Impact of Nordic Flow-Based on the Nordic System Price

In line with preparation of systems for go-live of the Flow-Based (FB) capacity calculation in the Nordic region (expected Q3 2024), Nord Pool is calculating the Nordic System Price based on the results of External Parallel Run simulations (EPR). 

The calculation methodology of the Nordic System Price (the reference price for future contracts in the Nordic region) remains unchanged and is as follows: 

  • The System Price is an unconstrained market clearing reference price for the Nordic region. The calculation is based on the same aggregated and anonymized orderbooks (OBK) for each of the Nordic bidding zones as are used in the calculation of Area prices in the EPR. In addition to the OBKs, hourly values of import and export flows of electricity to and from the areas neighbouring the Nordic bidding zones are included in the calculation of the Nordic System Price. These flows are calculated in the EPR simulation as planned flows day-ahead for each cable and interconnector per hour. The volume of import or export is added as sales and purchase volumes to the sales and purchase bid curves respectively in the relevant bidding zones.
    Here you can find the Methodology for calculating Nordic System Price.

The System Price is an unconstrained price calculation. Thus, from a methodology point of view, it makes no difference whether the capacity calculation in the SDAC market coupling is Available Transfer Capacity (ATC) or FB. 

However, flows on the nine borders between the Nordic region and the rest of the SDAC (Core/Baltic) can change as a result of FB capacity calculation in the Nordic region: 

  • NorNed (NO2A-NL) 
  • NordLink (NO2A-DE) 
  • COBRAcable (DK1-NL) 
  • DK1-DE 
  • Kontek (DK2-DE) 
  • Baltic Cable (SE4-DE) 
  • NordBalt (SE4-LT) 
  • SwePol (SE4-PL)  
  • Estlink (FI-EE) 

Nord Pool plans to publish these results with an explanatory note on a bi-weekly basis. 

Why the calculated system price based on the Nordic FB EPR results is different from the (production/published) system price?

Change in Import/Export 

As a result of introducing flow-based capacity calculation in the Nordic region, the flows (in the EPR) on the external borders (those between the Nordic region and rest of the SDAC) can be different from production (Nordic ATC based) results. 

External capacities provided differently in FB EPR and production. 

If different capacities are provided in FB EPR and production, then the calculated system price based on EPR results can be different from production. 

There can be different explanations for this, as described in the sections below.  

Note: How to compare capacities on external borders  

Capacities on external borders are provided to the algorithm differently in FB EPR and production today. This does not impact the allocation of the flow between the Nordic and neighbouring Bidding Zones (BZs) and therefore also does not impact the Nordic system price.  

In production, all the capacity constraints are given to Euphemia as ATC-constraints on these borders.  

In FB EPR the constraints for external Nordic borders are applied as an allocation constraint in the virtual BZ adjacent to the external Nordic border. For borders with net loss, this constraint will be considered in the allocation constraint. This will not affect the allocation possible on the border, but only increases transparency of the process for the Transmission System Operators (TSOs). This also means that the ATC capacity for borders with net loss applied in production cannot be compared directly to the allocation constraint used in EPR. It is necessary to take net loss into account before this can be done. 

Timing of capacity publication/ impact of late outages 

There can be a difference in production between ATC values and the Remaining Available Margin (RAM) of allocation constraint. This is due to the different deadlines for the Net Transfer Capacity (NTC) and FB process for operators when a change is made just before capacities are applied to the algorithm. This is because of different calculation times in production today and FB in EPR.  

NTC limited by Nordic: 

ATCs on external borders may be limited in production by the Nordic TSOs. This limitation will be handled by Critical Network Elements (CNEs) in Capacity Calculation Region (CCR) Nordic. The constraint on the external borders is therefore increased to the limit set by the external neighbouring TSO.  

Other effects on capacities:  

Apart from the above, the following reasons can cause the capacity of external borders in EPR to be different from those used in production (ATC): 

  • Error in data source 
  • Wrong handling of net loss  

EPR is a process for participants to learn how to use and operate FB. Inevitably there will be mistakes - the TSO takes these into account and will learn from them going forward. Simulation results can be found here.