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Lead North West European Integration

Electricity doesn’t recognise borders, electrons simply flow to the point of least resistance. Therefore, in an energy market with an increasing share of renewables, it makes little sense to act on a national level. To secure the supply of electricity and to integrate large amounts of renewable energy into the grid, TenneT is building an interconnected, cross-border grid, strengthening the electricity market in North West Europe (NWE).

TenneT has been working to integrate the NWE electricity markets for more than a decade, with the aim of creating a single market where electricity can be traded and supplied, easily and efficiently. By connecting our electricity grid with the countries around us, we physically enable electricity to flow across Europe. With increased interconnection capacity between countries, EU-wide rules have become crucial to manage electricity flows. In addition to building and operating the high-voltage transmission grid, it is also our role to support harmonising the rules and regulations for grid operation and electricity trading across national European electricity markets. By doing so we are creating one single fully-functioning integrated European electricity market. 

In this regard, our work can be linked to SDG 9 - Industry, Innovation and Infrastructure, as well as to SDG 13, Climate Action. Our work to increase the amount of cross-border capacity for electricity transport and ensure a secure, sustainable, efficient and cost-effective energy supply, helps combat climate change and its impacts.

Results

Market results

These results show how we are working on creating a more integrated NWE market. By increasing the number of interconnectors, we create more opportunities to import and export energy. This can benefit a more cost-efficient supply, as energy with a lower price on the other side of the border can be imported. Additionally it creates more opportunities to secure supply within the NWE region. Furthermore, we see that the installed capacity of the Dutch and our German part of the grid have a higher share of renewable energy sources (RES). Conventional generation such as nuclear and coal have a reduced share in the energy mix, which is in line with the German government’s ambition to phase out all nuclear power plants by the end of 2022 and the phase out of coal-fired power plants in the Netherlands. 

Infrastructure investments

With currently four connections between the Netherlands and Germany, one with the United Kingdom, two with Belgium, two with Austria, one with the Czech Republic, one with Sweden, two with Denmark and one with Norway, our grid forms a crucial link in the integrated NWE electricity system (see grid map on our website).

A good example of our work to strengthen the cross-border electricity market was recently completed. After years of planning, preparing and construction together with Amprion, the Doetinchem-Wesel 380 kV line became fully operational in November 2018. This 57 km connection between the Netherlands and Germany can carry up to 1,500 MW of electricity. Doetinchem-Wesel brings the number of cross-border interconnectors operated by TenneT up to 14.

In 2018, we continued our construction activities on the COBRAcable together with Energinet.dk. This high-voltage direct current (HVDC) sub-sea cable directly connects the grids in the Netherlands and Denmark with a capacity of 700 MW. In November 2018 a new milestone was reached when the cable was brought ashore in the Netherlands. The cable is planned to commence commercial operation in Q3 2019. An innovative feature of the COBRAcable is its ability to connect with an offshore wind farm. This project contributes to a sustainable international energy landscape by stabilising electricity prices in both countries, while further facilitating European market integration.

Our NordLink cable connecting the German and Norwegian grid is another important new interconnection supporting the development of an integrated European energy market. Once it is fully operational in 2020, it will be the first direct connection between the two countries’ power markets. With a capacity of 1,400 MW, the interconnector can provide renewable energy for more than 3.6 million households and will be able to export wind energy from approximately 466 wind turbines of 3 megawatts, each. 

The Westküstenleitung project constructs new, high capacity lines, which will collect the wind power produced on the west coast of Germany and transport it to the South. To meet the requirements of the energy transition, the Mittelachse project is replacing the 220 kV overhead line between Hamburg and Denmark with a new 380 kV overhead line that can transport seven times as much electricity over a distance of around 150 km. 

Market rules and regulations

To facilitate the harmonisation, integration and efficiency of the European electricity market, the association of European Transmission System Operators (ENTSO-E) has been tasked with drafting the so-called "network codes". These network codes are legally binding European Commission regulations, governing cross-border electricity market transactions and system operations. Each network code is integral to the drive towards completing the internal energy market, and achieving the European Union’s energy objectives for 2030 of:

  • At least a 40% cut in greenhouse gas emissions (from 1990 levels);
  • At least 27% share for renewable energy;
  • At least 27% improvement in energy efficiency​​​​​​​.

ENTSO-E has delivered a total of eight network codes, but the work is not yet completed as each requires TSOs to deliver more detailed methodologies and implement the regulations from the network codes. TenneT has been actively involved in drafting the network codes and is fully involved in delivering the remaining required methodologies and implementing them at EU, regional and national levels. This is a very time consuming process and requires a major effort of TenneT as many local IT-systems, documents and procedures have to be adapted. Key milestones in 2018 are the delivery of capacity calculation methodologies for day-ahead and intraday, a common grid-model methodology, as well as methodologies for coordinating operational security analyses.

In June 2018, following several years of intensive development and testing, an important step towards creating a European intraday market was taken with the successful launch of the European cross-border intraday (XBID) solution. XBID enables continuous trading of electricity across 14 countries, including the Netherlands and Germany, and automatically couples 10 local intraday markets. Most other European countries are due to take part in a second 'wave' in 2019.

