A flow-based methodology for the calculation of TSO to TSO compensations for cross-border flows

In the context of the development of the European internal electricity market, several methods for the tarification of cross-border flows have been proposed. This paper presents a flow-based method for the calculation of TSO to TSO compensations for cross-border flows. The basic principle of this approach is the allocation of the costs of cross-border flows to the TSOs who are responsible for these flows. This method is cost reflective, non-transaction based and compatible with domestic tariffs. It can be applied when limited data are available. Each internal transmission network is then modelled as an aggregated node, called 'supemode', and the European network is synthesized by a graph of supernodes and arcs, each arc representing all cross-border lines between two adjacent countries. When detailed data are available, the proposed methodology is also applicable to all the nodes and lines of the transmission network. Costs associated with flows transiting through supernodes or network elements are forwarded through the network in a way reflecting how the flows make use of the network. The costs can be charged either towards loads and exports or towards loads and exports or towards generations and imports. Combination of the two charging directions can also be considered. (C) 2004 Elsevier Ltd. All rights reserved.