Significance of cross-zonal trade
The possibility to execute cross-zonal trade is one of the positive results stemming from integration of the power systems. Adopting the European legislative package on internal energy markets facilitate cross-zonal trading, safeguard the security of electricity supply and lead to increased efficiency and competitiveness of the market. Common rules for the internal market are set in legislative packages, so called Energy Packages, where detailed rules on the particular element of the electricity market are set in implementing acts, so called Network Codes. For example, the forward markets are governed in detail by the Forward Capacity Allocation (FCA) Regulation, whereas the short-term markets are described by the Capacity Allocation and Congestion Management (CACM) Regulation.
Cross-zonal capacity allocation in the forward markets allows market participants to appropriately hedge financial risks against price fluctuations between bidding zones. The long-term transmission rights are purchased at explicit auctions i.e. cross-zonal capacity is procured separately from energy delivery contracts. TSOs can issue either Physical Transmission Rights (PTR) or Financial Transmission Rights (FTR).
Closer to the delivery time, electricity is traded in short-term markets i.e. the day-ahead market and the intraday market. The day-ahead market is an implicit auction where electricity and capacity are traded and allocated together the day prior to delivery. After the day-ahead market is closed, market participants may modify their positions through the intraday market which continues to grow in trading volume due to steadily increasing share of the intermittent renewable generation in electric power systems. The current intraday market allows only the continuous trading, nevertheless the intraday auctions are to be introduced in the future.
Cross-zonal capacity defines the capability of the interconnected system to accommodate energy transfer between bidding zones. The capacity calculation methodology are established in each Capacity Calculation Region. After calculation the cross-zonal capacity is offered to the market in order to facilitate the cross-zonal trade.
There are two permissible approaches when calculating cross-zonal capacity:
- ‘flow-based approach’ where energy exchanges between bidding zones are limited by power transfer distribution factors and available margins on critical network elements;
- ‘coordinated net transmission capacity approach’ where the cross-zonal capacity is based on the principle of assessing and defining ex ante a maximum energy exchange between adjacent bidding zones.
Detailed rules on capacity calculation are set in Annex 1 of the Polish grid code – ‘Instrukcja Ruchu i Eksploatacji Sieci Przesyłowej (IRiESP), Bilansowanie systemu i zarządzenie ograniczeniami systemowymi’.
Participation in cross-zonal trade
In order to participate in the forward market (yearly and monthly allocation), and the fallback procedure in the day-ahead market market participants have to enter into the agreement for rendering electric energy transmission services including the provisions of the agreement related to the cross-border transmission services.
Long-term transmission rights and capacities offered for fallback procedures in the day-ahead market are allocated through a single allocation platform (Joint Allocation Office).
Cross-zonal trade in the Single Day-ahead Market Coupling and Single Intraday Market is organized by Nominated Electricity Market Operators whose operation is governed by the Multi-NEMO Arrangements Operational Agreement (MNA OA).
The table below describes capacity allocation mechanisms used in the given time frame on the Polish borders:
|Border||Long-term market||Day-ahead market||Intraday market|
SDAC – Single Day-ahead Coupling
SIDC – Single Intraday Coupling
Detailed rules on participation in the cross-zonal trade are set in the Polish terms and conditions for Balancing Service Providers and Balance Responsible Parties – ’Warunki Dotyczące Bilansowania’.