Table of content 1. Introduction .............................................................................................................................................. 3 1.1. Background ............................................................................................................................................................. 3 1.2. Plans for grid investments in Norway ..................................................................................................................... 4 1.3. Legal frame work .................................................................................................................................................... 4 1.4. Criteria for the selection of appropriate measures ................................................................................................. 5 2. State of the transmission grid in southern part of Norway .................................................... 7 2.1. The Grid Development Plan .................................................................................................................................... 7 2.2. The Area Study of Southern Norway....................................................................................................................... 7 3. Investment and outage planning in Norway ............................................................................. 12 3.1. Planned grid investments ..................................................................................................................................... 12 3.2. Measures to minimize the need for restrictions ................................................................................................... 13 4. NTCs on NorNed and Skagerrak .................................................................................................... 15 4.1. Introduction .......................................................................................................................................................... 15 4.2. Calculation of NTCs D-1 ......................................................................................................................................... 15 4.3. Operational measures used to relieve congestions .............................................................................................. 16 4.4. Distribution of NTC restrictions between NorNed and Skagerrak ........................................................................ 20 5. Measures to relieve congestions before the operational phase ........................................ 23 5.1. Special System protection Scheme to increase capacity ...................................................................................... 23 5.2. Planned counter trade .......................................................................................................................................... 23 5.3. Principles for countertrade on the DK1-Germany interconnector – report by the University of Aachen ............ 25 5.4. Price areas ............................................................................................................................................................. 26 6. Initial assessment of planned counter trade ............................................................................. 27 6.1. What is at stake? ................................................................................................................................................... 27 6.2. Relevant European regulation .............................................................................................................................. 27 6.3. Structural versus non-structural congestion ......................................................................................................... 28 6.4. Countertrade as a potential measure to relieve the impact of congestions in the Norwegian grid on the internal market 28 6.5. Feasibility of countertrade on Skagerrak and availability of capacity in DK1 ........................................................ 28 6.6. Preliminary estimation of technical viability on the Danish side .......................................................................... 29 6.7. How quickly can balancing reserves be activated in DK1? .................................................................................... 29 6.8. How could countertrade be organized?................................................................................................................ 31 6.9. Conclusion on initial assessment .......................................................................................................................... 31 7. Other factors that may affect the flow on the interconnectors .......................................... 32 7.1. Loss factor on cables ............................................................................................................................................. 32 7.2. Flow based ............................................................................................................................................................ 32 8. Conclusions and TSO cooperation................................................................................................. 33 Annex 1 - Completed and planned investments ............................................................................... 34 Annex 2 – Estimated and realized NTCs on Skagerrak and NorNed in 2014 ........................ 36 Annex 3 - Estimated total capacities on NorNed and Skagerrak in 2015 ............................... 38 Annex 4 - Example on how the thermal limitation is handled .................................................... 38 2 1. Introduction 1.1. Background The regulators (NRAs) in Denmark, The Netherlands and Norway; Danish Energy Regulatory Authority (DERA), Netherlands Authority for Consumers and Markets (ACM ) and Norges Vassdrags- og energidirektorat (NVE), has sent a similar letter to their respective TSO. In the letter the NRAs inform about their intention to investigate whether the congestion management in Norway and the calculation and allocation of NTCs on the NorNed and Skagerrak interconnectors are in line with applicable EU and national regulation. The three TSOs; Energinet.dk, TenneT and Statnett, are asked to provide a report on the expected need for limitations of the capacity on the above mentioned interconnectors. Statnett finds it important to underline that no decisions are taken concerning the actual need for limitation in capacity on the NorNed and Skagerrak. The actual capacity given to the market (NTC) each day and hour are decided the day before the operating day (D-1) and provided to the market according to the procedures established through the North West Europe (NWE) market coupling. These capacities are based on the expected production, consumption and situation in the Norwegian grid for the following day. It should also be noted that "The exchange information" sent to the market plays an important role in providing information to market participants. This information is particular important for producers in the south of Norway in order to plan the use of water over time. As these production resources are part of the n-1 consideration performed by Statnett each day they are critical for the ability to up hold a high capacity in the south of Norway as possible over time. Statnett is through its public service obligation, given by the Norwegian Ministry for Petroleum and Energy obliged to take decisions during operation and investment based on socioeconomic optimisation. Statnetts annual income is regulated through an income cap covering operational cost, capital cost and system operations cost. The congestion rents connected to the interconnectors are used to reduce the tariffs paid by Norwegian consumers. This implies that marginal cost of investments and operation in the grid over all has the same effect as a marginal reduction in congestion rents due to limitations. The report explains the challenges in the operation of the grid in the southern part of Norway. It is important to note that there are two main types of situations that my lead to a situation where Statnett has to reduce the capacity on the interconnectors in order to maintain security of supply. One situation is when there are no outages in the grid (intact grid) but where there is a high demand for export over the NorNed and Skagerrak interconnectors. These situations and the consequences are explained in the market message from May 2013. The other type of situations that may lead to congestions are when there are outages due to maintenance and reinforcements in the grid. Statnett would like to underline that the maintenance and reinforcement work both in 2014 and the coming years are of the utmost importance to relieve 3 the long term changeling connected to the terminal congestions in the Western Corridor. Information about the expected outages and NTCs in 2014 was communicated to the market in February. For each outage a more precise information is given in urgent market messages (UMMs). 1.2. Plans for grid investments in Norway Statnett is actively working to reinforce the Norwegian transmission grid, with the investments most important to NorNed and Skagerrak scheduled to be completed by 2019. The planned grid investments, which will see the main parts of the transmission system upgraded to 420 kV (from 300 kV) in addition to new lines being built, are detailed in the