current state of trading tertiary reserves across borders in europe

8/13/2019 Current State of Trading Tertiary Reserves Across Borders in Europe

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Task Force Balance Management

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ETSO Report

Current State of Trading TertiaryReserves Across Borders in Europe

November 2005


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1. Introduction ...................................................................................31.1 Objective.......................................................................................................................3 1.2 Scope of Report............................................................................................................32. Two Trading Model Concepts ......................................................42.1 Model 1 (RP TSO), principles....................................................................................42.1.1 Implications on area control....................................................................................52.2 Model 2 (TSO TSO), principles .................................................................................53. Case studies ..................................................................................73.1 Tertiary reserves trade within the German control block (model 1)..............................7 3.1.1 Introduction .............................................................................................................73.1.2 Activation of Reserves ............................................................................................73.1.3 Settlement of imbalances .......................................................................................83.1.4 Reserves for several markets.................................................................................83.2 The German/Austrian model (model 1) ........................................................................83.2.1 Basic principles.......................................................................................................83.2.2 Harmonisation issues .............................................................................................93.3 The Nordel case (model 2) ........................................................................................93.3.1 Present balancing within the Nordel synchronous system ...................................103.3.2 Frequency control.................................................................................................103.3.3 Activation of balancing bids for Congestion management....................................113.3.4 The balancing process..........................................................................................113.3.5 Balancing before 2002-09-01 (the synchronous Nordel system)..........................123.3.6 Preferred harmonisation .......................................................................................123.4 Exchange of reserves between National Grid and RTE (Model 2).............................12 3.4.1 Services................................................................................................................12 3.4.2 Price of services ...................................................................................................133.4.3 Use of capacity ..................................................................................................... 133.4.4 Sourcing................................................................................................................13 3.4.5 Extension to other interconnections......................................................................133.5 External access to the French Balancing Mechanism................................................133.5.1 General.................................................................................................................14 3.5.2 External access conditions ...................................................................................14Glossary ................................................................................................16


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1. Introduction

1.1 ObjectiveThis report is the first of two reports that explore the state of affairs for establishing orincreasing cross border trading of Balancing Services and in particular examines thecommercial, market design and relevant technical issues associated with facilitating an

increase in such activity.

The potential benefits of increasing opportunities for System Operator Balancing activitiesacross borders relate primarily to the procurement of balancing services in an efficientmanner by the possibility of using internal and external reserve resources in a competitiveenvironment across a wider area. This is likely to have associated benefits in relation to plantloading efficiency (with associated environmental benefit) and a decrease in balancing costs,which are ultimately borne by consumers.

The issues and potential benefits are similar to those that could result from increasedfacilitation of energy trading between markets, particularly in respect of intra-day energytrading. Many of the issues associated with the facilitation of energy trading relate to theharmonisation of market and trading rules across Europe, which will be addressed in later

work.

1.2 Scope of Report

The remit of the ETSO Balance Management Task Force is to consider the management ofprocesses and services associated with active power (MW) balancing and frequency control,which are a subset of overall power system operation requirements. The first BalanceManagement Task Force report1 has already addressed issues relating to the definitions,terminology and technical parameters associated with balancing services and the structureand organisation of Balance Management. That report identifies two broad categories ofbalancing service that relate directly to Balance Management:

Frequency Control (automatic delivery)

Tertiary Reserves and Energy Balancing (manually instructed delivery)

Whilst both categories of service are important in Balance Management activities, the tradingof automatically delivered Frequency Control services (primary and secondary control) is notconsidered due to the much more complex nature of these services. Additionally, it isbelieved that there is potentially more economic value in developing arrangements related toTertiary Reserves and Energy Balancing.

The work is structured into two parts. An exploration part that analyses existing tertiaryreserve trading arrangements across control areas in the EU (this report 2) and investigatesstrongnesses, weaknesses, opportunities and threats (SWOT analysis) of possiblearrangements (report 3). The second part will explore possible solutions including thedevelopment of an ETSO Balance Management Reference Model and identification ofintegration steps and regulatory requirements.

