Magnus Energy Insights
Welcome to our April newsletter! Experts Tom Vonk, Henry Noller and Ksenia Tolstrup selected this month’s news and developments. Also, you will find our March Market Watch: pricing developments in the day-ahead market. Flex, flex, flex is on the agenda; this month we published our second report about flexibility in a series. Also, we talk to expert Mark Klein Entink about the complexity of test management in European projects.
Anticipatory investments?
To what extent should Distribution System Operators (DSOs) and Transmission System Operators (TSOs) be able to estimate the changes in power use and generation? And to what extent should they already invest in new assets, even if they later turn out to be unused? This is being debated between TSOs, DSOs, regulatory authorities, and stakeholders. TSOs and DSOs would like to be able to look ahead to the changing power needs and (better) anticipate the needed grid investments. This makes sense now that the energy transition is going faster than they can build infrastructure. However, this poses risks too: what if you built a new line that is then underused?
A new cost-benefit analysis framework
Naturally, any investment needs to be justified with a cost-benefit analysis. The European Network for Transmission System Operators for Electricity (ENSTO-E) just published a Cost-Benefit Analysis (CBA) framework for that (read more on ENTSO-E). The framework is to be used in the Ten-Year Network Development Plans (TYNDPs) of each member state. A large part of the asset planning is a national matter, meaning whether grid investments will be more ‘anticipatory’ - or not - depends on the national adoption of these methodologies by TSOs and national authorities.
A new Capacity Calculation Region (CCR): Central Europe
On 19 March, EU regulatory authority ACER approved a request to amend the definition of the Core & Italy North Capacity Calculation Regions (CCRs). Thereby, creating a new CCR: Central Europe. Capacity Calculation Regions are essentially designated areas within the EU. In these areas, TSOs collaborate to develop methodologies for capacity calculation and other key processes for operational planning. Until now, there were 8 CCRs in the EU: Nordic, Baltic, Hansa, Core, Italy North, Greece-Italy (GRIT), South-West Europe (SWE), and South-East Europe (SEE). With Central Europe, there are now 9.
Well-defined CCRs have several advantages for European consumers and producers:
They enable TSOs to conduct regional processes more efficiently, particularly capacity calculation, coordinated security assessment and coordination of remedial actions.
Elevated levels of cross-zonal capacity allow more trade and increase the security of supply.
Figure 1. the new Central Europe Capacity Calculation Region
Why merge regions?
Core & Italy North (including Switzerland) are highly meshed grids (i.e. many grid elements forming a dense network). Therefore, there are significant interdependencies of power flows and remedial actions within this area. The benefit of a common CCR is therefore:
Improved capacity calculations: greater accuracy in capacity calculation processes and lower reliability margins, higher operational security
Improved capacity allocation: more granular optimisation of cross-zonal exchanges in a larger area
Improved operational security: improved coordination and greater efficiency of (eventual) Regional Operation Security Coordination (ROSC) and cost-sharing.
Next steps
The next step for the Central Europe region is to submit a methodology for capacity calculation in the day-ahead timeframe to the regulatory authorities of the Central Europe CCR. This methodology is due in January 2025. The go-live of the day-ahead capacity calculation process in Central Europe CCR is expected in 2027. Merging of all other CCR-related obligations will be done in a stepwise approach. The timeline for this will be determined based on how the existing regional implementation of these projects is progressing. Read more here.
March Market Watch
In this month's Market Watch, our experts Chitransh Lot and Reinhard Kaisinger assess key developments and trends in the electricity market. Focusing on the single day-ahead market coupling (SDAC), they provide insights into the pricing dynamics, net positions, and noteworthy shifts in various regions.
European Price Dynamics
In March, the European electricity market continues its downward trend: persistently low average day-ahead electricity prices hovering around €64/MWh. This pattern was predominantly influenced by lower demand and robust renewable generation. The month saw the resurgence of the negative prices in Core and the Nordic region. Moreover, the price spreads for Q1 remain lower than the previous year, indicating less volatility in the electricity prices.
Market integration across Europe
The trend of price convergence persists in Europe, with the Core region maintaining price differences below €10/MWh for approximately 40% of the time throughout March. Allocation constraints emerge as a significant impediment to enhanced price convergence, notably affecting bidding zones such as Italy-North and Poland. Italy-North consistently struggles with congested borders, resulting in elevated price spreads across its bidding zone borders for a considerable duration. Similarly, Poland's allocation constraint led to elevated prices and widened spreads across its bidding zone borders.
Impact of Renewable Generation
Renewable energy sources, particularly solar power, played a pivotal role in shaping market dynamics. The proliferation of large-scale solar generation facilities notably contributed to instances of negative prices, exemplified by occurrences in the Netherlands. This phenomenon was underscored by the emergence of ‘duck curve' patterns, reflecting the challenges of balancing supply and demand in the face of high renewable energy generation.
Download the full market watch here.
Navigating the 15 challenges of flexibility
Europe’s pivot towards renewable energy sources is driving a transformative shift in the energy sector. Energy storage solutions, active demand side management, and advances in IT are gradually replacing conventional large-scale sources of flexibility. These developments spur innovations and profoundly alter market dynamics. Yet, unlocking the full potential of flexibility faces many technical, regulatory, and operational hurdles. How to navigate these challenges? Magnus Energy's experts guide you through this in the latest report in a series.
Download the report here.
The complexity of test management – with Mark Klein Entink
In European energy market integration projects, a crucial aspect is the stability of the systems and the continuation of the daily processes. Energy markets must always stay afloat. That’s why, before every new implementation is brought to production, extensive testing is required. Our expert Mark Klein Entink k has been involved in numerous of these projects. He shares his experiences and best practices with us.
Mark, what is test management actually?
The simple version is: if you change or implement a new IT system, you need to test it first. A test manager is responsible for the overall testing plan and ensures the deadlines are met by arranging the necessary resources and identifying the risks of not meeting them. However, in European market integration projects, test management is always complex.
What makes test management so complex?
There are many parties involved in these European projects. Multiple transmission system operators, power exchanges, and IT providers. Also, there are many systems impacted, since each party involved works with its own (often intricate) net of IT systems and IT infrastructure. Moreover, many scenarios need to be tried and tested. Add to that the numerous implementations per year, and the dependencies between the different projects and available resources. On top of that: most European market integration implementations have legal deadlines to be met, leaving little room for errors and delays.
Complex indeed! What role does Magnus Energy play in these projects?
We perform different roles, depending on the situation and the support required. Oftentimes, we act as a test manager: an independent party that ensures results and progress are met. In a way that accounts for all the different interests of stakeholders. We have worked on countless projects and are highly experienced.
Do you want to learn more about our work in test management, or are you inspired to join our team as a test manager? Reach out to Mark Klein Entink.
Join our team
The Magnus Energy team is a mixed team with high ambitions. We work on large international projects. Do you want to be part of our top-notch team? Check out our vacancies here.
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All the best,
The team of Magnus Energy
