Update on Electricity Market Integration between Moldova and Ukraine

Progress in the integration of electricity markets in Moldova and Ukraine is highlighted, focusing on national market developments, cross-border exchanges, and the implementation steps towards efficient market operations. The report covers the state of play in both national and cross-border markets, detailing key milestones and actions taken to facilitate seamless integration and improve operational efficiency.

• Electricity Market
• Moldova
• Ukraine
• Energy Community
• Cross-Border Exchanges

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1. Electricity market in Moldova and integration with Ukrainian market HLPT, Energy Community Secretariat, 24 September 2020 Energy Community Secretariat Energy Community Secretariat 1

2. Objective Work to continue in line with synch. roadmap Subject to national market developments* In focus Energy Community Secretariat Energy Community Secretariat 2

3. 1. State of play (national market) Efficient implementation of cross-border exchanges, goes hand in hand with the progress in the national electricity market in Moldova ANRE approved Market Rules includes also: Transitional provisions TSO taking the central role in balancing & settlement of imbalances Procurement procedures Entry into force of Sep/Oct 2021 Procurement procedures - Jan 2021 NEXT STEPS? Energy Community Secretariat Energy Community Secretariat 3

4. From approval to implementation TA-capacity building Testing Development of internal TSO processes Rules Effective implementation approved Today July 21 Sep/Oct 21 Dec 20 Moldelectrica needs (in discussion with ECS): 1. Transitional phase: improving processes of Moldelectrica to implement transitional balancing as of Sep/Oct 2021 Joint actions: capacity building / virtual workshops / ToRs being developed Implementation of the agreement with Ukrenergo on settlement of unintentional deviations Implementation of joint auctions 2. Work in parallel: procuring platform and putting in place processes for post- transitional implementation Potential TA / needs should be discussed!? Energy Community Secretariat Energy Community Secretariat 4

5. 2. State of play (cross-border) Efficient implementation national market in Moldova, goes hand in hand with the progress on cross-border exchanges Two project with short term objective: Activity 1: Settlement of inadvertent deviations Who? By? Activity 2: Joint capacity allocation Who? By? 1.1 Draft ToR for TA on TSOs' arrangements for scheduling, matching and settlement of deviations ECS 30.06.2019 2.1 Meeting with TSOs and NRAs from UA and MD for joint capacity allocation on UA-MD ECS & all September 2019 1.2 Launch of TA ECS 01.09.2019 2.2 Draft joint capacity allocationrules ECS & TSOs 15.10.2019 1.3 Drafting the inter-TSO agreement on scheduling/accounting and matching and settlement of inadvertent deviations ECS consultant 25.10.2019 2.3 Draft joint capacity calculation methodology for UA-MD ECS & TSOs 30.10.2019 1.4 Review & comments Cross-borderbalancing WG; TSOs and NRAs 20.11.2019 2.4 Review & comments Cross-borderbalancing WG; NRAs 20.12.2019 1.5 Workshop on operational implementation ECS & all End of November 2019 2.5 Workshop on operational implementation ECS & all January 2020 1.6 Final draft of the inter-TSO agreement and necessary explanatory document Consultant 20.01.2020 2.6 Submission to NRAs for approval TSOs 30.01.2020 1.7 Submission to NRAs for approval TSOs 30.01.2020 2.8 Approval NRAs 30.03.2020 1.8 Approval NRAs 15.03.2020 2.9 Go-live/implementation TSOs April-June* 2020 1.9 Go-live/implementation TSOs April-June* 2020 Energy Community Secretariat Energy Community Secretariat 5

6. Two decisions are needed to move the process Exiting process Effective implementation Today Settlement of deviations Joint auctions TSOs agree in principle on the agreement/provisions TSOs agree in principle for Ukrenergo as AO, but Law amendments on joint auctions in UA has not gone through yet. Price reference for settlement of deviations need to be agreed To be confirmed 1. Can this be done by end of October 2020? 1. Can Ukrenergo organise joint auctions base don existing platform/process and rules? (transitional) 2. Can we go-live as of 1 Jan 2021 (or shall be linked with national balancing in MD) 2. Can we go live as of 1 January 2021? Energy Community Secretariat Energy Community Secretariat 6

7. Slides from July 2019 HLPT (for information) Energy Community Secretariat Energy Community Secretariat Name of the Event 7

8. Short term objectives Key areas necessary for cooperation: 1. Arrangements for settlement of deviations Inter-TSO agreement for scheduling/accounting/matching Incentive to keep the systems in balance 2. Efficient use of cross-border capacity Cooperation on cross-border capacity calculation Market-based and non-discriminatory cross-border capacity allocation (explicit) To be achieved in the period 9 12 months Energy Community Secretariat Energy Community Secretariat 8

9. Medium term objectives Key areas necessary for cooperation: 3. Market coupling UA-MD Coordinated cross-border capacity calculation 4. Cross-border balancing mechanism Implementation of imbalance netting Assessment of potential for exchange of other balancing reserves/services To be achieved in the period 3 5 years Energy Community Secretariat Energy Community Secretariat 9

10. Long term objectives Key areas necessary for cooperation: 5. Synchronization of operation with ENTSO-E Continental Europe 6. Market coupling with EU MSs 7. Cross-border balancing with EU MSs To be achieved in the period beyond 5 years Energy Community Secretariat Energy Community Secretariat 10

11. Urgent measures Short term objectives are urgent measures: 1. Arrangements regarding inadvertent deviations are crucial, especially considering national market reforms in UA and MD 2. Joint explicit cross-border allocation requirement for both countries under the Third Energy Package In focus ECS proposes a detailed roadmap for these urgent measures Energy Community Secretariat Energy Community Secretariat 11

