Regulating Power Market (RPM) Review Study - High-level Summary

Page created by Micheal Aguilar
 
CONTINUE READING
Regulating Power Market (RPM) Review Study - High-level Summary
Regulating Power Market (RPM) Review Study

High-level Summary

Bonn / Oosterbeek 07.10.2013
Regulating Power Market (RPM) Review Study - High-level Summary
PURPOSE AND SCOPE OF STUDY

  ANALYSIS OF CURRENT RPM
                                  ANALYSIS OF CHALLENGES OF                           IMPROVEMENT
     DESIGN REGARDING
                                 FUTURE RPM DESIGN OPTIONS                              OPTIONS
ATTRACTIVENESS AND EFFICIENCY

•Design framework for system    •Exchange options with                      •Potential RPM Improvements
 balancing                       neighbouring systems                       •Evaluation of RPM improvement
•The current Nordic RPM         •Settlement period                           options
•Attractiveness of the RPM      •Common Market Interface                    •Improvements regarding use of
•Quantitative Analysis          •Impact of FRR-A on RPM                      RPM for balancing and
                                                                             congestion management

                                                           RPM Review Report Chapter Summary | 07.10.2013   2
Regulating Power Market (RPM) Review Study - High-level Summary
Summary of findings
RPM adequacy
 Qualitative part
   Observation
     Qualitative framework provided to be used in further assessment on long term adequacy
   Conclusion
     Recommendation to use the framework for the assessment on long term adequacy
 Quantitative part
   Observation
     Positive RPM participation incentive, although relatively small in Norway and Sweden
     Incentive to avoid harmful imbalance, although relatively small in Norway and Sweden
     For 2012 indications were found of RPM volume shortages, to be investigated and validated
   Conclusion
     Not conclusive for whole RPM as DK data was not provided and results need to be validated with the TSOs.
   Recommendation
     Recommendation to complete quantitative analysis with missing data.
     Recommendation to investigate and validate the results

                                                                       RPM Review Report Chapter Summary | 07.10.2013   3
Regulating Power Market (RPM) Review Study - High-level Summary
Summary of findings
Recommended RPM product improvements
 Project group agreed on the following options should be implemented
  Resting time mark
  Lower bid size
  Harmonization of minimum duration of bid activation to set prices
  Electronic activation instruction
 “Consultant view” in addition
  Publish imbalance forecasts

  Timing of implementation needs to be further investigated.
  Other options should be further investigated:
    Check the need
    Check the contribution

                                                            RPM Review Report Chapter Summary | 07.10.2013   4
Summary of findings
 Increase efficiency (lower costs) by
   Exchange standard product with neighbouring markets. Based on same time period and
    according to minimum NCEB characteristics
     Seems feasible with Poland and the Baltics
     Seems feasible in one way with the Netherlands. due to pricing issues
     Not feasible yet with Germany due to lack of TSO mandate
     Recommendation to proof feasibility with a pilot project (ENTSO-E pilot)
       Product definition
       Operational concept including conversion tool
       Pricing
   Explore feasibility of demand side response outside RPM
     To avoid transaction costs and further increase attractiveness to support system balance

  “Consultant view” in addition
   Implementing imbalance netting also on DC cables. Pilot project on DC recommended to proof
    feasibility first

                                                                       RPM Review Report Chapter Summary | 07.10.2013   5
PURPOSE AND SCOPE OF STUDY

  ANALYSIS OF CURRENT RPM
                                  ANALYSIS OF CHALLENGES OF                           IMPROVEMENT
     DESIGN REGARDING
                                 FUTURE RPM DESIGN OPTIONS                              OPTIONS
ATTRACTIVENESS AND EFFICIENCY

•Design framework for system    •Exchange options with                      •Potential RPM Improvements
 balancing                       neighbouring systems                       •Evaluation of RPM improvement
•The current Nordic RPM         •Settlement period                           options
•Attractiveness of the RPM      •Common Market Interface                    •Improvements regarding use of
•Quantitative Analysis          •Impact of FRR-A on RPM                      RPM for balancing and
                                                                             congestion management

                                                           RPM Review Report Chapter Summary | 07.10.2013   6
DESIGN FRAMEWORK FOR SYSTEM BALANCING
System balancing covers the TSO processes to maintain frequency. Apart from the technical processes to
maintain the frequency and the specifications of these reserves, the market design around these processes as
well as the reference framework for this market design are significantly taking influence on the result of the
balancing process.

