Serbia: Financial compensation of unwanted deviations in electricity flow

10. June 2016. / News Serbia Energy

Operation of more control areas within the synchronous interconnection inevitably leads to unwanted variations in active power exchange between interconnection members. In the European synchronous area “Continental Europe”, there is a decades-long practice of settling these deviations based on their compensation a week later. Until the end of the twentieth century, this practice has fully satisfied the needs of the interconnection members, then called UCPTE, or UCTE. It was a group of vertically organized state-owned power utilities.

Deregulation of the energy sector, unbundling and privatization of large state-owned power utilities and above all, the opening of the electricity market in the past years, significantly changed the operating regime of interconnection members. Large and rapid changes in the power sector, inter alia, made the question of compensation of unwanted deviations ever more prominent, increasingly acting anachronistic in the time of rapid electricity market development.

In professional circles it has been increasingly argued that this kind of coverage of unwanted deviations enables some interconnection members to perform weekly balancing and “play” with energy prices. For this reason, ACER requested for the Grid Code to anticipate settlement of unwanted variations in electricity exchange through monetary compensation.

The process of deregulation inevitably leads to the growing influence of market forces in all parts of the Europe’s power system. Changes in this direction are daily and strong. One of them, with a major impact on the TSOs operation, is financial compensation of unwanted deviations, which provides for the introduction of the draft Grid Code for balancing purposes. The expected benefits of this operating regime are multiple.

Financial settlement reveals the real costs of the regulation block imbalance, which is not the case when compensation programs are used. The reason lies in the fact that financial settlement relates to the time interval when there was energy exchange, together with energy prices in force at the time. This way, the implicit reallocation of costs between TSOs is avoided, which may arise due to changes in energy prices from the moment when the imbalance occurred until the time when it is returned based on the compensation program. Especially due to the fact that it may happen that TSOs do not return the energy in the first week when they were supposed to do so, but rather wait until prices fall and only then return energy.

Financial settlement will motivate each TSO to achieve better balance, thus increasing frequency and interconnection quality.

This activity is less workforce-intensive as it easier than calculating and exchanging compensation programs of energy exchange.

It also prevents the taking of cross-border capacities for energy exchange needs on the basis of compensation programs.

Financial settlement opened up a whole range of issues, only a few mentioned in this paper, which still require the right answers, transmits

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