Share

Stay up to date on the latest market insights through our free newsletter

Select your company type:

Select a type of user first

Corporate Energy Producer

Enter your company email:

Input your professional email

Stay up to date

You're now registered to receive newsletter updates

News

What is ALPACA and Its Objectives

ALPACA is the second transeuropean capacity market following the FCR Cooperation. Conceptualised in 2022 and built on the earlier cooperation between Austria and Germany, this market now allows for cross-border energy allocation between Germany, the Czech Republic and Austria.  The go-live of ALPACA (for delivery day) occurred on the 3rd of September 2025, enabling exchange of aFRR balancing capacity across the AT–CZ and DE–CZ borders. This platform is linked to the aFRR energy project – the PICASSO.

The objectives are well known and in line with those of other European balancing platforms: 

• Improve grid reliability 
• Achieve a more efficient allocation of resources

By optimising the use of available cross-border transmission capacity, each TSO gains better access to aFRR balancing capacity. This reduces redundancies over time and leads to lower overall procurement costs. Figure 1, depicts the active and observer countries of ALPACA as of today.

Remuneration Structure

In the ALPACA scheme, the remuneration structure for balancing capacity is addressed in the product specification and bidding rules. The features are similar to the ones currently in place on the aFRR balancing in Germany and are as follows:

• The balancing capacity product uses a pay-as-bid pricing mechanism: awarded bids receive the price they offered. 
• The minimum bid size is 1 MW (with increments of 1 MW), and bids are divisible.
• Separate procurement for upward and downward aFRR balancing capacity. 
• Procurement is organised daily, for six 4-hour blocks (00:00-04:00, 04:00-08:00, …) each delivery day. 
• Gate Opening Time (GOT): Day D-7 at 10:00 CET/CEST; Gate Closure Time (GCT): Day D-1 at 09:00 CET/CEST; Publication of results: D-1 at 09:30 CET/CEST. 

These structures mean that providers of balancing capacity commit to availability for the designated blocks and receive remuneration for the capacity available. The “pay-as-bid” model means each bidder sets its own capacity price and, if successful, receives that price.

If the units awarded in ALPACA are called to activate, the settlements of energy will follow the protocol of the energy market, in this case, the PICASSO.

From bid to activation: How Alpaca works

Here is a step-by-step overview of how ALPACA works from bidding to allocation:

1. Submission of Bids: Balancing Service Providers (BSPs) submit bids for standard balancing capacity to their respective TSO’s local procurement platform.
2. Procurement Optimization : The bids and the TSOs’ capacity demands are sent to a central optimisation engine called the Common Procurement Optimisation Function (CPOF). The CPOF computes an optimal procurement solution, taking into account constraints such as: Minimum required procurement in each LFC block; Maximum exchange limits across borders; Direction of cross-border transmission (Import/Export)
3. Final Allocation and Notification : The CPOF forwards the procurement results (volumes, awarded bids, prices) to the participating TSOs. The TSOs then finalise procurement and notify the BSPs about their allocated volumes and capacity prices.
4. Reservation and Activation : Once awarded, BSPs must make the capacity available during their contracted blocks. If activation is required (by the TSO) then the balancing energy is called upon via PICASSO. 
5. Settlement : The BSP receives the agreed capacity payment (as per the pay-as-bid) for being on standby. If the capacity is activated, additional remuneration according to the activation market rules applies.

Main implications for Renewable generators

Cross-border cooperation can open access to larger markets and enable more flexible resources—such as renewables and storage– to contribute to balancing capacity. By expanding the pool of capacity providers, cross-border procurement helps lower entry barriers and can drive down capacity prices. For renewable producers, this may translate into more competitive conditions and narrower profit margins, but also into more frequent opportunities to participate in balancing services.

In this case, Germany and the Czech Republic display notably different aFRR dynamics. The Czech Republic’s energy mix is dominated by conventional thermal and nuclear generation, whereas renewables are more prevelent in Germany. Consequently, German aFRR prices are more volatile and tend to average higher levels. This creates potential opportunities for Czech operators, aligning with the broader goal of harmonising aFRR capacity across borders.

Over the past two months, activation flows have occurred in both directions, confirming that market expansion has a positive impact. However, it is important to note that transmission capacity between TSOs remains a key bottleneck for deeper integration. Significant improvements in market efficiency will therefore take time to materialise as these constraints are gradually addressed.