relieving congestion at european interconnectors · implementation and testing of such flow based...

Relieving Congestion at European Interconnectors

Christian Todem

13th April 2007

2Verbund – Austrian Power Grid AGVerbund – Austrian Power Grid AG

AgendaAgenda

Background (legal framework, liberalisation,...)

Current Congestion Management Situation

Problems?

Regional Approach

Methods for congestion management

Load Flow Based Auctions

Theoretical Comparison of Models Outlook

Concept of Open Market Coupling (OMC)

Possible Development Paths

Ongoing development in different Regions


BackgroundBackground

Liberalisation of European Electricity Markets with the aim to create one integrated (internal) electricity market (IEM)

Shutdown of uneconomical power plants Purely market (price) based unit commitment Further (and still) increasing demand of electricityIncreasing commissioning of volatile production units (e.g. WindPower)

Lead to an increased system usage, and also to more volatile system usage!


BackgroundBackground

Transmission systems were originally planned and developed for emergency situation (and of course to avoid over investment for local peak capacity).Transmission system was originally not planned and developed as a market platform for interregional electricity trading activities.

- Market reaction is much faster than the provision of relevant infrastructure (difficult and long authorization processes for building infrastructure)!

- More often congestion occurs which could endanger the security of supply (blackouts)!

The need for managing congestion become more and more important.


Current Congestion Management SituationCurrent Congestion Management Situation

Nearly every border within Nearly every border within Europe is congested.Europe is congested.

Power trading companies need Power trading companies need to participate in several to participate in several (different) auctions to gain the (different) auctions to gain the relevant transmission rights. relevant transmission rights.

Inconsistent regulations and Inconsistent regulations and systems in use.systems in use.

Physical Physical „„realitiesrealities““ are not are not taken into consideration!taken into consideration!

Insufficient contribution for Insufficient contribution for guaranteeing the security of guaranteeing the security of supply!supply!

Source: according to ETSO (2006)


Impact of currently used allocation systems (NTC-based)Impact of currently used allocation systems (NTC-based)

-- YearYear 20032003-- CZ CZ APGAPG-- Off PeakOff Peak-- WeekendsWeekends


Regional ApproachRegional Approach

Decision of the 11th Florence Forum (Sept. 2004):Organisation of 7 Mini Fora on a regional basis with on major task:

to develop common congestion management systems at a regional level.

NE

GBI

CSESWE

BC

NWE CEE

SEE


Regional ApproachRegional Approach

Establishment of IEM in one step was too optimistic (different starting points, different level of market opening and harmonisation).Electricity Regional Initiative (ERI): to make concrete improvements in the development of a single energy market in Europe by first integrating national markets.Electricity Regional Energy Markets (REM): definition of seven regions with their own implementation processes per region.All relevant stakeholders are includes in that processes.Coordination is a precondition.


Implementation Process in each RegionImplementation Process in each Region

Guidelines Congestion Management

Regulators Coordination

Committee(Regulators)

ImplementationGroup

(Regulators, TSOs, Market Participants)

Stakeholders Group Meeting

(Regulators, TSOs, Market Participants, EC,…)

Florence Forum(yearly, EC, europ. Stakeholder associations)


Regulation (EC) 1228/2003*Regulation (EC) 1228/2003*

Regulates charges for access to network, regulates Inter-TSO-compensation mechanism and cross border congestion managementRecently adopted Guidelines on Congestion management (annex of Regulation 1228/2003) oblige TSOs to coordinate their cross border congestion management efforts and further coordinated methods (in terms of capacity calculation and allocation) are mandatoryDirect applicable law

Deadlines: 1.1.2007: coordinated congestion management procedure (at

least on yearly, monthly and day-ahead level)1.1.2008: Intraday congestion management

*...”on conditions for access to the network for cross-border exchanges in electricity”


Methods for capacity allocation and developmentsMethods for capacity allocation and developments

* Also non flow-based methods are imaginable. Source: according to SETSO.

