KEY MESSAGES
- On the Transition costs report:
- Eurelectric expresses significant reservations about the reasonableness and feasibility of the transition cost estimates provided in the study. The study’s reliance on a small and potentially non-representative sample, combined with methodological limitations and data quality issues, raises doubts about the reliability of the results. Therefore, Eurelectric urges caution in interpreting these estimates and calls for more transparency in the methodology to ensure accurate and reliable cost assessments.
- Eurelectric argues that the current definition of transition costs used in the studies is too narrow, potentially leading to an underestimation of the transition costs associated with bidding zone reconfigurations. The definition fails to account for factors such as the impact on forward trades, stranded costs, foregone costs, and the broader economic redistribution among market participants.
- Eurelectric emphasises the need for sufficient lead time to allow market participants to adapt and suggests to closely aligned with the duration of forward trades.
- On the Market liquidity report
- Eurelectric acknowledges the negative impact on market liquidity for most of the proposed reconfiguration, especially in the long-term markets. This is expected to result in higher transaction costs, with wider bid-ask spreads and reduced liquidity.
- Eurelectric considers that the conclusions about liquidity and transaction costs are based on proxy indicators (market size, market concentration, and price correlation), which may not reliably reflect actual market conditions. Issues include questionable data transparency, overestimation of interconnection capacities, and flawed reasoning behind using price correlation as an indicator. Therefore, Eurelectric urges caution in interpreting these estimates. The assessment of liquidity should include more comprehensive factors beyond just volume, such as open interest, bid-ask spreads, and time to maturity. This broader view is crucial for fully evaluating the market’s ability to manage risks effectively.
- Eurelectric regrets that the mitigation measures will only be considered ex-post and that they have not been informed about TSOs stance on this matter before TSOs issue their upcoming recommendation.
- On the Bidding Zone Review process:
- Eurelectric raises concerns about the lack of clarity on how the conclusions of studies, such as the transition cost and market liquidity studies, are integrated into the broader Bidding Zone Review process and how they are weighted against the other 20 parameters investigated. Eurelectric also calls for transparency and consultation on the results of the assessment of the other indicators.
- Additionally, Eurelectric raises concerns regarding the potential inclusion of mitigation measures in the final report without adequate investigation. This approach represents a significant shortcoming in the consultation process.
- Eurelectric emphasises the need for a more forward-looking study (e.g. up to 2035) that considers various scenarios and sensitivities over extended time horizons.