Serbia, SEE: Cross border capacity rules, auctions and scheduling

19. June 2015. / News Serbia Energy

Changing the rules for the allocation of rights to use the cross border transmission capacity and the transition from one mode of the auction on the other, affects the cross border exchange programs between market participants.

Text gives an historic review of the rules for the allocation of the rights to use cross border transmission capacities which were applied in the control area of the Serbian TSO company EMS in the last ten years, and also the changes in the number of cross border transactions have been analyzed in the case when the previous 1:1 nomination was replaced with 1:1 nomination with an exclusive cross border partner. Also, the analysis of the exchange programs has been performed at the borders where the way of auction allocation of cross border transmission capacities has changed from split to joint auctions. The aim of this analysis is to show the benefit of the new rules in terms of providing the opportunities for a larger number of market participants to participate in the cross border exchanges and to establish cooperation with a number of other participants.

The specific features of the electricity market have made the need to introduce the clear and standardized ruled for its efficient functioning. With the liberalization of the electricity market (hereinafter Market), the commercial trade in electricity of participants is becoming increasingly important at the market. In the market area, the EMS’s participants in the electricity market (hereinafter Participants), interested in the cross border trade of electricity, the access or use of transmission system realize through the access to the cross border transmission capacity (hereinafter cross border capacity). Determination of the cross border capacity is performed in cooperation with neighboring transmission system operators (hereinafter TSO), and that is for each border in both directions taking into account the anticipated operating conditions in the power system in the region for an appropriate period of time, technical criteria in accordance with the Rules of Procedure of transmission system and adequate procedures in the Rules of Procedure of the interconnection. The allocation of rights to use cross border capacity to the participants shall be governed by the rules for the distribution or allocation of cross border capacity.

The methods for allocation of cross border capacity can be divided into two groups:

– Methods based on non-market principles

– Methods based on market principles

Methods of first registration (first come first served) and proportional allocations (pro rata) are typical examples of non-market methods, while the allocation of cross border through auction is an example of the market method. There are two types of auctions that are used for awarding transmission capacity: the explicit and implicit auctions. The explicit auctions are a method of congestion management in which only the transmission capacity is traded, while the implicit auctions represent the congestion management method in which the transmission capacity is implicitly included in the electricity trade. The market liberalization allowed a greater number of participants to show up as users of the transmission system, and thus influenced the increase in the number of transactions that are submitted to TSO. The current rules, which are prepared by the TSO and Market Operator of the EMS, have changed and adapted in order to meet the new demands of the market. In accordance with the aforementioned changes, it comes to the development of the system for reporting daily work plans ESS (ENTSO –E Scheduling System).

ENTSO-e Scheduling system is an information system for the receipt, processing and acceptance of daily work plans of the Participants, it supports the ENTSO-E standards within Scheduling process during the exchange of information between Participants in the various stages of the balance-accounting process: a day in advance or planning phase, within days or operational phase and the day after or calculation phase.

Changing the rules for auctions maintenance and scheduling process

With the adoption of the Rules of Procedure of the Electricity market, the necessary contractual framework has been established, which regulates the rights and obligations of the market participants for the purpose of continuous, safe and reliable supply of electricity, as well as further liberalization of the market.

EMS, as well as TSO and Markets, regulates the procedure and method of distribution of rights to use the available cross border capacity at the borders of its control area. Rules, on the basis of which the grant of the right to cross border capacities is assigned, vary from border to border and must be adopted by the regulatory body.

How these changes have affected the cross border exchange between EMS and its neighbors as well as the development and the changes of the system for reporting daily work plans (Scheduling system), will be clarified.

The impact of changing the ways of organizing the auctions on the application process of daily work plans

In the past, the first nominations of cross border electricity transactions were conducted by verbal consent of TSO that the transaction can be conducted and then, sending a fax or e-mail in the custom format about the hourly values of these transactions. The number of the market participants was small and the requirements for the capacity did not exceed the technical limit of the power system so the calculation of the NTC values had not been conducted.

With the market liberalization, the number of participants grows as well as the volume of the cross border transactions. In order to preserve the security of the system and facilitate the work, in the second half of 2004, on the orders of the control areas of EMS, the NTC calculation and KISS format were introduced for reporting the transactions. The allocation of the cross border capacity without clearly defined rules was conducted by the method of first application.

