1

Application of a coordinated auctioning method for the allocation of cross border transmission capacities in the European system
P. Marannino, Fellow, IEEE, F. Zanellini, Member, IEEE, P. Bresesti, Member, IEEE, and R. Vailati

Abstract-- The in progress opening of the electricity markets in the European interconnected system is leading to a consistent increase of the Cross Border (CB) exchanges up to the risk of congestions that jeopardize the most convenient exploitation of the cheapest generation resources. Aimed to send right economic signals to the transmission network users by means of a fair and efficient allocation of the CB transmission capacity, methods for the solution of the problem based on market rules are required by recent statements of the European Commission. After a brief overview of the main market based methods, the authors focus their attention on the Coordinated Auctioning approach and simulate its application to the UCTE system (the largest interconnection in Europe). A transmission network model extended up to 4200 busses is employed in the developed optimization procedure where different hypotheses on the adoptable security criteria and on the characteristics of the capacity bids are examined. The economic results of the allocation scheme are discussed, presenting the distribution of costs and revenues to the countries involved in the auction. Index Terms--Power transmission economics, Power system security, Cross border exchange, Congestion management, Allocation of transmission capacity, Coordinated auctioning

I. INTRODUCTION

he increase of the Cross Border Exchanges (CBE) due to the relevant electricity price differences among the European countries is going to create congestions on several interconnection corridors. Therefore the Cross Border Transmission Capacity (CBTC) is becoming a scarce quantity that requires to be allocated in a competitive way [1]. In Europe several methods have been proposed to solve the congestion management problem: allocation of NTCs (Net Transfer Capacities), market splitting, and re-dispatching [2]. Market splitting method is applied in Nordic countries, whereas methods of CBTC allocation based on published

This work has been supported by MAP (Italian Ministry for Productive Activities) in the frame of Public Interest Energy Research Project named "Ricerca di Sistema" (MAP Decree of 28 February 2003) under contract No T3027RBA321 P. Marannino and F. Zanellini are with the Department of Electrical Engineering, Universit degli Studi di Pavia, via Ferrata 1, 27100 Pavia, Italy (e-mail: fabio.zanellini@unipv.it ; paolo.marannino@unipv.it). P. Bresesti and R. Vailati are with CESI, Business Unit Transmission and Distribution, via Rubattino 54, 20134 Milan, Italy (e-mail: bresesti@cesi.it).

NTCs are mainly applied in the UCTE synchronous interconnection. Therefore, in Europe there is not a unique method for transmission Congestion Management (CM). The implementation of a unique method for CM would require joint application of agreed solutions, as well as the harmonization of the organization of the electricity markets, which also implies the preparation of necessary corresponding legal preconditions. Implementation of market splitting at continental European level is difficult, taking into account differences in network characteristics and organization between the markets of Nordic countries (NORDEL system) and the ones of the UCTE members. The first reason is the meshed structure of the UCTE transmission network where the transmission capacities are highly interdependent, so that it is not easy to define fixed geographic borders for the implementation of this method. Besides, market splitting requires the existence of one or more electricity markets in all the geographically defined areas. In contrast to the NORDEL and the Northern America, the UCTE power markets are based on a separation between the allocation of network capacities and the decision on the generation dispatch. In most countries, market participants are generally free to decide the production of their power plants within the corresponding country, while the Transmission System Operators (TSOs) solve all potential constraints. The commercial use of CBTC is limited to the NTCs that are published by the corresponding TSOs in advance, even if there remains any spare capacity. These NTCs however are a purely commercial measure, i.e. their commercial use is no longer subject to physical laws. At present, the transfer capacities, calculated by each European TSO, are published on the website of the system operator association, namely the European Transmission Systems Operators, ETSO [3]. The NTC values are then allocated to the network users following several rules and criteria under continuous and stimulating debates [4][5]. Some of them, as the pro rata or the first come first served criteria are, not necessarily market based. The Regulation 1228/2003 published by the European Commission [6] states that the methods used for the CBTC allocation must be fair, non discriminatory and based on market rules, in order to send right economic signals to both network users and system operators. The first method, proposed by ETSO in April 2001,

1-4244-0493-2/06/$20.00 2006 IEEE.