Design Framework
 Nordic RPM covers the need for FRR-M reserves for all TSOs in the Nordic integrated power system.
 The Nordic power system consists of the Nordic synchronous power system and the Western-Danish
  subsystem, which is connected to the UCTE synchronous power system.
Design Criteria
 For this study, the efficiency objective is to minimize the total costs for the TSOs of procuring and activating
  RPM reserves by meeting the following sub conditions:
   quality targets for system balancing,
   network security and congestion management, and
   sharing reserves from the RPM.
 In general, consistence and robustness of a balancing market design will increase the attractive of a market
  place.
 Following criteria needs to be fulfilled to have natural market incentives to be balanced:
   Imbalance energy should on average be more expensive than wholesale market energy
   Control energy should on average be more expensive than wholesale market energy
   Control energy should on average not be more expensive than imbalance energy

                                                                      RPM Review Report Chapter Summary | 07.10.2013   7
THE CURRENT NORDIC REGULATION POWER MARKET
 Although the Nordic RPM market is largely harmonised, the product definition, the selection procedure, the
  pricing rules and the TSOs procedure of activation show some deviations.
 The following summarizes the harmonized framework details
   Harmonized                                                  DK | FI | SE | NO
   RPM Activation            Single buyer auction
                             General selection is based on price order
                             Product resolution 1hour
                             Marginal pricing rules
                             Own hourly market price
   Pre-contracting           All 4 TSOs have pre-contracting capacities, while rules and procedures are deviating
                             Pre-contracting only for upward regulation
                             TSOs put the resources on the RPM
                             Sharing of capacities via NOIS list
   Activation Procedure      Activation time is 15min after instruction
                             Full level delivery at specific set-time
                             Activation is done less than 45min before next hour of operation and for one hour
   Congestion                RPM bids used for this type of purposes do not set the market price of RPM
   Management Usage          Bids are paid based on pay-as-bid
                             Ex-post, when setting the price for RPM and settling with providers, the TSOs have the
                              discretion to choose which of the bids activated during an hour were activated for
                              congestion management and which for normal regulation

                                                                          RPM Review Report Chapter Summary | 07.10.2013   8
THE CURRENT NORDIC REGULATION POWER MARKET
 The following summarizes the difference in the framework details
   Differences     DK                         FI                         SE                            NO
   Product          Allow BRPs to pool        Request for faster       Flexibility activation       Request for faster
   Definition        units within the ELSPOT    activation is possible    time                          activation is possible
                     bidding areas with out  Allow BRPs to pool         Request for faster           Allowance of demand
                     any specification on the   units within the ELSPOT   activation is possible        side to specify a certain
                     location of the unit       bidding areas but BRPs  Minimum bid size               resting time
                                                need to specific the      below 10MW, in SE 4          Allow BRPs to pool
                                                location of the unit      which is 5MW                  units within the ELSPOT
                                                                                                        bidding areas but BRPs
                                                                                                        need to specific the
                                                                                                        location of the unit

   Bid Selection    Treatment of              Commercial bids are     Bid selection is not      Treatment of
                     commercial and non-        activated before the     dependent only on the      commercial and non-
                     commercial bids            units that are pre-      lowest price but the bid   commercial bids
                     equally                    contracted or owned by   activation time and/or     equally
                                                the TSOs                 bid size plays a role     Bid selection is not
                                                                        Commercial bids are        dependent only on the
                                                                         activated before the       lowest price but the bid
                                                                         units that are pre-        activation time and/or
                                                                         contracted or owned by     bid size plays a role
                                                                         the TSOs                  Fast activation (< 5 min)
                                                                                                    bids with large volumes
                                                                                                    to bring frequency back
                                                                                                    to nominal value is
                                                                                                    possible

