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Flow-based approach
European Union Electricity Market Glossary

 

 

 

‘Flow-based approach’ denotes a capacity calculation method in which energy exchanges between bidding zones are limited by power transfer distribution factors and available margins on critical network elements (Article 2(9) of the Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM Regulation (Regulation on market coupling)).

 

The physical limits of the network referred to in the said Article 2(9) of the CACM Regulation are:

 

- Power Transfer Distribution Factors (PTDFs), and 

 

- available margins on critical network elements (CNEs).

 

These margins determine the capacity that can be offered to the market in order to be allocated to where its value is the highest.

 

The alternative, permissible approach when calculating cross-zonal capacity is coordinated net transmission capacity (CNTC).

 

Both these methods are intended to maximise tradable cross-zonal capacity while safeguarding the operational security standards of the transmission system, also both result in the determination of possible commercial capacity that can be allocated for each direction on each bidding zone border.

 

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Commission Staff Working Document, Impact Assessment of 23.11.2017 accompanying the document Commission Regulation establishing a guideline on electricity balancing ({SWD(2017) 383 final}, p. 13, 14

 

The EU Target Model requires a 'flow-based' method to be used for capacity calculation and allocation.

 

Flow-based means that capacity is calculated and allocated taking into account the meshed nature of the transmission network and all possible paths through which electricity is flowing in it.

 

The flow-based calculation algorithms will thus optimise directly the commercial power flows taking into account the limitations of the network.

 

In other words, the values on available transmission capacity will be calculated as part of the market algorithm itself, i.e. simultaneously (and not ex-ante based on expected flows).

 

The EU Target Model is based on zonal pricing and requires efficient price-zones reflecting actual system constraints.

 

CACM has implemented key features of the EU Target Model, notably day-ahead and intraday market coupling, flow-based market coupling, and it has also introduced a structured bidding zone review process.

 

FCA has harmonised rules for longer-term capacity allocation.

  

Flow-based approach, however, optimises the calculation of available capacity taking into account that electricity can flow via different paths in highly interdependent grids.

 

Other distinctive features of the flow-based method are:

 

- the actual exchange between two bidding zones is dependent on the exchanges across adjacent borders within a Capacity Calculation Region (CCR),

 

- energy exchanges between bidding zones are limited by PTDFs and available margins on CNEs,

 

- the combination of possible exchanges is optimised via the flow-based market coupling (FBMC) algorithm,

 

- there is higher visibility of the location of physical congestions.

 

Flow-based approach is the most efficient capacity calculation method for meshed networks (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume, October 2017, p. 22).

 

According ng to the ACER, overall, the application of flow-based capacity calculation in combination with market coupling (i.e. FBMC) usually increases effciency by optimising the use of cross-zonal capacity.

 

Single day-ahead and intraday market coupling ensures that power usually flows from low-price to high-price areas.

 

The entity that uses a specific algorithm to match bids and offers in an optimal manner is the market coupling operator (MCO).

 

The results of the calculation in this model should be made available to all power exchanges on a non-discriminatory basis.

 

Based on the results of the calculation by the MCO, the power exchanges inform their clients of the successful bids and offers.

 

The energy is then be transferred across the network according to the results of the MCO's calculation.

 

The process for single day-ahead and intraday coupling is similar, with the exception that the intraday coupling should use a continuous process throughout the day and not one single calculation as in day-ahead coupling.

 

 

Recital 4 of the Network Code on Forward Capacity Allocation

 

The coordinated net transmission capacity based approach should apply to calculate and allocate long-term cross-border capacities. The flow-based approach might be applied where cross-zonal capacities between bidding zones are highly interdependent and the approach is justified from an economic efficiency point of view.

 

Capacity calculation for the day-ahead and intraday market timeframes should be coordinated at least at regional level to ensure that capacity calculation is reliable and that optimal capacity is made available to the market.

