The term 'redispatching' in the European Union Internal Electricity Market means a measure activated by one or several system operators by altering the generation and/or load pattern in order to change physical flows in the transmission system and relieve a physical congestion (Article 2(26) of the Regulation on submission and publication of data in electricity markets).
Some Transmission System Operators (TSOs) supplement the above definition with additional elements.
According to the Core CCR TSOs’ proposal for the methodology for coordinated redispatching and countertrading in accordance with Article 35.1 of Commission Regulation (EU) 2015/1222 of 24 July 2015, “Core RD and CT Methodology” of 5 September 2018 redispatching means a measure performed by one or several TSOs by altering specific generation and/or load patterns in order to change physical flows in the transmission system and relieve physical congestions, while the location of the units considered for redispatching are known and the parameters of the resource are known.
The EU Network Code on System Operation (System Operation Guideline - SOGL) in Article 55(c) lists redispatching among services provided by third parties, through procurement when applicable, that each TSO uses for ensuring the operational security of its control area.
Redispatching in the European Union Internal Electricity Market is part of the broader scope of remedial actions (see Article 22(1)(e) of the SOGL).
Explanatory document of 5 September 2018 to the proposal for the coordinated redispatching and countertrading methodology for Capacity Calculation Region Core in accordance with Article 35 of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management accentuates that in case of congestion, redispatching includes the modification of particular generation and/or load patterns.
This, in more detail, means that one TSO or several TSOs request from specific generators (consumers) to start or increase the production (to decrease the load), while other specific generators (consumers) are requested to stop or reduce the production (to increase the load).
It is also useful to observe, redispatching can be prepared in different processes and in different timeframes, i.e. day-ahead, intraday and real-time.
Remuneration of activated internal or cross-zonal redispatching differs among the EU Member States (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity Markets in 2015, September 2016, p. 27).
The most common method used is the pay-as-bid pricing followed by the regulated pricing based on either a market price (e.g. day-ahead price) or a cost-based pricing (e.g. remuneration for the cost of fuel and other costs related to the change in the operating schedule of the plant).
Also the aforementioned Core CCR TSOs’ proposal of 24 July 2015 categorises different pricing mechanisms for redispatching existing in different countries as:
- price-related, i.e. based on bids for upward regulation and downward regulation,
- cost-related, i.e. based on fuels, CO2, opportunity costs, starting costs, etc,
- cost-related plus, i.e. cost related complemented with an additional margin.
Core TSOs also mention that in a price-related mechanism the costs are known ex-ante, while in a cost-related mechanism the full costs are known only ex-post, but indicative prices are determinable.
Redispatching mechanisms are, moreover, considered by regulators in the context of competition rules, in particular as a function of the bidding zone's size.
Regulation establishing a Guideline on Capacity Allocation and Congestion Management (CACM - Regulation on market coupling)
TSOs should use a common set of remedial actions such as countertrading or redispatching to deal with both internal and cross-zonal congestion. In order to facilitate more efficient capacity allocation and to avoid unnecessary curtailments of cross-border capacities, TSOs should coordinate the use of remedial actions in capacity calculation.
TSOs should implement coordinated redispatching of cross-border relevance or countertrading at regional level or above regional level. Redispatching of cross-border relevance or countertrading should be coordinated with redispatching or countertrading internal to the control area.
Coordinated redispatching and countertrading
1. Within 16 months after the regulatory approval on capacity calculation regions referred to in Article 15, all the TSOs in each capacity calculation region shall develop a proposal for a common methodology for coordinated redispatching and countertrading. The proposal shall be subject to consultation in accordance with Article 12.
2. The methodology for coordinated redispatching and countertrading shall include actions of cross-border relevance and shall enable all TSOs in each capacity calculation region to effectively relieve physical congestion irrespective of whether the reasons for the physical congestion fall mainly outside their control area or not. The methodology for coordinated redispatching and countertrading shall address the fact that its application may significantly influence flows outside the TSO's control area.
