EP 20

Jean-Michel Glachant, Virginie Pignon

Nordic Electricity Congestion’s Arrangement as a Model for Europe: Physical Contraints or Operators’ Opportunity

EP 20 | Non-Technical Summary | PDF

Abstract: Congestion on power grids seems a physical reality, a “hard” fact easy to check. Our paper models a different idea: congestion signal may be distorted by transmission system operators (TSOs), which puts the European integrated electricity market at risk. 1° when the TSOs share the revenue produced by congestion’s pricing they have an incentive in distorting data. 2° because congestion signals are not physical data but “home made” conventions, TSOs could be able distorting them. 3° when congestion appears on cross border lines that link several countries with their own regulatory mechanisms, the settlement of this incentive’s problem necessitates a high degree of coordination.  Congestion puts undoubtedly the threat of a collapse on interconnected grids. The “capacity constrained situations” have therefore to be avoided. Congestion signalling depends on norms set by TSOs and a signal is given when the power flows attain the “secure” limits set by TSOs. These security norms are not stable and invariable because some flexibility is needed by the very nature of the power flows and because lines physical capacity limits are not constant. Therefore TSOs are defining the congestion signal on a variable, complex and non transparent constraint and may manipulate it for their own interests. In Nordic countries the “Light Handed Regulation” makes this opportunistic behaviour more likely. We need a more effective congestion regulatory mechanism.

Keywords: Externalities; Information; Measurement; Incentives; Opportunism