Merger of German TSOs could solve electricity cost problem

GERMANY: Integration of wind and other renewable power into the electricity system is still far from cost-effective in Germany. Matters could be improved if the four transmission system operators (TSOs) could be persuaded to merge, doing away with processes and transactions that currently have to be carried out between them.

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In March, federal energy regulator Bundesnetzagentur (BNA) ordered Germany's four TSOs to improve co-operation between their so-called balancing zones, a move that is good for the electricity system as a whole, but also for renewables in particular.

As electricity can be stored only to a limited extent, each of the four TSOs must ensure that inputs and outputs to the electricity supply network in each of their zones are balanced, since otherwise network frequency will deviate from the required frequency.

Inputs and outputs to each zone become imbalanced when consumers use less or more electricity than had been predicted in the zones. The TSOs correct the imbalances by using expensive balancing power, which is called up from power stations that are under contract for that purpose.

The power stations supply positive balancing power by generating extra power when the TSO has a deficit in its zone. Or they reduce their generation output - effectively creating negative balancing power - when a surplus of electricity exists.

Since July, three of the TSOs - Transpower, 50Hertz and EnBW Transportnetze - have co-operated to ensure that situations do not arise where one balancing zone has a deficit in electricity supply and needs positive balancing power at the same time as the neighbouring zone has a surplus that requires negative balancing power. They balance out such differences against each other.

The BNA has instructed the TSOs to create a single tendering procedure for acquiring the various types of balancing power from generator companies. This is expected to increase competition and reduce prices for balancing power.

The cost saving when all four TSOs cooperate amounts to around EUR260 million per year. This is progress.

But, in particular in the marketing of wind and renewable electricity, much more could be achieved to reduce the costs if the TSOs acted as a single unit, says the BNA. This is due to the mechanics of trading electricity on the energy exchange.

In Germany, most electricity from renewable sources must, by law, be sold on the day-ahead and intra-day markets of the electricity exchange Epex Spot. Selling the electricity on the exchange is currently possible up to 75 minutes before physical delivery of the electricity.

Beyond that, deviations in renewables feed-in from forecast feed-in can no longer be dealt with by normal trading - that is, buying or selling power on the intra-day market - in order to meet delivery commitments. Instead, the deviations have to be ironed out using more expensive balancing power. If the 75-minute period could be shortened, the amount of balancing power needed could be significantly reduced and large costs saved.

For instance, RWE's TSO Amprion revealed in documentation provided to the BNA that if the 75-minute period could be reduced to just 15 minutes before delivery, the need for balancing power in its zone alone could be reduced by several hundred GWh a year.

Improved accuracy

This means that the deviations in wind and renewables supply from the forecast amounts could be dealt with by trading on the intra-day market up to 15 minutes before delivery. More expensive balancing power would only have to be used in the final 15 minutes before delivery, and these amounts would be very small as wind forecasting becomes much more accurate the closer the forecast is to real-time.

But achieving this benefit would require the TSOs to operate as one entity, eliminating the time-consuming scheduling activities that currently go on between them. So far they have resisted the idea of a merger. And electricity consumers have suffered accordingly (for more see 'how consumers bear the brunt of TSO conflict and possible solutions). 


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