Options for the future of power system regional coordination. Report for ENTSO-E, 8 December 2016

The ongoing transformation of the electricity industry with the development of decentralised generation, storage, smart grids and active consumer participation, together with the implementation of the Internal Energy Market (IEM), are having a significant impact on the functioning of the European power system - and more specifically on system operations. The Third Legislative Package 1) established the cooperation of TSOs through a European entity, ENTSO-E (European Network of Transmission System Operators - Electricity), of regulators, through the European Agency for the Cooperation of Energy Regulators (ACER) and initiated the development of Network Codes and Guidelines. The system operation guideline (SOGL) 2) - and indirectly the Capacity Allocation and Congestion Management (CACM) guideline 3) - foresees the roll-out of Regional Security Coordinators (RSCs), which will provide five core services to TSOs in the field of operational planning and capacity calculation by 2018. Substantial benefits for system operation are expected from the roll-out of RSCs and, more generally, from the implementation of the guidelines. With the growing penetration of intermittent RES and the subsequent changes in the generation mix, market participants optimise their portfolio closer to real time and increasingly trade across borders. Consequently, the different generation patterns, in combination with extensive trading, lead to increasing power flows across Europe, creating challenges for system operators and market trading in some parts of Europe due to significant unscheduled (loop and transit) flows. A sustainable and long-lasting solution is the implementation of improvements to market design, accompanied by the relevant development of the transmission infrastructure needed to sustain the level of RES. As far as market design is concerned, the first step already anchored in CACM is the implementation of coordination of capacity calculation on the borders of appropriately defined bidding zones, which may help to better use the limited grid capacities. Regarding transmission development, there are plans to reinforce existing infrastructures, with 150 b euros of planned investment across Europe over the next decade. However, these infrastructure developments are often slowed down by local opposition which generates delays and additional costs, or even sometimes the cancellation of projects. Given the profound and rapid transformation of the electricity industry and of the IEM, the European Commission is considering the future of system operation, in order to foster cooperation at the regional level. In this context, ENTSO-E has commissioned an independent study from FTI - Compass Lexecon Energy to analyse potential practical options for the future of system operation regional coordination in the next decade, with the objective of looking beyond the SOGL and identifying a number of practical recommendations to enhance regional cooperation. (author)