The focus of this second report is on definition of two generic contractual models for sharingor trading balancing services across borders and on exploring existing arrangements. Thefollowing chapter describes two different conceptual models for the cross areaexchange/trading of balancing services. Then, in chapter 3 different examples of existingtrading models will be described in detail.

1 The first report entitled Current State of Balance Management in Europe was published inDecember 2003 and is available on the ETSO website www.etso-net.org


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2. Two Trading Model Concepts

The procurement of Balancing Services is the responsibility of individual TSOs. From thecurrent practice in trading of balancing services in Europe two conceptually different tradingmodels have been identified.

A TSO trading directly with a reserve provider in a different TSOs area

A TSO trading with one or more TSOs

Based on those two concepts the Task Force has developed two generic models whichdescribe how trading of balancing services across borders could be realized. This chapterwill describe the principles of the models, covering the roles and responsibilities of eachparticipant. The next chapter will describe in detail how the models function in practicebased on case studies and the issues associated with each of them. However, it is not theintention of the task force to restrict possible solutions to these two models .

The two conceptual models that have been developed are:

Model 1 Reserve Provider to TSO Trading (RP-TSO)

Model 2 TSO to TSO Trading (TSO TSO)

Both models are already in use. Model 1 is used inside the German control block includingthe part of Austria that belongs to this control block. A variant of Model 2 is used withinNordel. The next two chapters describe both models in more detail. An important issue inBalance Management is in how far a centralized versus decentralized approach is used. Thisissue and the possible implications will be handled in a later report. The models that aredescribed next are generic on this and can be applied to either approach.

Where possible the ETSO role model definitions have been used. The principles of eachmodel are described below.

2.1 Model 1 (RP TSO), principles

The main principle behind model 1 is that Reserve Providers connected in different controlareas (which may be different countries) can contract for the provision of balancing servicesdirectly with a TSO in a different control area.

Control Area 2

TSO1

Reserve

Provider

Imbalance

Settlement

Arrangements 1

TSO2

Reserve

Provider

Market Area Balance Area

Control Area 1

Imbalance

Settlement

Arrangements 2

ETSO role model terminology

Control Area 2

TSO1

Reserve

Provider

Imbalance

Settlement

Arrangements 1

TSO2

Reserve

Provider


Control Area 1

Imbalance

Settlement

Arrangements 2


Control Area 2

TSO1

Reserve

Provider

Imbalance

Settlement

Arrangements 1

TSO2

Reserve

Provider


Control Area 1

Imbalance

Settlement

Arrangements 2


Figure 1: Contractual Arrangements for Trading Balancing Services Using Model 1


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The key features of this model, as described in the diagram are:

The TSOs in Control Area 1 and Control Area 2 are different, and are responsible forbalancing in their own Control Area

The Reserve Provider (RP) in Control Area 1 is physically connected to the networkcontrolled by the TSO in Control Area 1 (same applies to Control Area 2)

Each control area has its own set of electricity market rules, including those relating toimbalance settlement

The Reserve Provider in Control Area 1 may contract and provide Balancing Servicesto the TSO in Control Area 1

The Reserve Provider in Control Area 1 may also contract and provide balancingservices directly to the TSO in Control Area 2

In Model 1 the TSO can buy services directly from an external reserve provider (RP),however two or more TSOs have to be involved, since the exchange schedules have to beadjusted on both sides of the border.

2.1.1 Implications on area control

If trading of reserves takes place across borders of different control areas or control blocks iteffects exchange schedules of all TSOs concerned. In the case of model 1 where directtrading between the purchasing TSO and reserve providers from another control area orcontrol block can take place arrangements have to be made to correctly account for eachcontrol block's responsibility.

Within the UCTE-system the load frequency control (LFC) of all involved TSOs (purchasingTSO, connection TSO, control block responsible TSO) is affected.

In order to exchange reserves over the border of control areas or control blocks according tomodel 1 two arrangements are possible.

Direct activation of the external RP by the purchasing TSO. The LFC of the involvedTSOs are adapted on the basis of the online measured generation of the external RP.

The generated reserve of the external RP is shifted via virtual tie line (as mentionedby UCTE) into the control area of the purchasing TSO. This solution has so far notbeen implemented to exchange reserve power within ETSO.