NTC (ATC) based Flow-based

Coordinated

Explicit implicit, hybrid

Coordinated explicit auctions

Open-Market-Coupling*

Explicit Implicit

Multilateral (Scan-dinava)

Bilateral implicit

Auctions

First come/ First

served

Pro-rata Explicit Auctions

Bilateral(common)

Coordinated (Cz, P, D, Sk)

Dry-run in SEE-Region

Development in CEE und CWE

Market based methods: “Auctions“Administrative

Development, Trend

TLC

FR, NL, BE

CEE - Central Eastern EuropeCWE - Central Western EuropeSEE - South Eastern EuropeTLC - Trilateral Market Coupling


explicit vs. implicit Auctionsexplicit vs. implicit Auctions

Costs of Energy

(location A)

Price of Energy

(location A)

Implicit AuctionPrice of Capacity (auctions)

(loco A loco B)„complete”costs

of Energy (location B)

Explicit Auction1. Step:CAPACITY (A B)e.g.: bilateral explicit

auctions

2. Step:ENERGY (location A)e.g.: bilateral (OTC) or

power exchanges

Cost of Cross Border

Capacity(loco A loco B)

Hybrid Auctions: Hybrid Auctions: Both, implicit and explicit auctions simultaneously possible!


Load Flow Based AuctionsLoad Flow Based Auctions

-Weak interconnection capacity

Loop Flows may endangersecurity of supply and reduce trading possibilities

Commercial contract path

Physical flow


A B

C D

E

Program1 [MW]Exchange program between A and BExchange program between A and B

30%30%

55%55%

15%

15%

45%

45%

45%45%

15%15%

Corresponding distribution of Corresponding distribution of ““realreal””(estimated) power flows(estimated) power flows i.e.i.e.PPowerower TTransferransfer DDistributionistribution FFactorsactors

PTDF factors can be defined between PTDF factors can be defined between each pair of zones, thus forming each pair of zones, thus forming PTDF MATRIXPTDF MATRIX

Load Flow Based Auctions, exampleLoad Flow Based Auctions, example

PTDF matrix is calculated by the PTDF matrix is calculated by the TSOsTSOs involved based on a common involved based on a common grid model of the respective region!grid model of the respective region!

Source: according to SETSO and EKC-Serbia


Why Load Flow Based Auctions?Why Load Flow Based Auctions?

Bilateral auctions are imprecise tools; they relay on worst cases and so some TSOs have to adopt conservative hypothesis by calculating the available capacities (NTCs) due to unexpected loop flows.Without “coordination” of such bilateral NTC based auctions loopholes may exist; i.e. also at borders without physical congestion auctions have to be installed in order to avoid by-passing of congestions.Effect of bilateral auctions is sometime questionable; e.g. in a worst case NTC is set equal to zero and still congestion may exist.Load flow based (explicit and/or implicit) allocation methods - by (regional) coordinated capacity assessment and capacity allocation -tend to optimise the usage of available transmission resources.Load flow based (explicit and/or implicit) allocation methods tend to increase the security of supply because of taken (estimated) physical flows into consideration.


0,00

5,00

10,00

15,00

20,00

25,00

1

A->CZCZ->A

A->HUHU->A

SI>A

CZ->EONA->SI

EON->CZ

PSE->CZ

CZ->PL

VET->CZ

CZ->VET

PL->SL

SL->PL

VET->PL

PL->VET

CZ->SL

SL>CZ

B->NLNL->

B

RWE>NL

NL->RWE

E.ON-> N

L

NL-> E.O

NF-> B

B-> F

Own source, picture shows yearly auctions results from 2006

€/M

Wh

APG CEE-Region CWE-Region

Specific willingness to pay on selected bordersSpecific willingness to pay on selected borders


Theoretical Comparison of ModelsTheoretical Comparison of Models

Flow based modelling maximises the security domain allowing for more cross-border trade opportunities.

A=>C

A=>B

flow-based

Security domain

Coordinated ATC assessment max(A=>B+A=>C)

Coordinated Technical profiles assessment

BA

C

100

160 170

* Mini Forum Central Western REM, 20. June 2006.


Explicit Auction (direct to Auction Office)

Concept from EEX for hybrid Auctions: OMC (Open Market Coupling)Concept from EEX for hybrid Auctions: OMC (Open Market Coupling)

Auction Office

EinzelstundengeboteKombinationsgebote

PowerExchangesTraders

Source: according to EEX/ Moser (2005)

Implicit Auction (via Power Exchanges)

Hybridauction

+

Additional business

Central Counterpart for the regional market!

EinzelstundengeboteKombinationsgebote

PowerExchanges

Aggregated ‘Order Books’

Implicit Bids

Explicit Bids for Capacity

settled Capacity

TSOs

Max. Cross Border Capacity

Load Flow (PTDF-Matrix)‘Clearing’


Possible Development PathsPossible Development Paths

Source: ETSO, as presented at the CW MF.

Flow-Based

Technical Profiles

Coordinated ATC assess.