                                                                              RPM Review Report Chapter Summary | 07.10.2013    9
THE CURRENT NORDIC REGULATION POWER MARKET
 The following summarizes the difference in the framework details
   Differences   DK                         FI                          SE                          NO
   Pricing        Minimum activation        Minimum activation         Minimum activation         Minimum activation
                   duration 10min             duration 1min               duration 1min               duration 10min
                                             Separate pricing for       Separate pricing for
                                              activated pre-              activated pre-
                                              contracted units            contracted units

   Requirement    Only BRP can be active    BRP and also BSP can      Only BRP can be active      Only BRP can be active
                   on the RPM                 be active on the RPM       on the RPM                   on the RPM
                                              (to help smaller players
                                              to participate)
                                             BSP needs agreement
                                              called balance power
                                              market agreement
   Activation     Electronic                Manually activation        Manually activation        Manually activation
                   communication to all       processes typically via     processes typically via     processes typically via
                   BRPs                       phone                       phone                       phone

                                                                          RPM Review Report Chapter Summary | 07.10.2013
                                                                                                                                10
ATTRACTIVENESS OF THE RPM
 In case of an active RPM players with no investment costs and willingness to take part in the RPM, the
  capacity payment are necessary to ensure adequacy if
  1.      players are risk averse,
  2.      transaction costs to bid are high, and
  3.      there is idle but needed capacity.

 However even with the fulfilment of these conditions its not possible to deduct that capacity payments
  are necessary, since
   Players may have a vested interest in bidding into the RPM to decrease the imbalance price and thus reduce their imbalance
       risk.

 According to the TSO/BRP interviews, conditions 1 and 3 seem to be already fulfilled for the Nordic
 RPM.
 Hence, a key variable to decide on the need for capacity payments is the level of transaction costs. If
 the transaction costs for bidding into the RPM are high then capacity payments are necessary if we
 ignore the incentive of players to lower the imbalance price.

                                                                             RPM Review Report Chapter Summary | 07.10.2013   11
QUANTITATIVE ANALYSIS
 The quantitative analysis was intended to quantify attractiveness, efficiency and effectiveness of the Nordic
  RPM by the use of quantitative indicators.
 As a consequence of incomplete data and lack of time to investigate and validate results with the TSOs, the
  quantitative analysis is not complete and no definite conclusions can be made at this state.
 Due to this it is recommended to proceed the analyses and in particular to analyse on seasonal/quarterly
  base.

Main observations
 Average imbalance as a fraction of available FRR-M capacity indicates that total volume of
  accessible RPM bids even on country level may
  not always be adequate from a system control perspective.
 Total unused but accessible bids in a group of bidding zones compared with the remaining
  imbalance of the bidding zone indicates shortages for some days in March 2012.

                                                                     RPM Review Report Chapter Summary | 07.10.2013   12
QUANTITATIVE ANALYSIS
Main observations
 Average hourly market imbalance shows a shift in
  pattern over the observation period. This pattern
  differs per country.

   Hourly market imbalance

 Controller effectiveness analysis indicates a far from
  effective energy balance control. Note that if power
  balance control is perfect, energy balance control
  would also be perfect and all dots would occur on
  the X-axis.

                                                           Controller effectiveness

                                                                  RPM Review Report Chapter Summary | 07.10.2013   13
QUANTITATIVE ANALYSIS
Main observations
 Average RPM income is positive for all
  system imbalance situations.
 The participation in the Nordic RPM market
  for Nordic market participants with an
  average RPM income of 14 €/MWh.
 Less attractive than participation of domestic
  participants in the Dutch or German RPM
  where the average RPM income has been
  between 45 and 60 €/MWh respectively.
                                                   Average RPM income for BSPs in NO, SE and FI (over the period
                                                   2011-2012)

                                                                  RPM Review Report Chapter Summary | 07.10.2013   14
PURPOSE AND SCOPE OF STUDY

  ANALYSIS OF CURRENT RPM
                                  ANALYSIS OF CHALLENGES OF                           IMPROVEMENT
     DESIGN REGARDING
                                 FUTURE RPM DESIGN OPTIONS                              OPTIONS
ATTRACTIVENESS AND EFFICIENCY