Activation of the external RP by the purchasing TSO by means of exchangeschedule. The LFC of the involved TSOs are adapted on the basis of exchangeschedules. This is the solution for the exchange of reserves within the Germancontrol block including a part of Austria as will be described in chapter 3.

Conclusively, when arranging trade according to model 1 it is important not to leave out theconnecting TSO.

2.2 Model 2 (TSO TSO), principlesThe main principle behind model 2 is that TSOs will contract with each other for the provision

of balancing services to each other. Each TSO will then be responsible for taking actions inhis own area to deliver the balancing service to the other TSO.


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Control Area 2

TSO1

Reserve

Provider

Imbalance

Settlement

Arrangements 1

TSO2

Reserve

Provider

Control Area 1

Imbalance

Settlement

Arrangements 2



Control Area 2

TSO1

Reserve

Provider

Imbalance

Settlement

Arrangements 1

TSO2

Reserve

Provider

Control Area 1

Imbalance

Settlement

Arrangements 2


Figure 2: Contractual Arrangements for Trading Balancing Services Using Model 2

The key features of this model, as described in the diagram are:

The TSOs in Control Area 1 and Control Area 2 are different, and are responsible forbalancing in their own Control Area

The Reserve Provider in Control Area 1 is physically connected to the network controlledby the TSO in Control Area 1 (same applies to Control Area 2)

Each area has its own set of electricity market rules, including those relating to imbalancesettlement

The Reserve Provider in Control Area 1 may provide balancing services to the TSO inControl Area 1

The Reserve Provider in Control Area 1 may not provide balancing services directly tothe TSO in Control Area 2

The TSO in Control Area 1 may contract with the TSO in Control Area 2 to provideBalancing Services (and visa versa)

The TSO in Control Area 1 is responsible for taking balancing actions in his own controlarea in order to deliver the Balancing Service to the TSO in Control Area 2

In Model 2 TSO can only buy services from external reserve providers (RP) through theconnecting TSO.


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3. Case studies

3.1 Tertiary reserves trade within the German contro l block(model 1)

3.1.1 Introduction

The German control block case is a typical and so far with Europe unique example of amodel 1 trading of tertiary reserves across control areas. This example includes the (control)areas in Austria that belong to the German control block (TIRAG and VKW Netz).

The German market for balancing services was opened in February 2000, since September2002 every German TSO procures his overall demand for primary control, secondary controland minutes reserve by open tendering procedures. A reserve provider of control power cantake part in each of the 4 German markets for balancing services, i. e. independent from hisphysical connection to the grid within Germany. The reserve provider needs to be technicallypre-qualified to enter the market. The German markets for reserves were also opened for theAustrian control areas that are part of the German control block (In the control block thedifferent control areasare balancing on their own, and in addition RWE TNS has taken theresponsibility in front of the other UCTE control blocks for balancing the German control

block). This report describes the present situation in 2005. In July 2005 the new GermanEnergy Law came into force. This may lead to adaptations in the market for balancingservices in the future.Within the German control block the daily market for reserves has developed rapidly anddynamically. The share of reserves provided by external reserve providers varies from 0 % to100 %.

3.1.2 Act ivation of Reserves

Figure 3 illustrates how the exchange of reserves actually works between the control areas inGermany.

connection TSO purchasing TSO

manual activation (e.g. phone)

reserve schedule

1

3

4

starts provision

of reserve

2

schedule management systems of purchasing and connection TSO

reserveschedule

5

reserveschedule

asrequestedby

purchasingTSO

adaption of exchange programs of pur chasing TSO and connection TSO6

7supervision

quality check

MPext

Figure 3

purchasing TSO activates the external RP e.g. by phone (1)


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external RP starts providing reserves (e.g. increasing generation) (2) purchasing TSO sends exchange schedule to external RP (3) purchasing TSO sends the reserve schedule to his schedule management system (4) external RP sends the reserve schedule to the schedule management system of the

connection TSO (5) load frequency control of purchasing and connection TSO is adapted automatically

(6) connection TSO has to supervise and to check the provision of reserves of the

external RP (7)

3.1.3 Sett lement of imbalances

Payment for providing reserves is based on the exchange schedules. In order to take thedeviations between exchange schedule and real generation into account, the settlement ofimbalances of the reserve provider takes place in the control area of the connection TSO. I.e.the imbalances of the reserve provider are settled with the imbalance price of the controlarea the reserve provider is connected to.

