Transmission, system management & ancillary services

Transmission, system management & ancillary services • Hubert Lemmens

Agenda Elia Group Electricity market Role of the different players Elia productsand services Ancillary services • Balancing • Ancillaryservices • AS markets • Challenges& opportunities

Agenda Elia Group Electricity market Role of the different players Elia productsand services Ancillary services • Balancing • Ancillary services • AS markets • Challenges& opportunities

Elia Group - reliable and resilient networks Ownership Elia • 100% of 380-150kV network • 94% of high voltage network (70-30kV) 50Hertz • 100% of 380-220kV network • 34% of the German 380kV network • 19% owner of the German 220kV network Age of networks Elia • Less than 15 years for 50% of underground cables • Less than 25 years for 50% of lines & substations 50Hertz • Around 10 years for 90% of the network (refurbished after German reunification in 1989)

Elia + 50Hertz Transmission = Top 5 in Europe 5

Elia’s Role Elia operates, maintains and develops a network consisting of lines, underground cables, transformers and substations linking producers and consumers of electricity Elia France Netherlands Luxembourg U.K.? Germany? France Netherlands Luxembourg U.K.? Germany? Exports Imports Large & Medium Industry Belgian producers Small Industry Domestic Customers Electricity Generation Distribution from 15 kV to 230 V Transmission 380 to 30 kV

The transmission grid: key in energy policy The European transmission system: • 34 interconnected countries • 532 million consumers • 880 GW installed generation • 3.200 TWh/year consumption • 380 TWh/year international exchanges The European transmission grid: • 305.000 km interconnections •  A remarkable technological accomplishment of the 20th century !

Agenda Elia Group Electricity market Role of the different players Elia productsand services Ancillary services • Balancing • Ancillaryservices • AS markets • Challenges& opportunities

Regulatoryframework Europe • Liberalisation is an European initiative: • Creation of one European market • Free market … • Producers • Supply • System operator • Natural monopoly • Independent system operator • Strong regulation • With social and environment corrections

Power market design Brasil, US, Korea, Australia,… ISO model 3rdpty TSO model Europe 3rdpty Critical interface

EU Market Model Forward • Manage forward price and vol. Risk • Arbitrage • Maintenance planning • Investment planning Intraday • Volume adjustment/fine tuning (T°, wind,…) • Outage management Balancing • System security Day Ahead • Manage STprice and vol. Risk • Close forward positions • Generation optimization (Make or buy)

PowerMarkets: generalframework Energy onlymarkets Capacity market Multilateral market TSO is single buyer

Different electricity markets Retail Market Retailers Wholesale Market OTC and Exchange Traders Balancing Market

European power exchanges Products Bilateral, brokered or exchange-based Physical or financial delivery Forwards, futures, options and other derivatives Years, quarters, months, weeks, days, hours Price per delivery zone (~ country)

Market actors 16 • Producers • Produce electricity • Have a licence for production • Suppliers • Sell the energy to the consumers • Have a supplier licence • Traders • Buy and sell the energy, but don’t supply • Grid Users • Are connected to the Grid (Transmission or Distribution) • Take energy off or inject energy in the Grid • Grid operators (Transmission / Distribution) • Build and maintain Grid • Guarantee security and quality of supply • Control and manage balance, voltage, frequency and congestions • Promote the opening of the market

Rolesandresponsibilities • Responsibility: government/market • Tools: • Measurement/ forecasts • Capacityremunerationschemes • Strategic Reserves • Responsibility: energy market actors/ TSO (residual) • Tools: • Direct control (dispatchable load) • Response topricesignals (non-dispatchable load) • Responsibility: TSO as buyer - generation&load as provider • Tools: • Direct control (dispatchable load) options (pre-contracted) • DSOsinvolved, especiallywhen Distribution gridcongestion issues

