The power market design column – Calling for cross-border capacity - Part 2

In the 13th column in this series, I described how ACER, national regulators and the EU Commission are pushing the TSOs to make more transmission capacity available for cross-border trade.

There is no news on the case of DG Competition against TenneT regarding the Danish-German border. Also there is no white smoke yet, from the trilogue discussions regarding the Clean Energy Package and in particular regarding Article 14.7 of the proposal for a Regulation on the internal market for electricity. However, progress has been made with the Capacity Calculation Methods (CCMs) that are being developed as a result of the CACM Network Code. Regulators have recently approved the CCM of the Ireland-UK region and for the Nordic region. So, let’s see what is in these methodologies.

The Capacity Calculation Methodologies (CCMs) are being developed per Capacity Calculation Region (CCR) and ten of such regions have been established. The Capacity Calculation Region Ireland – United Kingdom (CCR IU) covers the border between the bidding zones Great Britain and the Single Energy Market of Ireland and Northern Ireland. The CCR Nordic covers all bidding zone borders between Sweden, Denmark and Finland.

The Nordic region: introduces economic assessment of remedial actions

The most interesting aspect of the CCM of the Nordic CCR is that it introduces (article 11) an assessment of economic efficiency of so called “costly remedial actions”. These are congestion management actions that incur costs for TSOs and the typical example is redispatch of power plants. The idea is that TSOs have to check whether the use of such remedial actions is efficient, and if so, they must be used to manage congestions before such congestions may result in limiting the possibilities for cross-border trade. This is a feature that has been asked for by market participants but was also already required according to existing regulations.  In particular article 1.7 of Annex I to EU Regulation No. 714/2009 must be mentioned.

Now, it will be interesting to learn whether this economic assessment will have a big impact compared to the current way of calculating cross-zonal capacity. And obviously many questions remain. For example, the CCM still leaves it at the discretion of the TSOs to decide which remedial actions are relevant.

The Ireland-UK region: straightforward solution

The CCM of the IU CCR simply sets the day-ahead cross-zonal capacity equal to the “MPTC”, which is the maximum permanent technical capacity that the DC-interconnector is capable of transmitting. It is thus set by the availability of the interconnector asset only. Only in case of outages in the grid with a significant impact on the interconnector, the cross-zonal capacity may be lower. This means that as long as the grid is fully available, cross-zonal capacity is not reduced, also not in case of high wind generation or other events.

As is the case in the Nordic CCR, economically efficient costly remedial actions must be considered within the IU region. Such remedial actions must be considered in case of grid outages grid with a significant impact. And they will only be actually used when they are more efficient than the alternative which is reducing interconnector capacity for which the interconnector company will be compensated. (See article 11.)

Outlook

The two regions are very different. The Nordic CCR is a large meshed system with several AC interconnectors as well as a few DC interconnectors, and employs a flow based method. The CCR IU covers just one border that consists of two DC interconnectors, the Moyle interconnector and the East West Interconnector, and employs a NTC method.Therefore, these two CCMs could be used as a blueprint for all the other CCMs. After all, the idea is to develop a common and harmonised set of rules for the single EU power market.

This is my 15th column on power market design issues. The earlier columns covered the following topics: flexibility, cross-border capacity calculation, electric time and unintended exchanges, EU Network Codes, price formation and zero marginal cost generation, simplicity in the Clean Energy Package,  smart grids, storage, auto-generation, balancing, VoLL, demand side response, interconnectors and the Economist on market design.

Disclaimer: The views as expressed in this column do not necessarily reflect the views of Statkraft

Paul Giesbertz

paul.giesbertz@statkraft