suggests to allocate the transmission rights on the interconnection corridors following a multilateral explicit auction, the so-called coordinated auction. The auction assigns the transmission capacity to the bids that gives more value to it up to the attainment of the transfer limits, calculated, in agreement with the ETSO proposal, by means of the so called Power Transfer Distribution Factors (PTDF) approach [7]. Therefore, in February 2002 ETSO proposed an evolution of the coordinated auction method, providing its introduction in a zonal approach with the use of market splitting [8]. In 2003, the European Power Exchange association (EuroPEX) suggested the Decentralized Market Coupling approach, based on a mutual interaction between each national electricity market and a centralized market of the CBTC [9]. In September 2004 this proposal has been developed and integrated in a joint ETSO and EuroPEX method called Flow based Market Coupling. A recent report prepared for the European Commission [10] shows the efforts recently done by CEPS (Czech Republic), PSE (Poland) and VE-T (Germany) aimed to establish a coordinated auction scheme that leaves more flexibility to the market in the allocation of the transfer capacities to individual borders. At the end of 2004 the TSOs of SEE (South East Europe) developed a pilot project for the realization of a regional coordinated auctioning scheme. This project highlighted the feasibility of the approach and its benefits in terms of CBE increase and maintenance of the interconnection security. The regional allocation method foresees coordinated explicit auctions to select the cross border transactions and adopts the PTDF approach to evaluate the impact of each transaction on the physical cross border power flows. After the project approval in October 2004 by the regional Athens Forum and by the European Commission, a regional task force (SETSO) has been charged to realize a dry-run system (without money), with the participation of the electricity regulators of the region. This project is carefully observed by EU countries, that in many cases still rely on bilateral auctions for the CBCT allocation. The paper is organized as follows: section II presents the mathematical formulation of the "coordinated auctioning" procedure developed by the authors while section III shows the results of the application of the program to an equivalent model of the UCTE EHV network, simulating the allocation of the CBTCs for a set of bids submitted by the network users. The use of an extended model of the European grid allows to allocate the transmission capacity of each interconnection line instead to assign the NTC quantities as proposed in [15]. The developed procedure makes use of the Matlab [11] programming environment: the auction method is formulated as a linear programming problem where the network constraints are linearized using the PTDFs. The auction results can be easily interpreted in terms of impact of the accepted bids on the congested corridors, therefore assessing the correctness of the economic signals provided by

the auction clearing mechanisms. In addition, the matter of allocation of auction costs and revenues is discussed. Section IV presents two criteria proposed by ETSO for the distribution of revenues, while section V of the paper reports the numerical results for the case studies analyzed. II. THE COORDINATED AUCTIONING FORMULATION As stated before, the coordinated auctioning model makes use of the so-called Power Transfer Distribution Factor (PTDF) to take in to account the network constraints in a DC approximation of the network. The PTDF formulation is deeply described in [12][13][14] while the auction model is presented here below. The aim of the explicit auction mechanism is to allocate the Cross Border Transmission Capacities (CBTC) to the highest bids, taking in due account the limitations imposed by a secure operation. Supposing the network composed by R nodes, each of them indicated with capital letter, and by I interconnection lines, each of the M bids submitted to the auction is identified by the sending and receiving nodes X an Y, the index i, of the bid, the amount of the required bilateral transaction Qreq ( X , Y , i ) and the bid price ( X , Y , i ) representing the willingness to pay of the transaction actors. The resulting optimization problem can be written as follows:

max Q( X , Y , i ) ( X , Y , i )
i =1

(1)

subject to the following constraints:

0 Q( X , Y , i ) Qreq ( X , Y , i )

i = 1,....M

(2) (3)

PTDF(
i =1 M

j X ,Y , i )

Q( X , Y , i ) TNj j = 1,....I

PTDF(
i =1

j ,k X ,Y ,i )

Q( X , Y , i ) TNj 1 j = 1,.I k = 1,..P (4)

where:

TNj (TNj1 ) is the transmission capacity (MW) of

the interconnection j in N (N-1) security;
j PTDF( X ,Y ,i ) is the distribution factor of the

bilateral transaction between the busses X (sending) and Y (receiving) on the interconnection line j;
j ,k PTDF( X is the distribution factor of the ,Y ,i )

bilateral transaction between X (sending) and Y (receiving) on the interconnection line j in the hypothesis of the outage of the interconnection line k (N-1 security); P is the number of outages included in the contingency set. Constraints (2) are lower and upper bounds on the allowed transactions. Constraints (3) and (4) represent the transmission limits respectively in N and N-1 security. The clearing process gives the allocated quantity

Q( X , Y , i ) (MW) for each bid, that can be charged by a payas-bid mechanism or by the Marginal Price (MPi) obtained by the linear combination of the Lagrange multipliers (dual variables) T j and T j of constraints (3) and (4) shown in
N N 1

the following formula:

