The harmful effects of transmission congestion on energy security and prices
In late 2014, electricity will have to flow freely “in” and “between” the 8 regional markets of the European Union. All the energy sale and purchase offers for the next day across the EU should meet on a common exchange platform. But this deadline has already become uncertain, due to weakness shown on power exchanges (PXs) in treating transmission congestion. In the interconnected European power grid hundreds of bottlenecks are recorded every day in energy transmission. The presence of congestions in such a large number is officially explained by the fact that the European power transmission system hasn’t been designed to host a single market.
Two decades after the opening of the market was launched, the explanation remains only partially valid.
Indeed, every EU Member State has developed its cross-border interconnection transmission facilities (CBTF) for well-defined external energy exchanges or for mutual help in critical situations. But there hasn’t been enough interest to accommodate interconnections to the single market requirements. National regulations have too little motivated and supported the transmission and system operators (TSOs) to build new power lines. The official explanation refers to congestions at political borders. Connoisseurs know, however, that even within national systems there are numerous “borders” (sections, corridors) of congested networks, because network development did not anticipate the (permanent) changes in zonal power generation and consumption. Network inadequacy acts as an additional cost, of congestion, and therefore in areas restricted by congested borders market prices are different.
Completing the 400kV network will free up additional capacity of the existing lines
For political and not economic reasons, the wholesale price discrimination has been avoided in the national market. Lacking incentive to eliminate the causes of congestion, TSOs used the easy way, “pushing” most of them to the political borders. The procedure has reduced external energy transactions and made them more expensive.
But congestions not only limit the use of the designed capacity of the network, but are also a threat to the operational security of the electricity system. The physical system may collapse once it operates without a significant margin of stability. And congestions reduce these margins, because they are limits of power transmission, caused by either the equip- ment capacity or by system stability. Limits imposed by stability are more likely to overflow, usually being more severe, and must be conservative, depending on the operating mode.
The designed capacity of power lines in the relevant internal borders of the national transmission system exceeds by far the operational limits of power transfer, imposed by stability requirements For example, 80% to 85% of the rated capacity of power lines in S3 and, on average, 70% to 75% of the total capacity of external interconnections is not available for the market. Admissible lower limits for internal lines are the consequence of the network inadequacy to the production – consumption configuration. Through section S3 power is massively transferred on the west-east direction, on a route with high electrical impedance. This phenomenon is exacerbated by the lack of Northern segments (Suceava – Bistriţa – Cluj – Tarniţa – Oradea/Mintia) and Western segments (Arad – Timişoara – Porţile de Fier) of the network ring at 400kV voltage level. Completing the 400kV network will free up additional capacity of the existing lines, including the connection capacity of wind farms in the south-east of the country, with 1500-2000MW, according to our estimates. We further show that CBTF limits are also lowered by the current system of transmission congestion management.
Transmission congestion management policies in the EU
Distribution of information into the market on zonal generation-consumption balancing, on available transmission capacities and on capacities actually allocated to “traders” is the first, easiest and cheapest measure to limit the number and effects of congestions.
EU Regulation on Energy Market Integrity and Transparency (REMIT) requires the TSOs to post the key-data on balancing energy into the system, network availability and actual CBTF. But the information must also be accurate. This aspect is regulated by the Technical Codes of the transmission network, developed by ENTSO-E and approved by the European Commission. Accurate estimate and equitable allocation on energy transactions of network capacities available for the market is still a big problem of the European electricity market. It is known as transmission congestion management, an essential component of the network access service.
In South-East Europe (SEE), CBTF is determined and leased by auction so far organized by interested TSOs, most often on a bilateral basis. For more than 5 years is has been attempted to transfer this task to a Centralized Auction Office (CAO), based in Montenegro, representing the TSOs in the region. The author had the occasion to show from the launch that CAO project cannot have a future, within consultancy financed by USAID on energy market organization in SEE, granted to ECRB – the association of energy regulators in the region. It has been proven that explicit allocation, either bilateral or centralized, is a cumbersome and unfriendly procedure for electricity trade. For participants in the energy market, CAO remains opaque, collects taxes on political borders and does not stimulate TSOs to declare the real interconnection capacities or to develop them. Under such circumstances, we cannot speak of free electricity trade in SEE. The most affected are the variable sources requiring quick network access and at the highest volume possible.
The European Council, EC and ACER currently promote the allocation by implicit auction, after the model of price market coupling (MC) for the next day, as a pivotal-solution to achieve the single energy market.
CBTF allocation is auctioned all at once with energy within spot powery exchange (PX) transactions, usually resulting higher values available for the market. The coupling model gradually adjusts the energy exchange schedules between markets based on auctions performed on exchanges, so that CBTF is not exceeded. In Central-Eastern Europe (CEE), Hungary has managed a coupling to the Czech and Slovak markets and, in parallel, the project for coupling Poland and Romania is under way.
