Designing the market

RTE’s structuring role for the electricity market

Background

The electricity market is European. Alongside other electricity transmission system, RTE plays a leading role in the construction of this market, designing and implementing the solutions for its operation. The resulting market operating rules are approved by the Energy Regulatory Commission (CRE) and the other national regulators concerned.

Driving market coupling

Market coupling enables the day’s electricity to be bought and sold for the next day in the countries concerned, by way of electricity exchanges which are limited only by the physical design of the grid. This is a major asset to the optimisation of the generation resources and meeting electricity needs on an international scale. RTE’s jurisdiction was part of the first zones to be coupled, along with Germany and the Benelux countries in 2010. At the beginning of 2015, this market coupling system includes 19 European countries; constituting 80% of European electricity consumption.

Developing market tools

The electricity transmission systems need physical infrastructures and markets to be coupled with one another, and for the rules and tools to be shared by all parties concerned. We design and set up the market mechanisms for free trade flows. They contribute to the cost-effectiveness of electricity supply and the security of electricity supply to our customers. They help the electricity system participants to focus their investments on the means of generation and energy savings. They constitute drivers for energy transition.

The balancing mechanism is a market mechanism which allows the supply and demand of electricity to be balanced  at all times. It manages technical contingencies (discrepancies between the consumption projected by the market participants and actual consumption, or failure of the means of generation) by calling on the French power generation companies and consumers and also on offers available abroad, so that they can modify their operating programme promptly. It also provides RTE with the possibility of dealing with significant events which may occur on the grid with sufficient margin built in. The capacity mechanism enables the security of supply to be sustained by giving the electricity system participants a financial incentive to invest in generation and energy savings, or to change consumer behaviour in periods of peak consumption.

Electricity consumption: focus on modulation

Our teams are familiar with peaks in consumption, so they know how to plan for them. This is the case for the evening peak illustrated in this diagram. The market participants are responsible for balance within the scope of their activity.Given the issue of growing maximum power demand during periodsof peak consumption, RTE has developed new market systems to value consumption modulation.

A more in-depth view

We have designed and set up several mechanisms to strengthen and free up market operation. Here is an overview:

The balancing mechanism, dealing with major contingencies

RTE is responsible for ensuring electricity supply and demand balance at any time for a deadline close to real time. The balancing mechanism, set up in 2003, enables the electricity system to be rebalanced further to contingencies occurring in real time: imbalance between forecast generation and consumption, failure of the means of generation, loss of the interconnection line between two countries, etc. This mechanism constitutes a stock of offers at RTE’s disposal to be used while factoring in the requirements expressed by the participant and economic precedence as soon as the need is detected.

All the flexibility available with notice of normally less than two hours may be proposed to RTE by the market participants with the balancing mechanism: means of generation whose injection is adjusted upwards or downwards, industrial sites and residential customers who are ready to give up a part of their consumption at the request of RTE. The offers may be located in France or in the bordering countries. The balancing mechanism enables the price of the modulations carried out by RTE to be sent to the participants responsible for the differences in the supply and demand balance.

Demand side management, to value consumption modulation

Whenever the electricity grid is in high demand, RTE and the market participants may henceforth resort to demand side management for electricity generation and consumption balance. How does it work? Two types of demand side management can be distinguished:

  • Voluntary load shedding, for industrial customers, already operational

Upon the signal from RTE, the industrial company agrees to reduce its consumption for example by momentarily stopping electrical equipment in its factory for a certain amount of time, in return for remuneration. Within the framework of invitation to tender, RTE asks the balancing participants to submit their bids for the next day, and then activates them according to their needs. With the energy saving block trade notice system, the industrialists can react to the prices right from the evening before and plan for load shedding.

  • Distributed load shedding for individuals

Individuals agree to voluntarily modify their usage, consuming less electricity at certain times of the day. This initiative is carried out with help from the load management operator.

In order to value these different load shedding operations, we have outlined new rules based on the energy saving block trade notice. This innovative system is being experimented with and enables the load management operators (consumers, suppliers and market participants) to value their reduced consumption directly on the electricity market.

The capacity mechanism for improved security of electricity supply

Up to now, more and more means of generation have had to be developed  to deal with peak consumption, especially in the winter. The capacity mechanism proposed by RTE in 2013 and developed after consultation with the various electricity system participants, constitutes a new solution. It encourages these participants to invest in power generation, to make energy savings and to modulate their own peak consumption, for which they are recompensated in proportion to the benefit to the local authorities. The system is in the implementation phase before being fully operational for the winter of 2016-2017.

Auction mechanisms and market coupling to foster cross-border connection access

The development of cross-border connections improves grid safety, enhances security of supply and stimulates trading. RTE developed auction mechanisms which are open to all the market participants early on in the process. RTE has greatly contributed to the development of market coupling for trading on a daily basis. The aim is to allocate interconnection capacities in an effective and non-discriminatory manner. We manage hundreds of transactions with the border countries, for around 120 billion kWh traded on an annual basis.

The balance responsible party for financial incentive to reduce the differences between generation and everybody’s consumption

The balance responsible party system encourages the participants to balance generation and consumption. Every participant has to be assigned to a balance responsible party to be able to carry out a commercial transaction (injection and withdrawal) on the French electricity market. In concrete terms, the balance responsible party is in charge of a portfolio of activities and shall compensate for the difference between generation and consumption within the established scope. If the electricity generated within the portfolio is greater than that consumed, RTE pays financial compensation to the balance responsible party. On the other hand if it is lower, the balance responsible party pays RTE the cost of the differences observed.

In addition, we participate directly or indirectly in the capital of the different companies contributing to the construction of Europe’s electricity system. Find out more.

Market tools with high added value

  1. 1

    Freer trade flows between the different participants in Europe

  2. 2

    Safer electrical power for our customers

  3. 3

    Incentive for investments in generation and energy savings

  4. 4

    Drivers for energy transition

  1. +25 %

    In 10 years, maximum power, known as peak load, increased by more than 25% to 102 GW in February 2012, driven by population growth, development of electrical heating, urban transport, information and communications technologies, etc

Browse through our website

Article

Thinking ahead to tomorrow's market

As part of the fight against global warming, the European Union has set itself ambitious targets for 2020.
Article

Embody smart electricity: our R&D roadmap

RTE has set up an R&D roadmap for 2013-2016 to meet the major challenges faced by the French and European power system.
Article

RTE: from past to present

From the date it was founded, RTE has been constantly developing a smart grid ...