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01/2002
A capacity shortage situation means a risk of capacity shortage - either in the entire exchange area or in one or several Elspot areas.
In an ideal market, Nord Pool Spot (NPS) receives bids on all production opportunities, bids on all possible consumption decreases and no decreases in the transmission capacity because of high demand.
In order to facilitate bidding on plants with considerable start and stoppage costs, block bids have been introduced. At the moment there are five different types of block bids (h 1-7, h 8-18, h 19-24, h 8-24 and h 1-24). At present, we are considering introducing two new blocks (h 7-10 and h 17-20) for morning and afternoon peaks. These two blocks exist on EEX and have been suggested to ease the trade Germany/Nordic Area.
In order to achieve as good bidding as possible in winter, NPS will contact larger consumers and some other participants during November. The goal is to gain an overview of the consumption decreases that are possible during extremely high prices and to make the participants aware of how to take such possibilities into account in their bidding.
The available transmission capacities for spot trade have been increased considerably during the last years, through investments in the transmission grid and automatic shedding of production and an overhaul of operational margins. However, during capacity peaks the internal bottlenecks are often moved to the national borders and the export and import capacities available for spot trade are reduced or cancelled. It is important to take measures to avoid this. Appropriate measures are large transmission investments, changed price area borders or extensive counter trade.
If despite all these efforts a price cross is not achieved, the rulebook allows NPS to reduce the bids pro rata until a price-cross is achieved. After such a reduction the participants has the opportunity to regain balance through bilateral contracts, through Elbas trade (in Sweden and Finland) or through own physical adjustments. If no balance is achieved during the operational hour, the last resort for the TSO is to use rotating disconnections.
An energy crisis situation can occur in a hydroelectric power dominated system if the reservoirs are empty before the snow melting. Such situations can occur in Norway and Sweden and electricity rationing has earlier occurred.
NPS' view is that the market mechanism is superior in an energy crisis situation. The market solution means that it is the consumption with the least will to pay that will reduce while rationing hits more or less blind.
An energy crisis situation escalates during a longer period of time while a capacity crisis situation sometimes can be unexpected for many participants. This means that we expect a very good bidding in Elspot to handle the energy crisis situation, just as we have had very good bidding when a capacity crisis situation has been expected.