Elia’stasks Electrical system management Operation of the transmission network, including the management of the energy flowsand the organisation of ancillary services. Management of the balancebetweeninjectionand off-take of the networkaround the clock (7 days/7, 24 hours/ day) Maintenance of the transmission networkand the implementation of the necessaryinvestementstodevelopandimprove the network. Grant access to the network on anobjectiveand transparant basis. Development of instrumentsand systems thatshouldenhance the goodfunctioning of the market: hub, nominations, auction of transmission capacity at the borders, energy exchange, market coupling. High voltage infra-structure management Marketfacilitator

Elia is a market facilitator • Nominations • Transmission programme for every ARP and balance responsible party • Validation by Elia • Day ahead: normal procedure • Intraday: in the event of an imbalance, restore balance through exchanges on the hub • HUB • IT platform for bilateral exchanges between ARPs to safeguard the balance • Day ahead & intraday (intraday = in the event of unexpected imbalances) • Balancing: offset imbalances • Allocation of border capacities • Energy exchanges: purchase and sell electricity anonymously • Belpex: Belgian energy exchange with trilateral market coupling (Belgium – the Netherlands – France); APX: energy exchange between Belgium, the Netherlands and the UK • Participation in Powernext, France’s energy exchange (via HGRT) • CWE and CWE-Nordic ITVC market coupling: launched 9 November 2010

Product overview In its interactions with the market, we distinguish following categories of products: Services supplied to Grid Users Connection to the Grid Access to the Grid Use of the Grid Supply of ancillary services Management of balance Allocation of interconnection capacity Services contracted with third parties Supply of energy for ancillary services Coordination of Injection of Production (CIPU)

Product overview For each of them specific contracts are signed:

Principle BRP balanced day-ahead (ARP = BRP)

Goal : BRP must be in balance All Injections = All Off-takes (Sum IN = Sum OUT) Injections : • Import from NL/FR • Purchase on HUB • Generation/ injection Off-takes : • Export to NL/FR • Sale on HUB • Offtakes for direct clients or DGO • Losses

Imbalance tariffs: objectives Incentive to avoid imbalances By good forecasting By participation on the intraday markets By use of own flexibility Incentive not to source on real time market => Ideal situation no regulating power need to be activated by the TSO Avoid excessive charges deterring market entry ARP whoseimbalances are zero on averageand are notcorrelatedto system imbalancewillpay small imbalance charges on average. Incentives to execute requested regulating power Transparency; real time publication XB harmonization

Electricity consumption = generation on interconnected network otherwise: BLACK OUT! General principles balance management • Balance between electricity • consumption and generation: coordination between TSO’s • Every BRP is responsible for maintaining ¼ h balance between total injections and total off-takes in his portfolio • TSO ensures balance • in its control area

Balancing - Elia Means of maintaining balance Primary reserve Secondary control (LFC) Incremental or decremental bids (non-contractual R3) Contractual tertiary reserves (production and interruptible customers) Inter-TSO emergency reserves All the other small productionunits (‘MW Action’) Defence Plan: U-5% Defence Plan: interruption of load Curtailing (in theory) Control Time unit R1 Power stations: automatic VFR ms R2 Elia: automatic SCADA sec - min R3 Elia: manual 15 min

Agenda Elia Group Electricity market Role of the different players Elia productsand services Ancillary services • Balancing • Ancillary services • AS markets • Challenges & opportunities

System Services organisedby Elia • Essential for quality and reliability of power supply: #products • R1, R2, R3: different kinds of reserve capacities to be activated by TSO • Interruptible customers ICH • Inter TSO support • Voltage regulation • Black start • Congestionrelieve • Compensationforgridlosses • TSO responsibilities • -> market design/architecture • -> contracting/tools • -> settlement/monitoring • Pass trough in tariffs – but good housekeeper principle (Regulatory scrutiny)

PrimaryReserves Objective: to maintain a balance between GENERATION and consumption (DEMAND) within the SYNCHRONOUS AREA, using “primary controllers” • The activation of Primary reserves is based on localfrequencymeasurment, installedby the supplier. • Accurancy of 10mHz • Minimum sample rateevery 1-2seconds • The minimum activation time for R1 is: • 50% of the contractedvalueafter 15seconds • 100% of the contractedvalueafter 30seconds.

