Imbalance Netting and aFRR-Activation-Optimisation
The German and Austrian transmission system operators (TSOs) are members of the International Grid Control Cooperation (IGCC). IGCC aims at avoiding the activation of automatic Frequency Restoration Reserves (aFRR) by netting demands of the member countries.
In a further step in 2016 APG and the German TSOs started a cooperation to optimize the aFRR activation based on a common merit order list (Merit Order List - MOL) and on a TSO-TSO model . Hereby both countries are able to activate aFRR in an economically beneficial manner. This coordinated optimization of aFRR activation already anticipates one of the key requirements stated in the Guideline on Electricity Balancing (EBGL).
Specifically, selected aFRR bids of AT and DE are merged into a common MOL and the bids are sorted according to their energy prices. The activation optimization is based on this common MOL with the goal to find a common economic optimum, taking into account the amount of cross-zonal capacity (CZC) between the control blocks AT and DE that remains after intraday-trading or that has been allocated for this specific purpose. In case of operational limitations of CZC between AT and DE or when not enough CZC is available, this coordinated aFRR activation must deviate from the economic optimum and will then be based on the local MOLs.
Common Procurement of aFRR
The next step for the cooperation of APG and the German TSOs is the common procurement of aFRR capacity, which is again based on a TSO-TSO model . As a consequence, Balancing Service Providers (BSPs) do not need to adapt to new IT-interfaces. For market participants in AT, APG’s Tendering and Trading System (TTS) remains the main interface.
The aFRR demand in Austria and Germany is procured based on the dimensioning rules simultaneously via daily local tenders. A central capacity procurement optimization function (CPOF) determines the economically most efficient selection of bids, taking into account the CZC that has been allocated for the exchange of aFRR balancing capacity between AT and DE (see Figure 1). This common procurement can lead to situations where one control block procures more aFRR than needed to cover its demand. On the other hand, the respective cooperating control block may procure less. The total sum of procured aFRR capacity will, however, always sufice to cover local demands. The information about selected bids is published on the respective national tendering platforms.
Figure 1: High-Level Design of the Common aFRR Procurement
Due to the common procurement of aFRR, Austrian BSPs gaining access to a larger market - without additional requirements for prequalification. In addition, the Austrian energy market as well as the entire energy system benefit from increased liquidity of the market and hence from a reduction of procurement costs.
Harmonisation of Products and Market Rules
The common procurement of aFRR capacity requires the products and tendering rules in Germany and Austria to be harmonized. Since 2017 during a first round of harmonisation, the procurement has been changed from weekly to daily procurement and the validity periods have been reduced from peak and off-peak products to 4-hour-products. The gate opening in Austria and Germany takes place simultaneously one week before the delivery day D: D-7, 10:00. The gate closing takes place simultaneously one day before the delivery day D: D-1, 09:00. According to the provisions of the EBGL proposals for these changes have been consulted with market participants and stakeholders and have been approved by the relevant regulatory authorities.
Allocation of Cross-zonal Capacity for the Exchange of aFRR Capacity
In order to perform a common procurement of aFRR, TSOs need to allocate CZC for the exchange of aFRR capacity. This allocation allows cooperating TSOs to access, at each moment, the necessary aFRR that is connected to the cooperating control block. The amount of CZC on the border between AT and DE which is tendered in the monthly auction of CZC (JAO) is thereby reduced by the CZC that has been allocated for the exchange of aFRR capacity.
To determine the optimal allocation of CZC for the exchange of aFRR capacity, APG and the German TSOs developed a cost-benefit analysis (CBA) that compares the market value of CZC on the day-ahead with the market value of CZC for the aFRR market. The CBA is performed before the monthly auction of CZC. For the initial phase of the common aFRR procurement the maximum allocation of CZC is limited to 80 MW. Figure 2 describes schematically the comparison of market values and the resulting allocation of CZC.
