Power & Politics Hub

The Platform for International Coordination of Automated Frequency Restoration and System Stability (PICASSO) is a project supported by all European transmission system operators, members of ENTSO-E. The aim is to establish a European platform for the exchange of balancing energy from auto-activated frequency recovery reserves or aFRR-platform, pursuant to Article 21 of Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing guidelines for balancing of electricity.

To date, four countries are active members of PICASSO – Germany, the Czech Republic, Austria and Italy, and most EU member states have expressed their desire to join by the end of 2024. According to article 13.1 of the first annex to the ACER decision on the establishment of the platform, all transmission system operators of the member countries must annually make assessments and report on the development of the platform. The general report should be published on the ENTSO-E webpage and shared with all relevant regulators.

In all four countries, however, the implementation of PICASSO has not gone smoothly, with the most significant problems appearing in Italy, where on March 1 of this year there was a call from the regulator Arera for the Italian transmission operator Terna to leave PICASSO until the necessary reforms have been carried out. Other countries that have declared that they will join within the current calendar year, for their part, are already discussing postponing their accession. The market expert Jean-Paul Harreman shares the view that a major cause of the problems is that different countries show huge differences in bidding around activation prices, which causes unintended effects.

Specifically in Italy, negative imbalance prices have been observed since August 2023, which cannot be explained by aFRR offers in the Italian market because they never fall below zero. In September 2023, Italian regulator Arera ordered an investigation, the results of which were recently published. It states that Italy should leave PICASSO until mitigating measures proposed at European level by the transmission operators are adopted. One of the proposed strategies is a deeper sharing of resources and an increase in supply with the accession of new countries such as France, the Netherlands and Sweden, which is expected to happen on July 24.

One issue that stands out is that countries like Austria and Italy seem to form a “non-congested zone”, meaning that the region is optimized in PICASSO as one block based on the order of pricing, disregarding the country of origin. Data for the period 3-5 February 2024 shows that the overall off-peak position is long (negative), with Italy exporting active power to Austria. This is equivalent to importing a negative aFRR from Italy.

In this case, Austria has a slightly “negative position” (-76 MW on average) which requires a downward adjustment of aFRR.

Electricity imports from Italy have pushed Austria to further cut regulation, with Austria’s minimum bid being -9,200 EUR/MWh. 

As both the Italian and Austrian markets have exhausted the downward aFRR capacity offered in the PICASSO mechanism, the most extreme negative price has been reached. This marginal price is included in the calculation of the Italian balancing price, resulting in a balancing price of close to -9,000 EUR/MWh.

However, if we look at the domestic availability of aFRR in Italy, the figures show quite a large volume of aFRR available.

Therefore, we can see that these extreme market events are due to two factors: Italy offers only part of its volume in PICASSO, and Italy and Austria are not regarded as different markets.
Despite these problems, PICASSO has also been the subject of praise, including claims that the platform could help achieve the goals of the Green Deal. A TransnetBW GmbH article mentions that the platform contributes to the integration of renewable energy sources (RES) in Europe. Above all, the introduction of a harmonized European balancing platform will create a large European market for secondary reserve, which in turn will lead to a large choice of contract partners, reducing prices for European electricity consumers. By activating bids from all over Europe, the necessary balancing power is more likely to be generated from a renewable plant, as the sun may be shining or the wind may be blowing somewhere on the continent. It is also important to note that in the future it will be possible to bid up to about 25 minutes before the market closes, instead of 1 hour as it is now, and the balancing energy will be able to be delivered fort about 15 minutes, instead of at least 4 hours as in the past. As a result of these possible changes, the PICASSO platform will enable a harmonized, cost-effective and collaborative distribution of balancing energy by connecting all transmission system operators with their reserve requirements and offers made by all market participants. If there are no faults in the power lines, this will allow a Norwegian pumped-storage power plant to step in and compensate for an imbalance in Italy, for example.