Source: EURLEX
Language: en
Format: md

**Council of the**
**European Union**
**Brussels, 28 November 2024**
**(OR. en)**

**8260/24**
**ADD 1**

**Interinstitutional File:**

**2024/0297(NLE)**

**UK 44**

**ENER 577**

**COVER NOTE**

From: Secretary-General of the European Commission, signed by Ms Martine
DEPREZ, Director

date of receipt: 28 November 2024

To: Ms Thérèse BLANCHET, Secretary-General of the Council of the
European Union

No. Cion doc.: COM(2024) 539 final

Subject: Annex to the Proposal for COUNCIL DECISION on the position to be
taken on behalf of the European Union within the EU-UK Specialised
Committee on Energy of the EU-UK Trade and Cooperation Agreement

Delegations will find attached document COM(2024) 539 final.

Encl.: COM(2024) 539 final

8260/24 ADD 1

## GIP.EU-UK EN

EUROPEAN

COMMISSION

**ANNEX**

**to the**

Brussels, 28.11.2024
COM(2024) 539 final

ANNEX

**Proposal for COUNCIL DECISION**

**on the position to be taken on behalf of the European Union within the EU-UK**
**Specialised Committee on Energy of the EU-UK Trade and Cooperation Agreement**

# **EN EN**

**ANNEX**

**Recommendation …/2024**

**of the Specialised Committee on Energy established by Article 8(1)** **(l)** **of the Trade and**
**Cooperation Agreement between the European Union and the European Atomic Energy**

**Community, of the one part, and the United Kingdom of Great Britain and Northern**

**Ireland, of the other part**

**of …**

**to each Party concerning the preparation of technical procedures for the efficient use of**

**electricity interconnectors**

The Specialised Committee,

Having regard to the Trade and Cooperation Agreement between the European Union and the
European Atomic Energy Community, of the one part, and the United Kingdom of Great
Britain and Northern Ireland of the other part (the ‘Trade and Cooperation Agreement’), and
in particular Article 311(1) and (2), Article 312 (1) and (2), Article 317 (1), (2) and (3), and
Annex 29 thereof,

Whereas:

(1) Pursuant to Article 8(4), point (a) of the Trade and Cooperation Agreement, the

Specialised Committee on Energy (the ‘Specialised Committee’) has the power to
monitor and review the implementation and ensure the proper functioning of the Trade
and Cooperation Agreement in its area of competence. Pursuant to Article 8(4) point
(c), it has the power to adopt decisions and recommendations in respect of all matters
where the Trade and Cooperation Agreement so provides or for which the Partnership
Council has delegated its powers to that Specialised Committee pursuant to Article
7(4), point (f). Pursuant to Article 329(3) of the Trade and Cooperation Agreement, it
shall make recommendations as necessary to ensure the effective implementation of
the Chapters for which it is responsible.

(2) Pursuant to Article 312(1) of the Trade and Cooperation Agreement, the Specialised

Committee, as a matter of priority, shall take the necessary steps in accordance with
Article 317 to ensure that Transmission System Operators (‘TSOs’) develop
arrangements setting out technical procedures in accordance with Annex 29 within a
specific timeline.

(3) On 7 February 2023, the Specialised Committee adopted Recommendation No 1/2023

for each Party to request its respective TSOs to provide the additional information as
set out in Annex II to Recommendation No 1/2023 within five months of the date of
request made by each Party.

(4) The European Union and United Kingdom TSOs provided that additional information

to the Parties in response to their respective requests, and the respective EU and UK
regulatory authorities provided opinions to the Parties in relation to that additional

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information, in July 2023. The Specialised Committee welcomed these important
contributions to the implementation of the Energy Title of the Trade and Cooperation
Agreement at the Specialised Committee meeting on 9 November 2023.

(5) Both EU and UK TSOs and regulatory authorities have identified significant risks of

market manipulation associated with the Preliminary Order Books approach to the
operation of day ahead electricity trading arrangements based on the concept of MultiRegional Loose Volume Coupling (‘MRLVC’).