Figure 2: Illustration of the Cost-Benefit-Analysis
Release of CZC for the energy market
Following the monthly process to determine the allocation of CZC, the final amount of CZC is re-evaluated on a weekly basis. Therefore, before each GOT of the first aFRR capacity auction of a calendar week, an additional CBA is performed. Analogous to the monthly CBA, the market values of allocated CZC for the aFRR market is compared with the market value of allocated CZC for the day-ahead market.
In case the weekly cost-benefit analysis results in a lower optimal allocation, the difference between the monthly and weekly result will be returned to the intraday market. Figure 3 shows the monthly allocation process as well as the weekly re-evaluation and release of CZC.
Figure 3: Process for Cross-Zonal Capacity Allocation
CZC which is not required for the exchange of aFRR capacity shall be released based on the Increase-Process of the CWE region and shall be returned to the intraday market. In case of a release of CZC, an “Increase-Request” is triggered in order to increase the amount of CZC available on the intraday market. However, whether this request is approved depends on the general situation of the transmission grid.
After each monthly CBA the CZC which is allocated for the exchange of aFRR capacity is published on the homepage of APG (here), separately for import and export direction. After the weekly re-evaluation the values are updated to show the final CZC that is available for the exchange of aFRR capacity between AT and DE.
All results from the coordinated aFRR tender are being published within one hour after gate closure time on the respective tender platforms (https://www.regelleistung.net/ext/ in DE und https://tts.apg.at/emwebapgrem/startApp.do in AT).
The publication contains all selected bids including their respective energy and capacity prices. Moreover the nationally activated aFRR, the quantities netted between AT and DE as well as activated aFRR which is exchanged at the common border are also published.
The settlement between TSOs and the local market participants is not affected by the cooperation. Regarding aFRR, the capacity price is used for the procured capacity, and the energy price determines the settlement of actually activated aFRR energy (Settlement).
The common procurement of aFRR can lead to situations where one control block procures aFRR for the cooperating control block. In order to maintain the financial neutrality of the TSOs, payments necessary for aFRR capacity which is procured for another control block must be settled between the TSOs. This TSO-TSO settlement is based on a model in which the most expensive bids which need to be selected in addition to local demand are to be compensated by the cooperating control block.
In addition, the cooperation with regard to the aFRR activation optimization requires settlement rules for activations for the cooperating control block. The settlement between APG and the German TSOs is designed such that all TSOs pay the same specific price for their demanded aFRR energy in the respective direction. In case there is a quarter-hour with no exchange of aFRR energy between the control blocks, e.g. due to the price situation or operational limitations, no settlement between the TSOs is necessary and aFRR energy prices are entirely based on the prices of local bids. The examples below show both settlement situations based on the same demand situations.
Regarding Imbalance Netting cooperations, the settlement is based on opportunity prices of all participating control areas.
Example for the settlement of aFRR energy
In Figure 4 a cross-border exchange of aFRR energy is performed. AT delivers, within a quarter-hour, 40 MWh of positive aFRR energy to DE; and DE delivers 25 MWh of negative aFRR energy to AT. The resulting specific energy prices are 93,333 EUR/MWh for positive aFRR and -2,000 EUR/MWh for negative aFRR. With these prices and the demanded aFRR energy in the respective control area the target costs are derived for each control area in each control direction. The difference between the target and actual costs (based on the settlement with aFRR providers) is compensated between the TSOs (in this example: 3.016,76 EUR).
>>>Figure 4: Example for cross-border exchange of aFRR energy
In case there is no exchange of aFRR between the control areas, the target and actual costs are equal. Therefore no financial compensation between the control areas is needed. Due to the deviation from the common MOL for aFRR the overall costs of activation are higher, as shown in Figure 5. As a result the target costs of at least one control area are increasing accordingly (compare the yellow shaded values).
>>>Figure 5: Example without cross-border exchange of aFRR energy
 In a TSO-TSO model the respective TSO is the first contact for each technically connected aFRR provider with respect to dimensioning, pre-qualification, procurement and activation of aFRR. The operational processes for activation of aFRR between the TSO and aFRR providers is not affected by the cooperation.