ECONOMIC AND MARKET IMPACTKey achievements of international cooperation and their scale

Implementation of the Flow-Based Marked Coupling mechanism implemented in CORE Region

Since 8 June, 2022, the CORE region has had a single electricity market coupling mechanism launched, using a method that optimises available transmission capacity based on physical electricity distribution (flow-based). This will make electricity trading more efficient, and will respond better to the challenges of the energy transition.

The main objective of the project was to establish a mechanism to take into account the interdependencies between trade transactions at each market area boundary and power flows in the coupled power system.

This mechanism is known as the Flow-Based Allocation (FBA) method. The computational algorithm of the FBA method takes into account a number of parameters and seeks an optimal path for electricity exchange, taking into account, as far as possible, realistic operating conditions of the power grid between market areas within the Core region. In other words, the solution being implemented will allow better integration of physics into the market world, which was not possible with the Available Transfer Capacity (ATC) method used to date.

16 transmission system operators and 10 energy exchanges (Nominated Energy Market Operators, NEMOs) were involved in preparations for the launch of the CORE Flow-Based Market Coupling. The CORE region covers the market areas of Austria, Belgium, the Czech Republic, Croatia, France, Netherlands, Luxembourg, Germany, Poland, Romania, Slovakia, Slovenia and Hungary. The area is home to 278 million people, and annual energy consumption is about 1,500 TWh.

Launch of the European Single Intra-Day Coupling (SIDC) mechanism at the Polish-Slovak border

On November 29, 2022, Slovakia joined the SIDC. In the context of the Polish bidding zone, this means changing the rules for allocating transmission capacity and energy commercial exchanges on the power connection linking the market areas of Poland and Slovakia in the intra-day horizon from the explicit method (a market participant enters into separate contracts for transmission capacity and for energy) to the implicit method (a market participant enters into only one contract for energy within the available transmission capacity). From the Polish perspective, Slovakia's joining SIDC marks the closing of the process of integration with the European intra-day market.

Synchronisation of Ukraine and Moldova

Since the launch of the project, PSE has been involved in expanding the Continental Europe (CE) system to include the systems of Ukraine (UA) and Moldova (MD). In 2017, an agreement specifying the conditions for the synchronous connection came into force. In December 2021, analytical works were completed that determined the scope of countermeasures needed to be implemented in the UA system before synchronisation.

On the day the first test of island operation of UA/MD systems began, which was one of the conditions included in the aforementioned agreement, i.e. on February 24, 2022, the Russian Federation (RF) invaded Ukraine. As a consequence of the decision not to return to the IPS/UPS system and the TSOs' requests from the UA and MD for emergency synchronisation, these systems were connected synchronously to the CE on March 16, 2022.

Since synchronisation, PSE representatives have actively participated in the works of a working group functioning within the CE, coordinating alignment with technical and formal conditions by UA and MD operators.

As of June 2022, the CE TSOs began the process of gradually opening capacity for trading on the UA/MD-CE profile – initially at 100 MW. At the end of 2022, capacity in the UA/MD direction was 700 MW at night (from 10:00 pm to 5:00 am) and 600 MW during the rest of the day, while in the CE direction it was 300 MW. As of June 2023, the permitted exchange volume in the UA direction was 1200 MW, while in the CE direction it was 400 MW. A multilateral agreement for emergency supplies from the CE system to UA (MLA) was concluded in March 2023.

Reconstruction of 400 kV Rzeszów-Chmielnicka connection

In July 2022. PSE and Ukrenergo signed a framework agreement defining the principles of cooperation in the reconstruction at 400 kV of the closed Rzeszów-Chmielnicka connection, including assumptions on the provision and allocation of capacity. The huge scope of works required to reopen the connection, which has been closed for decades, was completed in a very short period of time. After a voltage and load test, the line was put into service on May 1, 2023. Since mid-May 2023, transmission capacity on the Polish side of the connection in the direction to and from UA has been made available by PSE through unilateral auctions. Capacity on the UA side is made available by the Ukrainian TSO, including in unilateral auctions. According to current plans, the process of making capacity available through coordinated auctions should be launched in early 2024.

Synchronisation of the Baltic states' systems

PSE is actively involved in the process of extending the synchronous system of Continental Europe (CE) with the systems of the Baltic states (BS). In October 2018, the CE TSOs agreed to launch a relevant extension procedure. It set up a working group to coordinate the process, headed by a representative of PSE.

In May 2019, the agreement specifying the conditions for the future synchronous connection of the BS system to the CE system entered into force (CFI Agreement). The CFI Agreement contains the so-called set of requirements, which is a list of detailed technical conditions required to be implemented by BS TSOs to ensure secure operation of the systems after synchronisation. One of the main infrastructural elements included in the set is the Poland-Lithuania DC submarine link (Harmony Link). In 2021, a series of study works were started to prepare the systems and the BS TSOs for synchronisation in 2025, as stipulated in the provisions of the CFI Agreement. As a result of the Russian aggression against Ukraine, analytical works were started to assess the possibility of synchronising the BS and CE system earlier. The results of the works are expected to be available in the third quarter of 2023.

In December 2019, PSE and LITGRID received €10 million in funding from the EU's Connecting Europe Facility (CEF) for activities carried out as part of the preparatory phase of this project. In December 2020, PSE and the BS TSOs signed a grant agreement with the EU's Innovation and Networks Executive Agency (INEA) awarding €719.7 million in funding for Phase II synchronisation projects, including €492.5 million for Harmony Link's implementation phase. In May 2021, PSE and LITGRID made positive investment decisions, thus the project moved from the preparation phase to the implementation phase. In 2021, PSE and Litgrid announced auctions for the selection of a converter station contractor in Poland and Lithuania, respectively, and an HVDC cable contractor. In April 2023, both procedures were cancelled – both TSOs are carrying out works to reorganise the project's implementation assumptions.

Currently, BS systems operate under the IPS/UPS system, which geographically covers areas of the former Soviet Union Republics. The synchronisation of the BS systems with the CE, scheduled for 2025, is part of the European Energy Union concept and an example of solidarity in the area of energy security. The implementation of the project is critical to completing the integration and increasing the scope of connecting BS system markets to the European system.

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