(6) Both EU and UK TSOs and regulatory authorities have identified that the potential

benefits of the Common Order Book approach to MRLVC will depend on the
resolution of a number of fundamental design challenges. Further specific work to
develop a robust design for MRLVC following a Common Order Book approach is
needed before any decision on implementation can be made. This design will, among
other requirements, need to ensure secure and efficient operation of the respective EU
and UK electricity wholesale markets, and address any trade-off between the
efficiency of MRLVC and the secure and efficient operation of the EU and UK
electricity wholesale markets. Thorough consultation, assessment, and testing of the
mechanism will also be required ahead of any implementation decision. Moreover, the
Specialised Committee noted that development of the design must be consistent with
the process set out in Article 312(1), 312(2) and 317 of the Trade and Cooperation
Agreement and requirements set out in Annex 29.

(7) Both the 2021 cost-benefit analysis (‘the 2021 CBA’) and the 2023 additional

information prepared by EU and UK TSOs have found that the efficiency of MRLVC
will depend to a significant extent on the accuracy of the bordering bidding zone net
position forecaster. Further specific work to develop and confirm the validity of the
concept of this forecaster is needed before a decision on implementation can be made.
The Specialised Committee notes that EU and UK TSOs proposed a phased approach
to the development of the forecaster in their report, beginning with an initial prototype
design and validation phase.

(8) Both the EU and the UK have ambitious goals to unleash the offshore renewable

energy potential in the North Seas to enhance access to affordable energy and advance
their transitions towards climate neutrality. Pursuant to Article 321 of the Trade and
Cooperation Agreement the Parties shall cooperate in the development of offshore
renewable energy by sharing best practices and, where appropriate, by facilitating the
development of specific projects. The EU and UK TSOs identified in their report that
the future development of offshore hybrid projects will require electricity trading
arrangements that support efficient pricing and capacity utilisation. The Specialised
Committee acknowledged that further consideration needed to be given to ensuring
EU-UK electricity trading arrangements support their ambitions for the rapid
development of renewable energy projects in the North Seas.

(9) The 2021 CBA identified a single Great Britain clearing price at the day-ahead

timeframe as an assumption in all MRLVC design options under consideration. The
UK published its consultation response on re-coupling relevant Great Britain auctions
for cross-border trade with the EU at the day-ahead timeframe in August 2023. The
UK’s analysis showed the majority of respondents were supportive of the proposals

# EN 2 EN

set out in the consultation. The UK has since engaged with the Specialised Committee
and presented the outcomes of the consultation.

(10) In the light of progress achieved to date by the TSOs, and the additional
information provided in response to Annex II to Recommendation No 1/2023, the
Specialised Committee on Energy should address the Parties to ensure that the TSOs
commence a next phase of work. This work should focus on addressing the
fundamental design issues which have been previously highlighted to satisfy the
Specialised Committee’s obligations under Article 312(1) of the Trade and
Cooperation Agreement.

(11) The Specialised Committee noted that the Parties expect a phased approach to the

development of technical procedures for MRLVC, starting with an initial conceptvalidation phase. In light of findings from the TSOs’ report submitted in July 2023,
additional analyses are necessary and should be included in the concept validation
phase. This concept-validation phase should inform and support the development of a
single set of draft technical procedures for MRLVC in line with Articles 312(1) and
317(2) of the Trade and Cooperation Agreement.

(12) Any decision by the Specialised Committee on the implementation of technical

procedures for an MRLVC solution following a Common Order Book Approach,
pursuant to Article 317(4) of the Trade and Cooperation Agreement, should be
supported by stakeholder consultation, robust periods of testing, and an updated cost
benefit analysis.

HAS ADOPTED THIS RECOMMENDATION,

_Article 1_

The Specialised Committee acknowledges that the Preliminary Order Books approach is not a
viable way forward for the further development of a Multi-Regional Loose Volume Coupling
(‘MRLVC’) solution and recommends that it not be pursued further by the Parties.

