9 min. read

High Voltage Grid Cooperation in Europe is one of the main components of the up-and-coming EU internal electricity market, developed under the previous Commission with the noteworthy collaboration of the Council and the Parliament. Effectively, in December last year, the target of 15% interconnection capacity in 2030 for each EU country has entered into force, as part of the numerous energy changes occurring with the adoption of the Clean Energy for all Europeans Package (CEfAE). This means that each Member State should have an infrastructure in place that allows at least 15% of the electricity produced by its power plants to be transported across its borders to neighboring countries in 2030.

In practice, High Voltage Grid Cooperation occurs through cross-border interconnection cables that allow countries to trade electricity through basic supply and demand principles. Strategically, high voltage integration and flow management requires strong and arduous cooperation between the national Transmission System Operators (TSOs) in order to reach commercial and operational harmonization. However, the result is worth the trouble of adapting the electricity market to all the ways in which it has and need to evolve.

At Greenfish, we are passionate about understanding the issues at stake regarding these changes in the electricity market integration, as part of the energy transition we push for. Therefore, examining the ins and outs of grid cooperation for our readers was an ineluctable topic. It is in fact often largely underestimated, but ultimately essential, in terms of national and regional energy transition policies. In this Paper, the interest of high voltage grid integration and on what it physically relies is explored, then the way that interconnection is planned between countries is explained, and finally the perks of such an integration will be discussed. Enjoy!

A large network ensures resilience

The High Voltage Cooperation’s subject should be tackled by understanding its different challenges and evolutions. Managing these developments is the role of the European Network for Transmission System Operator for Electricity (ENTSO-e). It is an organization that encompasses 41 TSOs throughout Europe (34 countries) and is in charge of the application of the market design rules, while ensuring that they are in line with the policy regulations given by the CEfAE [1] [2].

All of these developments physically correspond to changes in the grid. Continental Europe’s synchronous grid, called UCTE*, is the largest interconnected grid in the world in terms of power capacity, with more than 1 TW installed by 2015. There are different markets (and power exchanges) in Europe for electricity, which are bringing together many countries at a time in different « bidding zones ». The prices are the same between two bidding zones when interconnections are not saturated at the borders. Related bidding zones can trade electricity from their own production through an implicit cross-border mechanism: the market coupling mechanism. In unrelated bidding zones, the prices are different, and the markets are separated. The main purpose of market coupling is to maximize the social welfare between the Member States while respecting the physical limitations of interconnection. That said, it requires constant analysis and calculations procedures from the TSOs from both sides to know the Net Capacity Transfer (NTC) available in the cables.

This grid and these mechanisms form the basis of European electricity resilience. Indeed, in case of emergency, TSOs have signed agreements to help each other through the interconnection network, by absorbing or providing additional electrical power. Moreover, electricity reserves typically used at a national level are progressively being planned to be integrated in the European market. The provided flexibility is really valuable for TSOs which are responsible for balancing the market in their geographical areas.

Interconnections in numbers

Let’s look at the cooperation dynamic through numbers to get a better understanding.

The exchange volume between TSOs in Europe was 434 TWh in 2017 (for instance, around 90% of the total French electrical consumption) and has been growing for the last 25 years. TSOs that form ENTSO-E are gathering 300 000 km of electrical high voltage cables for more than 1 TW of installed power, which is equivalent to the power available in the US or in China [4]

Figure 1: Cross Border electricity exchange in ENTSO-E region, Source: ENTSO-E [12]