•Design framework for system    •Exchange options with                      •Potential RPM Improvements
 balancing                       neighbouring systems                       •Evaluation of RPM improvement
•The current Nordic RPM         •Settlement period                           options
•Attractiveness of the RPM      •Common Market Interface                    •Improvements regarding use of
•Quantitative Analysis          •Impact of FRR-A on RPM                      RPM for balancing and
                                                                             congestion management

                                                           RPM Review Report Chapter Summary | 07.10.2013   15
EXCHANGE OPTIONS WITH NEIGHBOURING SYSTEMS

 Based on the draft Network Code on Balancing and the Nordic situation the following observations are
  made:
   For the forming of a common merit order with any TSO, sufficient comfort must be reached on the level of a
       harmonized balancing market design.
   This involves the following prerequisites
    1. a coordinated activation function for all the involved TSOs, and
    2. a harmonisation of products to standard products including the pricing of bids, settlement of bid activation,
          the imbalance pricing and settlement.

   If any of these prerequisites are missing or not sufficiently fulfilled, two other options remain:
  1.     Imbalance netting: this imposes no conditions to harmonized market designs so this option should from this
         perspective be implemented on all external Nordic borders as soon as possible. Although the concept of netting
         within synchronous systems is well-known and applied today (IGCC as in Germany with NL and DK W), the
         concept of automatic imbalance netting between synchronous systems is not well-known.
  2.     TSO-TSO exchange of balancing products: This is linked to mainly four challenges: TSO mandate to exchange
         and control product delivery; product standardisation; pricing of exchanged products and imbalance pricing. On
         top of this, for exchange of reserve capacities cross-border transmission capacity access must be pre-agreed
         during contracting.

 We consider here any activation of exchange based on the integration of a foreign bid ladder with the RPM
  on the Nordic side and integration of the RPM with the foreign bid ladder on the foreign side as a mirrored
  common merit order. In this mirroring, foreign bids would not be visible if cross-border capacity is not
  available or if the bid is already activated on any side.

                                                                         RPM Review Report Chapter Summary | 07.10.2013   16
SETTLEMENT PERIOD
As a 15 min settlement period is under review for Nordic power system, the identified options were evaluated
regarding the impact on it.

Option                                                Impact of 15 min settlement period
Resting time mark                                     potentially increases need for this option
Block bids                                            potentially increases need for this option
Lower bid size                                        may add more very small bids
Imbalance price should reflect system scarcity (min
                                                      less deviation between momentary and average scarcity
duration of activation to set price)
Minimum contractual duration time (guaranteed
payment according to assumed minimum activation       chance of getting fully activated during whole period increases
duration)
15 min bids                                           becomes feasible with 15 min settlement period
Minimum physical duration of activation (additional
                                                      need would reduce due to higher chance of getting fully activated during
price condition on bid: minimum income from
                                                      the whole period
activation)
Gate closure closer to real-time                      potentially more gates (up to 4x more)
                                                      if the update frequency is fixed then there is no impact, if it is related to
Real-time balancing information
                                                      the settlement period, the update frequency increases
Publish imbalance forecasts                           some impact on data requirements for forecasting

Publish bid ladder volumes and prices (ex ante)       more data to be published

Directly activated RPM reserves                       no
Electronic activation instruction                     would be required because of increased number of activations

                                                                              RPM Review Report Chapter Summary | 07.10.2013          17
COMMON MARKET INTERFACE
 A cost/benefit analysis for a common market interface was not performed during this project.
 Contribution of common market interface
  1. to increase the efficiency of the RPM market, and
  2. to have a higher exchangeability with neighbouring systems.
  Since in the longer term benefits could be reached and the common market interface could serve as a pilot for the
  future European common market interface for FRR/RR markets. In the shorter term no direct benefits or drawbacks in
  terms of efficiency or exchangeability are expected.
 Stakeholders have varying expectations from a common market interface depending on their own market
  perspective. Their expectations are about
  1. huge benefits to the market,
  2. an integrated interface for both intraday market and RPM,
  3. an uniform communication interface, and
  4. and some do not think it will bring many benefits.
 Due to this, it is recommended to review in co-operation with stakeholders the need for a common market
  interface in the context of the need for a Nordic common system. Such a Nordic common system could
  provide central services to the TSOs and the market for e.g. the bidding into RPM, access to the common
  bid ladder, an algorithm to optimally select bids for the six RPM demand processes, area imbalance price
  calculation, settlement of activated RPM bids and BRP imbalances and finally, transparency.
 In this context it is also relevant to look into similar developments on the continent where coordinated TSO
  processes for capacity calculation and allocation have been and are being developed and supported by
  central service providing entities.

