reporting requirements

Following each revision of the capacity split, TSOs will publish the MW volumes for each long term product, alongside the auction calendar. An example template is given below;

Timeframe Direction 1 (e.g. GB-FR) Direction 2 (e.g. FR-GB)

Annual 900MW 900MW

Seasonal 200MW 200MW

Quarterly 300MW 300MW

Monthly 300MW 250MW

Sum of all Long-Term timeframes shorter than

Monthly

100MW 50MW

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16

Annex 1 - Responsible TSOs

The Responsible TSO(s) for each Interconnector are detailed below.

Interconnector Bidding Zone Border Responsible TSO(s)

ElecLink GB-FR ElecLink Limited

BritNed GB-NL BritNed Development Limited

IFA GB-FR

National Grid Interconnectors Limited, and Réseau de Transport

d’Électricité

Nemo Link GB-BE Nemo Link Limited

IFA2 GB-FR National Grid IFA2 Limited, and

Réseau de Transport d’Électricité

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17

Annex 2 - Option Analysis

Capacity Split shall be determined:

across all LTTR timeframes for each LTTR timeframe

Using percentages

Using MW values

Using a combination of Percentages and

MW values

Using percentages

Using MW values

Using a combination of Percentages and

MW values

Capacity Split should apply to:

Channel Region

Per

direction X X X X X X

Both

directions X X X X X X

Bidding Zone Border

Directional X X X Possible X Possible

Non-

directional X X X Possible X Possible

TSO

Directional X X X Possible Possible Possible

Non-

directional X X X Possible Possible Possible