3.1.4 Reserves for several markets

If technically possible a reserve provider can offer his services to more than one TSO at thesame time. There is no priority for the connection TSO. If the reserve provider falls short

when providing the reserves the mismatch occurs in the control area of the connection TSOand consequently the imbalances are settled by the connection TSO.

3.2 The German/Austrian model (model 1)

Austria introduced a balancing market in 2002. The offers of reserve providers are ranked ina merit order list. There is no obligation for reserve providers to offer to the balancing market.In case there are not sufficient offers a market maker, whos bids were accepted in aseparate tendering process, guarantees the provision of reserves up to a predefined extent.

Due to the recent requirements of the market and regulating authorities Austria and Germanyhave started discussions about an approach to exchange tertiary reserves i.e. Minute

Reserve (Germany) and Balancing Energy (Austria) including the part of Austria notbelonging to the German control block but to the control block of Austria/APG. This has leadto the development of a German/Austrian model for the trading of tertiary reserves thatcovers also the specific requirements for crossing the border of control blocks. In this modela lot of practice from the German control block was taken over and some new aspects had tobe handled. The next sections describe the model developed.

3.2.1 Basic principles

A basic concept and the contents of a multilateral agreement between the involved TSO'shave been developed and the technical platforms for the necessary IT have been analysed.The cross border exchange of reserves between Austria and Germany will follow the basicprinciples described hereafter:

A pre-qualification for reserve providers is required only from the TSO where thereserve provider is connected to (connecting TSO). Once a reserve provider is pre-qualified he is allowed to offer in the area of every TSO who participates in the model(i.e. all German an Austrian control areas)

Reserves are exchanged via schedules (no virtual tie line solution)

The purchasing TSO activates the external RP according to the market model for hisarea (minutes reserve in Germany and balancing energy in Austria)

The purchasing TSO informs the other involved TSOs (connection TSO, control blockresponsible TSO) about the order on the basis of exchange schedules (triggerinformation for all necessary adjustments with the other TSOs)


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The exchange of schedules has to occur within a short time frame in order to fulfilUCTE-requirements (restore the balance within 15 minutes after the incident). Tocomply with this requirement

o All exchange schedules are confirmed automaticallyo The purchasing TSO has to check if all confirmations (from the connection

TSO and the control block responsible TSO) are available. If confirmations aremissing the purchasing TSO immediately has to look for clarification.

o The load frequency control devices of all involved TSOs (purchasing TSO,connection TSO and control block responsible TSO) are adaptedautomatically without hierarchic conversion and without further check upaccording to the adapted exchange schedules (notwithstanding the procedurefor commercial trading).

The purchasing TSO is fully responsible for activation and possible malfunction of theprocess between all involved TSOs (purchasing TSO, connection TSO and controlblock responsible TSO).

A multilateral agreement for all involved TSOs (purchasing TSO, connection TSO andcontrol block responsible TSO) covers the legal aspects between the involved TSOs

3.2.2 Harmonisation issues

In general a total harmonisation of market rules is not mandatory. It is expected that existing

differences will be compensated by market forces or slight changes in the regulatoryframework. Nevertheless the following aspects will need to be harmonised to facilitate thisdeveloped trading model,

Data exchange between TSOs and between TSOs and RP including orderingprocedure, confirmation, withdrawel in predefined situations, etc. in order toguarantee an automatic and fast communication between all involved parties (IT-platform and data formats).

Supervision of the reserve providers - it must be clear who supervises and what arethe organisational and contractual consequences; this depends also on the generalprocedure and the question who bears the risk.in order to guarantee the quality of thereserve services.