_Article 2_

The Specialised Committee recommends that each Party requests its respective TSOs for
electricity and, for the Union, the ENTSO-E facilitating the work of EU TSOs, to jointly
commence an initial concept-validation phase prior to producing the single set of initial draft
technical procedures for MRLVC in accordance with Annex 29 of the Trade and Cooperation
Agreement and with supporting analysis, comprising:

(a) An optimal operational timeline combining the operations of the MRLVC, the EU
Single Day-Ahead Coupling, and the Great Britain wholesale electricity market
arrangements under a Common Order Book approach, including the optimal
validation and fallback arrangements. The optimal operational timeline should
promote the robust and efficient use of interconnectors while minimising risks for the
secure operation of the EU and UK electricity wholesale markets and taking into
account possible market developments up to 2030-35. The operational risks linked to
that timeline on both the EU Single Day-Ahead Coupling and the Great Britain
wholesale electricity market should be assessed and, to the extent possible,
quantified. A range of options for operational timelines should be included in the

# EN 3 EN

supporting analysis to support the identification and assessment of the validity of an
optimal timeline.

(b) A draft tender specification for a prototype for a bordering bidding zone net position
forecaster. This draft tender specification should include a detailed description of
requirements, including the following:

        - The methodology (e.g., statistical and/or deterministic) to be employed;

        - Specific outputs that would be required from the forecaster;

        - How the forecaster will incorporate future market developments, including the
future introduction of new bidding zones whether onshore or offshore;

        - How outputs from the forecaster will be inputted into wider MRLVC

processes;

        - Any other key requirements identified through the work set out under
subparagraph (a) and Article 3.

This draft tender specification should be accompanied by the following:

        - Information on how the tender would be issued and governed, including
consideration of ownership and intellectual property rights;

        - A detailed breakdown of anticipated timings and costs;

        - Any relevant issue related to administrative functions required to address UK
and EU system interdependencies in the implementation of an MRLVC
solution.

_Article 3_

1. The Specialised Committee recommends that the Parties request their respective
TSOs for electricity, and, for the Union, the ENTSO-E facilitating the work of EU
TSOs, to produce a joint report for the Specialised Committee investigating any
barriers to the delivery of joint and hybrid offshore projects that may result from
existing trading arrangements or MRLVC, and any specific changes needed to
existing trading arrangements or specific requirements of the design of MRLVC
needed to deliver efficient electricity trading that supports the delivery of joint and
hybrid offshore projects.

2. The TSOs joint report should investigate the impact of both existing trading
arrangements and an MRLVC solution on joint and hybrid projects, over the medium
term (2030-2035 horizon), with a particular focus on:

        - the scope of the application of the trading modalities, and whether and how the
performance of capacity allocation may be affected;

        - how these trading arrangements could operate with different market designs, in
particular offshore bidding zones; and

        - whether there may be sufficient clarity in the business case for infrastructure
investment,

The TSOs joint report should take into consideration:

# EN 4 EN

        - the nature and scale of possible offshore renewable energy infrastructure
developments across the North Seas in the medium term, including possible
hybrid interconnectors, energy islands, meshed grids and offshore
electrolysers;

        - possible mechanisms of price formation;

        - the complementary role of forward and intraday trading arrangements;

        - impact on the accuracy of bordering bidding zone forecasts; and

        - any specific adjustments that may be required in the design features of these
trading modalities, within their general confines, to help address any identified
barriers and or requirements in the development and operation of joint and
hybrid offshore projects to deliver efficient trading arrangements.

_Article 4_

The development of the work recommended under Articles 2 and 3 should involve regular
oversight and input by the Parties. It may also involve the TSOs engaging with wider
stakeholders that may include regulators, nominated electricity market operators/power
exchanges, and academia.

_Article 5_

The Specialised Committee recommends that the Parties coordinate their communication with
their respective TSOs for electricity and, for the Union, the ENTSO-E facilitating the work of
EU TSOs with respect to Articles 2 and 3 and request them to complete the work listed under
those Articles within 11 months of the adoption of this Recommendation _._

_Article 6_

The Specialised Committee recommends that the Parties request their respective TSOs for
electricity and, for the Union, the ENTSO-E facilitating the work of EU TSOs to request an
informal opinion of the UK national energy regulators and ACER regarding their work
completed with respect to Article 2 and Article 3, to be delivered within one month of the
delivery of the TSOs joint report.

[Done at [XX], [DATE]]

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