3. Each TSO may redispatch all available generation units and loads in accordance with the appropriate mechanisms and agreements applicable to its control area, including interconnectors. By 26 months after the regulatory approval of capacity calculation regions, all TSOs in each capacity calculation region shall develop a report, subject to consultation in accordance with Article 12, assessing the progressive coordination and harmonisation of those mechanisms and agreements and including proposals. The report shall be submitted to their respective regulatory authorities for their assessment. The proposals in the report shall prevent these mechanisms and agreements from distorting the market.
4. Each TSO shall abstain from unilateral or uncoordinated redispatching and countertrading measures of cross-border relevance. Each TSO shall coordinate the use of redispatching and countertrading resources taking into account their impact on operational security and economic efficiency.
5. The relevant generation units and loads shall give TSOs the prices of redispatching and countertrading before redispatching and countertrading resources are committed.
Pricing of redispatching and countertrading shall be based on:
(a) prices in the relevant electricity markets for the relevant time-frame; or
(b) the cost of redispatching and countertrading resources calculated transparently on the basis of incurred costs.
6. Generation units and loads shall ex-ante provide all information necessary for calculating the redispatching and countertrading cost to the relevant TSOs. This information shall be shared between the relevant TSOs for redispatching and countertrading purposes only.
As the ACER's document of 31 July 2013 (The influence of existing bidding zones on electricity markets, PC_2013_E_04, p. 8) observes, redispatching is very often organised in a non-market based way and this induces further costs (i.e. loss of social welfare), which are not visible within the day-ahead market coupling.
Competition in redispatching is weaker than competition in the day-ahead market coupling.
Redispatching is often used to solve congestion in larger bidding zones.
Therefore, with an increase of redispatching linked to bidding zone size, it may be argued that the decrease of general market power in larger zones may be counterbalanced by the increase of (locational) market power of some market players in the redispatching market.
However, the magnitude of market power effects (i.e. price increase and volume of energy affected) can be quite different in both markets (i.e. day-ahead and redispatching).
As follows from the said ACER/CEER Annual Report of September 2016 (p. 27), the volumes (in GWh) for the internal redispatching for 2015 were the biggest in such EU Member States as:
- Germany - 11,127,
- Spain - 6,461,
- United Kingdom - 6,195,
- Poland - 6,065.
When it comes to the volumes for the cross-border redispatching for 2015 the most prominent EU countries were Germany (volume in GWh 1,601) and Poland (volume in GWh 1,551).
The above stake is analogous with respect to overall cost for 2015 for internal and cross-border redispatching actions (thousand euros):
- Germany - 880,500,
- Spain - 690,878,
- United Kingdom - 465,503,
- Poland - 106,400.
According to the Report of the Core TSOs of 13 December 2018 assessing the progressive coordination and harmonisation of mechanisms and agreements for redispatching and countertrading (in accordance with EU Regulation 1222/2015 article 35(3), Version for Public Consultation, p. 3) in the Core region, the impact of redispatching is not the same everywhere.
Some TSOs apply redispatching already for a long-time, whilst others only apply it occasionally or have developed non-costly remedial actions to solve their congestions.
Generally, the agreements and mechanisms used for redispatching are national, and they are often quite different due to historical reasons.
The Core TSOs consider the implementation of the requirements set out in the CACM Regulation (Regulation establishing a Guideline on Capacity Allocation and Congestion Management) as the next step.
Article 35 of the said CACM Regulation provides for some coordinated measures on redispatching.
According to the said provisions, within 16 months after the regulatory approval on Capacity Calculation Regions (CCRs), all TSOs in each CCR are required to develop a proposal for a common methodology for coordinated redispatching.
As the provisions stipulate, the said methodology "shall include actions of cross-border relevance and shall enable all TSOs in each capacity calculation region to effectively relieve physical congestion irrespective of whether the reasons for the physical congestion fall mainly outside their control area or not".
Each TSO must, moreover, abstain from unilateral or uncoordinated redispatching measures of cross-border relevance.