Measures/procedures for congestions including also further affected TSOs

Measurement and accounting Time frame system for schedules (e.g. 15 min), because the product definition of

minutes reserve/balancing energy follows the common time frame pattern of therespective commercial energy markets

Assignment of reserve providers to a Balance Responsible Party (settlement ofimbalances).

Time limits for orders - in case reserve providers intend to offer in both or severalmarkets simultaneously, which should be the normal case

3.3 The Nordel case ( model 2)The current Nordic model does best fit the model 2 concept. It can be seen as a furtherdevelopment on model 2 because TSO's are combining their balancing resources for the

balancing of the total Nordel system as a whole. The dispatch criterion is the frequency in thesynchronous system and the balance on the border to Germany for Western Denmark. Thismeans that area control error (ACE) is no longer taken in to consideration for balancing in theNordel synchronous system.

In normal operation all deviations between planned exchange (day ahead, intra day) andactual exchange on interconnections within Nordel caused by activation of reserves (inNordel regulating power bids) or imbalances, is handled as exchange of balance powerbetween TSOs. I.e. activations of reserves do not affect the plan for power exchange oninter-connections. It will only affect settlement of exchange of balance power.


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The balancing is conducted in such a way that reserves are activated in the area with thelowest cost. Equal balancing prices in the areas result if there are no congestions. Partieswith activated reserves shall be compensated for their costs.

3.3.1 Present balancing within the Nordel synchronous system

Balancing within the synchronous system is conducted in such a way that the specifiedquality standards regarding frequency and time deviation are met. Requirements regarding

frequency response are maintained. Furthermore, balancing is conducted in such a way thatthe transmission capacity is not exceeded.

Sweden and Norway represent approx. 75% of the annual consumption of the synchronoussystem. The Parties have agreed in the Nordic system operation agreement that SvenskaKraftnt and Statnett will thus have the task of maintaining the frequency and time deviationwithin set limits. Fingrid and Energinet for Western Denmark) will normally only activatereserves after contacting Svenska Kraftnt. Energinet will exchange regulating power forEastern Denmark with the Nordel synchronous system after contacting Statnett.

Figure 4: Joint list for regulating power in Nordel

A joint list of bids for regulating power is compiled, in order of price, containing bids from boththe synchronous system and Western Denmark, see Figure 4. During the hour of operation,activation of bids is initially carried out for network reasons and then, if necessary, forbalancing, i.e. to maintain the frequency. Activation of bids for network reasons within theoperational hour needs only to be in one direction.

3.3.2 Frequency contro l

To control the frequency of the synchronous system, the bids on the joint list for regulatingpower are used in price order, with the exception of bids confined behind a bottleneck. The


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activated bids are marked as activated for balancing (i.e. for frequency reasons) andincluded when calculating the balancing price and volume.

For each hour, the balancing price is determined in all Elspot (Nordpool market) areas. Thebalancing price is set at the marginal price of activated bids in the joint list. When bottlenecksdo not arise during the hour of operation, the prices will be equal.

When a bottleneck arises during the hour of operation between Elspot areas or withinanother Elspot area which entails a bid in an area not being able to be activated, the relevantarea will obtain a balancing price of its own. This balancing price will be decided by the lastbid activated in the joint list for regulating power prior to the bottleneck arising.

Bottlenecks to/from an Elspot area which are caused by imbalances within an Elspot areagive rise to a divided balancing market.

3.3.3 Activation of balancing bids for Congestion management

Bottlenecks caused by a reduced transmission capacity to/from an Elspot area, after Elspotclearing but before the operational hour, are managed using counter trading (two-sided socalled "special" regulation, i.e. activation of both up and downward regulation bids fornetwork reasons). Activation of bids for management of bottlenecks within the operational

hour are done in one direction only as mentioned before. All bids that are activated fornetwork reasons get the activation type special in Figure 4.

Activation of bids (regulation) for network reasons shall not affect the balancing pricecalculation.

When regulation is done for internal network constraints in an Elspot area, bids are usedfrom the common Nordic merit order list of regulating power bids, for rectifying the networkproblem in the subsystems. When choosing a bid, attention must be paid to both the priceand the effectiveness of the activation of the regulating object behind the bid.After the network constraint has been rectified there might be a deviation in frequencycaused by the network constraint regulation. Frequency will then be restored by normalbalancing operation.

