Northern European Power System Research Articles

Economic incentives for capacity reductions on interconnectors in the day-ahead market

We consider a zonal international power market and investigate potential economic incentives for short-term reductions of transmission capacities on existing interconnectors by the responsible transmission system operators (TSOs). We show that if a TSO aims to maximize domestic total welfare, it often has an incentive to reduce the capacity on the interconnectors to neighboring countries. In contrast with the (limited) literature on this subject, which focuses on incentives through the avoidance of future balancing costs, we show that incentives can exist even if one ignores balancing and focuses solely on welfare gains in the day-ahead market itself. Our analysis consists of two parts. In the first part, we develop an analytical framework that explains why these incentives exist. In particular, we distinguish two mechanisms: one based on price differences with neighboring countries and one based on the domestic electricity price. In the second part, we perform numerical experiments using a model of the Northern-European power system, focusing on the Danish TSO. In 97% of the historical hours tested, we indeed observe economic incentives for capacity reductions, leading to significant welfare gains for Denmark and welfare losses for the system as a whole. We show that the potential for welfare gains greatly depends on the ability of the TSO to adapt interconnector capacities to short-term market conditions. Finally, we explore the extent to which the recently introduced European “70%-rule” can mitigate the incentives for capacity reductions and their welfare effects.

Assessing the benefits of exchanging spinning reserve capacity within the hydro-Dominated nordic market

This paper presents a hydrothermal scheduling toolchain suitable for detailed studies of procurement of spinning reserves in the hydro-dominated Nordic power system. The toolchain combines a long-term model to find the expected marginal value of water in the hydropower reservoirs and initial states for thermal generators, and a short-term model to optimize the daily unit commitment and dispatch. The short-term model has a detailed description of both hydro and thermal generation technologies to realistically constrain their capabilities as reserve capacity providers. The toolchain is applied on a data description representing a 2030 scenario of the Northern European power system to quantify the benefits of exchanging spinning reserve capacity both between bidding zones and between countries within the Nordic market. By allowing 10% of the transmission line capacity for exchange of reserves, we find that the daily average economic benefit is 290 k€ and 102 k€ for reserve exchange between bidding zones and countries, respectively. Moreover, we quantify and illustrate the importance of applying unit commitment for hydropower stations and strictly enforcing their minimum power requirements.

Convex Relaxations of the Short-Term Hydrothermal Scheduling Problem

This paper concerns the assessment of two methods for convex relaxation of the short-term hydrothermal scheduling problem. The problem is originally formulated as a mixed integer programming problem, and then approximated using both Lagrangian and Linear relaxation. The two relaxation methods are quantitatively compared using a realistic data description of the Northern European power system, considering a set of representative days. We find that the Lagrangian relaxation approximates system operational costs in the range 55-81% closer to the mixed integer programming problem solution than the Linear relaxation. We show how these cost gaps vary with season and climatic conditions. Conversely, the differences in both marginal cost of electricity and reserve capacity provided by the Lagrangian and Linear relaxation are muted.

Power-to-heat as a flexibility measure for integration of renewable energy

Higher shares of variable renewable energy (VRE) in energy systems reduce electricity spot prices at times when the supply of these sources are most abundant, leading to a lower market value per unit for these sources compared to energy sources with a constant or adjustable supply. This disadvantage for VRE can be offset by evolving the energy system towards wider market integration and flexible demand or supply. This study analyses how increased integration of heat and power markets by use of power-to-heat in district heating system could increase the value VRE sources in the Northern European power system. For the quantification, we apply a partial equilibrium model with a detailed representation of power and district heat generation for a likely 2030 energy system. The results show a markedly increase in VRE market value when installed capacity of power-to-heat is increased, especially in scenarios with a large Nordic power surplus. The study concludes that power-to-heat solutions in district heating systems can increase system flexibility in a short time perspective that considers hours to weeks, but also in a longer perspective that accounts for the significant inter-annual variability in hydropower supply.

Integrating variable renewables: the benefits of interconnecting thermal and hydropower regions

Purpose This study aims to investigate the effects of thermal–hydro interconnection on the revenues, market value and curtailment of variable renewable energy (VRE). The increasing market shares of VRE sources in the Northern European power system cause declining revenues for VRE producers, because of the merit-order effect. A sparsely studied flexibility measure for mitigating the drop in the VRE market value is increased interconnection between thermal- and hydropower-dominated regions. Design/methodology/approach A comprehensive partial equilibrium model with a high spatial and temporal resolution is applied for the analysis. Findings Model simulation results for 2030 show that thermal–hydro interconnection will cause exchange patterns that to a larger extent follow VRE production patterns, causing significantly reduced VRE curtailment. Wind value factors are found to decrease in the hydropower-dominated regions and increase in thermal power-dominated regions. Because of increased average electricity prices in most regions, the revenues are, however, found to increase for all VRE technologies. By only assuming the planned increases in transmission capacity, total VRE revenues are found to increase by 3.3 per cent and VRE electricity generation increases by 3.7 TWh. Originality/value The current study is, to the authors' knowledge, the first to analyze the effect of interconnection between thermal- and hydropower-dominated regions on the VRE market value, and the authors conclude that this is a promising flexibility measure for mitigating the value-drop of VRE caused by the merit-order effect. The study results demonstrate the importance of taking the whole power system into consideration when planning future transmission capacity expansions.

