Flow-Based Concept and Methodology

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1 Flow-Based Concept and Methodology Dr. ir. Pieter Schavemaker E-Bridge Consulting B.V. Joint NordREG / Nordic TSO workshop on Flow-Based Capacity Calculation Clarion Hotel, rlanda, Stockholm, Sweden December 11, 2014

2 Table of Contents Congestion management Flow Based in Europe What is Flow Based and what is the difference with TCs? TC FB TC vs FB dvantages of the FB approach FB allocation and price formation 2

3 Questions? lways welcome, do not hesitate to ask! 3

4 Congestion management 4

5 What is congestion? Source: Schavemaker, Tessensohn, Beune, Optimal European Electricity Market Design Under Future Grid Developments, European cross border power trading forum, Berlin, May

overloaded transmission lines leading to outages Source: Schavemaker,

6 What is congestion? commercial: more capacity requested by the market than is available physical: overloaded transmission lines leading to outages Source: Schavemaker, Tessensohn, Beune, Optimal European Electricity Market Design Under Future Grid Developments, European cross border power trading forum, Berlin, May

Congestion management in the broadest sense determination of available transmission capacity capacity allocation congestion forecast if needed: congestion relief Bids / reservations Generation

7 Congestion management in the broadest sense determination of available transmission capacity capacity allocation congestion forecast if needed: congestion relief Bids / reservations Generation schedules Timeline Source: Schavemaker, Tessensohn, Beune, Optimal European Electricity Market Design Under Future Grid Developments, European cross border power trading forum, Berlin, May

8 Congestion management in the broadest sense determination of available transmission capacity capacity allocation congestion forecast if needed: congestion relief Bids / reservations Generation schedules Timeline Source: Schavemaker, Tessensohn, Beune, Optimal European Electricity Market Design Under Future Grid Developments, European cross border power trading forum, Berlin, May

9 Network Code on Capacity llocation & Congestion Management Source: 8

10 ENTSO-E CCM network code (final draft, 27 September 2012) There are two permissible approaches when calculating cross zonal capacity: Flow based or coordinated net transmission capacity based. The flow based approach is preferred over the coordinated net transmission capacity approach for day ahead and intraday capacity calculation where interdependencies of cross zonal capacity between bidding zones is high. The coordinated net transmission capacity approach may be applied in regions where interdependencies between cross zonal capacity are low and the added value of the flow based method cannot be proven. Source: ENTSO-E: Network Code on Capacity llocation and Congestion Management, 27 September

Market Coupling: a constrained optimization

brought together in order to be matched by a

transmission capacity capacity allocation Bids /

variables: Maximize social welfare Net positions

11 Market Coupling: a constrained optimization problem ll the bids of the bidding areas are brought together in order to be matched by a centralized algorithm Determination of available transmission capacity capacity allocation Bids / reservations Objective function: Control variables: Maximize social welfare Net positions Subject to: net positions = 0 Grid constraints Today Future? TC FB 10

12 Flow Based in Europe 11

(based on flow gates), the current flow-based methodology (based on

13 Flow-Based (FB): the next-step coordinated capacity calculation method CWE CEE fter ETSO created the fundament of the flowbased methodology (based on flow gates), the current flow-based methodology (based on critical branches) was developed more or less independently in both CWE and CEE. 12

14 Current status of FB Flow-Based Market Coupling Feasibility study ongoing Nordics CWE Flow-Based Market Coupling Implementation ongoing External Parallel run: ongoing Go-live foreseen Q CEE Flow-Based Market Coupling Started FB development for FB explicit auctions Project ongoing to introduce FBMC 13

15 What is Flow Based and what is the difference with TCs? 14

16 What is Flow Based and what is the difference with TCs? - TC 15

17 n example three-node network Let s consider a three-node network Max: 1000 MW B Equal impedances Max flow on the branches: 1000 MW Max: 1000 MW Max: 1000 MW C 16

18 n example three-node network Let s consider a three-node network Max: 1000 MW B Equal impedances Max flow on the branches: 1000 MW Max: 1000 MW Max: 1000 MW The maximum export from to another bidding area amounts 1500 MW: C MW 500 MW B 1000 MW C MW 16

19 n example three-node network: TCs TCs are determined by the TSOs to facilitate the market while safeguarding the grid n TC limits a commercial exchange between two bidding areas TCs are simultaneously feasible 17

n example three-node network: TCs TCs are determined by the TSOs to facilitate the market while safeguarding the grid n TC limits a commercial exchange between two bidding areas TCs are

20 n example three-node network: TCs TCs are determined by the TSOs to facilitate the market while safeguarding the grid n TC limits a commercial exchange between two bidding areas TCs are simultaneously feasible Given the maximum export of bidding area, the TSO needs to split the 1500 MW export capability into two bilateral exchanges, for example: TC(>B) = 750 MW TC(>C) = 750 MW TC(>B) = 750 MW B TC(>C) = 750 MW TC(B>C) = 750 MW C 17