MPi =

PTDF
I j =1

j ( X ,Y ,i )

T j +
N

PTDF
k =1
P I r =1

r ,k ( X ,Y ,i )

T r

N 1

It is worthy to notice that each Lagrange Multiplier (LM) gives the variation of the objective function for an increase of 1 MW of the right end side of the corresponding constraint. Note that the marginal price is zero if no congestion arises from the clearing process, or if the distribution factors of the examined bilateral transaction are zero in correspondence of all the congested interconnections. Moreover it can be shown that the marginal price is systematically lower than the bid price submitted to the auction, except for bids partially accepted (marginal bids) for which the marginal prices are equal to the offered ones. III. TESTS AND RESULTS The coordinated auctioning procedure has been applied to a test network representing an equivalent model of the interconnected UCTE system with reference to its extension at the year 2004. Therefore the south eastern system is not represented. The size of the network is of about 4200 busses, 6000 lines, 1500 transformers, 500 thermal generators and 550 hydro generators. In the simulation we assume that the Marginal Prices (MP) in the UCTE countries (see Table I) reflect the availability in each member of the interconnection of generation capability margins on different kind of power plants.
TABLE I ASSUMPTIONS ABOUT NATIONAL PRICES IN SOME EUROPEAN COUNTRIES

steam power plants feed by gas or oil. It is important to underline that the prices assumed in the simulation are not exactly consistent with the today production costs, but reflect the lack of homogeneity of these costs. Furthermore the price gaps were intentionally increased in order to better understand the results of the simulation. It is assumed that the market participants have perfect information about market prices and that, as a consequence, the willingness to pay for the attainment of the transfer capacities suitable to make feasible a desired transaction between importing and exporting countries is equal to the price gaps. In the following we present the results of two tests performed with the marginal prices of table I but assuming two different offer sets (case 1 and case 2) characterized by different strategies in supplying and demanding electrical energy. A. Case 1 Case 1 considers the offer set presented in table II, which describes: the bid code in the first column, the countries (second column) and the network busses (third one) interested by the offer (first the sending bus and then the receiving one), the amount of the transaction and the requested transmission capacity (in the fourth column); the price bid (in the fifth column). It has to be said that some of the requested quantities in the bids are intentionally set very large, in order to indicate the transfer from a generation area to a large load area including several busses and to make possible a synthetic presentation of the results. In this case, the receiving busses are in Italy, the Netherlands, Belgium, Germany and Spain (importing countries), while the sending ones are in Poland, Germany, Czech Republic, Switzerland, Slovenia and Hungary. Six transactions from France and Italy present bids at 40 Euro/MW (corresponding to the MP gap Italy - France) for a total demand of 5450 MW. Italy presents its offers for the completion of additional transactions to import power from Slovenia (40 Euro/MW, 600 MW), Poland (30 Euro/MW, 100 MW), Switzerland (40 Euro/MW, 400 MW) and Hungary (30 Euro/MW, 300 MW). Therefore Italy demands to import a total power of 6850 MW of which approximately 80 % coming from French producers. The results of the simulations carried out in N security are summarized in table III that furnishes the accepted amount and the marginal price in the fourth and sixth columns respectively. The last two columns bring back the Lagrange Multipliers (LMs) corresponding to the upper and lower bounds on the bids. The "N security" test evidences only one congested interconnection: the 220 kV line Lienz - Soverzene (Austria -

Country
France Slovenia Switzerland Poland Czech Republic Slovakia Hungary Germany Spain Belgium Italy The Netherlands

Marginal price [Euro/MWh]

10 10 10 20 20 20 20 40 45 50 50 50

Surplus on nuclear and hydro characterize the marginal prices of the first three countries in the table, surplus on coal or lignite are evident on the group of nations with marginal price 20 Euro/MWh. The first seven nations represent the exporting countries. In the other nations with higher price (importing countries) the marginal units are conventional

