European Internal Electricity Market Research Articles

Research on Power Aggregators within the European Internal Electricity Market

Abstract The ongoing climate changes have determined governing bodies from all around the globe to set ambitious targets for CO2 reduction. In recent years, renewable energy technologies have proven themselves to be a method of CO2 reduction that is competitive in terms of both costs and efficiency, which led to the technologies becoming affordable and practical for residential use. Since the adoption of the Clean Energy for all Europeans Package in 2019, consumers were encouraged to have an active role in the power sector. This has led to the emergence of a new participant in the energy system, the power aggregator. From the scientific literature that has been covered so far, many articles focus on the economic benefits that different aggregator business models bring to the aggregators, their clients, and the system. Other scientific papers focus on optimizing how aggregators participate in energy markets by taking into consideration the technologies included in their portfolios and pricing mechanisms. Regardless of the subjects tackled, the articles mostly present theoretical aspects since, in practice, residential power aggregators are still not present in many countries. For all the reports that have been turned in so far, secondary research was carried out to gain a better understanding of the current power sector context. Renewable energy technologies were reviewed to uncover synergies that would prove valuable for power aggregator portfolios, existing business models of aggregators were examined to have a grasp on regulatory and economic limitations, and academic papers related to mathematical optimization models were studied. The doctoral research, for which this paper presents the progress, aims to use secondary research to understand aggregators at a European level and then to perform primary research into implementing the aggregating activity in Romania in the context of an accelerated shift to a decentralized power system.

Physical adequacy of a power generation system: The case of Spain in the long term

Generation adequacy is a key ingredient to security of electricity supply. We develop a stochastic model of demand and supply (from different technologies) for measuring it from a physical or technical point of view. We adopt several metrics of supply shortfalls. Next we demonstrate the model by example. Because of limited interconnections with neighboring countries, Spain can be considered an electric island. We get numerical estimates of the parameters underlying the model. We then resort to Monte Carlo simulation to derive the risk profile of the adequacy metrics in the coming decades. We consider up to ten scenarios, with different demand paths and generation parks. The proposed deployment of renewable technologies and the envisaged closure of coal-fired and nuclear stations result in greater risk of shortages. For one, assuming that demand grows at 1.36% per year, from 2020 to 2030 the expected energy not served increases more than 400-fold as coal and nuclear capacities are reduced; the factor runs into the tens of thousands by 2040 and 2050 when those technologies cease to operate. These results are potentially important for policy makers, system operators, and power companies involved in the construction of the European internal electricity market.

Cooperation or Localization in European Capacity Markets? A Coalitional Game over Graph Approach

Capacity markets, as a means to address the capacity adequacy issue, are constantly becoming an important part of the European internal electricity market. The debate focuses on how the capacity markets will be smoothly integrated in one Pan-European power market, without resulting in multiple national fragmentations and consequently in economic efficiency losses. Cross-border participation and regional cooperation are considered as two sine qua non conditions in this respect. The present paper provides a coalitional game theoretical approach aiming to facilitate the cooperation of neighboring countries, when it comes to the security of electricity supply and the necessity of establishing a capacity market. Such an approach can support respective decisions about capacity markets cooperation as well as stress-test the benefits considering all cooperation possibilities.

Briefing: The North Sea grid

It is estimated that ~33 GW of offshore wind capacity will be installed in the North Sea by 2020, and this is expected to increase to 83 GW by 2030. The North Sea grid is a concept that is intended to transfer the electricity generated from offshore wind farms installed in the North Sea to land, interconnect the grids of adjacent countries and facilitate the creation of a European internal electricity market. This briefing note explains the North Sea grid concept and the basic principles of high-voltage direct current submarine power transmission.

The implication of the European inter-TSO compensation mechanism for cross-border electricity transmission investments

Abstract An efficient cross-border investment and well-designed markets and regulatory instruments are crucial prerequisites to the creation of a fully functional European internal electricity market. One of the prominent regulatory measures taken to speed up the creation of the internal market was to abolish tariff pancaking by replacing cross-border tariffs with an Inter-Transmission System Operators Compensation (ITC) mechanism through which transmission system operators (TSOs) can compensate each other. In this study, the implication of introducing such mechanism on the cross-border investment outcome is explored. The results indicate that the current ITC mechanism is loosely linked to the cross-border investment decisions of TSOs. In addition, the study concludes that factors such as the ITC fund size and the number of participating TSOs can influence the investment outcome.

