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Delayed TERRE implementation course to be further developed in early 2021

Image: National Grid ESO.

Image: National Grid ESO.

TERRE implementation course set to be released early in 2021, with a TERRE-like mechanism operating in standalone mode being assessed.

In an open letter, National Grid ESO has outlined the latest implementation plans for the TERRE (Trans European Replacement Reserves Exchange) project. It highlighted that of the four initial scenarios possible, only one and two are now under consideration, with three ruled to be not credible and four as just a nuance of scenario one.

Scenario one that would see GB participate as a third country to exchange replacement reserves using TERRE will not be permitted as originally envisaged.

As such there are two potential actions – dubbed scenario 1a and 1b – within the first of which Britain operates a TERRE-like mechanism in standalone mode. This would mean no cross-border component, so there is no need for revised interconnector agreements. In 1b, European replacement reserves would be accessed through a bilateral agreement, which would require revising existing agreements.

Scenario two involves an agreed final trade agreement position between the UK and Europe including balancing market arrangements, which would include access to TERRE.

Both scenario one and two involve waiting for legal clarity before proceeding, suggesting there will be further delays to the process. The ESO presented draft implementation plans for both scenario on 9 December 2020 to stakeholders, with some noting “that the timelines seemed quite longer than expected, given previous work”.

The open letter has been released following GB TERRE Implementation Group meetings at the end of 2020, which saw the new cross-industry group set up in response to Ofgem's open letter of 6 November 2020. This letter suggested that implementing Project TERRE in 2020 was “not prudent” and should be held off till January 2021 given the uncertainty around the UK’s access to EU balancing platforms.

Project TERRE had previously been set to go live on 30 June 2020, a date set following an extension due to “difficulties” with implementing new systems and controls. The ESO was then given greater flexibility to complete it until 27 October as the project was marked as low priority during the initial COVID-19 lockdown in April.

National Grid ESO’s most recent open letter states that the Implementation Group – which includes representatives from Ofgem, BEIS, Elexon, RTE, interconnectors and other interested market participants – will work to recommend an optimal course of action during the early part of 2021. This will include a cost-benefit analysis on a TERRE-like mechanism operating in standalone mode.


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