Impacts of renewables generation and demand patterns on net transfer capacity: implications for effectiveness of market splitting in Germany

For the further development of an integrated European electricity market, congestion management mechanisms are one of the major market design issues. Against the background of increasing generation from renewables and resulting congestions, an efficient management of network congestions is gaining importance especially in Germany. Introducing nodal pricing as the first best mechanism is not considered to be realistic for Germany in the nearby future. Yet the splitting of the German electricity market into several market zones will also improve congestion management. A key issue in the so-called market splitting is the determination of the net transfer capacity (NTC) between the market zones as it determines the effectiveness of market splitting as congestion management mechanism. The authors therefore propose an integrated approach to incorporate the effects of renewables feed-in, load patterns and cross-border flows on NTCs. On the basis of results of a European power market model they specify typical hours using a clustering approach. Subsequently, a DC security constrained optimal power flow model is used to calculate situation-dependent NTCs. They conclude that the obtained NTCs strongly depend on renewables feed-in and that this effect has to be considered when modelling alternative congestion management mechanisms such as market splitting.