In accordance with Article 21(1)(b)(ii) of the CACM, the proposal for the common capacity calculation methodologies should include rules for avoiding undue discrimination between internal and cross-zonal exchanges to ensure compliance with point 1.7 of Annex I to Regulation (EC) No 714/2009.
According to Article 74(6) of the CACM, the common methodologies for the sharing of redispatching costs between TSOs must:
- ensure a fair distribution of costs and benefits between the TSOs involved,
- facilitate adherence to the general principles of congestion management under Article 16 of Regulation (EC) No 714/2009, and
- comply with the principles of transparency and non-discrimination.
The said issues were the subject of the ACER Recommendation No 2/2016 of 11 November 2016 on the common capacity calculation and redispatching and countertrading cost sharing methodologies.
When it comes to the Core CCR the TSOs submitted the above proposal on 5 September 2018 (Core CCR TSOs’ proposal for the methodology for coordinated redispatching and countertrading in accordance with Article 35.1 of Commission Regulation (EU) 2015/1222 of 24 July 2015, “Core RD and CT Methodology” - see link in the documentation section).
It is noteworthy, the Winter Energy Package (Annex to 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)) entrusts Regional Operational Centres (ROCs) with the task of supporting the transmission system operators of the system operation region in administering the financial flows related to inter-transmission system operators settlements involving more than two transmission system operators, such as redispatching costs, congestion income, unintentional deviations or reserve procurement costs.
According to Article 21(1)(d) of the Regulation of the European Parliament and of the Council on the Governance of the Energy Union national objectives as regards redispatching should be included in integrated reporting the EU Member States carry out as regards the mechanisms of the internal energy market.
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) (so-called Winter Energy Package)
Redispatching and curtailment
1. Curtailment or redispatching of generation and redispatching of demand response shall be based on objective, transparent and non-discriminatory criteria.
2. The resources curtailed or redispatched shall be selected amongst generation or demand facilities submitting offers for curtailment or redispatching using market- based mechanisms and be financially compensated. Non-market-based curtailment or redispatching of generation or redispatching of demand response shall only be used where no market-based alternative is available, where all available market-based resources have been used, or where the number of generation or demand facilities available in the area where suitable generation or demand facilities for the provision of the service are located is too low to ensure effective competition. The provision of market-based resources shall be open to all generation technologies, storage and demand response, including operators located in other Member States unless technically not feasible.
3. The responsible system operators shall report at least once per year to the competent regulatory authority on curtailment or downward redispatching of generating installations using renewable energies or high-efficiency cogeneration and on measures taken to reduce the need for such curtailment or downward redispatching in the future. Curtailment or redispatching of renewable energies or high-efficiency cogeneration shall be subject to compensation pursuant to paragraph 6.
4. Subject to requirements relating to the maintenance of the reliability and safety of the grid, based on transparent and non-discriminatory criteria defined by the competent national authorities, transmission system operators and distribution system operators shall:
(a) guarantee the capability of transmission and distribution networks to transmit electricity produced from renewable energy sources or high-efficiency cogeneration with minimum possible curtailment or redispatching. That shall not prevent network planning from taking into account limited curtailment or redispatching where this is shown to be more economically efficient and does not exceed 5 % of installed capacities using renewable energy sources or high-efficiency cogeneration in their area;
(b) take appropriate grid and market-related operational measures in order to minimise the curtailment or downward redispatching of electricity produced from renewable energy sources or high-efficiency cogeneration.
5. Where non-market-based downward redispatching or curtailment is used, the following principles shall apply:
(a) generating installations using renewable energy sources shall only be subject to downward redispatching or curtailment if no other alternative exists or if other solutions would result in disproportionate costs or risks to network security;
(b) generating installations using high-efficiency cogeneration shall only be subject to downward redispatching or curtailment if, other than curtailment or downward redispatching of generating installations using renewable energy sources, no other alternative exists or if other solutions would result in disproportionate costs or risks to network security;
(c) self-generated electricity from generating installations using renewable energies or high-efficiency cogeneration which is not fed into the transmission or distribution network shall not be curtailed unless no other solution would resolve network security issues;
(d) downward redispatching or curtailment under letters a to c shall be duly and transparently justified. The justification shall be included in the report under paragraph 3.