When regulating for network reasons on the border between Elspot areas, the cheapest bidsare normally used in the subsystems rectifying the network problem.

3.3.4 The balancing process

RP's submit bids for regulating power to their TSO who transfer the bids to the common TSOinformation system, NOIS. According to the Nordic system operations agreement, the TSO inNorway, Statnett (SN) and the TSO in Sweden, Svenska Kraftnt (SvK), are jointlyresponsible for frequency and activation of tertiary reserves. Finland and Denmark providebids for the common list. Depending on the frequency situation SN and SvK agree, over thephone, on necessary steps, see Figure 5. SvK has the responsibility to activate bids inFinland and on Western Denmark, SN has similar responsibility against Eastern Denmark.

The activating process takes approximately 10-15 minutes.Error!


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SNSvK

Fingrid

1. Frequency deviation

2. Telefoncall

3. Checking

NOIS togetherwith SvK

3. Checking

NOIS togetherwith SN

4. Agreed to

regulate 200

MW. 100 MW

in Norway, 50

MW in Finland

and 50 MW in

Sweden

5.SvK order

Fingrid to

activate 50 MW

in Finland

5. RP in Norway

activates

100 MW

5. RP in Sweden

activates

50 MW

5. RP in Fin land

Activates

50 MW

6. Frequency restored

SNSvK

Fingrid

1. Frequency deviation

2. Telefoncall

3. Checking

NOIS togetherwith SvK

3. Checking

NOIS togetherwith SN

4. Agreed to

regulate 200

MW. 100 MW

in Norway, 50

MW in Finland

and 50 MW in

Sweden

5.SvK order

Fingrid to

activate 50 MW

in Finland

5. RP in Norway

activates

100 MW

5. RP in Sweden

activates

50 MW

5. RP in Fin land

Activates

50 MW

6. Frequency restored

Figure 5: The NORDEL balancing process

3.3.5 Balancing before 2002-09-01 (the synchronous Nordel system)

The only difference between previous and present procedures are that before September2002 all exchange of tertiary reserves (Nordel term: secondary reserves) between areas washandled as supportive power. I.e. exchange of tertiary reserves was handled with change of

plans for the exchange on the interconnections.

3.3.6 Preferred harmonisation

In spite of different rules and legislations within each country this trading model works. Ofcourse its desirable to facilitate and develop the model. Generally the following aspectsshould preferably be harmonised:

data exchange protocol between TSOs and between TSO and suppliers includingordering procedure, confirmation e.g.

supervision of the suppliers, SCADA

activating time for regulating power

pre-qualification of suppliers

requirements concerning the planning process submitting of plans from RP to TSO

all interconnections capacity available for Elspot market, and owned by the TSOs.

3.4 Exchange of reserves between National Grid and RTE(Model 2)

3.4.1 Services

Two services are covered:


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1. Emergency exchange : this service is permanently available but may only be called incase of last resort before load shedding. A TSO can only refuse the service if he ishimself in such a position that he should himself curtail customers to be able tosupply. The volume offered is 1000 MW in each direction (FR to UK or UK to FR)

2. Balancing services : this service allows RTE and National Grid to exchange energy inorder to solve a congestion or to balance their respective systems. This service isavailable as long as it is not declared unavailable. The volume offered is 500 MW ineach direction. This volume is limited by Intraday Transfer Limits (intraday limits ofavailable capacity) defined intradaily from end of day ahead on. A TSO may ask morethan 500 MW but acceptation by the other is not mandatory. A TSO uses this serviceafter using his local balancing mechanism in case there are no available bids/offersable to solve his problem.

3.4.2 Price of services

The prices of each service are as follows :- The TSO that activates the service pays to the other for the use of the link- Emergency exchange : fixed price (much higher/lower level than normal spot price for

supply/absorption)- Balancing and ancillary services : price announced day ahead for each half an hour of

Day D; this price is based on imbalance pricing for each system. In France, it is based on

highest Powernext hourly price + 50 Euro.