Energy system impacts of the Norwegian-Swedish TGC market

Purpose– The purpose of this study is to analyze the power market and greenhouse gas (GHG) emission effects of the joint Norwegian–Swedish tradable green certificates (TGCs) market, which is established to support investments according to a 26.4 TWh increased annual renewable electricity generation (REG) by 2020.Design/methodology/approach– The study applies an energy system model with high granularity in time and space, and detailed power system data for the Nordic countries, Germany, The Netherlands and UK.Findings– The results show that the TGC scheme will cause a 8.7-9.3 /MWh reduction in average electricity prices in the Nordic countries. The price decrease will to a limited extent pass through to Germany, The Netherlands and UK. When assuming a low carbon price level, the new REG will reduce annual GHG emissions by 10.9 Mtonnes in 2020, primarily through substitution of German natural gas power. A sensitivity analysis shows that the GHG emission effect of the TGCs is highly sensitive to changes in the carbon price. Investment levels up to a 90 TWh increased REG per year are found to cause increasing GHG emission reductions.Originality/value– The study results signal the importance of taking the TGC policy into account in decision-making processes in the Northern European power system, in particular for market actors in the Nordic area. The authors conclude that the Nordic countries potentially can play a vital role in a future Northern European low carbon power system through export of green balancing power, substitution of thermal power and reduced GHG emissions from the Northern European power sector.

Reserve procurement and transmission capacity reservation in the Northern European power market

This paper provides the modeling approach and the associated results of determination of bidding prices for frequency restoration reserves (FRR) provision, and implications of cross-border transmission capacity reservation for FRR exchange. A model with three optimization blocks is developed. The FRR bidding price determination block uses an opportunity cost based approach to calculate the cost of providing FRR. For the FRR procurement, the transmission system operator (TSO) selects the cheapest bids with the possibility of cross-border exchange if transmission capacity is reserved for this purpose. In the day-ahead procurement block, optimal unit commitment and dispatch is determined, taking into account the reserve and transmission capacity allocations. A case study is done for the Northern European power system, consisting of the Nordic countries, Germany and the Netherlands. The results show how, among others, the FRR bidding prices are determined by the difference between the daily averaged sport price forecasts and the units’ marginal costs. The day-ahead and total reserve procurement costs are positively and negatively correlated to the system load respectively. As could be expected, costs are reduced in the FRR market when transmission capacity is reserved for this purpose. But a decrease in cost in the day-ahead market was also obtained for small transmission capacity reservations, caused by the increased flexibility in the FRR importing market. The total costs are the lowest for a transmission capacity reservation level of around 20%, illustrating that such reservation can be beneficial.

How dead ends undermine power grid stability.

The cheapest and thus widespread way to add new generators to a high-voltage power grid is by a simple tree-like connection scheme. However, it is not entirely clear how such locally cost-minimizing connection schemes affect overall system performance, in particular the stability against blackouts. Here we investigate how local patterns in the network topology influence a power grid's ability to withstand blackout-prone large perturbations. Employing basin stability, a nonlinear concept, we find in numerical simulations of artificially generated power grids that tree-like connection schemes--so-called dead ends and dead trees--strongly diminish stability. A case study of the Northern European power system confirms this result and demonstrates that the inverse is also true: repairing dead ends by addition of a few transmission lines substantially enhances stability. This may indicate a topological design principle for future power grids: avoid dead ends.

The north European power system dispatch in 2010 and 2020

Prospectively, the European power system will need to incorporate a large share of power production from renewable energy sources. Likewise a significant change in the portfolio of thermal power plants and a strengthening of interconnections is expected. Moreover, the current process of integrating electricity markets will alter the system dispatch and have a significant impact on electricity prices as well. An operation optimisation model suited for hydro-thermal systems (EMPS), is applied to assess these changes. A 2010 and a 2020 scenario of the Northern European power system are developed and simulated. The scope of the analysis is on the increasing interaction of the Nordic and continental European power systems. Given nearly a doubling of interconnection capacity between the Nordic region and continental Europe up to 2020, the possibility of balancing the variable power production from renewable energy sources with Nordic hydro power will be enhanced. The simulations show reduced operation of thermal power plants, a higher variability of the Nordic hydro power production as well as an overall increased exchange among the areas. The impact of the level of wind power production on the system dispatch is illustrated. Moreover, electricity prices become more volatile, but their average decreases.

Transmission expansion planning in Northern Europe in 2030—Methodology and analyses

The expected increase of intermittent electricity production imposed by renewable energy sources in Northern Europe poses rising challenges to the operation of the power system. The Nordic hydro based power system, particularly the Norwegian, is in a favourable position to provide necessary production flexibility to the Continental European power system. For this provision sufficient transfer capacity is required.In order to assess the provision of power production flexibility, a detailed operation optimisation model is necessary. Moreover, investments in the power system have to be set in relation to the economic outcome of the system operation. As a simultaneous system optimisation is not possible due to the size of the operation optimisation model, a two-step investment algorithm containing an iteration loop is proposed in this paper.The proposed investment algorithm identifies profitable investments based on the results of the operation optimisation model, where the effect of the investments on the power market outcome is taken into account through the iterative process.The presented investment algorithm is used for a transmission expansion analysis for a 2030 scenario of the Northern European power system. The results for the simulation of the scenario and the transmission expansion analysis are presented as well.