COLUMN-Stray power threatens EU regional grid project: Wynn

Wed Dec 12, 2012 11:39am EST

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(The author is a Reuters market analyst. The views expressed are his own)

By Gerard Wynn

LONDON Dec 12 (Reuters) - As European countries deploy more wind power and become more connected through cross-border cables, electricity is taking ever more circuitous routes between sources of supply and areas of major demand, threatening grid stability.

Solutions to the problem may conflict with the EU's plans for a regional electricity market and add to the unplanned consequences and costs of an ambitious roll-out of renewable energy.

European countries are ramping up renewable power to meet 2020 targets in order to help cut carbon emissions and boost security of supply.

But they face growing integration problems, such as the higher cost of generating wind and solar power and the need for more grid interconnections and fossil fuel back-up capacity.

What's more, electricity flows from unexpected surges in wind power, known as "loop flows", may spill unpredictably across borders. Loop flows arise from the fact that electricity is used at the instant of generation, rather than stored, and will find the path of least resistance to end-users, including in this case circuitous routes via neighbouring countries.

These flows cause problems for countries, including congestion of cross-border transmission capacity, which curtails scheduled trade, and similar crowding and potential tripping of transmission lines.

The solutions all involve some economic cost, and some of them directly confound the idea of a regional market.

They include splitting up power markets into smaller wholesale price zones for bidding purposes; the use of power flow controls, or phase shifters, that temporarily block cross-border capacity; temporary curtailment of power generation; and the construction of more transmission capacity.

GERMANY-AUSTRIA

The central-western European (CWE) market, comprising Germany, France, Belgium, the Netherlands and Luxembourg, was launched in 2010 and is the hub of European power trading. It has been at the forefront of plans to create an internal European electricity market by 2014.

It is also now at the centre of the loop flow problem.

The transfer of wind power from northern Germany to consumers in southern Germany and Austria via an inadequate transmission system, for example, has pushed flows through Polish and Czech grids. The most affected East European countries now want the single-price bidding zone for Germany and Austria to be broken up.

"These unplanned flows significantly affect both power flows and security conditions in the neighbouring countries, endanger the network security of neighbouring systems and limit their cross-border trade capacity," electricity transmission operators in Poland, Hungary, Slovakia and the Czech Republic said in a report published in March.

"We strongly believe that fundamental corrections in the definition of bidding zones should be introduced as soon as possible in order to improve the efficiency of coordinated capacity calculation and allocations, as well as to avoid the further escalation of insecure grid operation in the CEE (Central and Eastern European) region."

INTERNAL MARKET

Measures to deal with loop flows may run up against the EU's larger goal to integrate national power markets and drive an EU-wide convergence of wholesale prices.

For example, France and the Netherlands have installed phase shifting transformers (which redirect electricity by increasing transmission resistance) to defend against loop flows.

A Czech ministry document obtained by Reuters in October showed that it planned to do the same at the German border this winter if surges threaten the Czech power system.

Limiting flows during power surges only shifts the grid stability problem elsewhere, for example back into Germany.

Such measures also risk flouting EU regulations on the single energy market that prohibit limitations on cross-border capacity.

"TSOs (transmission system operators) shall not limit interconnection capacity in order to solve congestion inside their own control area," EU regulations say.

The alternative of splitting markets into smaller price zones may be even less palatable.

Germany could be divided into southern and northern bidding zones. Given that these zones would have limited linking transmission capacity, they would have different power prices when there is congestion. Consumers in the south would pay higher prices than they do now under the single zone, and generators in the north would get lower prices.

Again EU guidelines are not supportive. The EU's Agency for the Cooperation of Energy Regulators (ACER) does not encourage splitting up price zones unless there is "significant internal congestion".

COSTS

Another alternative is for grid operators to pay wind farms and other generators not to dispatch power.

In 2008 the forced shutdowns and restarts of power plants to maintain grid stability across eight central and northern EU member states cost over 500 million euros ($650 million), according to a paper published in September by the Robert Schuman Centre for Advanced Studies.

Loop flows are yet another sign that the EU's ambition for more renewable power potentially conflicts with its goal of a single energy market and inflicts unplanned or hidden costs.

ACER is currently studying an increase of five to 10 times in the bloc's 100 million euro per year compensation fund for cross-border flows of electricity.

Short-term solutions to avoid loop flows such as splitting up bidding zones or limiting cross-border capacity impose costs on consumers.

And the longer-term solution of increasing transmission capacity also entails not only a heavy investment cost but also a social cost, as shown by widespread public opposition against more overhead power lines.

There is no easy answer for this problem.

($1 = 0.7693 euros) (editing by Jane Baird)

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