3.4.3 Use of capacity

The DC link is open to intraday OTC trade. There are 6 gates :

Intra-day Gate Number Time Period From Period To

1 19:00 D-1 23:00 D-1 23:00 D+1

2 07:00 D 10:00 D 23:00 D

3 10:00 D 13:00 D 23:00 D

4 13:00 D 16:00 D 23:00 D

5 16:00 D 20:00 D 23:00 D

6 02:00 D 05:00 D 23:00 D

(Times quoted are UK local time)

The two services are activated within the limits of capacity left available by trade.

3.4.4 Sourcing

Each TSO sources these services on his local balancing mechanism.

3.4.5 Extension to other interconnections

In RTEs view it is possible to extend the two first services (emergency exchange andbalancing trade) to other interconnections as a first step to balancing trade between TSOs,providing that these TSO are able to source the involved energy and are allowed by theirregulatory framework to use such services.

Similar arrangements are in place between RTE and Terna.

3.5 External access to the French Balancing MechanismThere are other cases in Europe where a TSO procures (or has procured) balancing servicesacross it's control area border. However these are not illustrating the integration of balancingmarkets (supply side and/or demand side; the Nordel case is an example of demand side


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and supply side integration of balancing markets, the German/Austrian cases are examplesof a supply side integration process) but rather of an opening up of an internal market toexternal reserve providers. One example of this is the French Balancing Mechanism.

3.5.1 General

RTE offers the possibility, whenever the intra-day cross-border arrangements atneighbouring TSOs allow so, to integrate offers from interconnected areas into the Balancing

Mechanism (BM). During the first year this possibility has been open only for Switzerland;RTE has since then opened the mechanism to participants from Spain, England andGermany. It can be considered today that around 20% of the energy traded on the FrenchBM comes from abroad, that is around 2 TWh a year.

French BMs daily activity starts day ahead at 4:00pm when bidders send their offers/bidstogether with their day ahead schedules. In addition the BM provides twelve even gates inwhich RTE gathers offers and bids. The corresponding lead time is therefore 2 hours.

Distribution of incremental bids

(September 03 - July 05)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

sept

-03

oct-0

3

nov-03

janv-04

mars-04

avr-0

4

mai-

04

juin

-04

juil-

04

sept

-04

oct-0

4

nov-04

janv-05

mars-05

avr-0

5

mai-

05

juin

-05

juil-

05

Generation Load Interconnection

Figure 6: Distribut ion of incremental bids " purchased" by RTE

3.5.2 External access condit ions

External reserve providers in the French BM (who bid from an interconnection) have todefine an Interconnection Balancing Unit, which is not a physical unit. The bid format isrectangular. Technical conditions of the bids (which are bidders responsibility) depend on :

the technical characteristics of the physical means used by the bidder to source hisbid

the intra-day cross-border arrangements for entry/exit of energy defined by theneighbour TSO.

In any case, it is bidders responsibility to define these characteristics and make sure thatthey are respected in real time.

When RTE activates a bid:

on the French side, RTE schedules the corresponding exchange program

on the neighbouring TSOs side, it is bidders responsibility to make sure that his bidis scheduled by the TSO

in case the two schedules do not match, the bid cannot be delivered; in this case,under the lines of the BM rules, bidders responsibility is engaged, as is the casewhen a generating unit does not deliver energy corresponding to the agreed activatedbid.


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This mechanism has so far proven to be efficient in keeping system balance in compliancewith European system security and allowing a sound competition on the French BM andtherefore giving rise to a credible imbalance pricing system on the French hub. It will havehowever to be updated as soon as intra-day and common cross-border balancing tradearrangements are defined with neighbouring TSO's.


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Glossary

Term (Acronym) {Synonym} (reference)Definition/explanation CROSS-REFERENCE

Balance Responsible Party (definition from report 1)A party which is responsible for paying IMBALANCEcharges if a position of IMBALANCEoccurs.

Balancing Services (definition from report 1)Processes and services associated with power system operation, which ensure balancebetween supply and demand.

Congestion (EC questionnaire for TSO's)(in an electric transmission grid) exists if the operational planning and forecast before thereal-time operation indicate that the operational security constraints cannot be met withoutadditional counter measures (CONGESTION MANAGEMENT).

