When drawing up the rules for the internal European electricity market, the question of whether it should be possible to reserve interconnector capacity for cross-border balancing is often discussed. Reserving interconnector capacity means that interconnector capacity is “withdrawn” from the day-ahead market and “saved” for the real-time market.
Conceptually, it is clear that reserving interconnector capacity could result in significant net gains if the value of the trade in balancing energy exceeds the value of the day-ahead trade. However, from a practical point of view a number of issues need to be considered, including the likelihood of day-ahead and balancing energy prices diverging, and market participants’ ability to develop insights on this price difference in advance – for instance at the day-ahead stage.
The optimum capacity to be reserved on a given day will depend on the market design of the interconnected markets. In Germany, secondary reserve auctions are carried out before day-ahead auctions. This means that capacity and energy prices for flexible plant are known at the time of market coupling – meaning there could in theory be inputs to the market coupling algorithm, optimizing day ahead interconnector capacity and capacity reserved for the shorter term. The situation is trickier if there are no daily auctions for secondary or tertiary reserve as is the case in the Nordic countries and Great Brittan.
Interconnector capacity reservation can also be seen from static and dynamic perspectives. From a static (short-term) perspective, the location of the regulating resources is not affected by the possibility to reserve capacity for cross-border balancing. However, from a dynamic (longer-term) perspective, reserves could be located outside the home market if there is an (increased) certainty that transmission capacity will be available, if these reserves are needed.
Given the need to give more detailed consideration to these issues, Market Design research program is hosting a seminar to discuss with stakeholders the pros and cons of reserving interconnector capacity for cross-border balancing purposes.
Introduction, Peter Fritz, Market Design
Current discussions within the EU, Elin Broström, Svenska Kraftnät, the Swedish TSO
Allowing TSOs to reserve capacity: benefits & practical difficulties, Dan Roberts, Frontier Economics
Why is it profitable to reserve capacity on the cable between Norway and Denmark? Søren Klinge, Energinet.dk, the Danish TSO
Analyses and modelling of the exchange of balancing resources in Europe Gerard Doorman, NTNU
Reserving IC capacity for balancing:
How much can be gained and what do we risk? Niclas Damsgaard, Sweco
Optimising the amount of capacity to reserve on any given day under different market designs Sucheta Shanbhag, Frontier Economics
Pros and cons of reserving interconnector capacity for balancing purposes:
panel discussion lead by Mats Nilsson, Vattenfall