750 MW >B = 750 MW B>C = 750 MW >B = 750 MW Commercial Physical

21 n example three-node network: TCs and physical flows The following commercial exchanges are feasible given the TCs: >C = 750 MW >B = 750 MW B>C = 750 MW >B = 750 MW Commercial Physical MW 500 MW B B >C = 750 MW B>C = 750 MW 1000 MW C C MW 18

22 n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security TC(<>B) = 750 MW TC constraints TC domain 1500 Net balance B 1000 TC(<>C) = 750 MW TC(B<>C) = 750 MW Net balance B C

23 n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security TC(<>B) = 750 MW TC constraints TC domain 1500 Net balance Max export B 1000 TC(<>C) = 750 MW TC(B<>C) = 750 MW Net balance B C

24 n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security TC(<>B) = 750 MW TC constraints TC domain 1500 Net balance Max export B 1000 TC(<>C) = 750 MW TC(B<>C) = 750 MW Net balance B C Max import 19

n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not

25 n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security TC(<>B) = 750 MW TC constraints TC domain 1500 Net balance Max export B 1000 TC(<>C) = 750 MW C TC(B<>C) = 750 MW Net balance B Max import C Max import Max import B Max export C Max export B 19

26 n example three-node network: TC domain The TCs in the three-node system define the TC domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security TC(<>B) = 750 MW TC constraints TC domain 1500 Net balance B 1000 TC(<>C) = 750 MW TC(B<>C) = 750 MW Net balance B C

27 What is Flow Based and what is the difference with TCs? - FB 20

28 n example three-node network: FB constraints FB constraints are a kind of simplified grid model, reflecting the impact of import/export positions on the flows on the grid FB constraints ( grid model ): +100 MW 33 MW Margins PTDF factors B Line Maximum flow from area >B 1000 MW 33 % from area B from area C B>C 1000 MW 33 % 67 MW >C 1000 MW 67 % C -100 MW 21

29 n example three-node network: FB constraints FB constraints are a kind of simplified grid model, reflecting the impact of import/export positions on the flows on the grid FB constraints ( grid model ): 33 MW +100 MW Margins PTDF factors B Line Maximum flow from area from area B >B 1000 MW 33 % - 33 % from area C B>C 1000 MW 33 % 67 % 67 MW >C 1000 MW 67 % 33 % C -100 MW 22

30 n example three-node network: FB constraints FB constraints are a kind of simplified grid model, reflecting the impact of import/export positions on the flows on the grid FB constraints ( grid model ): Margins PTDF factors B Line Maximum flow from area from area B from area C >B 1000 MW 33 % - 33 % 0 B>C 1000 MW 33 % 67 % 0 >C 1000 MW 67 % 33 % 0 C -100 MW +100 MW 23

n example three-node network: FB and the reference node n exchange of 100 MW from bidding area to bidding area B is equivalent to: an exchange of 100 MW from area to the reference node C an exchange

31 n example three-node network: FB and the reference node n exchange of 100 MW from bidding area to bidding area B is equivalent to: an exchange of 100 MW from area to the reference node C an exchange of 100 MW from area B to the reference node C This property holds due to the linearity of the PTDF computation (DC load flow) +100 MW 33 MW B 33 MW +100 MW B +100 MW -100 MW 67 MW B 67 MW C C 67 MW 33 MW C -100 MW -100 MW 24

32 n example three-node network: FB constraints FB constraints are a kind of simplified grid model, reflecting the impact of import/export positions on the flows on the grid FB constraints ( grid model ): Margins PTDF factors B Line Maximum flow from area from area B from area C >B 1000 MW 33 % - 33 % 0 B>C 1000 MW 33 % 67 % 0 >C 1000 MW 67 % 33 % 0 C B> 1000 MW -33 % 33 % 0 C>B 1000 MW - 33 % - 67 % 0 C> 1000 MW - 67 % - 33 % 0 25

33 n example three-node network: FB domain The FB constraints in the three-node system define the FB domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security Line Maximum flow from area from area B FB constraints from area C >B 1000 MW 33 % - 33 % 0 FB domain Net balance B>C 1000 MW 33 % 67 % 0 >C 1000 MW 67 % 33 % 0 B> 1000 MW - 33 % 33 % Net balance B C>B 1000 MW - 33 % - 67 % C> 1000 MW - 67 % - 33 %

34 n example three-node network: FB domain The FB constraints in the three-node system define the FB domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security Line Maximum flow from area from area B FB constraints from area C >B 1000 MW 33 % - 33 % 0 FB domain Net balance B>C 1000 MW 33 % 67 % 0 Constrained by >C >C 1000 MW 67 % 33 % 0 B> 1000 MW - 33 % 33 % Net balance B C>B 1000 MW - 33 % - 67 % C> 1000 MW - 67 % - 33 %

