ACER Revises Loop Flow Cost Rules Across 13-Nation Core Power Region
The EU energy regulator's updated cross-border capacity and loop flow rules reshape how transmission costs are allocated across Europe's most congested power corridor.
EU energy regulatory agency ACER approved updates to power loop flow cost rules covering 13 European nations on Thursday (2026-07-24), according to Montel News, following a separate decision earlier the same week to greenlight transmission system operators' revised day-ahead and long-term cross-border capacity calculation methodology for the same Core region.4,2
The Core region spans some of Europe's most heavily traded cross-border corridors, including France and Germany. Loop flows — power that transits a country's grid without being scheduled to do so — have long frustrated TSOs in this region, creating unplanned congestion and forcing operators to curtail scheduled trades. How those costs are recovered, and from whom, has been a persistent source of regulatory dispute.2
ACER's approval on Monday (2026-07-21) of the revised capacity calculation rules for the Core region was a prerequisite step. Day-ahead and long-term cross-border capacity depends on how much transmission headroom TSOs can reliably offer to the market, and that calculation is directly distorted when loop flows consume grid capacity that operators had counted as available. Fixing the accounting without fixing the cost allocation would have left an obvious gap. The loop flow cost update, published Thursday (2026-07-24), closes it.2,4
The practical consequence is a reallocation of who pays for the inefficiencies inherent in a meshed grid. Where loop flows force a TSO to run remedial actions — counter-trading, redispatch, or curtailment — the revised rules change how those costs are assigned across the 13 nations. For power traders active in Core, this matters because capacity allocation and congestion revenues on interconnectors will be recalculated under the new framework.2
Germany's grid sits near the center of this problem. The country's continued role as a major transit corridor, combined with the rapid growth of variable renewable generation, has made loop flow management increasingly difficult. Germany had negative power prices 5% of the time in 2024, up from 3% the prior year, and that share had risen to 10% in the first eight months of 2024, according to data cited by Pexapark CEO Michael Waldner. Periods of oversupply and constrained export capacity are exactly when loop flows become most commercially disruptive.1
Europe's grid investment deficit amplifies the problem. The European Commission's next seven-year budget proposes to raise grid spending to over €30 billion, against just €5.8 billion in the previous cycle. But that capital is years from deployment. In the interim, regulatory frameworks for cost allocation are doing some of the work that physical infrastructure cannot.1
ACER is meanwhile working along a parallel regulatory track. The agency has said it intends to decide by January 20 on new frequency containment reserve rules for the continental Europe synchronous area, a separate set of changes aimed at grid stability and blackout prevention. The two processes — loop flow costs and frequency reserves — are distinct, but both reflect the same underlying pressure: a grid built for a different generation mix is being asked to handle one that is faster, more distributed, and less predictable.3
The frequency reserves decision is worth tracking for traders who hold positions sensitive to European grid balancing costs, because reserve procurement volumes and procurement rules directly affect system marginal prices and TSO balancing expenditure. A January decision from ACER would follow a public consultation period and could see further rounds of revision before final implementation.3
For now, the loop flow cost update is the more immediate operational change. TSOs in the 13 Core nations will need to adapt their cost-recovery models to the new allocation framework, and market participants who trade interconnector capacity or hold congestion income rights will need to assess how the revised methodology affects their expected revenues. The full text of the decision was behind Montel's paywall as of Thursday (2026-07-24), limiting public visibility into the precise allocation mechanics.4
What remains unclear is how quickly national regulators in each of the 13 countries will implement the revised rules and whether any will seek to challenge the methodology. Regulatory approvals at ACER level do not always translate smoothly into uniform national application, particularly where TSOs have differing financial exposures to loop flow costs. The January frequency reserve deadline gives a rough sense of ACER's current pace — but implementation timelines on capacity calculation rules have slipped before.2,3