Competition Law and Negotiated Settlements in Competition Proceedings

1. Introduction

Curtailment prioritisation means deciding which electricity generators should reduce their output first when a power grid is constrained. A constrained grid occurs when available electricity generation is greater than the network's ability to safely transport or use that electricity.

This issue is especially important in grids with large amounts of wind and solar generation. Because renewable generation is increasing rapidly, system operators need clear legal rules for deciding which generators are curtailed, while ensuring that decisions are fair, transparent and non-discriminatory.

2. Why Prioritisation Is Necessary

Grid constraints can occur because of:

insufficient transmission capacity;

sudden changes in renewable generation;

high electricity production in one region;

low local demand;

transmission-line failures; or

system-security requirements.

If the operator does not reduce generation, the network may become overloaded. This can threaten system stability.

Therefore, prioritisation rules determine which generator reduces production, by how much, and for how long.

3. Market-Based Prioritisation

Modern electricity law increasingly favours market-based redispatch.

Under this approach, generators and flexible consumers submit offers to increase or reduce their electricity production or consumption. The system operator selects the appropriate resources according to market rules.

Under Article 13 of Regulation (EU) 2019/943, redispatching should generally be based on objective, transparent and non-discriminatory criteria, with market-based redispatch being the normal approach.

This approach reduces the possibility that an operator will arbitrarily select a particular renewable generator for curtailment.

4. Priority for Renewable Generation

Renewable generation receives important legal protection in the EU framework.

Article 13 requires transmission and distribution operators to take appropriate measures to minimise downward redispatching of renewable electricity. Non-market-based downward redispatch of renewable generation is subject to specific conditions.

Where renewable generation is curtailed for system-security reasons, the decision must be properly justified. Alternatives should be considered where they are available and economically reasonable.

Therefore, a system operator cannot simply decide that renewable generators should always be curtailed first.

5. Objective Selection Criteria

A good prioritisation framework should establish clear criteria.

These may include:

System Security

Generators that create a serious local network problem may need to be reduced first.

Economic Efficiency

The operator can consider the cost of different redispatch options.

Technical Characteristics

Some generators may be better suited to rapid reduction than others because of their technical characteristics.

Contractual Rights

Grid-connection agreements and PPAs may affect the allocation of curtailment risk.

Firm and Non-Firm Connections

Generators with non-firm connection arrangements may have accepted greater curtailment risk than generators holding firm connection rights.

These criteria should be established before the curtailment event wherever possible.

6. Non-Discrimination

Non-discrimination is a central principle.

If two generators create similar network impacts, the operator should not favour one without a legitimate legal or technical reason.

This is particularly important for renewable projects because discriminatory curtailment can affect investment decisions and undermine confidence in the electricity market.

Regulation 2019/943 therefore requires redispatching decisions to be based on objective and transparent criteria.

7. Compensation and Prioritisation

Prioritisation is closely connected with compensation.

Where qualifying non-market-based downward redispatch occurs, affected generators may be entitled to financial compensation under EU law. The compensation framework can take account of additional operating costs and the net revenue that the facility would otherwise have earned.

This means that the legal system addresses two separate questions:

First: Which generator should be curtailed?

Second: What financial protection should that generator receive?

Keeping these questions separate helps prevent arbitrary allocation of economic losses.

8. Role of Storage and Demand Response

Curtailment prioritisation should not focus only on generation.

A constrained grid can also be managed through:

battery storage;

pumped hydro;

demand response;

flexible industrial consumption;

electric-vehicle charging;

interconnection; and

other flexibility services.

If these alternatives can solve the constraint without curtailing renewable generation, they may reduce the need for renewable curtailment.

EU law specifically promotes flexibility and measures that reduce unnecessary renewable redispatch.

9. Relevant Case Laws

TenneT TSO GmbH and TenneT TSO BV v ACER, Case T-482/21

The General Court decided this case on 25 September 2024. It concerned ACER's methodology for allocating the costs of redispatching and countertrading in the European Core electricity region.

The case demonstrates the importance of legally sound methodologies when congestion-management decisions create financial consequences for transmission-system operators.

TransnetBW GmbH v ACER, Case T-476/21

This case also concerned the allocation of redispatching and countertrading costs between transmission-system operators.

It is relevant because cost allocation and curtailment decisions are closely connected in interconnected electricity markets. Clear rules help ensure that congestion costs are not allocated arbitrarily.

10. Regulatory Oversight

Energy regulators should monitor:

frequency of curtailment;

generators affected;

reasons for each curtailment decision;

compensation paid;

network constraints;

use of alternative flexibility; and

compliance with non-discrimination requirements.

Regular reporting allows regulators to identify whether particular generators or technologies are being repeatedly curtailed.

11. Conclusion

Curtailment prioritisation in constrained grids requires a clear, transparent and legally controlled decision-making system. The objective is to maintain grid security while reducing unnecessary renewable-energy losses.

A strong framework should prioritise market-based redispatch, apply objective technical and economic criteria, protect against discrimination, consider storage and demand response, and provide appropriate compensation where required.

The EU framework under Regulation 2019/943 provides an important example because it combines non-discrimination, renewable-energy protection, market-based redispatch and regulatory oversight. Cases such as TenneT v ACER and TransnetBW v ACER further demonstrate the importance of transparent rules for managing the economic consequences of congestion and redispatch.