80% to 85% of the rated capacity of power lines in S3 is not available for the market
CBTF size can be received from TSOs or it can be even determined by the coupling model of the power exchange. In the first case, market coupling is reported to a fixed limit of the electrical power transferred through the cross-border corridor. Fixed limits can only be conservative, because in a real network constraints vary with the operating conditions. Therefore, fixed power limits prevent network access to the actual capacity. In the second case, we have the flow-based market coupling determined by the PX platform with a simplifying method or, in other words, flow-based implicit capacity allocation. It is currently tested in Central- West Europe (CWE) to become a general model of the EU single market.
In our opinion, flow-based market coupling does not allow network access to the real capacity either; in other words, the network does not support the electricity market enough. First, a PX cannot be able to determine the real power flows and constraints in an electric power system, one of the most complex problems of engineering. Then, a PX cannot find and apply the “countermeasures” to stabilize the system and, implicitly, to increase access to the electricity market.
But the TSO is qualified to make such determinations and is able to increase the present and future transmission capacities, by mobilizing the so-called internal network flexibility as well. Unclear responsibilities of TSO and PX on operational security of the power system may lead to unacceptable risks while maintaining a low interest of TSOs to develop the network and mobilize its flexibility resources, in virtue of their operational duties. Connection permits are lacking content and even the grid design criteria, which do not specify access volumes depending on the route of energy flow within the network. Last but not least, arbitrary maintenance of unique energy prices between political borders is detrimental to competition, the main reason of integration.
The nodal network access, of entry-exit” type, is the most suitable Access tariffs and capacity limits should only be practiced at the “entry” and “exit” points of the transmission networks. Transmission tariffs of “entry – exit” type currently seem a solution that goes without saying, but things haven’t been so easy for those who promoted it 15 years ago.
Explicit allocation, either bilateral or centralized, is a cumbersome and unfriendly procedure for electricity trade
The network capacity model we have been proposing for many years extends the application of the nodal principle to the allocation of the transmission service volume. Power exchanges will be able to implicitly allocate, this time based on clear data, the available capacity to the network connection point, no longer being involved in the calculation and adjustment of power transfers through the network, operations which they cannot handle.
The control of critical power transfers relates to TSO operations, which will also support financially the effect of deviations from the notified transactions, on account of resources offered by the nodal tariff of network access. TSO will become really interested to increase network capacity and flexibility.
Integration of renewable energy in the energy market will be boosted without the TSO to be financially responsible for its balancing.
Romania has much to gain if it simplifies access for traders to increasingly larger interconnection capacities
Not necessarily by massive export of electricity. In good years, competitive energy for export accounted for 5-7% of total generation. Most likely, electricity export will continue to remain in 2020 at these levels. If a boom of export volumes is unlikely, there are however great opportunities for a better use of network capacity, of flexibility of conventional energy sources that are ancillary service suppliers, of alternative sources potential, currently limited to the insufficient balancing. It would also be a good signal for realizing the interconnection around the Black Sea (BS ring) and for energy transits from Russia and Ukraine to Turkey and Greece, or to Italy, Austria and Germany.
Unconventional energy would benefit especially from fast access and in large amounts to foreign markets and from cheaper balancing. Benefits would be maximized if we also had a national program of power grid development and a clear electricity law in terms of responsibilities on the development and flexibility of power grids. Unlike the EU, U.S., UK, Germany and many other developed countries, we don’t have a power transmission grid program supported by the state aiming at eliminating congestions and transmitting renewable energy. The completion of the inner transmission ring at 400kV , cross-border 400kV lines Suceava – Bălţi, Săcălaz – Novi Sad and submarine cable interconnection with Turkey are waiting for years to be executed.
All the significant projects should be included in one of the 12 corridors and energy areas of the trans-european infrastructure, for which the EU provides support in financing and authorization. Romania did not propose enough projects as against to the neighbouring countries, which it presented summarily or merely sketched. We focused on grid integration of nuclear units, although the EU funds with priority the infrastructure necessary to integrate renewables and achieve the Caspian Sea and Black Sea “rings”. The message sent in Brussels, of tempering investments in renewables, has rather been contrary to European policies. The Cluj – Oradea line (or the Cluj – Mintia alternative) misses from proposals, of great interest for the pumped-storage hydropower station Tarniţa. Which is also missing, although Bulgaria proposes one of 800MW. Interconnections at 400kV voltage with Moldova and Turkey are not included either.
Fast access and high volumes
Transmission congestion management remains the main challenge of the European electricity markets. The market coupling model currently promoted by Brussels is lacking efficiency and may induce security risks even if it claims an estimate of power flows. The truly competitive single market and with real network support requires a nodal network access model, of “ entry – exit” type. Our country would have much to gain from rapid access and at high volumes to the regional markets.
Jean Constantinescu is director and senior energy consultant & researcher at ROENP. He also led as president Transelectrica, ANRE and IRE.