Europe’s spot electricity markets have an automatic maximum price limit adjustment mechanism in case of extraordinarily high prices. The European Union Agency for the Cooperation of Energy Regulators (ACER) has approved changes in the methodologies for automatically increasing the maximum price limit in case of price spikes.
This adjustment of price limits was needed to ensure the security of supply this winter through optimal short-term dispatch of generation, efficient use of interconnections and to encourage demand response. According to ACER, the amended methodologies will lead to a more gradual increase of the day ahead and intraday market price limits than with the previous rules.
Today’s decision comes after a request made by ACER last year to the Nominated Electricity Market Operators (NEMOs), urging them to submit proposals to amend the Capacity Allocation and Congestion Management methodologies related to the Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Day-Ahead Coupling (SDAC); and the Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Intraday Coupling (SIDC).
The methodology amendments update the conditions that will lead to fewer and smaller adjustments of the price limits. This will allow market participants to get used to the new price limits, allowing new generation and demand responses to enter.
Overall, the combined effect of these amendments will be to more gradually adjust the short-term electricity market price limits, effectively limiting a cascading effect of increases in case of repeated extreme prices resulting from the current methodology, while conserving the benefits of timely adjustments of the price limits on the efficiency of the European spot markets.
Additionally, the automatic adjustment mechanism is introduced for intraday markets, triggering price limit adjustments on the intraday auctions, currently planned to be launched in the first months of 2024.