Congestion management in the LTM application Samoverskudd¶
Electricity is not always generated where it is consumed, so it must be transported through the transmission grid. Demand for electricity varies across different regions, and power can be transferred from areas with surplus generation to areas with higher demand. In many cases, the transmission network has sufficient capacity to accommodate these transfers. However, some transmission lines have physical limitations that restrict the amount of electricity that can be transported. These limitations are known as congestion, and bidding areas play an important role in managing them.
With sufficient transmission capacity between two areas, electricity flows unrestricted and area prices will be similar. When transmission capacity is constrained, prices may diverge, resulting in different electricity prices in the bidding areas.
Price Differences and Congestion Revenues¶
A price difference between two bidding areas indicates that the available transmission capacity is not sufficient to fully meet demand in the importing area with lower-cost electricity from the exporting area. As a result, additional and often more expensive local generation must be used in the importing area, leading to a higher electricity price.
Consumers pay the electricity price in the bidding area where the electricity is consumed, while producers are compensated based on the price in the bidding area where the electricity is generated.
The difference in price between two bidding areas, multiplied by the volume of electricity transferred between them, is known as congestion revenue. This revenue is recieved by the owner of the transmission connection linking the two areas. In Norway, Statnett manages these revenues. They are used to invest in the transmission system, including building new infrastructure, reinforcing existing grid assets, and maintaining the network. These investments contribute to an efficient and reliable power system and help reduce grid costs for consumers over time.
Congestion Revenues from International Interconnectors¶
The same principle applies to electricity trade between neighboring countries. When electricity is transferred across an international interconnector, congestion revenues arise whenever there is a price difference between the connected bidding areas.
These revenues are shared equally between the transmission system operators on either side of the interconnector.
Congestion revenues calculations in the application¶
The equation for congestion revenue \(C_{revenue}\) is:
where \(I\) is the set of interconnections, \(f_i\) is the flow on interconnection \(i\) [MWh], \(\Delta p_i = p_{import} - p_{export}\) [€/MWh] is the price difference between the importing and exporting areas for interconnection \(i\) and \(d\) is the discount rate.
If transmission losses are included they must be subtracted from \(fi\):
where \(loss_i\) is the transmission losses for interconnection \(i\).
Revenue allocation options¶
Revenues are shared equally between importing and exporting areas
In styredata.nett the option nordel loss functionality is false
Revenues are only allocated to the exporting area
In styredata.nett the option nordel loss functionality is true