Source - ENTSO-E BZRR Nordic 2025

ENTSO-E Main Report: Bidding Zone Review of the 2025 Target Year (Nordic section, Chapter 7, April 2025) and companion Annex 3: Nordic BZRR Input Data (Nordic TSOs / ENTSO-E, updated 2024-12-06). The main report covers the full EU-wide bidding zone review; the Nordic section is the primary source here. Annex 3 describes the technical modelling methodology and corrections made vs. the prior LMP Study.

Document details

Summary

The Nordic Bidding Zone Review (BZRR) assessed four alternative bidding zone configurations for Sweden against the current SE1–SE4 status quo. All four configurations showed negative socio-economic welfare (SEW) relative to the status quo. Under the BZRR Methodology, negative economic efficiency at Step 1 terminates the process — no further assessment is conducted.

Nordic BZRR formal proposal: maintain the current SE1–SE4 configuration. Approved by all participating TSOs.

The study took 28 months against a 12-month mandate, primarily because the BID3 market simulation model (provided by AFRY) required substantial development for the Nordic context.

Scope and modelling

The Nordic BZRR covers SE1–SE4 (Sweden), NO1–NO5, FI, DK2. Four alternatives assessed — all Sweden-only; no structural congestion warranting reconfiguration was found in Norway, Finland, or DK2.

Model: BID3 (AFRY) — the same model used in Svk LMA 2024. Simulation chain: Day-Ahead (DA) market dispatch → Operational Security Analysis (OSA) → Remedial Action Optimisation (RAO). Flow-Based capacity calculation (FBMC) with 10% FRM and 70% minimum cross-zonal capacity rule.

Three climate years: 1989 (low hydro), 1995 (reference), 2009 (high hydro) — simulated in parallel from the same starting conditions (70% reservoir fill), not sequentially.

Four alternative configurations

All four introduce a “central east area” carved from SE3 to handle east-west flows (Finnish imports and Danish/Norwegian exports through central Sweden):

Svk’s modifications (Configs 9 and 11) were grounded in operational practice rather than derived purely from the LMP model — making them less sensitive to the model errors discovered after the LMP Study.

Economic efficiency results

Average over all three climate years, relative to status quo:

SEW = total market welfare (DA dispatch: consumer surplus + producer surplus + congestion revenue) + additional RAO redispatch costs + reservoir delta. Configs 8 and 9 show large consumer surplus losses (higher prices in northern BZs) partially offset by producer surplus gains. Configs 10 and 11 have only minor SEW changes vs. the status quo.

Key simulation results

Prices: Configs 8/9 raise average annual prices in northern Swedish zones and Finland; central east area prices lower than current SE3 in all configs. Configs 10/11 show minimal price changes.

Flows: Config 11 most closely mirrors status quo flow patterns (Norway→Sweden via existing northern interconnections). Config 9 shows elevated circular flows between northern Sweden and Finland via the Fenno-Skan cables.

OSA/RAO: Annual overloads 1.5–1.9 TWh/year across all configs — approximately 4× higher than actual 2023 Nordic remedial action volumes. ~70% internal Norway, ~30% internal Sweden. The 70% rule is the primary driver: it forces cross-zonal trade volumes that then require redispatch to resolve. RAO solved primarily by hydro regulation (Norway ~7.5–8.5 TWh/year upregulation).

Key limitations (Section 7.3)

Material limitations acknowledged in the report:

1. Two LMP Study errors corrected mid-study: (a) Reactance input per km rather than per element — substantially inflated overloads in LMP; correction changed market welfare results significantly; could have affected which BZ configurations ACER proposed. (b) Stockholm 220 kV CNEC had artificially low Fmax — generated extreme shadow prices and loss-of-load events now removed. Both fixed in BZ Study. Svk’s Configs 9 and 11 less sensitive because they were based on empirical knowledge, not LMP model output.

2. Outdated scenario data: 2019 data (MAF 2020 / National Trends 2025). Renewable buildout substantially faster than modelled; industrial electrification, data center loads, and offshore wind largely absent. Fuel/CO₂ prices differ from current market expectations. Earliest Nordic implementation would be 2027/2028 (Svk switching its operational monitoring system) — by then even more outdated.

3. Grid capacity simplification: Constant security limits used for all hours; temperature-dependent and seasonal/maintenance-driven capacity reductions not modelled.

4. Hydrological modelling: Three climate years in parallel from identical starting conditions, not the 30+ sequential years that is standard in Nordic grid analysis. Limits robustness of hydro production and reservoir delta estimates; diverging hydro results between Configs 8 and 9 partly an artefact of the parallel setup.

5. RAO simplifications: (a) Only Nordic CCR in RAO — HVDC flows to continental Europe fixed at DA outcome. (b) Explicit DSR kept at DA levels (modelled with high-cost threshold, rarely activated). (c) Non-costly topological remedial actions — e.g., Svk’s ability to bypass series compensators on 400 kV SE2-SE3 lines during east-west flow conditions — not modelled; too complex for the simulation setup. This understates system flexibility and overstates effective congestion costs.

Next steps stated in the report

Svk states it “will continue to investigate whether there is a need for a new assessment of BZ configurations in Sweden.” The model development and knowledge built during the study are described as “valuable aspects to include in future studies.” This directly underpins the Swedish government assignment (tasked May 2025, due 29 May 2026). (Source - Svk Analys av Elområden 2026)

Annex 3: Input data and modelling methodology

15 inaccuracies corrected vs. the prior LMP Study (Table 5 in annex), including the two major ones above plus 13 minor corrections covering wind power allocation, reserve modelling, HVDC handling, and network element reactances. Network model: Nordic 400/220/130/66 kV grid built from PSSE, converted to BID3 internal format. Generation capacity from TYNDP and Nordic TSO forecasts. Hydro modelling: reservoir dispatch with water value functions calibrated per climate year. GSK (Generation Shift Key) strategies per BZ, used for PTDF calculation. RAM = Fmax − Fref − FRM − FAAC.

Relevance to wiki

• Bidding Areas: primary content source for the Nordic BZRR section; resolves the open question about what the April 2025 EU-wide review found
• Svenska kraftnät: Svk co-authored the Nordic section and proposed Configs 9 and 11; Svk’s next-steps statement underpins the Swedish government assignment (due 29 May 2026)
• Flow-Based Capacity Calculation: FBMC methodology with 70% rule applied throughout; documented major consequences for overload volumes and RAO costs
• Balancing Markets: OSA/RAO results document Nordic redispatch magnitudes, generation types used, and the role of hydro flexibility in operational security