We understand that the introduction of the new CSP market role gives rise to many questions. That's why we're sharing the most frequently asked questions about congestion management along with the associated answers. This Q&A will be kept up-to-date by adding questions from customers and market participants with the associated answers.
What is congestion?
Congestion occurs when the demand for the transmission of electricity exceeds the existing grid's available transmission capacity.
How is transmission capacity determined?
We do this based on the requirements in the new Grid Code: 'In accordance with the Grid Code, available transmission capacity is determined based on the applicable grid design criteria and operational safety limits. See Article II of the Draft Decision.'
What is a congestion area?
A congestion area is an area in which the electrical grid's maximum transmission capacity has been reached. This means that there is no latitude for granting transmission rights to customers (both new connections and GTV increases). Expansion is necessary first or extra capacity must be made available - e.g. via the use of congestion management.
Do malfunctions arise due to congestion?
No. Grid operators monitor the safety and supply reliability of the electrical grid. Therefore, in heavily loaded electrical grids, grid operators do not permit new connections. And existing connections cannot use any more capacity than is permitted by their contract.
How many congestion areas/areas of scarcity/bottlenecks exist?
The congestion areas are shown on the following web pages:
Who determines whether an area is a congestion area (and on what basis)?
The grid operators do this. They have insight into the capacity and use of the electrical grid. They are also responsible for the reliability and supply reliability and therefore ensure that the grid does not become overloaded.
What is congestion management?
Congestion management is a regulated form of flex market intended as a temporary measure to tide things over until the grid can be reinforced. The objective is to prevent the refusal of transmission requests ("imposing a transmission limitation") (requests from new connected parties, or requests for increases from existing connected parties). With congestion management, the limited capacity on an electrical grid is allocated at the moment that demand for electrical transmission exceeds the grid's capabilities. The grid operators do this by asking (large) consumers and producers of electricity to:
Supply less to the grid
Supply more to the grid
The capacity on the grid arising from this can be allocated by the grid operator among the customers on the waiting list. This enables grid operators to make more efficient use of the available, electrical grid capacity, and to assign transmission capacity to more customers until expansion of the network has been completed. Congestion management is an interim solution. It is an allocation mechanism by means of which the available transmission capacity can be better used; it provides temporary extra capacity to answer more customers' demand for transmission capacity. It does not create a structural solution. The available transmission capacity remains the same. For this reason, grid operators will be expanding the electrical grid at many locations in the coming years.
What if congestion management is cheaper than fortifying the grid?
Congestion management is a temporary measure to tide things over until the grid can be reinforced. The objective is to honour (some of the) transmission requests to provide both new and existing customers the desired transmission capacity. In the meantime, the grid operator could consider an approach of "reinforcement unless".
How is the decision made to use congestion management?
Whenever Liander, as a result of a transmission request, expects physical congestion in an area that cannot be resolved with technical solutions, then Liander must post a pre-announcement on our website indicating this. Liander then start a congestion management study. For additional information, see the chapter on congestion management studies.
The desire to have "sufficient competition" is understandable, but is not a necessary condition. Or do you think otherwise?
This is not a necessary condition, but competition does indeed help us to manage dealing with congestion at a reasonable cost by means of market-based congestion management. It also helps us remain under our cost ceiling for the congestion area and obtain a realistic price for resolving the congestion. So it's not a necessary condition, but is indeed desirable for the grid operators. Should a market-based solution turn out to be insufficient, then a connected party/CSP can be required, under certain conditions, to participate in congestion management, i.e. non-market-based congestion management.
Will there also be the possibility of offering aggregated flex capacity?
GOPACS already offers the possibility of flex capacity in congestion areas. For this, the CSP must contact the grid operator to discuss this. Concerning the official CSP authorisation and related processes on GOPACS: this is implemented on GOPACS. The conditions for aggregation are that all aggregated connections be part of the same BRP (Balance Responsible Party), measured remotely, allocated at quarter levels and be located within the same congestion area. For additional information about when a CSP can make offers for a group, see articles 9.32 and 9.34 of the Electrical Grid Code.
The role of connected parties
What role do customers play in congestion management?
Naturally, customers play a significant role in providing local flexibility in locations where the grid has reached maximum capacity. Participating in congestion management provides extra earning opportunities for large-scale consumers and large producers of solar and wind-generated electricity with flexible capacity or, in the future, for customers, with smaller connections, that join together via a Congestion Service Provider (CSP). Furthermore, this contributes to the sustainability of the grid since more sustainable generation can be achieved.