Italy) with a power flow of 313 MW and a LM equal to 518.1 Euro/MW. Italy imports 90 % of the required power (6197 MW respect to 6850 MW demands). The accepted transactions with France amount to 5450 MW (88.0 % of the total, all bids accepted), with Slovenia 347 MW (5.6 %) and with Switzerland 400 MW (6.4 %). The bids related to transactions with Hungary and Poland are not accepted. It has to pointed out that the network configuration of the Italian interconnection corridor with Switzerland doesnt take into account the operation of the new 380 kV double circuits line Robbia S.Fiorano, in service since January 2005.
TABLE II THE OFFER SET FOR CASE 1 Busses (source/sink) Golfech - Meerhout Vigy - Meerhout Paluel - Lelystad Isar - Maasvlakte Avoine - Wuergassen Blenod - Rocamoraroce Montezica - Hernani Paluel - Rubiera Tabarderie - Parma Muhlbach - Cislago Boctois - Bovisio Muhlbach - Parma Polanieca - Cagno Krsko Rome Teeoutanj5 Rome Muhlbach - Baggio Goesgen - Lacchiarella Goesgen - Meerhout Goesgen - Lelystad Dobrzena - Mitte Dobrzena - Eickum C1alb11 - Grohnde Nosovice - Wuergassen Paks - Cagno Quantity request [MW] 100 200 500 1400 300 300 500 350 1000 1200 1000 400 100 400 200 1500 400 1400 700 800 800 700 600 300 15150 Bid price [Euro/MW] 40 40 40 10 30 35 35 40 40 40 40 40 30 40 40 40 40 40 40 20 20 20 20 30

than those carrying out from the nuclear power plants in France and Slovenia.
TABLE III AUCTION RESULTS FOR CASE 1 (N SECURITY) Code 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Countr F-B F-B F - NL D - NL F-D F-E F-E F-I F-I F-I F-I F-I PL - I SL - I SL - I F-I CH - I CH - B CH-NL PL - D PL - D CZ - D CZ - D HU - I Total Q req Q acc Bid 40 40 40 10 30 35 35 40 40 40 40 40 30 40 40 40 40 40 40 20 20 20 20 30 MP LM Upper [Euro/MW] -6.70 72.06 -1.08 61.06 -5.26 77.99 8.94 2.10 -8.72 80.99 5.07 46.35 0.14 45.53 29.61 23.26 26.73 28.73 20.35 38.62 19.57 45.17 29.36 20.92 31.08 0 40.00 0 39.78 0.34 21.41 36.66 21.33 38.21 -3.65 63.34 -4.96 99.61 3.14 28.17 5.83 24.12 6.25 23.95 6.35 24.97 30.35 0 LM Lower 0 0 0 0 0 0 0 0 0 0 0 0 1.83 0 0 0 0 0 0 0 0 0 0 0.62

Code 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Country FB FB F - NL D - NL F-D F-E F-E F-I F-I F-I F-I F-I PL - I SL - I SL - I F-I CH - I CH - B CH - NL PL - D PL - D CZ - D CZ - D HU - I Total

[MW] 100 100 200 200 500 500 1400 1400 300 300 300 300 500 500 350 350 1000 1000 1200 1200 1000 1000 400 400 100 0 400 147 200 200 1500 1500 400 400 1400 1400 700 700 800 800 800 800 700 700 600 600 300 0 15150 14497

As far as concerns the physical power flows, transits are also high on the Swiss-Italian frontier, that is close to a lot of withdrawal busses (Baggio, Cislago, Bovisio, Lacchiarella and Cagno, nodes of the Lombardia Region). The analysis of the LMs of active constraints on offers shows that bids with positive (negative) LMs are completely accepted (rejected). The transactions with the highest LM are those involving France and Switzerland as sending areas and Belgium and the Netherlands as receiving areas. Furthermore it is interesting to notice that thanks to the topological characteristics of the network, these transactions have a netting effect on the congested line Lienz - Soverzene connecting Austria and Italy (the PTDF is -0.01 MW/MW). The offers for the transactions from Polaniec (Poland) and Paks (Hungary) to the Italian node of Cagno are not accepted, since their high PTDFs on the congested corridor (approximately 0.06 MW/MW) and their bid prices lower

It is emphasized that completely accepted transactions always have a marginal price lower than the bid, while those ones with marginal price higher than the bid are totally rejected (see transactions 13 and 24 in table II). If the two prices are equal, it is the case of the so-called "marginal" offers that are only partially accepted: in the considered case the transaction number 14 from Krsko (Slovenia) to Rome. The presence of bids with negative marginal price, candidates to receive revenues from the auction mechanism (using the marginal price method), is explained by the fact that their acceptance alleviate the congested interconnection. As an example, Fig. 1 depicts the impact of a 100 MW transaction from Golfech (France) to Meerhout (Belgium) on the CBE of some UCTE countries. The power balances of each country resulting from the auction of the CBTC, complying with a N security criterion are shown in table IV. The simulation test of the coordinated auctioning procedure in N-1 security is performed considering the same offer set and a contingency list including the outages of all the interconnection lines. In each contingency case a temporarily overload of 20 % is admitted for each interconnection line. The total allocated transmission capacity is equal to 14274 MW, a little bit lower than the value obtained in N conditions (14497 MW). Only one congestion is detected affecting the line 220 kV Divaca - Padriciano f the outage of the 380 kV line Divaca - Redipuglia (both lines belong to the interconnection Slovenia - Italy) with a LM of