                                                                       RPM Review Report Chapter Summary | 07.10.2013   18
IMPACT OF FRR-A ON RPM
Current Situation
 The Nordic synchronous power system stands at the dawn of an integration of automatic generation control
  with the manual activation of frequency restoration reserves.
 Recently an automatic generation control system for the Nordic synchronous area was installed with
  improvements to frequency quality as a result.
 FRR-A reserves were contracted for the goal of a pilot project in the first place, not for the goal of meeting
  agreed quality criteria. As the FRR-A market development takes place in another project which is still on-
  going, guiding principles for the review of FRR-A and RPM integration were considered premature by the PG
  and are not identified here.
Dutch / German Experiences from a integration of both markets
 For dimensioning of total FRR-A + FRR-M two approaches are applied. Either based on a single fault
  incident (NL) or on a probabilistic analysis of all incidents in the system that can occur within the TSO
  responsibility window (DE).
 Balance responsibility for the Dutch and German TSOs cover current and next program time unit (PTU).
 Self-dispatch reaction of the market is stronger in NL than in DE due to stronger energy balancing
  incentives. Therefore the Dutch TSO can take a certain market share into account when covering for
  dimensioning requirements.
 FRR-A dimensioning is an engineering issue. FRR-A dimensioning can be derived from statistical analysis of
  open loop ACE (if at least 5 minutes average values of frequency and flows are available).
 Most important aspects that could be of interest for a possible Nordic FRR-A / FRR-M integration are:
  1. The marginal pricing of balancing energies over all activated FRR-A / FRR-M bids.
  2. The surcharge on imbalance pricing in case of saturation of available bids.
  3. The activation of FRR-A bids in an energy price merit order.

                                                                      RPM Review Report Chapter Summary | 07.10.2013   19
PURPOSE AND SCOPE OF STUDY

  ANALYSIS OF CURRENT RPM
                                  ANALYSIS OF CHALLENGES OF                           IMPROVEMENT
     DESIGN REGARDING
                                 FUTURE RPM DESIGN OPTIONS                              OPTIONS
ATTRACTIVENESS AND EFFICIENCY

•Design framework for system    •Exchange options with                      •Potential RPM Improvements
 balancing                       neighbouring systems                       •Evaluation of RPM improvement
•The current Nordic RPM         •Settlement period                           options
•Attractiveness of the RPM      •Common Market Interface                    •Improvements regarding use of
•Quantitative Analysis          •Impact of FRR-A on RPM                      RPM for balancing and
                                                                             congestion management

                                                           RPM Review Report Chapter Summary | 07.10.2013   20
EVALUATION OF RPM IMPROVEMENT OPTIONS
PG and E-Bridge discussed and recommend the following options to implement.

Option               PG common recommendation                     E-Bridge recommendation

