Common Communication from the TSOs and the Regulators to the Support Group 1 of the Pentalateral Energy Forum

Provided their concerns regarding capacity calculation and its impact on social welfare are satisfied, regulators express their comfort concerning the ATC-based market coupling solution (daily operational and back up procedures, including their timings, choice of the COSMOS algorithm, fall-back solution, gate closure time, sharing of congestion revenue in ATC based market coupling) as described in the Implementation Study and its Addendum. Beside that, the publication of data for transparency and monitoring purposes will be discussed during the next expert meetings between the TSOs and the regulators.

To address the issue of capacity calculation, two technical meetings on ATC capacity calculation, between an expert group of the CWE TSOs and the CWE regulators (BNetzA, CRE, CREG and NMa), were organized at CREG premises on the 10th of December 2008 and 27th of January 2009.

During these fruitful meetings, the TSOs and the regulators have shared the following views and understanding on this issue.

1. Complexity of cross-border capacity calculation

The calculation of cross-border commercial capacities is a very complex issue. The principle of ATC calculation is to find ex-ante a set of cross-border capacities that ensure safe operation of the system. In particular, this set should be such that the flows in the physical lines of the system do not exceed the technical maximal admissible flows on lines exposed to crossborder flows for all possible transactions resulting from the coupling of the four markets.

Different options to perform these calculations may be considered:

The first option corresponds to the currently applied practice of bilateral ATC calculation. Stricto sensu, the calculated capacity is only valid for exchanges on the corresponding border, and any exchanges beyond the considered market hypothesis may put network security at risk. Therefore, specific security margins (e.g. addressing potential loop flows) are applied to ensure that network security is safeguarded. The optimal use of offered capacity which is determined as a result of the market coupling algorithm might lead to unforeseen/unseen stressed situations which this method may not be able to address efficiently.

The second option corresponds to a fully coordinated and automatic calculation of cross-border capacities based on the same ATC concept. TSOs indicated that the difficulties encountered in the development of coordinated ATC calculations were one of the reasons for switching, a few years ago, to flow-based approaches. From a theoretical and practical point of view, it seems impossible to set up a coordinated and automatic ATC calculation method that, at the same time, fully ensures network security and provides an efficient use of the technical capability of the transmission system.

A third option proposed by the TSOs for the CWE market coupling project corresponds to an approach midway between the two previous options. Capacities are calculated as in the first approach and then checked on the basis of a common grid model for two time stamps per day. If network security problems are detected, capacity adjustments may be decided before any capacity values are offered to the market.

Regulators and TSOs share the views that:

Flow-based is the most efficient trade-off between security of supply on the one hand, and facilitation of the market on the other hand. However, a flowbased solution will not be implemented from the start of CWE market coupling.

To get the potential benefits from market coupling before the launch of flowbased, the third option is the only short-term pragmatic solution for ensuring grid security in the current market design framework. Features of this option are discussed below.

2. Features of the coordinated capacity adjustment method

- Capacity adjustments

The proposed methodology starts from a best estimate of the situation established in D-2 which takes into account all flows (outside and inside the region). At D-2, only an adjustment (or reduction) of cross-border capacities inside the region is considered by this method so that as a result the CWE cross-border capacities are provided under the given conditions of system security. Potential reductions of exchanges outside the region are not accounted for in this method, while such reduction also may have a positive impact on the security of the network.

A limitation of internal exchanges within each country is also not considered. All three types of exchanges are adjustable. However, regulators and TSOs note that cross border exchanges are currently treated as the only adjustment parameters, whereas exchanges internal to a hub and exchanges external to the CWE area are currently not considered as adjustment parameters.

The grid security assessment in this option allows an expert view at each TSO to anticipate possible security of supply issues. From a theoretical point of view, this expert view allows measures like capacity adjustments (within or outside the region), topology changes and redispatch.

- Learning effect

Coordination between TSOs for the calculation of forecast flow patterns for the following day constitutes a major progress for ensuring network security. The coordination is needed since the usage of capacity in an implicit allocation will follow directly economic signals that can induce load-flow situations which are not yet known. This coordination includes an increased exchange of data between the TSOs, not only on network topology and consumption forecast, but also on expected dispatch of generation units. It also allows a better understanding of possible critical situations. This increased coordination may lead to a reduction of the uncertainty of the regional grid situation and consequently, by learning, to a possible increase in available capacities compared to the situation of bilateral ATC calculation.

3. Minimum capacity issues

Imposing minimum capacities on some borders is a non-technical decision that implies a trade-off between security of supply on the one hand and social welfare and market issues on the other. The proposed capacity adjustment method is technically able to handle minimum capacities. However, guaranteeing minimum capacities has a cost due to counteractive measures (if available) or due to reduction of capacities at other borders. Loop flows also have an impact on capacity calculation and may affect social welfare. A discussion on minimum capacity may be taken up later on if it proves to be an issue from the experimentation results as indicated in section 4. During these discussions, TSOs concerns regarding the availability of redispatch resources should be addressed, especially when preventive redispatch is considered. The way redispatching could be operated and coordinated between TSOs as well as how redispatching costs may be shared and recovered should be discussed in more detail between TSOs and regulators.

4. Planning

No detailed simulation of the new proposed coordinated ATC method has been made yet.

March 2009: Results of the sensitivity analysis of ATC values on social welfare figures will be provided.

End of April 2009: First common grid models created with daily practices will be available so that TSOs will check if they are on the right track. TSOs will communicate their findings to regulators at a technical meeting beginning of May.

End of July 2009: The impact of the proposed method on ATC values (including the frequency and the deepness of capacity reductions) will be available. TSOs will communicate these results to regulators.

End of August 2009: technical meeting between TSOs and regulators. According to the results presented by the TSOs, developing coordinated redispatching may need to be discussed for the future.

5. Reporting to PLEF

After each milestone of the project, main results will be presented to the PLEF.