Congestion management at French borders

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Congestion managementat French borders
Sophie Dourlens
IFRI Energy Breakfast Roundtable, 6 July 2009
2
Interconnection capacities at French borders

• France average exchange capacity
• around 13,000 MW for export
• around 8,000 MW for import

• Compared to the generation capacity in France
  (109,000 MW), it is close to the Barcelona target
  of 10

• But it seems insufficient for a true electricity
  market integration of France with neighbouring
  countries

imported electricity lt 7 of consumption
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Interconnection capacities at French borders

• A natural question comes

Do we need more interconnection capacities at
French borders?
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Market price differentials

• Hourly price convergence between French and
  neighbouring markets

Source CREs third report on interconnection
management and use
Except on the French-Belgian border, electricity
markets are far from integrated!

• Another question

Except on the French-Belgian border, is market
integration reachable without investing in new
capacities?
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Use of French interconnections

• Since prices diverge during about 90 of time at
  French borders, interconnection capacities should
  be fully used

0
Cross-border capacities are not used as they
should be!
Source CREs third report on interconnection
management and use
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The case of the French-Belgian interconnection

• Borders between France, Belgium and The
  Netherlands are managed with the so called
  Trilateral market coupling (TLC)

• This mechanism allows for using interconnection
  capacity in full consistence with prices of Power
  Exchanges, by managing interconnection capacity
  together with the economic merit order of bids
  and offers at the 3 markets

Source CREs third report on interconnection
management and use
7
Price convergence within the TLC markets

• The introduction of the TLC caused a strong price
  convergence between wholesale organised markets
  in France (Powernext), Belgium (Belpex) and The
  Netherlands (APX)

Source CREs second and third reports on
interconnection management and use
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The case of other French interconnections

• Other interconnections of France with Member
  States are managed with day-ahead explicit
  auctions

• This means that capacity and energy markets are
  separated to make a cross-border trade, market
  participants have to
• buy (or produce) energy in one country,
• buy explicitly the interconnection capacity, and
• sell (or consume) energy in the other country

• These successive different stages, operated each
  day, cause inefficiencies in the use of
  interconnections

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Example French-German interconnection

• Utilisation rate of French-German interconnection
  compared to price differential between wholesale
  organised markets in France (Powernext) and
  Germany (EEX)

Source CREs third report on interconnection
management and use
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Economic consequences

• Assessment of the loss in social welfare due to
  the absence of market coupling at French borders

Source CREs third report on interconnection
management and use
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A first conclusion

• At some borders investments in new
  interconnection capacity may be needed

Source CREs third report on interconnection
management and use
But at all borders, improvements in
interconnection management and use should be a
short-term priority!
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And a new question
How does CRE work for improving interconnection
management and use?
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Regional initiatives

• In 2006 European Commission together with
  European Energy Regulators launched the Regional
  Initiatives in gas and electricity

• In electricity there are 7 regions among which 4
  involve France

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Regional initiatives

• Regulators, TSOs, Power Exchanges and market
  participants work together in the framework of
  these regional initiatives

• Several projects aiming at improving
  interconnection management methods are discussed
  within this framework

• For example, stakeholders in the Central-West
  region are working at extending the Trilateral
  Coupling (France, Belgium, The Netherlands) to
  Germany

There are many other examples of projects aiming
at integrating electricity markets in each region!
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CREs monitoring reports

• Each year CRE publishes extensive reports on
  interconnection management and use at French
  borders

• The 1st report (published in May 2007) aimed at
  assessing the consequences of the implementation
  of market-based and non discriminatory mechanisms
  for interconnection capacity allocation at French
  borders

• The 2nd report (published in June 2008) aimed at
  monitoring the existing mechanisms, explaining
  the target mechanisms agreed between all
  stakeholders and drawing up a list of the
  important issues still to be resolved to achieve
  these targets

• The 3rd report (published very soon) aimed at
  monitoring the existing mechanisms, defining the
  current status of the discussions in progress for
  each of the 4 regional initiatives in which the
  CRE is involved and presenting the perspectives
  and the issues at regional and European level

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CREs monitoring reports

• The 3 reports are downloadable in French and in
  English
• http//www.cre.fr/

Thank you for your attention!