Abstract
Regulation EC No714/2009 on “… conditions for access to the network for cross-border exchanges in electricity …” (see European Commission 2009) and the Framework Guidelines on Capacity Allocation and Congestion Management (ACER 2011) formally introduced Transmission Rights in the European Electricity System. None of these documents really explain what these transmission rights should be but the Framework Guidelines are slightly more explicit than the regulation: transmission rights can be physical or financial; physical rights should be options subject to a use it or sell it clause (UIOSI); and financial rights can be options or obligations. Further details will come with the grid codes that Transmission System Operators (TSO) are preparing. The Framework Guidelines do not really elaborate on the market design that must accommodate these rights. They simply mention that “TSO implement capacity allocation in the day-ahead market on the basis of implicit auction … based on the marginal pricing principle”. Both Market Splitting (MS), which is now well established in the Nordic power market and Market coupling (MC), which is emerging as the European reference system outside of the Nordic countries satisfy these conditions. The US experience shows that the transmission rights and market design are closely intertwined and that one cannot discuss the former without referring to the latter. We follow suit and discuss the extent to which Transmission Rights can be meaningfully implemented in Market Coupling. Market Coupling can be seen as a very simplified version of nodal pricing (replacing nodes by zones and hoping that the rest applies). It is thus convenient to discuss transmission rights in Market Coupling keeping the nodal system in background. Chapter 3 of this book (Oren 2012) offers an in depth discussion of transmission rights in the nodal pricing model: we continuously (most often implicitly) refer to this chapter during the discussion. Much of the analysis of congestion management in nodal pricing was constructed on examples of two and three nodes grids. It is thus also reasonable to follow that approach and reason on two and three zones (not node) systems that we construct from a six-node (not zone) network. The rest of this introduction gives a brief survey of the literature on Market Coupling and the structure of the paper.
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Notes
- 1.
Physical rights must be nominated (“Use It”) before the opening of the day-ahead market in order to be used. Otherwise (“Or Sell It”) they are automatically sold back to the day-ahead market at the price that will come out from that market.
- 2.
Simultaneous feasibility is a property that requires that the set of transmission rights, whether financial or physical (but this notion was introduced for financial rights), be physically feasible (that is satisfy Kirchoff’s first and second laws) for the real grid. We come back to that question later.
- 3.
Counter-trading is an operation whereby TSOs buy adjustment injections and withdrawals of power at different nodes to generate counter-flows on congested line. A counter-trading operation may require an expensive plant to ramp up and a cheap plant to ramp down. These operations are also called “out of merit” because they violate the economic order of plant operations. Counter-trading is the responsibility of the TSOs and does not involve PXs; it must be planned on the basis of the real characteristics of the grid and not of the simplified model provided by the TSOs to the PXs.
- 4.
There is a guarantee before day-ahead but it only holds if the security of the grid is not endangered. Needless to say the security of the grid in real-time depends on the set of transmission rights that have been allocated, as well as on the real-time conditions of the grid. A guarantee of transmission right that can be waived because of an initial misallocation of transmission rights by the TSO is not a guarantee. There is however an incentive not to unduly curtail transmission rights as TSOs are not sure to recover the compensation in their tariffs.
- 5.
The solution obviously differs from the nodal prices of the six-node system as MC imposes that the number of prices is at most equal to the number of zones. But this is taken for granted (and even desired) at the outset.
- 6.
Rights that have not been nominated before the opening of the energy market in day-ahead are released to the implicit auction of Market Coupling and the former owner of these rights receives the price determined in the auction.
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Appendices
Appendix 14.1: Flows on the Interconnection in the Two-Node Model Before Cross-Border Trade
Appendix 14.2: Incremental Flows Due to Exports in the North–South Model
Appendix 14.3: Change of ZPTDF Due to a Limitation of Generation Capacity
Appendix 14.4: Computation of ZPTDF in the Three Zone Model
Appendix 14.5: Flows on Interconnection Due to Intra-zone Market Clearing in the Three-Zone Model
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de Maere d’Aertrycke, G., Smeers, Y. (2013). Transmission Rights in the European Market Coupling System: An Analysis of Current Proposals. In: Rosellón, J., Kristiansen, T. (eds) Financial Transmission Rights. Lecture Notes in Energy, vol 7. Springer, London. https://doi.org/10.1007/978-1-4471-4787-9_14
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