With the further development of the marker, it was necessary to provide a transparent and non-discriminatory method of allocating cross border capacity and its use with clearly defined rules, from which the writing of the first rules for allocation of the cross border transmission capacities in 2005 originated.

At this moment, the EMS performs the allocation of cross border transmission capacities by implementation of the explicit auctions, with the method of payment “marginal price”. Accordingly, there are two ways of auctions maintenance:

– Split auctions – where auctions are organized by adjacent operators for allocation of 50% of the total available cross border capacity on the common borders and the rules on how to implement these auctions are prescribed by the operators individually.

– Common or joint auctions – where the auction offers 100% of the available cross border capacity at the common border. The organization and implementation of the auctions is subject to the agreement of the system operator on whose borders the allocation of the cross border capacity is conducted.

The introduction of the joint auctions with the operators of adjacent systems aims at further liberalization of national and regional markets and its integration into the single market.

In order to improve interstate cooperation in the energy sector, to ensure a higher level of safety and reliability in the supply and development of a competitive market, when writing the new rules, it should take into account that the market mechanism, which is adopted, is a transparent and non-discriminatory, that allows the distribution of cross border capacity of all participants and to facilitate the implementation of the assigned rights to use the cross border capacities. There are changes in the Scheduling system and in the way of reporting the daily work plans in accordance with the previous changes.

The impact analysis of the changes in ways of organizing the auction on the cross border exchange

For the appliance of the daily work plans on a time horizon a day ahead or intra-day, the participants use the Scheduling system. The rules for access to the network for cross border use of the allocated cross border capacity are in accordance with the regulations which are in relation to the access to the system in each of the regulatory authorities and in accordance with the applicable market rules in these areas.

Based on the harmonized programs of the cross border exchange, the analysis of the number of transactions which are reported by the participants during 2013 and 2014 on the Croatian border has been conducted. In 2013, the split auctions were conducted on the border between Serbia and Croatia, and in 2014 they moved to joint auctions. The analysis was performed for the exchange in both directions, Serbia – Croatia and Croatia- Serbia.

It can be concluded that the number of the accepted transaction in each month during 2014 was increased in comparison to 2013. Based on the analysis, the percentage increase is 126.26 %.

It can be concluded that the number of the accepted transactions, in annual terms during 2014, was increased in comparison to 2013. According to the analysis, the percentage increase is 20.21%. It can be noticed from the graphic that, in some months, the number of transactions was higher in 2013 compared to the same months in 2014. In that period during 2013, the trend of energy flow was such that there were generally more imports than exports from the control area of the EMS, and thus the previous deviation from the expected results appeared.

Appointment of the exclusive cross border partner and 1:1 nomination

The participants are entitled to, with the application of cross border exchange within the daily work plans and in accordance with the Rules of Procedure of the Transmission System, seize granted right to use the cross border capacity carried out by the EMS or adjacent operator. The Participant has a right to cross border capacity allocated in the allocation procedure conducted by the EMS at the split auctions, and he has the status of balance responsible party (hereinafter BRP) to use directly through the application for cross border exchanges.

In order to exercise the right to the capacity that is allocated to its cross border partner by the adjacent operator on the split auction, the Participant must first notify the EMS.

The Participant can use this cross border capacity if submits to the EMS the form for the appointment of an exclusive cross border partner for the appropriate border. One pair of the exclusive cross border partners make BRP in the control area of the EMS and the Participant who is entitled to work in an adjacent field, but the Participant can occur only in a pair of exclusive cross border partners at the border within one calendar year.

On the borders where the joint auctions are conducted, the right to the capacity, assigned at the allocation procedure, the market participant can use if he submits to the EMS the form for the appointment of the cross border partner for the appropriate border. It this case, it is 1:1 nomination or 1:1 nomination with an exclusive cross border partner (1:1 registration).

If the rules for the allocation of the transmission capacity define that the cross border transaction should be achieved only between pairs of 1:1 nomination then the owner of the capacity can apply the cross border exchange only with his cross border partner. This kind of exchange in the control area of the EMS is present only on the border with Hungary.

