ACER proposes changes to improve EU electricity forward markets

The EU Agency for the Cooperation of Energy Regulators (ACER) has published a Policy Paper on the Further Development of the EU Electricity Forward Market.
The following are the main suggestions made by ACER in this policy document for amending the Forward Capacity Allocation Regulation:
+ Identification of the issues with this market sector, the primary ones being market fragmentation and a lack of integration, as well as
+ Suggestion on solutions (e.g. regional virtual trading hubs to pool liquidity). Accessible transmission rights must be added to these regional hubs in order to cover the remaining risks faced by market players.
In order to enhance the efficiency of the EU energy forward market, ACER suggests the following changes:
1. Creation of virtual trading hubs combined with the issuance of transmission rights between bidding zones and those hubs;
2. Improved allocation of the transmission rights (more frequent, over longer period of time, in revised quantities) by the TSOs;
3. Transmission rights issued in the form of financial obligations; and
4. Optionally, the possibility to assign market making tasks.
What advantages of the adjustments are anticipated?
+ Regional hubs will attract and pool the liquidity of many zones, thereby significantly increasing the forward market liquidity.
+ Hedging products at such hubs will cover the majority of price risks faced by market participants, whereas the remaining risk would be covered by transmission rights issued by the TSOs.
+ Other proposed changes aim to make these transmission rights more accessible, liquid, as well as to better match the hedging needs of the market participants.
Of note, to present its above policy paper, ACER organises an online workshop on 13 March 2023 between 14:00 – 16:00 (CET). You can register by Sunday, 12 March 2023 by using this registration link.