164.2 Euro/MW. Table V.

The

auction

results

are

shown

in
TABLE V AUCTION RESULTS FOR CASE 1 (N-1 SECURITY) Code 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Countr F-B F-B F - NL D - NL F-D F-E F-E F-I F-I F-I F-I F-I PL - I SL - I SL - I F-I CH - I CH - B CH-NL PL - D PL - D CZ - D CZ - D HU - I Total Q req Q acc Bid 40 40 40 10 30 35 35 40 40 40 40 40 30 40 40 40 40 40 40 20 20 20 20 30 MP LM Lower [Euro/MW] -3.26 61.86 -0.75 57.69 -2.78 68.14 3.22 12.04 -4.75 66.86 2.21 42.67 0.06 45.63 13.06 53.37 11.65 54.31 8.66 55.57 8.64 61.71 12.46 50.05 20.56 16.98 53.87 0 57.97 0 9.08 56.31 8.87 55.74 -2.40 58.80 -3.19 91.51 5.04 24.81 7.50 21.04 8.63 18.08 8.81 20.47 30.00 0 LM Upper 0 0 0 0 0 0 0 0 0 0 0 0 0 17.61 24.67 0 0 0 0 0 0 0 0 0

Fig. 1. CBE modifications caused a 100 MW transaction from Golfech (France) to Meerhout (Belgium). TABLE IV POWER BALANCE RESULTS FOR CASE 1 (N SECURITY)

Country
Czech Rep. France Poland Slovenia Switzerland Belgium Germany Italy Netherlands Spain Hungary

Import [MW]
0 0 0 0 0 1700 3200 6197 2600 800 0

Export [MW]
1300 7350 1600 347 2500 0 1400 0 0 0 0

Balance [MW]
1300 7350 1600 347 2500 - 1700 - 1800 - 6197 - 2600 -800 0

[MW] 100 100 200 200 500 500 1400 1400 300 300 300 300 500 500 350 350 1000 1000 1200 1200 1000 1000 400 400 100 100 400 0 200 0 1500 1500 400 400 1400 1400 700 700 800 800 800 800 700 700 600 600 300 24 15150 14274

TABLE VI THE OFFER SET FOR CASE 2 Busses (source/sink) Tabarderie Maasvlakte Avoine - Meerhout Paluel - Lelystad Blenod - Rocamoraroce Montezica - Hernani Paluel Rubiera Paluel - Meerhout Boctois Bovisio Muhlbach Parma Polaniec A Cagno Krsko - Rome Te Eoutanj - Rome Muhlbach Baggio Goesgen - Lacchiarella Goesgen Cislago Goesgen - Wuergassen Dobrzen - Mitte Dobrzen Ciserano C1alb - Parma Nosovice - Parma Paks Cagno Quantity request [MW] 2000 1000 1000 300 500 200 1500 500 400 100 400 200 700 400 1300 900 800 800 700 600 300 14600 Bid price [Euro/MW] 40 40 40 35 35 40 40 40 40 30 40 40 40 40 40 40 20 30 30 30 30

Code 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Country F - NL F-B F - NL F-E F-E F-I F-B F-I F-I PL - I SL - I SL - I F-I CH - I CH - I CH - D PL - D PL - I CZ - I CZ - I HU - I Total

Considering the localization of the congestion, it can be understood that the offers totally rejected are the ones from Slovenia to Italy, while the partially accepted transaction is the one between the busses of Paks (Hungary) and Cagno (Italy). As already observed, the bids between France/Switzerland and Belgium/Netherlands have a negative marginal price thanks to their de-congesting effect also on the Slovenian - Italian frontier. In N-1 security test, Italy imports 5974 MW with a reduction of 223 MW with respect to the case in N security. B. Case 2 Case 2 considers the offer set presented in table VI with some important differences. Italy requires more imported power from Poland and Czech Republic, while reducing the volume of transactions with France. Belgium and the Netherlands increase their import requirements from France. Germany imports are based on transactions with Switzerland and Poland only.

The country energy balances of the test in N-1 security are close to those previously shown in table IV for N security: the changes are for Slovenia (no accepted transactions), Poland (total export 1700 MW) and Hungary (export 24 MW).