Good Neighbourliness in a Sustainable European Internal Electricity Market: A Tale of Communities and Uncommunautaire Thinking

The internal energy market is much like the ‘normal’ internal market so that the degree of completion is measured by economic interpenetration. This means that the more business is done across the border, the more the market has transformed from a national market to the internal market. This is coupled to a desire to come to a sustainable, i.e. more environmentally friendly and secure, energy production and supply. The objectives of market integration and sustainability lead to increasing interconnections between national energy systems and the corresponding need to take into account the effects of national policies on neighbouring countries. This contribution will examine how the principle of good neighbourliness can already be identified - albeit embryonically - in current EU sustainable energy policy. It also investigates whether and how this principle can form a useful framework to come to a sustainable European internal electricity market. It starts, however, by first identifying what this principle may entail with the use of similar concepts in small communities and how this may be contrasted when the communities become less relevant and neighbourliness is operationalised in a hierarchical setting.

Germany’s Energy Transition and the European Electricity Market: Mutually Beneficial?

Germany's energy system is in transition towards less nuclear, lower carbon emissions and more renewables. Notwithstanding widespread neglect of its European dimension, this Energiewende will further exacerbate current network fluctuations due to the significant increase in wind and solar power. Key data from Denmark show that this transition will soon bring the German national power system to its limits for absorbing the resulting intermittency, and increase the need for more cross-border power transfers. Yet network analysis of import/export data shows that Germany's position in the European power system is contrary to the Danish case. The need for a European solution for Germany's energy transition will therefore soon become evident. In order to establish the necessary infrastructure, the Energiewende needs hence to be guided by an economic approach designed to prevent further fractures in the Internal Electricity Market. Constructive negotiations with neighbouring countries on market designs and price signals will be important preconditions. The article emphasizes the still neglected European paradox of Germany's energy transition and presents working examples and possible solutions to uphold electricity supply in Europe's power house. The neglect of Europe's Internal Electricity Market is one of the most surprising aspects of Germany's Energiewende (energy transition—Substantially increasing the share of renewables in the energy mix, while phasing out nuclear power), as the country's central geographic position, its importance in the European electricity system and the growing pressure on Europe's networks makes a European approach imperative: A dense, cross-border infrastructure which allows flexible import and export of electricity from one region to the other might be the sine qua non of Germany's Energiewende, at least from a technical standpoint. The German government's decision to initialise a complex transition of the country's energy system therefore could be followed by a turn in its policy towards market opening. Germany might be forced to give up its longstanding opposition against deeper integration and become an advocate of an European power system which is large and flexible enough to allow trade and load management at different levels—Local, national, and supranational. Yet this scenario has an economic flipside, which is much less straightforward: As the European Internal Electricity Market is still characterized by a variety of national (and regional) market models, its features, among other things, different electricity tariffs. Given that potential exporters of electricity should favour international markets and better transnational interconnectivity, electricity producers that might sustain losses in their market share, should oppose it. The delicate task of market opening hence depends on mutually beneficial interactions between Germany's energy transition with its environment in a truly finalised Internal Electricity Market. Yet one key element of Germany's energy transition makes the outcomes of the Energiewende highly uncertain: The

A flow-based methodology for the calculation of TSO to TSO compensations for cross-border flows

In the context of the development of the European internal electricity market, several methods for the tarification of cross-border flows have been proposed. This paper presents a flow-based method for the calculation of TSO to TSO compensations for cross-border flows. The basic principle of this approach is the allocation of the costs of cross-border flows to the TSOs who are responsible for these flows. This method is cost reflective, non-transaction based and compatible with domestic tariffs. It can be applied when limited data are available. Each internal transmission network is then modelled as an aggregated node, called ‘supernode’, and the European network is synthesized by a graph of supernodes and arcs, each arc representing all cross-border lines between two adjacent countries. When detailed data are available, the proposed methodology is also applicable to all the nodes and lines of the transmission network. Costs associated with flows transiting through supernodes or network elements are forwarded through the network in a way reflecting how the flows make use of the network. The costs can be charged either towards loads and exports or towards generations and imports. Combination of the two charging directions can also be considered.