Primary ReservesContracted capacity – transfer of obligations via sec. market • Suppliers can exchange theircontractualobligation via the secondary market for R1 symm & R1 down.

PrimaryReservesR1 remunerations • Remuneration for the reservation (capacity fee): • Paid on monthly basis • KB 2013: 45€/MW/h for the symmetrical part • Attention, in case of increased liquidity on the market, these prices are not representative. • No remuneration for the Activation: Energy up and energy down are the same in the time.

SecondaryReservesPrinciples Objective: SECONDARY CONTROL maintains a balance between GENERATION and consumption (DEMAND) within each CONTROL AREA • SECONDARY CONTROL makes use of a centralized AUTOMATIC GENERATION CONTROL, • Via a setpoint, Elia ask to modify the active power of GENERATION SETS in the time-frame of seconds to typically 15 minutes. • There are two types of regulation: • Upwards regulation: Elia can ask to produce more electricity than scheduled • Downwards regulation: Elia can ask to produce less electricity than scheduled • In case of multiple supplier, all suppliers are activated simultaneously and pro rata based on the total volume secondary that can be activated

SecondaryReservesContracted capacity / selection • Contractedcapacity: • Elia Contracts 140MW of Secondary reserves on a yearly basis from different suppliers. • Upwards/downwardsregulation • Peak / off-peak • The contractedcapacity must beavailable 100% of the time. • Possibilityto exchange via a secondary market • Free Bids: • EverySupplierwithan R2 contract can offer, day-ahead on quarterhour basis secondary reserves toElia @ anactivationprice.

SecondaryReservesContracted capacity / selection • Selection of Seconday reserves • Day ahead, Elia selects 150MW • The selection is doneseparatelyforupwardsanddownwards volumes • The selection is doneeveryquarterhour • Economial ranking: • Lowestpricesforupwardsregulation (Elia buys energy andpays money tosupplier) • Highestpricesfordownwardsregulation (Elia sells energy andreceives money from the supplier)

SecondaryReservesSecondary Market • Suppliers can exchange theircontractualobligation via the secondary market.

Secondary ReservesActivation • Elia transmits a dynamic and continuous setpoint. • The dynamic setpoint, represents the volume with which the supplier must increase/decrease its production. • The supplier is required to keep the activated reserves equal to this signal. • Maximum deviation of 15% • The slope of the setpoint is defined by the total selected volume in a direction devided by 7,5 minutes. • The dynamic setpoint is updated every 5 seconds.

SecondaryReservesRemuneration • Remuneration for the reservation (capacity fee): • Paid on monthly basis • KB 2013: 22,5€/MW/h in one direction • Attention, in case of increased liquidity on the market, these prices are not representative. • Remuneration for the Activation: • Remuneration for the energy (separate for upwards and downwards for each QH) • Day-ahead the supplier communicates the volume of reserves + the price of activated energy. These prices are subject to price caps • Price for upwards energy < the fuelcost of a standard CCGT +40€ • Price for downwards energy > 0€ • These prices are used for the selection of R2

Tertiary ReservesPrinciples Objective: Reserve power with which ELIA can restore the balance between the supply of and demand for active power within the Control Area. • Specifically: “A third line of reserve toresolve major imbalances” • Copewith a major or systematicimbalance in ELIA control zone • Offset a significant frequencyvariation • Resolve major congestionproblems • Only upwards • Activatedmanually • Tobeactivatedwithin 15 minutes • 400MW fromProduction units

TertiaryReservesContracted capacity • Contractedcapacity: • Elia Contracts400MW of Tertiaryreserves on a yearly basis from different suppliers. • Upwardsregulation • Peak / off-peak • The contractedcapacity must beavailable 100% of the time. • Free bids: Free bids are managed via the CIPU contract (coordinationforinjection of production units) • Principle: allproduction units that are minimum stand-by (not in revision) offer theircapacityto Elia on a quarter-hour basis. • Upwardsanddownwards volumes.

