(The author is a Reuters market analyst. The views expressed
are his own)
By Gerard Wynn
LONDON Dec 12 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
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
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
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.
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."
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
"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
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
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)