12. Roadmap (1) of Activity on settlement of deviations Activity 1: Settlement of inadvertent deviations Who? By? 1.1 Draft ToR for TA on TSOs' arrangements for scheduling, matching and settlement of deviations ECS 30.06.2019 1.2 Launch of TA ECS 01.09.2019 1.3 Drafting the inter-TSO agreement on scheduling/accounting and matching and settlement of inadvertent deviations ECS consultant 25.10.2019 1.4 Review & comments Cross-border balancing WG; TSOs and NRAs 20.11.2019 1.5 Workshop on operational implementation ECS & all End of November 2019 1.6 Final draft of the inter-TSO agreement and necessary explanatory document Consultant 20.01.2020 1.7 Submission to NRAs for approval TSOs 30.01.2020 1.8 Approval NRAs 15.03.2020 1.9 Go-live/implementation TSOs April-June* 2020 * Target date for go-live is 1 April 2020, but in any case not later than June 2020. Energy Community Secretariat Energy Community Secretariat 12

13. Options on settlement of deviations (1) 1. Ukrenergo performs the accounting and program for compensation of deviations (similar to Swissgrid for ENTSo-E TSOs) Exchange programs of two TSOs, Ukrenergo and Moldelectirca, matched between themselves. Measurements exchanged and agreed. Ukrenergo developing the compensation program on weekly basis based on scheduled exchanges and physical flows. Deviations from previous week are included in the program for the next week per products deviated (peak, base, etc.), as such they are compensated. Advantage: build based on ENTSO-E experience. Disadvantage: Readiness of Ukrenergo and related costs to perform such function. Energy Community Secretariat Energy Community Secretariat 13

14. Options on settlement of deviations (2) 2. Moldelectrica included as balance area within UA balancing mechanism Exchange programs of two TSOs, Ukrenergo and Moldelectirca, matched between themselves. Measurements exchanged and agreed. Deviations from Moldelectrica are settled based on balancing mechanism/price in UA (using imbalance price in UA market as index) Invoicing done by Ukrenergo Advantage: Additional incentive to avoid deviations Disadvantage: Readiness of Ukrenergo and related costs to perform such function Energy Community Secretariat Energy Community Secretariat 14

15. Options on settlement of deviations (3) 3. Other ideas? Hybrid of previous two options Other options open to discuss other ideas that could potentially be assessed by the consultant under TA Energy Community Secretariat Energy Community Secretariat 15

16. Roadmap (2) of Activity on capacity allocation Activity 2: Joint capacity allocation Who? By? 2.1 Meeting with TSOs and NRAs from UA and MD for joint capacity allocation on UA-MD ECS & all September 2019 2.2 Draft joint capacity allocation rules ECS & TSOs 15.10.2019 2.3 Draft joint capacity calculation methodology for UA-MD ECS & TSOs 30.10.2019 2.4 Review & comments Cross-border balancing WG; NRAs 20.12.2019 2.5 Workshop on operational implementation ECS & all January 2020 2.6 Submission to NRAs for approval TSOs 30.01.2020 2.8 Approval NRAs 30.03.2020 2.9 Go-live/implementation TSOs April-June* 2020 * Target date for go-live is 1 April 2020, but in any case not later than June 2020. Energy Community Secretariat Energy Community Secretariat 16

17. Joint capacity allocation (1) 1. Ukrenergo performs allocation based on agreed and approved procedures Option 1 Changes of the law or flexible interpretation of the UA law in relation to auction participants Explicit joint auctions (Y, M, D, etc.?) single auction rules/auction office 50:50 revenue sharing (minus reimbursement and compensation to ensure firmness) Advantage: Ensures compliant allocation process, non-discriminatory & market based Disadvantage: Potential delays in changing the law Energy Community Secretariat Energy Community Secretariat 17

18. Joint capacity allocation (2) 1. Ukrenergo performs allocation based on agreed and approved procedures Option 2 (transitional step in case of delays with law changes) Ukrenergo utilizing auction processes, where only UA market participants can participate in the auctions Explicit joint auctions (Y, M, D, etc.?) single auction rules/auction office 50:50 revenue sharing (minus reimbursement and compensation to ensure firmness) Advantage: Ensures compliant allocation process Disadvantage: Discriminates non-UA participants, but still a step forward from existing unbundled process Energy Community Secretariat Energy Community Secretariat 18

19. Medium and long-term objectives Work to continue in line with synch. roadmap Subject to national market developments* In focus Energy Community Secretariat Energy Community Secretariat 19

20. *Imbalance Netting A mechanism to optimize the activation of balancing reserves Avoids the activation of the balancing reserves in two opposite directions by two TSOs National balancing mechanism are preconditions to assess the benefits of the imbalance netting ECS will propose a detailed plan for assessment of such benefits and potential implementation this is subject to reforms in the national markets Subject to national market developments* Initial view on some level of cross-border exchange of reserves is expected as part of the TA on inter-TSO arrangements Energy Community Secretariat Energy Community Secretariat 20

21. Other activities Synchronization with ENTSO-E on its own path Reforming the national market is important to move ahead in this specific activity Market coupling UA-MD and UA with EU-MS in future Understanding the processes, but focus should remain on urgent measures Implementation of market coupling between UA and MD is subject to an evolution from the existing processes through the short term objectives Exchange of cross-border balancing reserves This requires mature national markets and mature balancing mechanisms Energy Community Secretariat Energy Community Secretariat 21

22. Thank You! Energy Community Secretariat Energy Community Secretariat 22