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.

Item: Value

Annex 3 date: Updated 2024-12-06

Legal basis: CACM Regulation Art. 32; IME Regulation Art. 14; ACER Decision 11/2022

Process initiated: 8 August 2022

Study year: 2025 (target year); model input data mostly from 2019

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 ran longer than the twelve-month process foreseen in IME Regulation Art. 14(6); the report attributes the longer study period to the new model developments (BID3, provided by AFRY) needed alongside the study to implement the BZR Methodology.

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) within the Nordic CCR (other borders approximated by NTC), with FRM set at 10% of the thermal limit and the BZR Methodology’s 70% minimum cross-zonal capacity rule.

Three climate years: 1989, 1995 and 2009 — chosen as the three years best representing a 30-year study period (residual-load criterion; not the full spread of Nordic variability) — simulated in parallel from the same starting conditions (reservoir levels set to 70%), not sequentially. Detailed RAO figures are shown for 1995.

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. In the report’s operational-practice review, Config 11 is described as the most promising of the four, but it too was rejected at Step 1 on economic efficiency.

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 minor changes in consumer and producer surplus; Config 11’s negative result comes mainly from additional redispatch cost (about €15.7M/year).

Key simulation results

Prices: Configs 8/9 raise average annual prices mainly in the northern zones of Norway and Sweden, in Finland and the Baltics; the central east area has lower prices than current SE3 in all configs, and prices in the southern Swedish zones rise to levels comparable to status-quo SE4. Config 10 has a higher SE2 price than the status quo.

Flows: In Config 11, more power is imported from northern Norway to Sweden than in the other alternatives, with flows similar to the status quo. In Config 8, more power flows from northern Sweden to Finland and back to Sweden via the Fenno-Skan cables. In Configs 9 and 11, power transits the central east area from north to south.

OSA/RAO: Annual overloads 1.5–1.9 TWh/year across all configs — the report describes these overloads as much higher than seen historically, and the simulated remedial-action costs as around four times the 2023 Nordic costs (2023 practice used NTC rather than FBMC, so the comparison is loose). ~70% internal Norway, ~30% internal Sweden. The report says the overloads are largely driven by the 70% rule; a test run without it cut status-quo overloads (1995) from 1.85 to 0.19 TWh/year (about 90%). RAO solved primarily by hydro regulation (Norway ~7.5–8.5 TWh/year upregulation, climate year 1995).

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 incorrect capacity (Fmax since set very high, in line with operational practice) — it caused very high 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 growth has generally been faster than expected, and fuel and CO₂ prices in the study are lower than markets currently expect for 2025; several grid reinforcements planned after 2025 would also affect the need for and setup of new configurations. 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; the report says the opposite hydro-production results in Configs 8 and 9 might to some extent result from water usage not being calibrated correctly.

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, among others, wind power allocation, reserve capacity, nuclear must-run modelling, fuel prices and HVDC handling. Network model: the common Nordic planning model in PSSE (transmission grid 420 kV down to 50 kV). Hydro modelling: water values computed with stochastic dynamic programming in BID3. GSK (Generation Shift Key) strategies per BZ, used for PTDF calculation. RAM is the thermal limit adjusted for FRM (10%) and flows not induced by cross-zonal trade (F0), subject to the 70% floor.

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