UnilateralATC assess.

Market CouplingMultilateral AuctionsBilateral AuctionsUnilateral Auctions

Sharing bidsSharing bids

path #1

path #2

Two path towards social welfare maximization for regional capacity allocation:

- market coupling first (sharing energy bids)- flow-based modelling first (optimal use of the system)

Gri

d m

odel

sG

rid

mod

els


Ongoing development in different RegionsOngoing development in different Regions

-

CWE-Region:

- Trilateral Market Coupling (non flow-based) (established between Fr, Be, Nl in 2006)

- investigating coordinated explicit and implicit flow-based auctioning (MC)

CEE-Region:

- Coordinated ex. flow-based auctioning

SEE-Region:

- Coordinated ex. flow-based auctioning

- Dry-run with participation of Traders


Involvement of Verbund APG in such developmentsInvolvement of Verbund APG in such developments

7 7 Regionale MRegionale Määrkte:*rkte:*

Nordic, Nordic, CEECEE, , BalticBaltic, , ItalyItaly, , IberianIberian, , Western EuropeWestern Europe, , UK/IRLUK/IRL

APG supports in SEE - Region the implementation and testing of such flow based auctions (APG has developed and provided a software tool for the „Dry-Run“ in SEE).

*) schematic picture – some countries take part in more than one region.

Strong movement toward flow based auctions in Europe (due to Guidelines for Congestion Management).

APG has to take part in two regions, CEE -Region and Italy -Region.

CEE.. Central East Europe (A, D, PL, CZ, HU, SK, Sl)

Italy.. Italy Region (A, I, D, SI, Fr)

APG together with 7 other TSOs from CEE -Region intend to implement a (explicit) flow based allocation system. It is also envisaged to establish a common coordinated Auction in Freising/Germany for CEE-Region.


CEE - RegionCEE - Region

SLO

Creation of a common regional coordinated (explicit) flow based auction system for the entire region.Enhancements of models for further increasing of efficiency (e.g. Market Coupling,...).

8 Partners TSOs: APG, CEPS, ELES, E.ON, MAVIR, PSE-O, SEPS, VET

ObjectiveObjective::

Establishment of a common coordinated Auction Office in Germany/Freising (May 2007 envisaged).Start operation with day-ahead explicit auctions (2008).

Next stepsNext steps::


Dry-run in SEE in 2006Dry-run in SEE in 2006

PowerExchanges

Auction Office

TSOsTrader(TSOs)

‘Settlement’

Participating Parties Participating TSOs in Dry-Run

Explicit Bids for

Capacity

settled Capacity

Max. Cross Border Capacities

Load Flow (PTDF-Matrix)

No legal entity, each month another TSO performed the “role” of the coordinated Auction Office!

(www.DrCAT.at) 8 SEE-TSOs and Turkey have performed that Dry-run in 2006.


Dry-run in SEE in 2007Dry-run in SEE in 2007

Auction Office

TSOsTrader

PTDF-calculation

Auctioning

BC-coordination

BillingRisk-Management SchedulingSecondary Trading

„NACM PF“

Financial

flow

Fina

ncia

l flo

w

Bids

ClearingTe

chni

cal i

nput

Results R

esul

ts,

Bids

Regulators

ConsultantSETSO

EFET

Nec

essa

ry fo

r the

Dry

-run

!

Not necessary for the Dry-run, but precondition for “real” run!


Some results Dry-run 2007Some results Dry-run 2007

More than 40 traders are taking More than 40 traders are taking part at the Drypart at the Dry--run in SEE!run in SEE!Additional benefit:Additional benefit:--““ValuesValues”” of congestion at of congestion at

interconnectorsinterconnectors are calculated are calculated (based on physical models and (based on physical models and market prices).market prices).

-- Values addresses the need of Values addresses the need of investments (investment investments (investment decisions)decisions)


The recent approaches and developments towards regional coordination have shown first promising results.Such approaches will optimise the use of the existing infrastructure by taking security of supply issues directly into account.Such methods also have some positive side effects like achieving(relevant) investment signals (as a “by-product”).Complex interdisciplinary problem (technical and economical) with less experience in continental Europe.Also from academic point of view this is a topic with potential for R&D.

ConclusionConclusion

The recent regional approaches/developments show that the active work done so far by TSOs seems to be the right basis for further improvement of the European Electricity market.


Thank you for your attention!

relieving congestion at european interconnectors · implementation and testing of such flow based...

Documents