Nordic area price model updated with SE3 sum allocation marketing coupling mechanism
Nena Product Update:

Nordic area price model updated with SE3 "sum allocation" market coupling mechanism

Last week the Swedish TSO Svenska Kraftnät (SvK) implemented a sum allocation (SA) mechanism in the market coupling for the SE3 price area.

SA is a power export capacity limitation from SE3 to NO1 and DK1. The SA capacity is referred to as SE3-SE3LS and has to date been between 1000 to 1500 MW since its implementation. SA in SE3 implies that export capacity limitations are no longer placed on each border. Rather, a summed export limitation is set out of SE3. This means that any non-used capacity on either border cable can be utilized and allows for a transit flow to occur via SE3 from either DK1 or NO1, to each other.

The consequence of having transit flows is the manifestation of non-intuitive flows. These are flows occurring from a higher priced area to a lower priced area. In the current market state with SA implemented, this is most often seen as a flow from a higher priced DK1 towards a lower priced SE3.

The motivation for SA comes from the last two years of major changes in the Nordic power system:

  • A loss of production in western Sweden due to the closing of the nuclear reactors Ringhals 1 and 2.
  • Increase in wind power production in northern Sweden.
  • An increase in export capacity from Norway to UK and Germany.

Effectively this has created a strong East-West energy flow in the physical grid which has significantly affected trade capacity with SE3. With SA, trade capacity is increased in SE3 without increasing operational risk.

As of March 31st, Nena’s Nordic area price model has fully implemented the SA mechanism in SE3 along with effectively modelling non-intuitive flows in the DK1-SE3-NO1 coupling.

Since the implementation of SA, we have already seen many hours with non-intuitive flows in transit out of DK1 via SE3 to NO1. We expect this to occur often, at least until summer. The SA mechanism will be relevant until the introduction of flow-based market coupling in the Nordics.

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Nordic Power Markets

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