A comparative analysis of the number of accepted transactions is conducted for the relation Serbia- Croatia as well during 2013 and 2014.

No matter if it comes to the cross border capacity allocated on the split or joint auctions, when defining an exclusive cross border partner, the EMS allows the right to cross border capacity to be used in the following way: if the owner of the capacity BRP in the control area, then the EMS can perform the cross border exchange not only with their cross border partner, but with any participant from the adjacent control area as well. If the capacity owner is from the adjacent control area, then his capacity is attributed to the cross border partner, the BRP from the control area of the EMS. Then again, the Serbian BRP can conduct the cross border exchange not only with their cross border partner but also with any participant from the adjacent control area that meets the conditions for the use of the allocated capacity.

The method of application which is permitted by the EMS cannot be accepted if the adjacent operator does not have the possibility for the realization of the cross border transactions in this manner. Most frequently, the adjacent operator of the system requires that the owner of the allocated capacity appears as a participant in a cross border transaction, so when the owner of the capacity is a participant from the adjacent control area, then his capacity is assigned to the cross border partner, BRP from the control area of the EMS, which may perform the cross border exchange only with their cross border partner, that is the capacity owner. The application of the cross border transactions in the previously mentioned way is applied at the borders of the EMS control area with Croatia, Bulgaria and Bosnia and Herzegovina.

At the border with Romania, there is a deviation from the previously explained rules that gives to the Participants the additional freedom when applying the cross border transactions. If the capacity owner is BRP with a valid and effective contract on the system usage concluded with the Romanian TSO, then that capacity will be attributed to its cross border partner in the control area of the Republic of Serbia. Serbian BRP will then give the option to report the transaction not only with their partners but also with each participant who belongs to the balancing group of its partners.

Analysis of changes during the transition from 1:1 nomination on 1:1 nomination with an exclusive cross border partner

Based on the approved programs of the cross border exchange, the analysis of the number of transactions, which were reported by the participant during the first two months of 2014 and 2015 on the border with Romania, was conducted. In 2014, the joint auctions were conducted that required 1:1 nomination, in order to implement the joint auctions that require 1:1 nomination with an exclusive cross border partner. The analysis was conducted for the exchange in both directions Serbia – Romania, and Romania- Serbia. The number of the accepted transactions for the analyzed two months during 2015 was increased compared to 2014. Based on the analysis, the percentage increase is 52.33 %.

Based on the analysis presented, it can be concluded that the number of the accepted transactions was reduced in 2015 in comparison to 2014. According to the analysis, the percentage reduction is 40.37%. The market participants did not use the possibility of changing the rules and they kept the method for applying according to the principle 1:1 nominations. In addition, the mentioned period during 2015, the production capacities in the control area of the EMS were not sufficient to allow the sale of energy, and therefore the prior deviation from the expected results occurs.

Changing the existing and introduction of the new rules for allocation of the cross border capacities gives the opportunity to higher number of participants to take part in the cross border exchanges and the possibility to expand the range of its associates.

Based on the analysis conducted in this paper, which is based on the confirmed cross border transactions, it may be noted that the number of cross border transactions has increased significantly. Moving from the split to joint auctions at the border of the control area of the EMS with Croatia, in annual terms, the number of the cross border transactions in one direction is increased by 20.21%, while in the other direction the increase was even 126.26%. The trend of moving from split to joint auctions led to the liberalization of the national and regional market, so that more changed are expected in that direction.

At the border of control area of the EMS with Romania, where was a transition from 1:1 nomination to 1:1 nomination with an exclusive cross border partner, the number of transition has increased by 52.33% in the direction Romania – Serbia, while in the opposite direction reduced by 40.37%. Since in the analyzed period the trend of energy flow was such that the energy was imported, there was a decrease in the number of transactions in the direction of Serbia – Romania.

In order to achieve the benefit that the organization of the joint auctions and changing the rules for the allocation of the rights to use the cross border transmission capacity bring, as well as to allow the use of allocated capacity to the greater number of the market participants with the elimination of the additional administration, it is necessary to change and improve Scheduling system in order to introduce N:M nominations on all the borders of the control are of Serbia.

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