Congestion Income in the European Electricity Market

A Summary of the 2021 Report

The recent report on congestion income in the European electricity market found that the total available congestion income in 2021 was 69 billion euros. This represents a significant increase over the previous year, when the total available congestion income was 55 billion euros.

Causes of Congestion Income

Congestion income is the result of the difference between the price of electricity in two different locations. This can occur when there is a physical constraint on the transmission network, such as a bottleneck or a transmission line outage. When there is a physical constraint, electricity cannot flow freely from one location to another, which can lead to price differences between the two locations.

Congestion income can also occur when there are differences in the availability of renewable energy resources in different locations. For example, if there is a lot of wind power generation in one location, but not in another, this can lead to price differences between the two locations.

Impact of Congestion Income

Congestion income can have a number of impacts on the electricity market. First, it can lead to increased prices for consumers in areas with high congestion. Second, it can discourage investment in new transmission lines, as investors may not be able to recoup their investment if there is a lot of congestion income.

Third, congestion income can lead to inefficient use of the transmission network. For example, generators may choose to locate their facilities in areas with high congestion income, even if this is not the most efficient location for the grid.

Solutions to Congestion Income

There are a number of potential solutions to congestion income. One solution is to invest in new transmission lines. This can help to reduce congestion and lower prices for consumers. Another solution is to implement congestion management strategies, such as redispatching or network splitting. These strategies can help to optimize the use of the transmission network and reduce congestion income.

Finally, it is important to consider the role of renewable energy resources in congestion income. As the share of renewable energy in the electricity mix increases, it is likely that congestion income will become more common. To address this, it is important to develop policies that encourage the siting of renewable energy facilities in areas with low congestion.