Scheme of the Algorithm for the Acceptance and Settlement of Bids in the TSO-TSO Model of AT-BE-CH-DE-FR-NL

Σ Demands (AT, BE, CH, DE, FR & NL) Common Merit Order EUR/MW MW … Common FCR Demand = Σ Demands (AT, BE, CH, DE, FR & NL) Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume In normal operation, c= Total Procured Volume Bids are (partially) awarded in the Common Merit Order list, based on their offered capacity price. 26.08.2019 26.08.2019 2

Σ Demands (AT, BE, CH, DE, FR & NL) Common Merit Order EUR/MW MW Indivisible Bid … Common FCR Demand = Σ Demands (AT, BE, CH, DE, FR & NL) Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume If it proves to deliver the economic optimum, a larger volume than the Common FCR Demand can be procured, due to indivisible bids.  OVERPROCUREMENT 26.08.2019 26.08.2019 3

Σ Demands (AT, DK, DE, NL, CH) Common Merit Order EUR/MW MW Indivisible Bid … Common FCR Demand = Σ Demands (AT, DK, DE, NL, CH) Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume The acceptance of an indivisible bid must never prevent the acceptance of a cheaper divisible bid. Per specification, the algorithm will never calculate such a result. All fully accepted divisible bids of a country receive a marginal price equal or higher than the offered price, all partially accepted divisible bids of a country receive a marginal price equal to the offered price. 26.08.2019 26.08.2019 4

Σ Demands (AT, DK, DE, NL, CH) Common Merit Order EUR/MW MW Indivisible Bid … Common FCR Demand = Σ Demands (AT, DK, DE, NL, CH) Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume There is no paradoxical rejection of divisible bids, meaning no rejection of divisible bids with an offered price smaller than the marginal price. Indivisible bids may be rejected if their acceptance does not reduce the overall procurement cost and leads to paradoxically rejected divisible bids. 26.08.2019 26.08.2019 5

Calculation of marginal prices From 01/07/2019 on, all bids will be rewarded with the marginal price. In case no import- and export limits are hit in the whole cooperation, there will be one cross border marginal price (the price of the most expensive awarded bid in the cooperation) that applies for all countries. In case a country hits an import- or export limit, this country will have a local marginal price (the price of the most expensive awarded bid in this country) that applies for this country. 61 605 527 181 158 368 100 66 111 56 FCR cooperation FR CH DE NL BE 46 42 77 423 Values for 2019. Import- and export limits are set according to system security criteria according to SOGL and limit FCR exchange. 26.08.2019

Calculation of marginal prices EUR/MW MW … Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume Cross border marginal price Local marginal price (CH) If there are no import and export limits hit, one common cross border marginal price will be calculated. In this example, Switzerland hits the export limit and the local marginal price for CH is calculated based on the most expensive awarded Swiss bid. 26.08.2019 26.08.2019 7

Calculation of marginal prices If local marginal prices apply, there are countries who receive less money for their exports (export limit violation) or who pay more for their imports (import limit violation) respective to the cross border marginal price. A rent is generated, which is distributed among all countries proportional to the absolute shares of imports and exports. A B C Import(+) / Export (-) [MW] Bold… limit hit -20 -50 70 MP (LMP) [€/MW] 180 160 Net position TSO [€] - 3.600 - 8.000 12.600 Import/Export-Pool [€] 1.000 TSO shares Import/Export-Pool [%] 14% 36% 50% TSO shares Import/Export-Pool [€] - 143 - 357 - 500 TSO-TSO settlement [€] - 3.743 - 8.357 12.100 26.08.2019

No more decoupling due to market reasons After, 01/07/2019, decoupling due to market reasons can no longer occur as there is a harmonised bid structure in the new market design. All efforts are undertaken to calculate common results for the whole FCR Cooperation region AT-BE-CH-DE-FR-NL 26.08.2019

OVERPROCUREMENT and SHORTFALL situations 26.08.2019

Σ Demands (AT, BE, CH, DE, FR & NL) Overprocurement EUR/MW MW Indivisible Bid … Common FCR Demand = Σ Demands (AT, BE, CH, DE, FR & NL) Bid from AT Bid from CH Bid from DE Bid from BE Bid from NL Bid from FR Total Procured Volume Overprocurement can take place if the last awarded bid is an indivisible bid. In this case, the Total Procured Volume may be larger than the Common FCR Demand. 26.08.2019 26.08.2019 11

Shortfall Situation (Illustration with 4 TSOs) Pooling of local surpluses In case of an overall shortfall (Common FCR Demand cannot be reached), the offered volumes stay initially with the connecting TSO. If local surpluses exist, they are pooled and distributed to the TSOs how have shortfalls, based on their original share of the Common FCR Demand. Remaining missing volumes have to be procured locally. 26.08.2019 26.08.2019 12