The role of market parties
What role do market parties play in congestion management?
CSPs are the parties that actually provide access to flexible capacity to Liander. For these parties, it's particularly important that they have a good understanding of the necessity of providing flexibility by means of the various congestion management products, and that they indicate any possible preferences for the way in which (IT) they will provide this to Liander. In addition, the BRPs play an important role in providing transmission prognoses to the grid operator.
Are long-term contracts (mandatory provision contracts, capacity-limiting contracts with and without call-off) always standard contracts or is customisation also possible?
We aim for standardisation as much as possible, but customisation is sometimes necessary. Mainly in the areas with customers (LDN).
What is the time period for "long-term"? Is that the entire congestion period or a few years?
Long-term contracts can vary in length. This can last for the entire period of congestion, but it can also be shorter depending on the situation.
Can long-term contracts also be made available to TenneT? Or only to other regional grid operators?
Long-term contracts will be made available primarily between TenneT and the regional grid operators. Grid operators have less need for this among themselves since there is limited overlap in grid areas.
Who is responsible for submitting transmission prognoses?
The ultimate responsibility for submitting a transmission prognosis lies with the connected party. The submission route for this runs via the BRP.
Can on-call D-1 offerings be placed before 7 am (D-2)?
Most certainly. D-1 (Day Ahead) should be seen here as the entire period prior to the connection of the Day Ahead market. At the same time, it should be said that the accuracy of our forecasts decreases significantly the longer prior to the day of delivery that they are made ("D").
Are the forecasts used as a baseline for the amount of potentially needed congestion relief?
The forecasts are used for grid safety analysis, and to determine whether congestion will occur.
What are the financial boundaries?
According to the ACM, the upper financial limit must be proportional to the (social) value of the extra transmission that can be facilitated using congestion management. If no financial cap were set, this would mean that grid operators would have to devote unlimited financial resources to ask customers to adjust their demand for transmission in return for payment, even if the social benefits of the additional electricity transported amounted to less than the costs of congestion management. Therefore, the regulations state that grid operators need not apply congestion management for transmission demand for each congestion area in instances where the cost of congestion management during the period for which the congestion area is designated exceeds the financial limit. This financial boundary is €1.02 per MWh of the amount of energy that can be transmitted with the available transmission capacity in the congestion area during the congestion period. The formula for calculating the financial boundary is: capacity bottleneck [MW] * expected duration of congestion [h] * factor (€1.02 per MWh).
Who shoulders the costs?
In addition to expanding the grid, the grid operators, also invest in congestion management. This way, we can utilise the electrical grid optimally in areas where capacity shortages occur. These costs include fees paid by the grid operators to parties that help us resolve congestion. Since we work with public monies, a financial boundary has been established by the ACM for the grid operators' implementation of congestion management. Efficiency costs are included in the determination of grid operators' permitted revenues and rates (and mainly end up in consumers' rates). However, this does not result in precise reimbursement coverage.
New Grid Code
What's the purpose of these new regulations?
Increasing possibilities for the deployment of flexibility. The regulation contains tools to unlock grid flexibility in congestion areas by means of congestion management.
Congestion management as a measure to allocate additional transmission rights ahead of time in anticipation of grid reinforcement anyway. The flexibility tools in item 1 can be deployed for the implementation of congestion management.
Will congestion management studies be done in all of the red-zone scarcity areas in accordance with the new Grid Code?
All areas will be re-evaluated. However, the question is: 'how quickly can that be done?' The grid operators intend to do this within one year, taking the remaining duration of the congestion into account (e.g. areas in which reinforcement is planned within six months will not be re-evaluated).
Congestion management studies
What is involved in a congestion management study?
In a congestion management study, the grid operator takes a look at whether there are opportunities to apply congestion management measures in a particular congestion area. For this, a technical analysis, a financial analysis and a market analysis are performed of the grid and the possibilities. Extensive market consultation is also performed to check whether there are sufficient customers and/or market participants who can deal with their capacities flexibly. Based on these insights, the grid operator publishes a final report explaining all parts of the congestion management study. The outcome of the study (whether or not congestion management is possible in the area, or which form of congestion management can be used) is based on this.
