Czech TSO blasts lacklustre power trade cap mooted by Germany, Austria

1 June 2017, Week 21 Issue 862

Czech transmission system operator (TSO) CEPS has complained that German and Austrian proposals to limit cross-border power trade between two states do not go far enough.

The Agency for the Co-operation of European Regulators (ACER) recommended in November that the single bidding market for Germany and Austria should be decoupled, ending an arrangement that has been place since 2002. Single bidding areas allow unfettered power exchanges between multiple countries, removing, in theory, capacity controls at national borders.

ACER’s recommendation was made in response to recent erratic fluctuations in wind generation in Germany. Sudden surges in output at wind farms have resulted in excess power flooding the German market, with local operators responding by offloading this surplus onto Austria. However, because of technical limitations on the southern German grid, much of this trade is being channelled indirectly via neighbouring states, putting strain on their transmission systems.

ACER concluded that this situation had been exacerbated by Germany and Austria being able to trade power without capacity restrictions.

CEPS said last week that proposals set out by Berlin and Vienna to cap the generation capacity that could be exchanged between the two states at 4,900 MW from October 2018 were insufficient. It noted that the plans had been drawn up without consulting other Central European countries.

“It is true that the division of the German-Austrian trading zone [needs] to take place as soon as possible. We consider it to be [crucial for creating] a level playing field for electricity trading in Central Europe,” CEPS representative Zbynek Boldis said last week. “However, issuing bilateral decisions without co-ordination with other TSOs runs against the principle of closer co-operation.”

CEPS says its concerns are shared by the TSOs of Hungary (MAVIR), Poland (PSE), Slovakia (SEPS), and Romania (Transelectrica.)

Germany’s neighbours are having to invest in costly upgrades at their grids to handle the excess German wind power in transit. Czech news website Echo24 reported on May 28 that CEPS had budgeted 2 billion koruna (US$85 million) for four new transformers to cope with the extra flows. Two of these were launched in January, while the other two should launch by the end of this month.

Slovakia’s TSO, SEPS, has earmarked some of its 694 million euro (US$780 million) budget up to 2026 for upgrades to ease bottlenecks at its interconnectors to Hungary and Ukraine that have been caused by the displaced German wind power.

 

Perspectives

Germany’s Bundesnetzagentur (Federal Network Agency) has said it supports ACER’s decision. It believes Central European grids are technically incapable of exchanging unlimited power and sees decoupling as necessary to reduce payments to wind farms for energy curtailed because of grid issues.

“The need for redispatching drops considerably when congestion management is in place to ensure that exchanges in electricity are based on the transport capacity that is technically available,” it was quoted as saying by TSNet, an organisation representing 10 European TSOs.

But Austria’s TSO, APG, is not convinced.

It claims border trade controls between Germany and Austria would amount to an artificial barrier, undermining the European Commission’s ambition for deeper integration of power markets across the EU.

APG’s CEO, Ulrike Baumgartner-Gabitzer, was cited as saying these barriers would have “only a little impact”.

Austrian power regulator E-Control, meanwhile, has warned that decoupling from Germany could inflate prices for Austrian consumers by around 15%.

“The main reason of grid insufficiency is unsatisfactory grid expansion,” Baumgartner-Gabitzer said in November.

Luxembourg also forms part of the single bidding area with Germany and Austria, but the future status of this set-up is unclear given Luxembourg’s small population of below 600,000.

ACER’s decision is sure to create further controversy given that open trading positions worth 25 billion euros (US$28.2 billion) depend on indexes compiled from the Germany-Austria bidding zone. In September last year, the vice chair of ACER’s electricity working group, Mark Copley, conceded that a legal challenge to the decoupling was probably inevitable.

“My bet is there will be a challenge in the European Court of Justice (ECJ) and we will move forward from that point,” Copley was quoted by ICIS as saying, “We are regulators. And good regulation needs to be challenged sometimes.”

Joseph Murphy

Edited by

Joseph Murphy

Editor

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