Relieving Congestion at European Interconnectors. Christian Todem 13 th April 2007

Transcription

1 Relieving Congestion at European Interconnectors Christian Todem 13 th April 2007

2 2 Agenda 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

3 3 Background 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 electricity Increasing commissioning of volatile production units (e.g. Wind Power) Lead to an increased system usage, and also to more volatile system usage!

4 4 Background 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.

5 Current Congestion Management Situation Nearly every border within Europe is congested. Power trading companies need to participate in several (different) auctions to gain the relevant transmission rights. Inconsistent regulations and systems in use. Physical realities are not taken into consideration! Insufficient contribution for guaranteeing the security of supply! Verbund Austrian Power Grid AG Source: according to ETSO (2006) 5

6 6 Impact of currently used allocation systems (NTC-based) - Year CZ APG - Off Peak - Weekends

7 7 Regional 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 BC NWE CEE SWE CSE SEE

8 8 Regional 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.

9 9 Implementation Process in each Region Guidelines Congestion Management Regulators Coordination Committee (Regulators) Implementation Group (Regulators, TSOs, Market Participants) Stakeholders Group Meeting (Regulators, TSOs, Market Participants, EC, ) Florence Forum (yearly, EC, europ. Stakeholder associations)

10 Regulation (EC) 1228/2003* Regulates charges for access to network, regulates Inter-TSOcompensation mechanism and cross border congestion management Recently 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 mandatory Direct applicable law Deadlines: : coordinated congestion management procedure (at least on yearly, monthly and day-ahead level) : Intraday congestion management Verbund Austrian Power Grid AG *... on conditions for access to the network for cross-border exchanges in electricity 10

11 Methods for capacity allocation and developments Explicit NTC (ATC) based Implicit Flow-based Coordinated First come/ First served Pro-rata Explicit Auctions Bilateral implicit Auctions Multilateral (Scandinava) Explicit Coordinated explicit auctions implicit, hybrid Open-Market- Coupling* Administrative Bilateral (common) Coordinated (Cz, P, D, Sk) Development, Trend Dry-run in SEE-Region Development in CEE und CWE Market based methods: Auctions TLC FR, NL, BE CEE CWE SEE TLC - Central Eastern Europe - Central Western Europe - South Eastern Europe - Trilateral Market Coupling Verbund Austrian Power Grid AG * Also non flow-based methods are imaginable. Source: according to SETSO. 11

12 12 explicit vs. implicit Auctions Implicit Auction Explicit Auction complete costs Cost of Cross Border Capacity (loco A loco B) 1. Step: CAPACITY (A B) e.g.: bilateral explicit auctions Price of Capacity (auctions) (loco A loco B) of Energy (location B) Costs of Energy (location A) 2. Step: ENERGY (location A) e.g.: bilateral (OTC) or power exchanges Price of Energy (location A) Hybrid Auctions: Hybrid Auctions: Both, implicit and explicit auctions simultaneously possible!

13 13 Load Flow Based Auctions Commercial contract path Physical flow - Weak interconnection capacity Loop Flows may endanger security of supply and reduce trading possibilities

14 Load Flow Based Auctions, example A Program1 55% [MW] B Exchange program between A and B C E 45% 15% 30% 45% 15% D Corresponding distribution of real (estimated) power flows i.e. Power Transfer Distribution Factors PTDF factors can be defined between each pair of zones, thus forming PTDF MATRIX PTDF matrix is calculated by the TSOs involved based on a common grid model of the respective region! Verbund Austrian Power Grid AG Source: according to SETSO and EKC-Serbia 14

15 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. Verbund Austrian Power Grid AG 15

16 Specific willingness to pay on selected borders 25,00 APG CEE-Region CWE-Region 20,00 15,00 10,00 5,00 0,00 1 Verbund Austrian Power Grid AG 16 /MWh A->CZ CZ->A A->HU HU->A A->SI SI>A CZ->EON EON->CZ PSE->CZ CZ->PL VET->CZ CZ->VET PL->SL SL->PL VET->PL PL->VET CZ->SL SL>CZ B->NL NL->B RWE>NL NL->RWE E.ON-> NL NL-> E.ON F-> B B-> F Own source, picture shows yearly auctions results from 2006

17 * Mini Forum Central Western REM, 20. June Theoretical Comparison of Models Flow based modelling maximises the security domain allowing for more cross-border trade opportunities. 160 C 170 A=>B A 100 B Security domain Coordinated ATC assessment max(a=>b+a=>c) A=>C Coordinated Technical profiles assessment flow-based

18 Concept from EEX for hybrid Auctions: OMC (Open Market Coupling) Implicit Bids Power Exchanges Traders Einzelstundengebote Kombinationsgebote Explicit Auction (direct to Auction Office) + Implicit Auction (via Power Exchanges) Hybridauction Einzelstundengebote Power Kombinationsgebote Exchanges TSOs Aggregated Order Books Additional business Explicit Bids for Capacity settled Capacity Clearing Max. Cross Border Capacity Load Flow (PTDF-Matrix) Auction Office Verbund Austrian Power Grid AG Central Counterpart for the regional market! Source: according to EEX/ Moser (2005) 18

19 Possible Development Paths 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) Sharing bids Unilateral Auctions Bilateral Auctions Multilateral Auctions Market Coupling Unilateral Grid models ATC assess. Coordinated ATC assess. Technical Profiles Flow-Based path #2 path #1 Verbund Austrian Power Grid AG Source: ETSO, as presented at the CW MF. 19

20 20 Ongoing 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 -

21 Involvement of Verbund APG in such developments 7 Regionale Märkte:* Nordic, CEE, Baltic, Italy, Iberian, Western Europe, UK/IRL Î APG has to take part in two regions, CEE -Region and Italy Region. Î Strong movement toward flow based auctions in Europe (due to Guidelines for Congestion Management). Î 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). CEE.. Central East Europe (A, D, PL, CZ, HU, SK, Sl) Italy.. Italy Region (A, I, D, SI, Fr) Verbund Austrian Power Grid AG Î 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. *) schematic picture some countries take part in more than one region. 21

22 CEE - Region 8 Partners TSOs: APG, CEPS, ELES, E.ON, MAVIR, PSE-O, SEPS, VET Objective: 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,...). SLO Verbund Austrian Power Grid AG Next steps: Establishment of a common coordinated Auction Office in Germany/Freising (May 2007 envisaged). Start operation with day-ahead explicit auctions (2008). 22

23 Dry-run in SEE in 2006 Participating Parties Participating TSOs in Dry-Run Trader Power Exchanges (TSOs) TSOs Explicit Bids for Capacity settled Capacity Settlement Max. Cross Border Capacities Load Flow (PTDF-Matrix) Auction Office No legal entity, each month another TSO performed the role of the coordinated Auction Office! ( Verbund Austrian Power Grid AG 8 SEE-TSOs and Turkey have performed that Dry-run in

24 Not necessary for the Dry-run, but precondition for real run! 24 Dry-run in SEE in 2007 Regulators SETSO Consultant Trader Bids EFET Clearing Results Financial flow Financial flow Auction Office NACM PF Results, Bids TSOs Technical input PTDF-calculation BC-coordination Auctioning Necessary for the Dry-run! Risk-Management Billing Secondary Trading Scheduling

25 25 Some results Dry-run 2007 More than 40 traders are taking part at the Dry-run run in SEE! Additional benefit: - Values of congestion at interconnectors are calculated (based on physical models and market prices). - Values addresses the need of investments (investment decisions)

26 26 Conclusion 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. 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.

27 27 Thank you for your attention!