Transformation of Commercial Flows into Physical Flows of Electricity – Flow Based Method

Abstract

We are witnesses of large – scale electricity transport between European countries under the umbrella of the UCTE organization. This is due to the inabilyof generators to satisfy the growing consumption in some regions. In this content, we distinguish between two types of flow. The first type is physical flow, which causes costs in the transmission grid, whilst the second type is commercial flow, which provides revenues for the market participants. The old methods for allocating transfer capacity fail to take this duality into account. The old methods that allocate transmission border capacity to “virtual” commercial flows which, in fact, will not flow over this border, do not lead to optimal allocation. Some flows are uselessly rejected and conversely, some accepted flows can cause congestion on another border. The Flow Based Allocation method (FBA) is a method which aims to solve this problem.Another goal of FBA is to ensure sustainable development of expansion of transmission capacity. Transmission capacity is important, because it represents a way to establish better transmission system stability, and it provides a distribution channel for electricity to customers abroad. For optimal development, it is necessary to ensure the right division of revenue allocation among the market participants.This paper contains a brief description of the FBA method. Problems of revenue maximization and optimal revenue distribution are mentioned.