Congestion management (EC questionnaire for TSO's)A common term for a number of different measures for prevention (i.e. for acting before theactual violation of operational security criteria happens) of congestion, including grid-relatedmeasures like changing topography of the grid, as well as the measures related togeneration, like REDISPATCHand COUNTERTRADE, and demand, like demand sidemanagement and demand response.

Connection TSO {connecting TSO}TSO responsible for balancing of the area where the RESERVE PROVIDERis physicallyconnected (provider may be connected to a distribution network), also responsible for thepre-qualification of reserve providers within his control area.

Control Area {TSO area, Balancing area} (UCTE Glossary)

A CONTROL AREA is a coherent part of an interconnected system (usually coincident with theterritory of a company, a country or a geographical area, physically demarcated by theposition of points for measurement of the interchanged power and energy to the remaininginterconnected network), operated by a single TSO, with physical loads and controllablegeneration units connected within the CONTROL AREA. A CONTROL AREA may be a coherentpart of a CONTROL BLOCK that has its own subordinate control in the hierarchy of SECONDARYCONTROL.

Control Block {Balancing area) (UCTE Glossary)A CONTROL BLOCK comprises one or more CONTROL AREAS, working together in theSECONDARY CONTROL function, with respect to the other CONTROL BLOCKS of the synchronousareait belongs to.

Control Block Responsible TSOTSO responsible for the external relationship of the whole CONTROL BLOCKagainst the otherCONTROL BLOCKs, will be involved if the reserve provider is physically connected outside itsCONTROL BLOCK.

Countertrading (EC questionnaire for TSO's)Any purchase or selling of electricity from generators or customers induced by the systemoperator in order to relieve congestion; to be distinguished from grid-related measures.

External Reserve Provider (ERP)RESERVE PROVIDERoutside of a purchasing TSOs CONTROL AREA.


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Frequency Control Services (definitions from report 1)

Primary ControlAutomatic reaction of the primary controller of generation units sets, involved inprimary control, to a frequency deviation caused by a disturbance or small variationsin production and consumption.

Secondary Control {UCTE only: Load Frequency Control}Instructed action of particular generating sets linked to a control loop in a control area,to move the overall system (frequency and interchange) deviation of the control areatoward zero following the delivery of primary control in response to a sudden variationin production or consumption.

ImbalanceThe difference between the (aggregate of) contracted energy flows of a BALANCERESPONSIBLE PARTY and the (aggregate of) actually occurred (i.e. metered) energy flows.

Internal Reserve Provider (IRP)RESERVE PROVIDERwithin a purchasing TSOs CONTROL AREA.

Purchasing TSO {Reserve receiving TSO}A TSO procuring tertiary reserves/energy balancing services, contractual partner of thereserve provider (commercial relationship).

Redispatching (EC questionnaire for TSO's)A direct change in the output of power plants in order to create overall electricity flows whichremain within the limits of the transmission line constraints.

Reserve Provider (RP)An entity contracting and providing TERTIARY RESERVES/ENERGY BALANCING SERVICESto aTSO.

System ImbalanceThe aggregate IMBALANCEof all BALANCE RESPONSIBLE PARTIESin a system.

System Operator (TSO) {Transmission System Operator} (EC Questionnaire for TSO)A natural or legal person responsible for operating, ensuring the maintenance of and, ifnecessary, developing the transmission system in a given area and, where applicable, itsinterconnections with other systems, and for ensuring the long term ability of the system tomeet reasonable demands for the transmission of electricity.

Tertiary reserves/Energy Balancing services (definitions from report 1)Those BALANCING SERVICESthat are not automatically delivered when required, but areinstead instructed by the TSO. They are generally used to cater for plant loss and significantdemand forecast error.

Virtual tie line (UCTE Glossary)A VIRTUAL TIE-LINE represents a telemetered reading or value that is updated in real-time andused as a tie-lineflow in the AGC/ACE equation but for which no physical tie or energymetering actually exists. The integrated value is used as a metered MWh value forinterchange accountingpurposes.

current state of trading tertiary reserves across borders in europe

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