In N security two interconnection lines are congested: the 380 kV line Avelin - Avelgem (France - Belgium), with a LM equal to 107.2 Euro/MW and the 220 kV line Lienz Soverzene (Austria - Italy), with a LM equal to 387.7 Euro/MW. The cleared quantities and the marginal prices (MP) of each transaction are shown in table VII. All the bids are totally accepted, except for the number 6 Paluel - Rubiera (F-I) and 7 Paluel - Meerhout (F-B), whose MP are equal to the offer prices. The composition of the marginal prices presented in table VIII shows that the France Belgium transaction has the effect of reducing congestion on the Austria-Italy border, but it has a strong impact on the France - Belgium congestion (Paluel is in Northern France near to the Belgian border). In contrast, the France - Italy transaction has a negative effect not only on the Italian interconnection, but also on the France - Belgium border. The table presents also the price composition for the bid "4" corresponding to a transaction from France (Blenod, close to the German border) to Spain, that is the only one with a negative price. This is related to the presence of a loop flow starting from France and crossing Germany, the Netherlands and Belgium before returning to France. This case points out the importance of parallel flows in the strongly-meshed European system: the total PTDF on France - Belgium border (two 380 kV lines plus two 220 kV) is -0.071 MW/MW, while the PTDF on the Avelin - Avelgem line is -0.098 MW/MW. The country power balances, presented in table IX, to be compared with the ones in table IV, put in evidence that also with similar import/export total amounts, the different demand/supply strategies determine a remarkable change in network utilization and congestion. The test of the procedure in N-1 security is characterized by the presence of two network congestions: the 380 kV line Avelin - Avelgem (France - Belgium), with a LM of 105.7 Euro/MW and the line 220 kV Divaca - Padriciano in the case of the outage of the 380 kV line Divaca -Redipuglia (both lines of interconnection Slovenia - Italy) with a LM of 198.9 Euro/MW. Two bids for transactions from Slovenia to Italy are rejected, due to their impact on the congested Italian border. The offers Paluel - Meerhout (F-B) and Paks - Cagno (HU-I) are only partially accepted. IV. RESULTS FOR COST/REVENUES ALLOCATION A. Case 1 The total willingness to pay (that is the sum of the products of the amounts of demanded transmission capacity multiplied by the offer prices) is of 495000 Euro, while the value of the objective function is 472875 Euro for the N security test. Such value would correspond to the volume of the market in case of pay-as-bid valorization method. Instead, using the MP method, the economic volume of the market would be equal to 162039 Euro, that is 34% of the previous value.

TABLE VII AUCTION RESULTS FOR CASE 2 (N SECURITY) Code 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Countr F - NL F-B F - NL F-E F-E F-I F-B F-I F-I PL - I SL - I SL - I F-I CH - I CH - I CH - D PL - D PL - I CZ - I CZ - I HU - I Total Q req Q acc Bid 40 40 40 35 35 40 40 40 40 30 40 40 40 40 40 40 20 30 30 30 30 MP LM Upper [Euro/MW] 30.30 16.74 33.95 9.43 32.17 13.49 -6.77 64.69 0.18 45.48 40.00 0 40.00 0 25.56 31.92 20.76 37.84 15.66 26.98 25.94 17.85 26.25 20.80 14.49 50.30 13.84 53.53 12.45 52.22 4.65 83.00 4.43 26.01 19.10 19.38 23.63 11.33 23.70 11.04 16.67 23.45 LM Lower 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

[MW] 2000 2000 1000 1000 1000 1000 300 300 500 500 200 69 1500 1122 500 500 400 400 100 100 400 400 200 200 700 700 400 400 1300 1300 900 900 800 800 800 800 700 700 600 600 300 300 14600 14091

TABLE VIII MARGINAL PRICE COMPOSITION FOR CASE 2 (N SECURITY) Busses (source/sink) Blenod - Rocamoraroce Paluel Rubiera Paluel - Meerhout Constraint F-B [Euro/MW] -10.57 17.84 42.95 Constraint F-I [Euro/MW] 3.80 21.16 -2.95

Code 04 06 07

Ends F-E F-I F-B

TABLE IX POWER BALANCE RESULTS FOR CASE 2 (N SECURITY)

Country
Czech Rep. France Poland Slovenia Switzerland Belgium Germany Italy Netherlands Spain Hungary

Import [MW]
0 0 0 0 0 2122 1700 6469 3000 800 0

Export [MW]
1300 7591 1700 600 2600 0 0 0 0 0 300

Balance Diff case1 [MW] [MW]

