Transmission congestion management in bilateral markets: An interruptible load auction solution

This paper describes development and experiences from the Nordic region and the current status and trend toward an integrated and open electricity market comprising most of Europe. The paper describes practical experiences as well as theoretical investigations and modeling studies. We focus on the following subjects: Congestion management: There are a variety of arrangements for transfer across national borders and for congestion management in Europe. A common future system based on an improved version of the Nordic market splitting system can be a good alternative. Management of ancillary services: We see certain trends concerning ancillary services in the Nordic market: 1) more focus on cost effectiveness and a move toward market arrangements including cross border trade in ancillary services; 2) increased use of the demand side in the provision of ancillary services; and 3) increased flexibility in defining the demand for ancillary services. Investment incentives: Experience as well theoretical investigations indicate that investment in generating capacity is a problem in an open electricity market, where investors are exposed to high risk and uncertainty. One important conclusion from our studies is that end user response (elasticity) to electricity prices is important in an open market. We also discuss how additional incentive mechanisms can be used as a measure to achieve capacity adequacy, when the market fails to provide sufficient signals for new investments.

Power System Planning and Operation in International Markets-Perspectives From the Nordic Region and Europe

Reservation Of Transmission Capacity For The Exchange Of Regulating Resources In Northern Europe: Is There A Benefit?

In order to ensure a stable operation of the power system, Transmission System Operators have to balance production and consumption of electiricty continuously. For this purpose balancing services are utilised. With the European objective to migrate to a sustainable power production, a significant share of generation is expected to be from renewable sources, with its inherent production forecast errors. To balance this variable production, the requirement for balancing services increases. The Nordic, particularly the Norwegian hydrobased power system is predestinated of providing such balancing services to the continental European power system.This thesis studies the integration of national regulating power markets, enabling the cross-border exchange of balancing services in Northern Europe. The research encompasses the development of a mathematical model for the regulating power market, which is based on a day-ahead spot market model. Furthermore, data models for the Northern European power system are developed. Succeedingly, these models are utilised for a set of case studies.The first part of the thesis focuses on the model development and implementation of system scenarios. The mathematical model of the regulating power market comprises the procurement as well as activation of regulating reserves and explicitly addresses the exchange of balancing services. This model is used to assess the integration of national regulating power markets.Two detailed data models are compiled, encompassing 2010’s and 2020’s state of the Northern European power system. For these scenarios the outcome of the the day-ahead spot market is analysed, which shows significant changes in the future system dispatch. Taking the system dispatch as input to the regulating power market model, its market outcome is investigated. The analysis illustrates significant cost savings for the integration of national regulating power markets.The second part of the thesis comprises a set of analyses, executed with the developed models. The increase in power production from renewable energy sources, especially wind power production is taken as a basis for the future development of the power system. With the changes in the power production portfolio in Northern Europe, including higher variability and increased production forecast error, the future outcome of the regulating power market is studied. Moreover, the impact of various forecast horizons for wind power production and the definition of different reserve requirement levels are investigated. In general the analyses illustrate the challenges due to increased power production from renewable sources. These result in higher system imbalances and hence costs in the regulating power market. It is shown, that an integration of national regulating power markets in Northern Europe provides a good possibility to counteract this cost increase, while the system security is enhanced.

Integration of Regulating Power Markets in Northern Europe

Alternative methodologies have been proposed where power flow calculations are included, and the main purpose of this paper is to present a simulation model which can be used to assess alternative methods for congestion management. The paper describes a simulation model where the flow based market coupling method is implemented and demonstrated. This method can be seen as a compromise between nodal pricing and market splitting (area pricing), where the criterion for congestion management is minimization of the socio-economic congestion cost. The main principles for the proposed model are described, and case studies are performed on a generic system model in order to highlight the main characteristics of the method, and to summarise the main benefits and challenges that remain for a practical implementation of the flow based market coupling method. The case studies show that the method has the potential to solve the congestion management problem in a way that is optimal from a socio-economic point of view. The total costs of congestions are minimized, and the maximum differences in area prices are normally reduced. As a consequence the transmission system utilization is improved and the market players' risk referred to area prices is reduced. However, a successful implementation of the method depends heavily on the power flow model that is applied. It is of vital importance that this model is sufficiently accurate and continuously updated to predict the actual power flows on the main cross-border transmission corridors

Model for area price determination and congestion management in joint power markets

The area price model used by Nord Pool in the Nordic day ahead market, is an option for other restructured power systems, including the future European spot market for electricity. However, improvements in the methodology for area price determination are needed to make the model suitable for the more meshed and complex power system in Continental Europe. An alternative methodology, where power flow calculations are included, is proposed in this paper. The proposed methodology is based on a combination of nodal and area pricing, and the criterion of optimization is minimization of the total (socio-economic) congestion costs. This paper describes the method and the implementation in a prototype simulation model. Case studies have shown that the proposed model has the potential to reduce socio-economic congestion costs in the Nordic system and to reduce maximum price differences between areas. This means that the transmission system utilization is improved, and the market player risk with respect to area prices is reduced.

L. Warland

Papers

Alternative model for area price determination in a deregulated power system

Model for area price determination and congestion management in joint power markets