Epex Spot signs German bottleneck project contract

The Paris-based Epex Spot exchange has signed a contract with Oldenburg-based regional utility EWE, formalising its collaboration on a local power grid congestion management platform.

The new contract "formalises the legal frame of Epex Spot's collaboration with the project" and is the "foundation of a successful collaboration within Enera", the exchange told Argus. The parties originally signed a co-operation agreement on the project in February.

Through the platform, which is part of the Enera energy transition project, Epex Spot and EWE are aiming to offer a market-based solution to local power grid congestion by matching flexibility supply to demand. Grid operators would have access to flexibilities offered by providers, such as generators, aggregators, virtual power plants and power storage operators.

Grid flexibility is becoming increasingly necessary in the context of rising renewable generation, as intermittency can cause network imbalances. But current grid congestion solutions, such as curtailing asset production, are purely regulatory, and can cost authorities money because they must continue to pay subsidies when generation is curtailed. A market mechanism would allow system operators to reliably and economically relieve congestions and bottlenecks, Epex Spot analyst Elies Lahmar said.

One of the challenges of organising such a local market is gathering the requisite number of participants and generating the necessary competition for the market to function effectively. The ultimate goal is to demonstrate the workability of the market to the German federal economy and energy ministry, which is funding the Enera project, Epex Spot head of product development Philippe Vassilopoulos said. But judging by the interest the project is driving, the exchange is "very confident" it will be a success.

The project is currently at the implementation phase, with the live demonstration phase due to run for two years from 2019. If successful, the project has been designed to be scalable, meaning it could be expanded to other local markets, which could then "talk to each other" to improve co-ordination between system operators. The mechanism might prove less costly than building grid reinforcements, Epex Spot said. It could also encourage investment in flexibility assets.