1300 7591 1700 600 2600 - 2122 - 1700 - 6469 - 3000 -800 300 0 + 241 + 100 + 253 + 100 - 422 + 100 - 272 - 400 0 + 300

For N-1 security, the value of the objective function in the solution point, corresponding to the total payments in pay-asbid case, is 462716 Euro, slightly lower than the N security case. Adopting the MP valorization method, the economic volume of the market goes down to 77861 Euro (17%), remarkably lower than in N security. As far as concerns the allocation of the revenues deriving

from the explicit auction, the use of the method based on the impact of the transactions on the CB (presented as criterion 1 in the previous section) gives place to the subdivision indicated in Table X. Italy and France, the largest participants to the auction, are the countries mainly involved in the compensation process, while Belgium (more) and Switzerland (less) (thanks to the marginal price valorization) can require the restitution of part of the revenues obtained through the explicit auction. Instead, when using a distribution according to criterion 2 (congested corridors), the total amount collected in the auction is fairly subdivided between the countries interconnected from the congested connection: in the N security case the payment to Austria and to Italy would be 81019 Euro (236437 Euro with pay-as-bid method). In the case of N-1 security, Italy and Slovenia would receive 38930 Euro (231358 Euro with pay-as-bid method).
TABLE X ALLOCATION OF REVENUES FOR CASE 1

auction (criterion 1) is indicated in Table XI.

TABLE XI ALLOCATION OF REVENUES FOR CASE 2

Pay-as-bid N sec N-1 sec [Euro] [Euro]

Czech Rep. France Poland Slovenia Switzerland Belgium Germany Italy Netherlands Spain Hungary Total 9000 149816 32000 12000 52000 42434 26000 116882 60000 14000 4500 518631 19500 150034 21500 0 52000 40034 26000 106209 60000 14000 3209 492485

Marginal price N sec N-1 sec [Euro] [Euro]

15382 101818 10197 7814 12957 39410 3868 61980 46383 -972 2501 301338 14781 97477 11354 0 8685 37186 5206 47458 46787 -1131 3209 271012

Pay-as-bid N sec N-1 sec [Euro] [Euro]

Czech Rep. France Poland Slovenia Switzerland Belgium Germany Italy Netherlands Spain Hungary Total 13000 143500 16000 6938 50000 34000 40500 123937 31000 14000 0 472875 13000 143500 17500 0 50000 34000 40500 118858 31000 14000 358 462716

Marginal price N sec N-1 sec [Euro] [Euro]

4091 60197 3587 6915 -28 -2999 12627 73649 3205 796 0 162039 5662 25629 6048 0 -1021 -1917 12224 30089 442 347 358 77861

V. CONCLUDING REMARKS The article presented a new procedure for the allocation of cross border transmission capacity based upon the coordinated auctioning method proposed by ETSO, the association of transmission system operators in Europe. The procedure has been applied to a large network model representing the western part of the UCTE system and proved its robustness. The coordinated explicit auction method shows its effectiveness in providing economic signals to the market participants, correlated to the impact of the cross border electricity trades on the congested corridors. The coordinated auction results show that the method of "marginal price" valorization, despite a higher volatility of economic volumes of the market, guarantees a lower expenditure from the importing countries, with respect to the choice of "pay as bid" valorization of accepted bids. It has to be said that one of the critical aspects of the coordinated auctioning method consists in the difficulty to a priori determine the correct valorization of the transmission capacity acquisition, thing that would require a perfect knowledge of the energy prices in the interconnected electric system. However, this matter is the same one that characterizes the bilateral auction models now in place in several European countries. Finally, two proposals of ETSO for the allocation of auction revenues were analyzed. With the first criterion, the revenues, even if in inhomogeneous way, are allocated to all the countries participants to the explicit auction. With the second criterion, some unexpected results were obtained (as an example, the allocation of revenues to countries not participating to the auction mechanism). Future works will be related to the application of the coordinated auctioning procedure to a future scenario, pertinent to the year 2010, in which the network model will

