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Merchant Interconnection in the Internal Energy Market: Implications of the Network Code on Capacity Allocation and Congestion Management

Hampson, Joseph LU (2015) In IIIEE Master thesis IMEN41 20151
The International Institute for Industrial Environmental Economics
Abstract
This study investigates the impact of the Network Code on Capacity Allocation (CACM) on the merchant approach to interconnector development. It also situates CACM in the context of the EU, analysing the progress it makes towards a functioning single market for electricity across European Member States. Known as the Internal Energy Market (IEM), the EU has worked to achieve a single market for over 20 years, with a series of legislative reforms beginning in 1996. With the development of interconnection recognised as vital to this project, it is important to understand the impacts of new legislation. This thesis thus uses a literature review, a legal approach to understanding the regulatory text, and expert interviews to both develop an... (More)
This study investigates the impact of the Network Code on Capacity Allocation (CACM) on the merchant approach to interconnector development. It also situates CACM in the context of the EU, analysing the progress it makes towards a functioning single market for electricity across European Member States. Known as the Internal Energy Market (IEM), the EU has worked to achieve a single market for over 20 years, with a series of legislative reforms beginning in 1996. With the development of interconnection recognised as vital to this project, it is important to understand the impacts of new legislation. This thesis thus uses a literature review, a legal approach to understanding the regulatory text, and expert interviews to both develop an understanding of the context of interconnector development and an understanding of what may change as a result of CACM. The study finds that CACM is likely to increase costs and lead to worsened commercial conditions for merchant interconnector developers. Ambiguity surrounding methodologies for capacity calculation and cost recovery may make it hard for developers to model a long-term business case, leading to fewer interconnector projects moving forward. This would be detrimental to the EU, with a lack of cross-border transmission capacity long identified as a barrier to a functioning IEM. (Less)
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author
Hampson, Joseph LU
supervisor
organization
course
IMEN41 20151
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Interconnection, CACM, Network Codes, Merchant interconnection, Internal Energy Market
publication/series
IIIEE Master thesis
report number
2015:25
ISSN
1401-9191
language
English
id
8053627
date added to LUP
2015-10-09 08:08:44
date last changed
2015-10-09 08:08:44
@misc{8053627,
  abstract     = {This study investigates the impact of the Network Code on Capacity Allocation (CACM) on the merchant approach to interconnector development. It also situates CACM in the context of the EU, analysing the progress it makes towards a functioning single market for electricity across European Member States. Known as the Internal Energy Market (IEM), the EU has worked to achieve a single market for over 20 years, with a series of legislative reforms beginning in 1996. With the development of interconnection recognised as vital to this project, it is important to understand the impacts of new legislation. This thesis thus uses a literature review, a legal approach to understanding the regulatory text, and expert interviews to both develop an understanding of the context of interconnector development and an understanding of what may change as a result of CACM. The study finds that CACM is likely to increase costs and lead to worsened commercial conditions for merchant interconnector developers. Ambiguity surrounding methodologies for capacity calculation and cost recovery may make it hard for developers to model a long-term business case, leading to fewer interconnector projects moving forward. This would be detrimental to the EU, with a lack of cross-border transmission capacity long identified as a barrier to a functioning IEM.},
  author       = {Hampson, Joseph},
  issn         = {1401-9191},
  keyword      = {Interconnection,CACM,Network Codes,Merchant interconnection,Internal Energy Market},
  language     = {eng},
  note         = {Student Paper},
  series       = {IIIEE Master thesis},
  title        = {Merchant Interconnection in the Internal Energy Market: Implications of the Network Code on Capacity Allocation and Congestion Management},
  year         = {2015},
}