6. Where non-market based curtailment or redispatching is used, it shall be subject to financial compensation by the system operator requesting the curtailment or redispatching to the owner of the curtailed or redispatched generation or demand facility. Financial compensation shall at least be equal to the highest of the following elements:
(a) additional operating cost caused by the curtailment or redispatching, such as additional fuel costs in case of upward redispatching, or backup heat provision in case of downward redispatching or curtailment of generating installations using high-efficiency cogeneration;
(b) 90 % of the net revenues from the sale of electricity on the day-ahead market that the generating or demand facility would have generated without the curtailment or redispatching request. Where financial support is granted to generating or demand facilities based on the electricity volume generated or consumed, lost financial support shall be deemed part of the net revenues.
Re-dispatch of generating plant by TSOs: relationship to the market and economic impact
We are concerned by the provisions of Article 12 of the draft recast Regulation on redispatching and curtailment. We generally support the key principle of using market-based mechanisms to determine the incidence of and payment for curtailment or redispatch. We however also recognise that due to the local necessity to adjust the generation schedule affecting specific facilities, the establishment of actual markets for redispatch may be complex, and in some cases neither possible nor desirable. For this purpose, sub-article Article 12.2 also foresees the possibility of regulated compensation for redispatch. However, one need to ensure that the circumstances allowing the regulated compensation for redispatch instead of market-based mechanisms are not too broadly described and defined.
In particular, we are concerned that the proposed wording of sub-article Article 12.6 envisages compensation which may end up under-valuing the loss of output: Article 12.6(b) of the draft recast Regulation foresees as an option that non-market based curtailment or redispatch could be compensated taking 90% of the net revenues from the sale of electricity in the day-ahead market that the generation of demand facility would have earned without curtailment or redispatch. We consider this proposal not acceptable as it constitutes an arbitrary measure, with no explanation of the European Commission where the 90% figure stems from. In fact this would certainly result in compensation below the actual costs incurred by the owner or operator of the asset as a result of the redispatch measure. Such an arbitrarily set formulae cannot reflect the complexity of redisptach measures and their related costs.
We therefore urge that draft recast Regulation should only determine the general principle for the design of redispatch compensation rules, i.e. that asset owners that are subject to curtailment or redispatch measures must be compensated in such a way that they are left financially indifferent, taking account of opportunity costs as well as actually incurred costs. This principle ensures the equal treatment of all market participants and avoids that individual market participants are discriminated as a result of local congestions.
EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 6
Article 12.5 of the draft recast Regulation also enshrines in EU legislation priority access for RES generators (and CHP operators): in case of non-market based redispatch, RES and CHP units would be the last ones to be curtailed or redispatched. We believe non-market based curtailment and redispatching should be a last resort option for TSOs (who should always use market measures first), and in this case system security should prevail as the main criterion for curtailment or redispatch decisions. Therefore, we recommend the deletion of the subarticle.
EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 16
Regulation on submission and publication of data in electricity markets, Article 2(13)
Network Code on System Operation, Article 55(c)
Regulation establishing a Guideline on Capacity Allocation and Congestion Management (CACM - Regulation on market coupling), Article 35, Article 74(6), Recital 10, 12
ACER Recommendation No 2/2016 of 11.11.2016 on the common capacity calculation and redispatching and countertrading cost sharing methodologies
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) (so-called Winter Energy Package), Article 12
EFET commentary on the Clean Energy Package for All Europeans, 20 April 2017, 20 April 2017, p. 6, 16
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity Markets in 2015, September 2016, p. 27
ACER's Consultation document of 31 July 2013 'The influence of existing bidding zones on electricity markets', PC_2013_E_04, p. 8