The comparison of the two methods shows large differences and somewhat irrational solutions for the case of criterion 2: in N security Austria would receive a compensation even not participating to the auction mechanism (and therefore not receiving compensation if the first criterion is applied). In the N-1 test Slovenia would get compensation, even if all its demands for acquisition of cross border transmission capacity are rejected. B. Case 2 The total willingness to pay is of 539000 Euro, while the value of the objective function (market volume in case of payas-bid valorization method) is 518631 Euro for the N security test. Instead, using the marginal price method, the economic volume of the market is 301338 Euro (58 %). For N-1 security test, the value of the objective function (market volume in case of pay-as-bid valorization method) is 492485 Euro. Instead, using the marginal price method, the economic volume of the market is 271012 Euro (55 %). The allocation of the revenues deriving from the explicit

include also the south eastern system. VI. REFERENCES

[1] Frontier Economics, Consentec, "Analysis of Cross - Border Congestion Management Methods for the EU Internal Electricity Market", Final Report, June 2004. [Online]. Available: http://www.consentec.de/ ETSO, "Evaluation of congestion management methods for cross-border transmission", November 1999. [Online]. Available: www.etso-net.org ETSO, Indicative values for Net Transfer Capacities (NTC) in Europe, Summer 2005, working day, peak hours. [Online]. Available on www.etso-net.org A. Ehrenmann, Y. Smeers, Inefficiencies in European Congestion Management Proposals, 23 December 2004. [Online]. Available on http://www.econ.cam.ac.uk/electricity/ L. Olmos, I. Perez Arriaga, A plausible congestion management scheme for the internal electricity market of the European Union, March 2004. [Online]. Available on www.iit.upco.es Regulation (EC) no 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for crossborder exchanges in electricity, Official Journal of European Union, 15 July 2003. ETSO, Co-ordinated Auctioning: a market-based method for transmission capacity allocation in meshed networks, Final Report, April 2001, available on www.etso-net.org ETSO, Reconciliation of market splitting with coordinated auction concepts: Technical Issues, Draft Discussion Paper, February 2002. [Online]. Available: www.etso-net.org EuroPEX, Using Implicit Auctions to Manage Cross-Border Congestion: Decentralised Market Coupling, 8 July 2003. [Online]. Available: http://www.europex.org KEMA Consulting, "Analysis of the network capacities and possible congestion of the electricity transmission networks within the accession countries", Version 1.3, June 2005. [Online]. Available: http://europa.eu.int/comm/energy/electricity/publications/doc/kema_accessi on_countries_final_june_2005.pdf Mathworks, Programmer's manual Matlab, Version 6.0 P. Marannino, F. Zanellini, L. Ballabio, P. Bresesti, Cross border sensitivities and tracing flow procedures to assess the use of transmission capacity of the UCTE network, Proceedings of the VI Bulk Power System Dynamics and Control Symposium, Cortina dAmpezzo, Italy, August 2004. M. Liu, G. Gross, "Effectiveness of the Distribution Factors Approximations Used in Congestion Modeling", Proceedings of the XIV PSCC Conference, Sevilla, Spain, June 2002. R. Baldick, "Variation of distribution factors with loading", IEEE Transactions on Power Systems, Vol. 18, No. 4, November 2003. D. Chianiotis, J. M. Coulondre, L. Saludjian, CASSIOPEE: A Simulation Tool for Coordinated Congestion Management Proceedings of the VI Bulk Power System Dynamics and Control Symposium, Cortina dAmpezzo, Italy, August 2004.

VII. BIOGRAPHIES
Paolo Marannino (M 1986, SM '95, F 2001) is Professor of Electric Energy Systems at Universit degli Studi di Pavia. He received the Dr. degree in Electrical Engineering from the University of Bari (Italy) in 1968. In 1970 he joined the Automation and Computation Research Center of ENEL in Milan, where he was responsible for research activities in the field of power system analysis, optimization and control. His main interests are power system optimization, voltage control and electricity market restructuring.

[2] [3]

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Fabio Zanellini (StM 00, M 03) received his M.Sc. degree (2000) and his Ph.D. degree (2004) in Electrical Engineering at the Universit degli Studi di Pavia, where he is now Assistant Researcher. His main interests are voltage stability, power system optimization and electricity market restructuring. He is a member of CIGRE and of AEIT, the Italian Electrotechnical Association.

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Paola Bresesti (M. 03) received her Doctorial Degree in EE from University of Pavia, Italy, in 1991. She joined CESI in 1991 where she currently is the Head of Network Studies Unit in T&D Network Department. Her main research interests include power system planning and operation, power system modeling and power system economics.

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Riccardo Vailati received his M. Sc. degree in El. Engineering in 2000 from Universit degli Studi di Pavia, Italy. Here he was for one year assistant researcher under contract at the Department of Electrical Engineering, in the field of power system optimisation. Since 2001 he joined CESI in Milan, as T&D systems consultant. His area of interest includes power system economics and analysis. He is a member of AEIT, the Italian Electrotechnical Association.