Increase in socio-economic welfare through European cooperation
TransnetBW operates two platforms from its own system control centre: IGCC (International Grid Control Cooperation) since 2011 and PICASSO (Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation) since 2022. These enable the cost-optimized activation and exchange of balancing reserves on the European continent - from the Atlantic to the Black Sea and from the Skagerrak in Norway to the Aegean.
The optimisation systems behind the two platforms IGCC and PICASSO determine an optimal use of balancing reserves and avoid the simultaneous activation of frequency restoration reserves (via so-called "imbalance netting"). Besides system security, the platforms do not generate a real profit in the sense of a cash flow, but they do generate overall economic cost savings through the cost-optimised call-up of balancing reserves.
How is the socio-economic welfare calculated?
For the IGCC, the welfare gain is easy to be determined: "Netting" prevents the activation of positive frequency restoration reserves in one control area and prevents the activation of negative frequency restoration reserves in another control area. Both have a certain price. The costs are added (with the correct sign) to calculate the socio-economic welfare. For the welfare calculation at PICASSO, about 650.000 simulation calculations are carried out per month, in which the balancing reserve price is determined for a simulated use of balancing reserves without cross-border exchange. The socio-economic welfare for the operationally connected countries results from the cost savings on the producer and consumer side that can be determined by comparing the costs in the coupled and decoupled case, as well as from the so-called congestion revenues.
Socio-economic welfare: noteworthy figures
Via the IGCC, the activation of 11.240 TWh of balancing reserves were avoided in the entire year 2022 through imbalance netting, which is roughly equivalent to the annual electricity consumption of Lithuania. This saved about €790 million in 2022 alone. In the first half of 2023, further savings of €293 million were achieved, and in May 2023 the amount of balancing netting reached a new high of 1.222 GWh.
Recommended by LinkedIn
To put this in perspective:
Since the start of the cooperation in 2011, with new partners almost every year, a cumulative socio-economic welfare of a total of €2.05 billion has been achieved. More than half of these gains have been achieved since the beginning of 2022. This is due to the now (almost) fully developed European market area and is also caused by the high energy prices.
The PICASSO system has been operational since the end of June 2022 and has since then facilitated the cross-border exchange of approximately 1.2 TWh of balancing energy. Depending on the assumed monetary valuation of the additional satisfaction of imbalances through PICASSO, an economic surplus of €173 million or €629 million could be achieved in the first full year of operation, from July 2022 to June 2023.
Where do we go from here?
With the accession of more countries, such as Italy most recently, further savings potential will be raised. Since only four countries have joined PICASSO, it can only be guessed how large the savings potential will become at the end of 2024 when the platform is fully developed. The PICASSO platform has the potential to become a prime example of European market integration. On behalf of all European TSOs, TransnetBW will operate one of the largest energy optimisation systems in the world.
Last but not least, optimising the balancing processes in the electricity grid will make it easier to efficiently integrate more and more volatile renewable energies and contribute to the decarbonisation of the electricity balancing market.
Principal at Magnus Energy | Electricity market expert | PhD in Energy Economics from TU Delft
1yNow we “just” need common balancing capacity markets 😉