 

Common regional capacity calculation methodologies should be established to define inputs, calculation approach and validation requirements. Information on available capacity should be updated in a timely manner based on latest information through an efficient capacity calculation process.

 

The Network Code on Forward Capacity Allocation stipulates the flow-based method should be used as a primary approach for day-ahead and intraday capacity calculation where cross-zonal capacity between bidding zones is highly interdependent and may only be introduced after market participants have been consulted and given sufficient preparation time to allow for a smooth transition.

 

The second method - coordinated net transmission capacity approach - may only be applied in regions where cross-zonal capacity is less interdependent and it can be shown that the flow-based approach would not bring added value.

 

The CACM Regulation (e.g. Article 20(4)) aims at extending market coupling beyond the EU borders.

 

ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume, October 2017, p. 22) mentions that in 2017 the TSOs of the Core (CWE) region provided to the ACER via ENTSO-E for the first time detailed information on the most relevant data items used in the Flow-Based Capacity Calculation process in the Core (CWE) region.

 

The said data included, inter alia, hourly information on the forecasted physical flows on internal and cross-zonal transmission lines in the Core (CWE) region resulting from internal exchanges.

 

These forecasted physical flows are used to define the constraints determining the tradable cross-zonal capacity in a flow-based context.

 

 

 

Article 10 of the Network Code on Forward Capacity Allocation

 

Capacity calculation methodology

 

1. No later than six months after the approval of the common coordinated capacity calculation methodology referred to in Article 9(7) of Commission Regulation (EU) 2015/1222, all TSOs in each capacity calculation region shall submit a proposal for a common capacity calculation methodology for long-term timeframes within the respective region. The proposal shall be subject to consultation in accordance with Article 6.

 

2. The approach used in the common capacity calculation methodology shall be either a coordinated net transmission capacity approach or a flow-based approach.

 

3. The capacity calculation methodology shall be compatible with the capacity calculation methodology established for the day-ahead and intraday timeframes pursuant to Article 21(1) of Commission Regulation (EU) 2015/1222.

 

4. The uncertainty associated with long-term capacity calculation timeframes shall be taken into account when applying:

(a) a security analysis based on multiple scenarios and using the capacity calculation inputs, the capacity calculation approach referred to in Article 21(1)(b) and the validation of cross-zonal capacity referred to in Article 21(1)(c) of Commission Regulation (EU) 2015/1222; or

(b) a statistical approach based on historical cross-zonal capacity for day-ahead or intraday timeframes if it can be demonstrated that this approach may:

(i) increase the efficiency of the capacity calculation methodology;

(ii) better take into account the uncertainties in long-term cross-zonal capacity calculation than the security analysis in accordance with paragraph 4(a);

(iii) increase economic efficiency with the same level of system security.

 

5. All TSOs in each capacity calculation region may jointly apply the flow-based approach for long-term capacity calculation timeframes on the following conditions:

(a) the flow-based approach leads to an increase of economic efficiency in the capacity calculation region with the same level of system security;

(b) the transparency and accuracy of the flow-based results have been confirmed in the capacity calculation region;

(c) the TSOs provide market participants with six months to adapt their processes.

 

6. Where a security analysis based on multiple scenarios is applied for developing the capacity calculation methodology in a capacity calculation region, the requirements for the capacity calculation inputs, the capacity calculation approach and the validation of cross-zonal capacity as provided for in Article 21(1) of Commission Regulation (EU) 2015/1222, except Article 21(1)(a)(iv) where relevant, shall apply.

 

7. When developing the capacity calculation methodology, the requirements for the fallback procedures and the requirement provided for in Article 21(3) of Commission Regulation (EU) 2015/1222 shall be taken into account.

 

 

 

 

 

 

IMG 0744

    Documentation    

 

 

 

 

 

Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM Regulation (Regulation on market coupling), Article 2(9), Article 20(4) 

 

Network Code on Forward Capacity Allocation, Article 10, Recital 4

 

 

 

 

 

 

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Last Updated on Thursday, 14 December 2017 22:35
 

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