Interconnection is expected to provide various benefits. Each year, EU consumers could save €12-40 billion if energy markets were fully integrated [5]. In 2012, the Central-West European Market (France, Germany, Belgium, Holland, Luxembourg, Austria and Denmark) region was saving around 250€ million per year according to the ACER [6]. The ‘projects of common interest (PCIs), which are key cross border infrastructure projects that link the energy systems of EU Member states, are the main tool to help reach the previously agreed political target of 10% at horizon 2020. The European Commission estimates that about 125€ billion will be needed by 2030, for the 15% target, and depending on the scenario between 300 and 420 billion until 2050 [7], ] according to the Ten-Year Network Development Plan (TYNDP) of 2016. For some TSOs, it could represent a doubled yearly investment [8]. In 2015, 12 Member States were insufficiently connected to the EU electricity market, namely Italy, Ireland, Romania, Portugal, Estonia, Latvia, Lithuania, the UK, Spain, Poland, Cyprus and Malta. The need for interconnections is estimated in regards to the peak load and the installed variable source power in the energy mix; the two main factors that reduce the flexibility of the network. A criterion for a powerfully integrated network would be a yearly average price differential between bidding zones, countries or regions below 2€/MWh**

The France-England IFA 2000 Electric Interconnection- An example of a project of Common Interest
IFA 2000 is an electric interconnection linking Calais in France to Sellindge in England with a capacity of 2000 MW. From 1986 to 2006, more than 25 stakeholders have used this line, trading more than 275 TWh (half the annual french consumption). Moreover, a mutual assistance agreement has been signed by TSOs in 2003. For example, if needed, either TSO can gain priority access to a real-time power reserve capacity of up to 1000 MW to ensure the integrity of its network. Since the French energy mix has lower carbon emissions per MWh than England, this interconnection has therefore reduced the carbon emission for England by consuming more French electrical energy.
In order to increase the current exchange capacity, a new line to add 1000 MW calledIFA 2 is an ongoing project. As a Project of Common Interest recognized in 2015, it aims at connecting the Tourbes substation (FR) to the Chilling (Hampshire; UK) 400 kV substation with 204 km of sub-sea cables. The project is planned to be operational in 2020.

Understanding interconnection allocation computation

To understand how interconnection is physically done and how flows are dispatched in the cables, the importance and difference between calculation methods needs to be highlighted.

Indeed, there is a fundamental difference between the commercial and the physical flows. TSOs aim to be as precise as possible to guarantee an efficient allocation of transmission capacity and thus increase economic efficiency. There are currently two different main methods used to calculate the transferred power in interconnection cables: the ATC and the Flow-based methods.

Figure 2: Modelisation of algorithm possibility for electrical flux [3]

The Available Transfer Capacity (ATC) method has an historic use and is based on the following principle: a commercial exchange between two bidding zones does not depend on the exchanges across adjacent borders. The maximum bilateral exchange is estimated ex-ante for 2 timestamps based on the documented recording [10].

After lengthy developments, the Flow-based method has currently been running since 2015 on the Central West Europe market, preceding a larger scale deployment with the hopes of setting new benchmarks and becoming more efficient [11]. The main difference with ATC is the following: commercial exchange between two bidding zones depends on exchanges across adjacent borders as well. The capacity calculation truly reflects the physical constraints involved in the trade in each critical line for each hour. As we can see on Figure 2, the total transferable flux between bidding zones is higher with the Flow-based method compared to the ATC one.

The Flow-based method provides a main advantage, offering progress toward a greater interconnection: a better resource allocation respecting the physical limits of the grid while reducing the average price on the market (Figure 3). Moreover, we observe a high price convergence of the markets, creating the expected coupling.

Figure 3: Day-ahead price convergence in Europe by region [13]

With the growing computational power available, the effective transferred power in interconnections can be better calculated. Therefore, more energy can be transferred in the cables concerned without jeopardizing them. Ultimately, this means that more interconnection capacity can be available without building any additional cables.

Perspectives of grid developments

In the short-term, there are opportunities that have already been identified for strong cooperation through high-voltage interconnections. Electricity systems will be more reliable and will have a lower risk of black-outs. Concretely, well integrated electricity grids can better manage increasing levels of renewables, particularly variable renewables like wind and solar. They also contribute to generation adequacy in Europe, lowering the needs for operational security margins and reducing grid losses. This already results in a price reduction on the market and between the markets [3], meaning that consumers will have more choices; lowering the pressure on their household bills. For instance, market coupling between Slovenia and Italy has increased the liquidity and stability of prices. In the mid-term, interconnections will allow for a better use of the differing generation combinations across Europe.