In October 2018, meeting the requirement of the Bundesnetzagentur (BNetzA), TenneT and other German TSOs successfully implemented congestion management on the border between Germany and Austria. Prior to that, there was unrestricted electricity trading between the two countries, but this led to bottlenecks in the heavily-loaded power grid that could only be stabilised with extensive measures. By implementing congestion management, the TSOs expect the effects of capacity constraints between Germany and Austria to be less severe. This will reduce the need for grid stabilisation and ease pressure on neighbouring transmission grids. In the long-term, this will have a positive effect on grid fees and help to reduce costs for electricity consumers.

Adhering to European harmonised rules has created a dilemma for TenneT. As a consequence of applying approved rules on capacity calculation on the Danish-German border, the amount of capacity that could be offered went down considerably over time. This decrease in offered capacity was reason for the European Commission to open a competition procedure against TenneT Germany. The European Commission argued that the lack of capacity at the Danish border might be considered discriminatory against Danish producers as it closed the German market. While TenneT rejected the notion that the company behaves discriminatory, TenneT nevertheless committed to increase the capacity offered at the German-Danish border irrespective of the results of common capacity calculation rules. Based on this commitment proposal the European Commission has closed the case, thereby obliging TenneT to implement the commitment. The effect will be that capacity offered at the border by TenneT will be higher than the capacity offered in the past.

Challenges

ChallengeAction
Lead North-West European integration
1A potential negative impact of the European Commission's Clean Energy Package legislation (to keep the European Union competitive as the clean energy transition changes global energy markets), is the prescribed new way of cross-border calculations. Not only does it carry a risk for security of supply, it could also lead to higher financial burdens for member states and TSOs, and increased electricity prices for end-users. The fact that the package rules out a possible tariff reduction, through income from congestion rents, is not encouraging.We continue to invest a great deal of time in discussing how an integrated European market should function. We provided detailed input to policy-makers throughout all ministry, council and parliamentary consultations and discussions. Collaboration between TSOs is vital, we need to work together on future market design and the way of market coupling.
2Lack of coordination in European context to plan / collaborate more efficiently between the member states in realizing our joint responsibility to ensure security of supply in an efficient and effective manner while also facilitating the shift to a low carbon economy.Given the share of RES increases with a high level of correlation between regions, the current practise of relying on neighbours to secure security of supply diminishes. We continue to work together and engage with other TSOs and governments to make progress in this field.

Strategic risks

As a result of increasingly uncertain power production and power flows, caused by the rapidly increasing amount of renewable energy flowing into the European grid, there is a growing need for more cross-country power balancing and concerted system operation. TenneT is well prepared to take a leading role in the further integration of national markets and developments. For instance, TenneT operates and builds interconnectors, increases border capacities and is currently heading ENTSO-E.

Outlook

After many years of effort to realise an interconnected North-West European electricity market, we have reached a turning point. Now that TenneT has brought 14 interconnectors into operation and crucial projects like COBRAcable and NordLink are nearing completion, integration and cross-border co-operation are reaching a stage where significant volumes of cross-border trade will have a significant impact on the internal high-voltage grid and will compete with internal transactions.

With upcoming rules from the Clean Energy Package (CEP) which oblige TenneT to always offer an amount of minimum capacity for cross-border trade, the electricity system will be forced towards the limits of safe and secure operation and more congestions in the local networks is expected. The focus will therefore shift from investing in more cross-border interconnection capacity towards increasing investments in local grids so that electricity flows from cross-border trade can be safely transported alongside electricity flows from internal electricity markets.

Case study: XBID

On 12 June, 2018 the European Cross-Border Intraday (XBID) trading platform was launched. This is one of the key projects on the roadmap towards the European Commission end-goals of the European Internal Energy Market. The XBID project realised the delivery of a single and harmonised XBID trading platform.

The delivery of the XBID platform has been a complex and intensive but successful process that lasted for several years. The cause for the specific delivery circumstances originate from the fact that the project context consists of a multitude of project partners (TSOs and Operators of the electricity trading markets) and stakeholders (European Commission, European & national regulators, market parties) from 14 countries that joined the XBID GO-live. Managing the complex dimensions such as international governance, political, regulatory, competition, technical, operational, etc. is something all involved parties can be proud of.

The successful delivery of XBID was without any doubt a clear European team effort of above mentioned project parties and stakeholders. TenneT has at specific moments in the project, and at key positions within the project, clearly put the leading ambitions for NWE integration into practice. TenneT has at specific moments in the project, and at key positions within the project, clearly put the leading ambitions for NWE integration into practice. Examples of this are the TSO project manager positon filled in by TenneT during the early initiation of the XBID project, the IT task force leader role during the implementation of the IT systems and also the broadly acknowledged key-expert contribution of TenneT during the entire project.

Now that XBID is in stable operation, the positive effects can be clearly observed. The short-term and cross-border trading of electricity in Europe has evidently become much easier and attractive. The availability of such an easily accessible, well-functioning and liquid short-term trading platform at pan-European scale is a pre-requisite to smoothly incorporate the increasing share of electricity production from Renewable Energy Sources into the European electricity system.

For the next years, a further European extension of the XBID trading platform is planned simultaneously with additional system improvements and further harmonisation.