35 n example three-node network: FB domain The FB constraints in the three-node system define the FB domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security Line Maximum flow from area from area B FB constraints from area C >B 1000 MW 33 % - 33 % 0 FB domain Net balance B>C 1000 MW 33 % 67 % 0 Constrained by >C >C 1000 MW 67 % 33 % 0 B> 1000 MW - 33 % 33 % Net balance B Constrained by B> C>B 1000 MW - 33 % - 67 % C> 1000 MW - 67 % - 33 %

36 n example three-node network: FB domain The FB constraints in the three-node system define the FB domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security Line Maximum flow from area from area B FB constraints from area C >B 1000 MW 33 % - 33 % 0 B>C 1000 MW 33 % 67 % 0 FB domain Net balance Constrained by B>C Constrained by >C >C 1000 MW 67 % 33 % 0 B> 1000 MW - 33 % 33 % Net balance B Constrained by B> C>B 1000 MW - 33 % - 67 % 0 C> 1000 MW - 67 % - 33 %

37 n example three-node network: FB domain The FB constraints in the three-node system define the FB domain: the import/export positions that the market is allowed to reach under the market coupling while not jeopardizing the grid security Line Maximum flow from area from area B FB constraints from area C >B 1000 MW 33 % - 33 % 0 FB domain Net balance B>C 1000 MW 33 % 67 % 0 >C 1000 MW 67 % 33 % 0 B> 1000 MW - 33 % 33 % Net balance B C>B 1000 MW - 33 % - 67 % C> 1000 MW - 67 % - 33 %

38 What is Flow Based and what is the difference with TCs? - TC vs FB 27

39 n example three-node network: TC vs FB domain In FB capacity split is not a choice of the TSO, but is market driven (at the time of allocation) Net balance FB domain TC domain FB offers more trading opportunities with the same level of security of supply Net balance B

level of security of supply -1500-1000 1000 1500 Net balance B Example: TC: North-South exchange limited to 1500 MW FB:

40 n example three-node network: TC vs FB domain In FB capacity split is not a choice of the TSO, but is market driven (at the time of allocation) Net balance FB domain TC domain FB offers more trading opportunities with the same level of security of supply Net balance B Example: TC: North-South exchange limited to 1500 MW FB: North-South exchange possible of 2000 MW MW B +750 MW MW B MW TC FB C MW MW C 28

41 dvantages of the FB approach 29

42 dvantages of the FB approach In FB capacity split is not a choice of the TSO, but is market driven (at the time of allocation) More efficient and flexible use of the grid FB offers more trading opportunities with the same level of security of supply More price convergence / smaller price differences Higher social welfare Income redistribution: Less congestion income and more producer and consumer surplus FB offers the possibility to have the DC cables efficiently embedded in the allocation mechanism, by providing a fair competition for the use of the scarce C capacity Flow-based market coupling provides an efficient allocation mechanism in which all exchanges that are subject to the allocation mechanism compete with one another for the use of the scarce capacity 30

43 FB allocation and price formation 31

44 Prices under a FBMC FBMC optimization Objective function: Control variables: Maximize social welfare Net positions Subject to: net positions = 0 Grid constraints In case of congestion, the grid constraint receives a shadow price (μ): the increase of the objective function (being the social welfare) when the constraint is relieved with 1 MW Price relation under FB: MCP i MCP j cb PTDF cb j PTDF cb i μ cb 32

45 Prices under a FBMC: an example 1500 MW MW B Line Maximum flow from area from area B from area C >B 1000 MW 33 % - 33 % 0 B>C 1000 MW 33 % 67 % MW C MW 40 >C 1000 MW 67 % 33 % 0 B> 1000 MW -33 % 33 % 0 C>B 1000 MW - 33 % - 67 % 0 C> 1000 MW - 67 % - 33 % 0 Price relation under FB: MCP C MCP PTDF PTDF C μ Price in area B: MCP B MCP PTDF PTDF B μ Shadow price equals μ = 15 /MW MCP B 30 MCP B 35 33

46 Prices under a FBMC: consequences In case there is no congestion, all bidding zones have the same price In case of congestion, the prices of the bidding zones are set in accordance to their electrical impact on the binding constraint (i.e. the PTDF factors) 34

47 Questions? 35

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Workshop Session 1: Theoretical understanding of flow-based method, intuitiveness, hybrid-coupling

Workshop Session 1: Theoretical understanding of flow-based method, intuitiveness, hybrid-coupling by Joel HOEKSEMA (APX), Adrien ATAYI (RTE) and Pieter SCHAVEMAKER (e-bridge) 1 Workshop 1 Agenda I. Flow-based