DSO-TSO cooperation issues and solutions for distribution grid congestion management Leonardo meeus & Samson Yemane Hadush Energy Centre, Vlerick business school November, 2017

TSO-DSO cooperation for distribution grid congestion management Issues TSO procure balancing services connected to distribution grids EU Clean Energy Package New DSO role to procure and use flexibility to remedy congestion in distribution grids

acknowledgements We received a lot of feedback by discussing these issues in the following settings 2016-2017 Florence School of Regulation focus group, online debate, and workshop Horizon 2020 project meeting at DG ENERGY DSO Chair partnership at Vlerick Business School Future Power Markets Platform Florence School of Regulation online training network codes Will be published as working paper at Florence School of Regulation

Different borders to manage T-T border (a) two transmission systems (T) T-UT border (b) a transmission system (T) and transmission grid user (UT) T-D border (c) a transmission system (T) and a distribution system (D) D-UD border (d) a distribution system (D) and distribution grid user (UD)

Congestion management approaches in different system states

Congestion management approaches in different system states Congestion Pricing Redispatch & Smart curtailment Curtailment Low High Grid Operator intervention High Low Market design reflects physical reality

Green state congestion management current situation Evolution Focus on T-T border Mostly national bidding zones Transfer rights to trade between bidding zones Allocation of rights Auctions (explicit) (Flow-based) Market coupling (implicit) “copper plate” national transmission grids

Green state congestion management current situation Nodal pricing in wholesale markets Zonal pricing in wholesale markets “copper plate” national transmission grids

Green state congestion management current situation zonal pricing in wholesale markets Zonal pricing in wholesale markets “copper plate” national transmission grids “Fit and forget” Distribution grids

Green state congestion management Possible Future? distribution locational marginal prices (DLMPs) Nodal pricing in wholesale markets Shaloudegi et al. 2012; Heydt et al. 2012; Meng & Chowdhury 2011; Singh & Goswami 2010; Sotkiewicz & Vignolo 2006; Li et al. 2014; Caramanis et al. 2016; Ntakou & Caramanis 2014

Orange state congestion management current situation TSO DSO Balancing Frequency Containment Reserves Frequency Restoration Reserves Replacement Reserves Congestion management Balancing services can also be activated to remedy congestion i.e. :”re-dispatching” Balancing DSO “pre-qualification” of TSO balancing services connected to distribution grids Congestion management Non-firm access to distribution grids i.e.: “smart curtailing or smart connection arrangements”

What if structural congestion? European experience USA experience

At which border will we have congestion in distribution grids? Smart curtailing  UD-D access rights DSO pre-qualification  T-D transfer rights

T-D Cooperation inspired by TSO-TSO Network codes Capacity calculation Capacity allocation TSO-TSO: Past TSO-TSO: past Separate calculation and methodology Explicit wholesale Borders often closed after day-ahead TSO-TSO: Network codes TSO-TSO: Network codes Capacity calculation regions Regional capacity calculation methodology Wholesale market coupling Exchange balancing energy TSO-TSO model; & balancing capacity with T-T border capacity reservation Product harmonization TSO-DSO Joint or hierarchical approach to TSO-DSO capacity calculation? TSO-DSO TSO-DSO model or BSP-DSO model? T-D border capacity reservation? Product harmonization? Network codes Capacity Allocation and Congestion Management (CACM) Forward Capacity Allocation (FCA) Electricity Balancing

T-D Cooperation inspired by TSO-TSO Network codes Curtailment compensation TSO-TSO: Past Compensation, except if force majeure Definition of force Majeure not clear TSO-TSO: Network code High compensation, if not force majeure Minimum compensation if force majeure (definition of force majeure less consequential) DSO-TSO cooperation DSO-TSO compensation methodology to be developed

Leonardo.meeus@Vlerick.com