|European Union Electricity Market Glossary|
Loop flows occur where electricity trading inside one bidding zone causes flows that have an impact on other zones.
Loop flows can result in the use of the neighbouring networks without bearing the costs for this use (i.e. free-riding).
Loop flows are significantly reducing the amount of cross-zonal capacities and have a negative impact on the functioning the market and cross-border trade and their volume should be therefore minimised.
Given the above circumstances, ACER Recommendation No 2/2016 of 11 November 2016 on the common capacity calculation and redispatching and countertrading cost sharing methodologies proposed a general principle that the capacity of the cross-zonal network elements considered in the common capacity calculation methodologies should not be reduced to accommodate loop flows.
Loop flows, along the unscheduled allocated flows, form together unscheduled flows.
However, according to the aforementioned ACER Recommendation of 11 November 2016, with the implementation of flow-based capacity calculation within appropriate capacity calculation regions (CCRs), the unscheduled allocated flows should gradually diminish and the loop flows would remain the main polluters.
Also Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 of October 2017 (ACER/CEER, p. 34) observes that, in theory, where flow based method applies, unscheduled allocated flows should disappear.
However, this is not yet seen in the Core (CWE) region for two reasons.
First, some exchanges scheduled on the Core (CWE) borders physically flow through borders outside the Core (CWE) region.
The opposite is also true, i.e. some exchanges scheduled on borders outside the Core (CWE) region physically flow through Core (CWE) borders.
Second, the methodology applied to estimate allocated flows (which are necessary to calculate unscheduled allocated flows) is still subject to improvements.
The so-called 'Winter Energy Package' envisions the rule that the transmission system operators (TSOs) must not limit the volume of interconnection capacity to be made available to other market participants in order to solve congestion inside their own control area or as a means of managing flows on a border between two control areas observed even without any transaction, i.e. flows over control areas caused by origin and destination within one control area.
Derogation from this principle may be granted in exceptional circumstances only (Article 14(7) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD) - see box).
However, in the policy statement of 15 March 2017 "Key Recommendations for the Clean Energy Package", ENTSO-E heavily criticised the European Commission's propositions, in particular, ENTSO-E said: "the requirements on TSOs capacity calculation to ignore internal congestions and loop flows and instead use costly remedial actions to increase cross-border capacity would lead to outcomes not reflecting the physical reality of European grids and significantly increase congestion management costs to be paid by end-consumers via transmission tariffs (Art. 14)."
In the document "Clean Energy Package: Promising market proposals, but some issues to be solved" of 15 March 2017, ENTSO-E expressed reservations regarding the fact that the European Commission's proposals in the said draft Regulation require no consideration of internal congestions nor loop flows within the capacity calculation process, and, in addition, they impose an obligation on TSOs to use preventive re-dispatch and countertrading to maximise available cross-border capacity.
"These provisions would oblige TSOs to ignore the physical flows that are an inherent part of the effective capacity calculation, increase the differences between the system reality on one side and the commercial exchanges on the other," ENTSO-E said.
According to the ENTSO-E the said draft provisions would lead to higher re-dispatch costs and risks related to possible unavailability or inexistence of necessary remedial actions to cope with congestions.
The growing problem of loop flows in the European electricity market is also perceived in the Report of the European Parliament’s Committee on Industry, Research and Energy Report of 27 February 2018 regarding the aforementioned proposal for a directive.
The said Committee proposed to amend Recital 11 of the draft directive by adding the following sentence:
In the Annex II to the ACER Decision No 04/2019 of 1 April 2019 (Evaluation of responses to the public consultation on the amendments of the proposal for amendment on the determination of capacity calculation regions) ACER observes that “[t]he Agency agrees that significant amounts of unscheduled allocated flows on a bidding zone border are not compliant with Regulation (EC) 714/2009”.
Report on the proposal for a directive of the European Parliament and of the Council on common rules for the internal market in electricity (recast) (COM(2016)0864 – C8-0495/2016 – 2016/0380(COD)), European Parliament, 27 February 2018, Committee on Industry, Research and Energy
|Last Updated on Tuesday, 16 April 2019 13:04|