TertiaryReservesActivation • Activations of tertiary reserves are based on a technical-economic merrit order: • First activation of free bids, merrit-order • Whenall free bids are used, activation of R3, merrit order • Manualactivationby the system operation via a communication platform “Probid”

TertiaryReservesRemuneration • Remuneration for the reservation (capacity fee): • Paid on monthly basis • Cost-based + margin • Remuneration for the Activation: • Energydelivered • ~ incremental in procedure nomination of dailybids (D-1 for day D) in CIPU Art.13.2.5 • Startup-costs • ~ as specified in CIPU (depending on fueltype & cost) • If and only if • Pnom ≤ Pminbefore and after activation quarter (calculated as average on 4 qtrs) • Startup-time <= 15 minutes (=M) • No FO duringbid

InterruptibledemandPrinciples • Objective: Reserve power, with which ELIA can restore the balance between the supply of and demand for active power within the Control Area. • a grid user interrupts a part of its offtakein a timeframe of 3minutes • An interruption = lowering the actual offtake of that moment below a contractual fixed value, SL(“Shedding Limit”) • 3 different variations of the product • SLA2: 12 activations of maximum 2 hours • SLA4: 4 activations of maximum 4 hours • SLA8: 4 activations of maximum 8 hours • Different Accespoints per contract are possible. (open foraggregators) P(offtake) SL time Activationperiod

InterruptibledemandContracted capacity • Contractedcapacity: • Elia Contractsyearly 261MW from different suppliers • Upwardsregulation (interuption of offtake) • Peak/offpeak/weekend • In average 100% availability duringthe year: • the average reserve made available over the wholeyear must be at least 100% • 87 hours(1% of the time) unavailability is allowed.

InterruptibledemandActivation • Elia activates, by remote control, a device located in the grid user’s process • When this signal is received, the grid user’s offtake must drop below the shedding limit within 3 minutes after Elia’s request; • The offtake must remain below the SL until Elia send a deactivation signal of the maximum contractual activation time is reached: • SLA2: maximum 2 hours • SLA4: 4 maximum 4 hours • SLA8: 4 maximum 8 hours • Between 2 activations is at least 24 hours • Elia cannot activate in case the Supplier has communicated unavailability to Elia (max 87h/year)

InterruptibledemandRemuneration • Remuneration for the reservation (capacity fee): • Remuneration for the actual reserve power made available through the year • Reserve power made available= average offtake of the year for the considered period(Peak/Offpeak/Weekend) – Shedding Limit for the considered period • Monthly fixed fee for the contracted reserve Power • Settlement at the end of the year: average reserve power made available • Surplus: extra remuneration of 20% of the contracted price • Less than 3% missing reserve power: 100% recovering of the remuneration • More that 3% missing reserve power: 120% recovering of the remuneration reserve power not made available (recuperation of the remuneration + 20% penalty) P(offtake) Averageofftake SL time Average Reserve power made available / Contracted reserve power (2) (1) (3) 0 97 100

InterruptibledemandRemuneration • Remuneration for the Activation: • Remuneration for the energy • The activated energy is considered as the difference between the actual offtake and the nomination, capped a the difference between the SL and the nomination. • Price= max [ 75€/MWh ; 108%*Belpex ] Offtake Remunerated energy Deactivation Activation

Activation of ancillary services: Balancing All selected secondary reserves (150 MW) are activated proportionally to obtain maximum flexibility with available R2 portfolio If the system imbalance exceeds 150 MW manual reserves are activated in a merit order (Free bids) Once all free bids are exhausted, Elia start with activations of R3 production R3 load shedding contracts can only be activated 5 times a year InterTSO emergency reserves are activated once all available reserves in the control area are exhausted Generally:

Other System servicesBlack start – MVAR Black Start If black out occurs…. Restore critical load (10%) after 7 hours Restore complete load after 14 hours For 5 zones in Belgium (NW, NE, SW, SE et Centre)one black start unit of at least 200MW is foreseen MVAR – Voltage MVAR needed for quality of voltage – local Different sources: Investments: Self (capacitive) of condensator (inductive) (GD) Contract producers (ENMAN)

Transmission, system management & ancillary services