In the long-term, a better flow allocation reduces both the need to build new power stations at national levels and the energy dependency on non-EU countries. From a financial point of view, grid cooperation will provide the investors with price transparency and reduce the risks by improving the security of supply. A well-functioning internal electricity market should provide producers with the appropriate incentives for investing in new power generation systems, including renewable energy sources, paying special attention to the most isolated countries and regions [7]. Interconnection should then be integrated in national power adequacy assessment. For this purpose, the Ten-Year Network Development Plan (TYNDP), elaborated by ENTSO-e every two years, aims at identifying infrastructure projects that are keys to the EU’s achievement of its climate and energy objectives [10].  In these plans, the results from multiple scenarios are projected for different timeframes, in an attempt to predict the consequences of energy policy results. For instance, in the modelling for 2040, TYNDP estimates a renewable energy share of 65% to 81% of the electricity consumption, and as such avoiding up to 90% of CO2 emissions compared to 1990 and saving up to 156 TWh of renewable energy. These plans form the unique roadmap chosen by the European Commission to foresee reaching the expected future.

In the end, at the European level, High Voltage Grid Cooperation is taking multiple forms as a result of the complexity of the market. It also depends on an elaborate and sometimes demanding cooperation between national TSOs to harmonize the grid codes and reach EU energy and climate objectives. Indeed, such is the European story, also for electricity markets. Each region has historically developed and is developing itself at different speeds, with different investment capacities, markets, and energy mixes, which tends to complicate the coordination. Delivering the numerous expected benefits of an integrated grid listed above is no mean feat and would certainly require many more efforts and cross-border tensions. In this regard, if you are a curious reader, we would advise you to take a closer look at the Regional Security Coordinators (RSCs) organisations. At the heart of grid borders and interconnections, RSCs, with their role as advisers to the TSOs, will have an increasing role in the future years to ensure grid stability and full network integration. Their role is surely on the rise and will become a key element of making the climate and energy targets of the EU a reality.

Melvin Duveau – Junior Consultant at Greenfish
Quentin Lancrenon – Project Analyst at Greenfish
Nassim Daoudi – Chief Executive Officer at Greenfish

* Union for the Coordination of the Transmission of Electricity

** The detail per country is presented in Report of the Commission Expert Group on Electricity interconnection targets, November 2017

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[1] Large-scale electricity interconnection: Technology and prospects for cross-regional networks, International Energy Agency, 2016
[2] Overview of Transmission Tariffs in Europe, Synthesis 2018, ENTSO-E, May 2018
[3] The benefits of cooperation in a highly renewable European electricity network, D.P Schlachtberger, T. Brown, S. Schramm, M. Greiner, June 2017
[4] ENTSO-E at a glance, ENTSO-E, 2015
[5] Connecting power markets to deliver security of supply, market integration, and the large-scale uptake of renewables, European Commission, 25 Feb 2015
[6] Cost of Non-Europe in the Single Market for Energy, Annex IV, V. Böckers, Pr.  J. Haucap, Dr. U. Heimeshoff, 2013
[7] TYNDP 2016 Executive Report, ENTSO-E, 2016
[8] Towards a sustainable and integrated Europe, Report of the Commission Expert Group on Electricity interconnection targets, November 2017
[9] The France–England (IFA 2000) electric interconnection, a strategic link at the heart of the European electricity market., November 2006, RTE
[10] Connecting Europe: Electricity, TYNDP 2018 Executive Report, ENTSO-E, 2018
[11] Flow-Based Market Coupling First lessons, Elia System Operator, Dec 2015
[12] Single European Electricity Market – Where Do We Stand?, 15th international Conference on the European Energy Market, Albert Moser, June 2018
[13] ACER, ACER Market Monitoring Report