                  Used in Norway today, so introduction
                                                                  Consider implementation as a special product for balancing. Simple merit
                  should not immediately increase
                                                                  order activation in combination with an "unavailable" mark during resting time
Resting time mark operationally complexity, if use
                                                                  would suffice. If volume increases, a more sophisticated bid
                  increases from today, sophisticated
                                                                  selection/activation tool may be required.
                  planning tools are necessary.
                     Harmonize to 1 MW
                                                                  Min bid size is an exclusion mechanism implement in combination with an
                     conditional to implementation of
Lower bid size                                                    electronic activation instruction to the BSP and improvement of the operator
                     electronic activation instruction and
                                                                  view on the bid ladder (so that the screen is not taken by many small bids).
                     adequate operator user interface.
                                                                  Harmonize minimum duration of activation to set price to 1 min. This could
                                                                  increase imbalance peak prices. This might increase the difference between
Harmonization of
                                                                  imbalance price and day ahead price, especially during scarcity. This is a key
minimum
                     Do it, with consideration to peak            design parameter in the balancing mechanism: if imbalance price does not
activation
                     pricing effects.                             increase with increased scarcity, this indicates that the market is indifferent to
duration to set
                                                                  an increased scarcity situation as the imbalance risk is low. In the short run this
prices.
                                                                  might be considered healthy for developing the market, in the long run this
                                                                  does not provide any investment incentive.
Electronic
                                                                  Do a costs/benefit analysis of the most promising options including costs of
activation           This is a prerequisite for lower bid size.
                                                                  electronic activation instruction where necessary.
instruction

                  Publication is not supported yet.
                  Imbalance forecasting at the four TSOs          Publication of accurate imbalance forecasts in combination with bid ladder
Publish imbalance
                  is of a different quality today.                volumes and prices increases awareness of imbalance risks. Prerequisite is that
forecasts
                  Harmonize the quality of this                   forecasts have sufficient quality and disclaimers and that imbalance price delta
(recommended by
                  imbalance forecasting by sharing the            generally increases with expected imbalances (see 6.3.12). If this is not the
E-Bridge)
                  knowledge and improving the                     case, this has no effect on incentive to better plan balance in day ahead.
                  forecasting tools to a similar quality.
                                                                                          RPM Review Report Chapter Summary | 07.10.2013            21
EVALUATION OF RPM IMPROVEMENT OPTIONS
Further PG and E-Bridge identified the following options, which shall be investigated by further
costs/benefits evaluations.

Option               PG common recommendation E-Bridge recommendation

                     Consider introducing this to
                                                             The advantage of this option is that it enables a group of BSPs with small reserves
                     anticipate towards demand side
                                                             to aggregate to the level where they meet minimum bid size requirement.
Bid aggregation      response. See BRG report on
                                                             Consider introducing this to anticipate towards demand side response.
                     challenges with the aggregator
                                                             Prerequisite is that bid activation should be allocable to BRPs.
                     role.
                     There is no direct benefit expected in terms of the total TSO costs of activated energy or the exchangeability. But the
Common Nordic        market is asking for it and it could ease extensions. Consider implementation of a CMI in the context of other changes
platform             to a Nordic common platform like e.g. the implementation of a harmonized automatic activation procedure or a
                     sophisticated activation algorithm. A common Nordic RPM platform could host this at lowest costs.

Harmonized bid       There may be good reasons to not
selection            harmonize between TSOs because          Procedure at each TSO should be clear and transparent to the market: review
procedure            of different operational                description on transparency and publish.
(triggering points   requirements. But the procedure         Review bid selection/activation processes in detail and evaluate feasibility to
for decision to      within each TSO should be clear         harmonize given differences in operational challenges.
activate)            and transparent.

                                                             Depending on expected volume which can be released, timing delay between the
                                                             SO and the connecting TSO and investment costs, this could be interesting. Also
                                                             consider contracting this kind of reserves as emergency reserves (already done
                     NO, FI, DK, SE: only consider if this
Directly activated                                           today in NO, SE and FI on some units) and including additional mark-up on
                     adds volume without capacity
RPM reserves                                                 imbalance price if activated (not done today). In that way this product allows a
                     payment.
                                                             capacity payment for the necessary dimensioning coverage without impacting the
                                                             normal RPM market. With the mark-up, it could also improve the balancing
                                                             incentives.
PG categorized other options as to be evaluated further, considered for further evaluation and ‚no go’.