Is the determination of whether natural growth is at issue part of the study?
Yes. In cases of autonomous/natural growth at small consumers, there is no possibility to refuse applications. For this type of natural growth among small consumers, the grid operator must estimate the amount of the growth. An inaccurate estimate can result in more congestion, and this can impact whether market-based or non-market-based congestion management is possible.(See the "Services" section for additional information about market-based and non-market-based congestion management).
Does a red area stay red until the results of the re-evaluation conclude otherwise?
Yes. In any case, no transmission request will be honoured until the re-evaluation studies have been completed. The conclusion of the re-evaluation study determines whether this will be possible or not, unfortunately.
How are requests handled in areas where the study is not yet completed?
Once the customer has issued the assignment, these requests are put on the waiting list. Once the study is completed, it is clear which requests, following the sequence of their receipt, can be approved.
What is the technical boundary exactly?
It's good to mention that the mount of extra transmission capacity that can be created in a grid using congestion management is finite. After all, the performance of congestion management does not change the physical transmission capacity. As long as the implementation of the reinforcement lasts, congestion management allocates the physical transmission capacity among customers by adjusting the feed-in or take-up at specific moments. This has limits, of course, considering grid design criteria and operational safety limits in a (portion) of a grid. Under the new regulations, the ACM asks grid operators to approach 110-150% of the technical limit, depending on the presence of controllable capacity. So the aim of the congestion management studies is to find an appropriate solution in which sufficient measures can be taken to limit the risk of congestion management for the other connected parties.
How does the grid operator intend to safeguard the technical boundary?
The technical boundary is a limit above which the grid operator is not authorised to assign any further capacity on the basis of congestion management.
How will things work in practice if customers are soon forced to participate in congestion management?
At this time, grid operators are working out together how they will apply the published regulations in practice. In doing so, they will align with market-based processes as much as possible. At the end of May we started preparing and implementing the new regulations for congestion management. At that point in time we had six months — i.e. until November 2022 — to incorporate these into our business processes.
Is CSP also necessary for non-market-based congestion management?
A CSP is mandatory for non-market-based congestion management. The connected party must have itself be represented by a CSP.
Under which circumstances will connections above 1MW be required to participate in non-market-based congestion management and what are the associated obligations?
In general terms, it can be said that an obligation will be imposed if it turns out that market-based congestion management doesn't work. The grid operator will issue a tender and connected parties will be asked to offer their own flexible capacity to the grid operator at regulated maximum rates.
Are these rates for non-market-based congestion management already available and where can they be found?
The Grid Code offers a clear framework for the compensation for generated power. These rates will be used.
Wouldn't it be better to have an independent body perform the CSP procedure?
The CSP procedure according to the same principle as the BSP procedure (Balancing Service Provider). According to the Grid Code, grid operators must set up and design the procedure. This also concerns a specific role for providing a service to the grid operators.
Is a single CSP authorisation sufficient for all of the grid operators?
The CSP authorisation applies nationally, i.e., to all grid operators.
Can multiple CSPs be registered from a single legal entity?
No. Only one single authorisation is granted to a single party.
Should a CSP lose its authorisation, does that apply to each connection or entirely as a CSP?
Entirely as a CSP.
What about the delivery reliability of congestion products in relation to CSP? Do they also require financial surety or can simply anyone become a CSP?
Accreditation as a CSP is not related to financial sureties and any party is free to initiate CSP accreditation.
A CSP is optional for capacity limitation. Does this still require a course of pre-qualification? Or does this apply only to re-dispatch?
Does this concern a fixed period of time? In that case, almost certainly not. Does this concern on-call capacity? In that case, additional things can be requested, such as a trial call-in and the question of how this will be ensured during weekends, for example.
Who needs to make the connected parties aware of congestion management?
Both the grid operator and the CSP. This is why the grid operator informs both the connected party (with a call to be represented by a CSP, if necessary) and the CSPs. We also see a role for industry associations.
The extent to which switching capabilities and processes are already in place will vary greatly from one connected party to the next. How will grid operators deal with this?
We are also quite concerned about this. Also, for weekend and evening supply calls, for example. We are still looking at how to respond to this properly, but we are certainly open to suggestions. We are therefore calling on connected parties in such cases to engage a CSP. This is also why we prefer to target larger connected parties, on the assumption that automation involves relatively lower costs for them.