Cross Border Flows. Importance for the European Power-Price- Building Mechanisms German Norwegian Energy Forum 27 October 20, Berlin Dr. Błażej Radomski Head of Analysis - Germany
Agenda I. Exchange vs. other price drivers II. III. IV. Different cross border algorithms and solutions What next? Conclusions
Agenda I. Exchange vs. other price drivers II. III. IV. Different cross border algorithms and solutions What next? Conclusions
Import / Export as production and consumption Import production Export consumption 20000 000 DE 10000 8000 NO2 10000 6000 5000 4000 0 2000-5000 0-10000 -2000-000 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep -4000 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep DE: imp vs exp [MWh/h] PRO DE WND PRO DE SPV NO: imp vs exp [MWh/h] PRO NO2 HY-ROR PRO NO2 HY-RES
Temporary conclusion Cross border exchange might contribute to a shift in a Power Balance with more weight than renewables, or other production types. It is often one of the most underestimated fundamental price drivers.
Agenda I. Exchange vs. other price drivers II. III. IV. Different cross border algorithms and solutions What next? Conclusions
Different types of interconnecting algorithms Different types of border limitation: ATC based solution : Implicit exchange (market coupling) Implicit Exchange & Price Explicit Exchange & Price Implicit & Explicit Exch. Exogenous exchange NO3 : Explicit exchange : Implicit & explicit exchange FBMC solution : FB Capacity Domain, PTDFs
Different types of interconnecting algorithms FBMC, 20.May 20 DE, FR, NL, and BE «Country-to-country» connections not relevant in FBMC Must look at flow in the whole area FBMC 4MMC, 19. Nov 2014 RO joining CZ, SK and HU 4MMC ATC based solution No flows in the «wrong» direction anymore
Explicit exchange vs. Implicit exchange (market coupling) vs. FBMC Explicit (RO-HU) 400 200 0-200 -400-600 Implicit 4MMC (RO-HU) 1000 500 0-500 -800-0 -120-80 -40 0 40 80-1000 -80-40 0 40 Price difference RO-HU vs. commercial flow (RO-HU, pre 4MMC,.05.2014-18.11.2014, 4488 data points) Price difference RO-HU vs. commercial flow (RO-HU, post 4MMC, 20.11.2014-26.05.20, 4488 data points) Implicit (DE-FR) 3000 2000 1000 0 FBMC (DE-FR) 6000 4000 2000 0-1000 -2000-2000 -4000-3000 -6000-4000 -80-60 -40-20 0 20 40-8000 -80-60 -40-20 0 20 40 Price difference DE-FR vs. commercial flow (DE-FR, pre FBMC, 20.05.2014-25.11.2014, 4556 data pts.) Price difference DE-FR vs. commercial flow (DE-FR, post FBMC, 20.05.20-25.11.20, 4556 data pts.)
Temporary conclusion The type of selected cross border algorithm has an impact on the importance of exchange for the power prices.
Price coupling vs. price decoupling: DE - NPA 80 70 60 50 40 30 Example of the last 7 days: In general higher German prices Only relatively small amount of hours with price coupling Coupling mostly during OffPeak hours 20 10 0 21-Oct- 22-Oct- 23-Oct- 24-Oct- 25-Oct- 26-Oct- 27-Oct- PRI NPA Spot PRI DE EEX Spot price coupling (price Δ < 0.5 ) Price coupling vs. price decoupling situations Price sensitivities in case of a bottleneck
Temporary conclusion In case of a border limitation (bottleneck situation) prices react with different sensitivity.
Agenda I. Exchange vs. other price drivers II. III. IV. Different cross border algorithms and solutions What next? Conclusions
Planned transmission grid extensions Table 6.2: Transnational grid expansion projects Table 6.7: Transnational grid expansion projects Year Transmission links Import Capacity Export Capacity (GW) (GW) 20 Existing capacity 17.0 14.0 20 Germany-Netherlands 0.3 0.3 20 Germany-Poland 0.5 1.5 2017 Germany-Netherlands 1.5 1.5 2019 Germany-Belgium (Alegro) 1.1 1.1 2020 Germany-Austria 1.5 1.5 2019 Germany-Zealand 0.4 0.4 2019 Germany-Jutland 1.0 0.7 2020 Germany-Norway 1.4 1.4 2021 Germany-Poland 1.0 1.5 2022 Germany-Switzerland 3.4 1.4 2025 Germany-Sweden 0.7 0.7 2025 Germany-Netherlands 0.5 0.5 2030 Germany-Poland 1.5 1.5 Total capacity 31.8 28.0 Source: MKonline - LTP Germany, LTP Nordic Year Cable links external Capacity (GW) 2019 Jutland-Germany 1.0 2019 Jutland-Netherlands 0.7 2019 Zealand-Germany (Kriegers Flak) 0.4 2020 Norway-Germany 1.4 2021 Norway-UK 1.4 2022 Jutland-Germany 0.5 2023 Jutland-UK 1.4 2024 Norway-UK 1.4 2025 Sweden-Germany 0.7 2030 Zealand-Germany 0.7 Table 6.6: Important internal Nordic grid expansion Year Internal links Capacity (GW) 20 SouthWest-link Swe 1.2 2017 Ørskog-Fardal 1.5 2025 Finland-Sweden 0.5/0.8 2026 Jutland-Zealand 0.6
Agenda I. Exchange vs. other price drivers II. III. IV. Different cross border algorithms and solutions What next? Conclusions
Conclusions Cross border exchange is an important price driver, meaning of which tends to be underestimated. In some situations and also in some markets exchange can contribute to a shift in a Power Balance with more weight than renewables or other production types. The solution chosen for a coupling algorithm (ATC, FBMC) has a crucial importance for the relevance of import/export as a price driver. According to the transition grid expansion plans, the importance of cross border exchange is expected to further rise. We in general expect less hours with a bottleneck situation between Germany and the Nordics.
Thank you! Dr. Blazej Radomski bra@mkonline.com Tel. +49 30 31719