                                                                                         RPM Review Report Chapter Summary | 07.10.2013            22
CONCURRENT USE OF RPM FOR
BALANCING AND CONGESTION MANAGEMENT
 Review the RPM activation processes regarding congestion and network security management processes:
   First, coordination between the four network security management processes: each of these processes could at
    different moments in time trigger a request activation.
   Second, coordination between the two balancing processes:
     While ENDK for DK W can activate bids earlier due
       to a more accurate imbalance forecasting, the
       imbalance forecasting quality in the Nordic
       synchronous system is generally insufficient to                                                         Frequency control
       apply equally early RPM bid activation. This could                                                  Nordic synchronous system
       be optimized if the imbalance forecasting qualities
                                                                                                 3                                          2
                                                                                                                   ACE control
       can be more aligned and therefore the timings to                                                             DK-West
       access RPM bids for balancing more harmonized.
                                                                                                                    CM/NSM
     Review if the requesting times for activation should
                                                            RPM bid                                                 Norway
       be extended to before ID gate closure
     Concurrent access to the RPM bid ladder becomes         ladder                                                CM/NSM
       an even more important issue when sharing bids                                                                Sweden
       with another synchronous system. In that case as                                          1
                                                                                                                    CM/NSM
       one prerequisite at least the RPM access timings                                                              Finland
       should be aligned. Other prerequisites like a level
       playing field in the RPMs should also be considered.                                                         CM/NSM
   Third, coordination between all six RPM activation                                                              Denmark
    processes: An optimal coordination could call for the Operational process overview of the RPM bid ladder
    design and implementation of an integrated
    optimization algorithm.

                                                                                 RPM Review Report Chapter Summary | 07.10.2013        23
CONCURRENT USE OF
RPM FOR BALANCING AND CONGESTION MANAGEMENT
 Improvements on transparency:
   Review the existing TSO-TSO communication to enable real-time sharing of information on special regulation.
    Communicate the special regulation designation of a bid to the market at the time of activation.
   Make the operational concept on congestion and security management transparent to the market to ensure that
    the reasons for special regulation are well understood. Train operators in applying this operational concept in a
    consistent way.
 Review on RPM pricing in relation to special regulation:
   Review the special regulation bid designation problem against optimal allocation principles.
  In particular,
   For each direction of regulation, areas are categorized in sets of areas that have no congestion between any of the
     areas in the set. RPM price in the regulation direction within each set are the same and equal to the price of the
     marginal bid activated in the set.
   Under this formulation, special regulation bids could only be designated if action and counteraction are within the
     same area. Also on each congested border congestion revenues are collected being the price difference of the
     marginally activated bids times the RPM flow over the congested borders.

                                                                         RPM Review Report Chapter Summary | 07.10.2013   24
FURTHER RECOMMENDATIONS BY E-BRIDGE
Exchange of balancing services:
   Imbalance netting between synchronous systems:
     develop concept with TSOs concerned
   Exchange of balancing reserves (capacity contracts):
     explore the business case with TSO concerned regarding capacity reservation and probabilistic approach, using
     available remaining capacity only
   Exchange of balancing energy:
    Seems possible with the Baltics and Poland today on the basis of FRR-M as a standard product and a TSO-TSO
    model: explore this further on the basis of the guideline standard product characteristics as elaborated on the next
    sheet

                                                                         RPM Review Report Chapter Summary | 07.10.2013   25
GUIDELINE STANDARD PRODUCT CHARACTERISTICS BY E-BRIDGE
As a point of departure for standard product definition:
   15 min activation and deactivation time
   15 min activation duration, e.g. a 15 min product time resolution.
   A single bid price for each 15 min period
   For pricing, consider the following principles by reviewing against the NCEB requirements:
      A foreign bid is selected and activated on the basis of the bid price but paid according to local BSP settlement
       arrangements: pay marginal in pay marginal systems (where it thus can set the price), pay as bid in pay as bid
       systems.
      The imbalance pricing would depend on a design choice: incentive compatible pricing or real-time pricing

      For an incentive compatible pricing the following principles could be considered:
        Imbalance price on average higher than regulating power price
        If border congested at market gate closure (ID) => RPM imbalance price should not be set equal to the RPM
          price (which includes the foreign bid) but to the price of the highest bid that is activated excluding any
          foreign bids
         If border not congested at market gate closure => imbalance price should be set to the RPM price (that
          includes the foreign bid)

      For a real-time pricing, the imbalance price should be set equal to the RPM price, including the foreign bid.

                                                                          RPM Review Report Chapter Summary | 07.10.2013   26
You can also read