IEEE Power & Energy Magazine - November/December 2014 - 42

are stochastic and cannot be operated at the will of their
owners or at the will of the system operator. Transmission
and storage facilities need to be redesigned to meet the challenge of integrating a large percentage of renewable production. This is because transmission facilities allow the
transfer of surplus energy produced by renewable units to
regions with an energy deficit, and storage facilities allow for
the deferral of the usage of energy produced by renewable
units to periods of high demand. The intermittent renewable installed capacity (MW) in the EU constituted 2% of
the total capacity in 2000 but is currently 16% of the total
capacity. In some countries this percentage is much higher,
e.g., in Spain, where it is 26%. This situation is illustrated
in Figure 3, which shows a sustained growth in production

100
90
80
70
(%)

60
50
40
30
20
10

Coal
Oil
Renewables

Gas
Nuclear

figure 3. EU gross electricity production by fuel type,
1990-2011.

Zeebrugge GTF
NBP

TTFGASPOOL
NCG

PEG Nord

CEGH

PEG Sud PSV

TIGF

figure 4. The five gas hubs in continental Europe (source:
Orkestra Deusto).
42

ieee power & energy magazine

from renewable and natural gas sources from 1990 to 2011
and a decline in production from coal and other fossil fuels.
Integrating renewables requires an appropriate level
of reserve provided by nonstochastic sources. The remuneration of such reserves requires pricing or compensation
mechanisms that may not be in place, which eventually may
endanger the security of supply.
Natural gas comes to the EU via pipelines from Algeria,
Norway, and Russia and is traded in gas markets, which are
less mature than electricity markets. Five markets (hubs)
operate in continental Europe: the Title Transfer Facility
(TTF) in The Netherlands, the Zeebrugge Hub (ZEE) in
Belgium, the Points d'Exchange de Gas (PEGs) in France,
NetConnect Germany (NCG) in Germany, and the Central
European Gas Hub (CEGH) in Austria. Among these hubs,
CEGH has physical trading, like the Henry Hub in the United
States, while the others are virtual trading hubs. Each hub
is made up of a large trading area fragmented into various
zones with limited interconnection capacities. It is therefore necessary to ensure both appropriate gas supply and
appropriate transmission capacity. The hubs are illustrated in
Figure 4 and the European natural gas network in Figure 5.
Gas trading is generally based on long-term contracts
indexed to oil prices and signed by a reduced number of producers. Daily operations involve storage management, dealing with transnational bottlenecks, and deciding on potential
supply interruptions. Liquefied natural gas (LNG) constitutes
an increasing segment of the gas industry, amounting in 2011
to 20% of total EU consumption. Figure 5 depicts the European natural gas networks. This figure reveals a strongly
meshed network in central Europe and rather weakly meshed
networks throughout peripheral Europe.

Electricity and Natural Gas
Markets in Spain
As shown in Figure 6, Spain's energy dependency on foreign sources is more than 74% of total consumption, which
is significantly higher than that of the EU as a whole. Given
this fact, the efficient design of gas and electricity markets is
crucial for ensuring the economic and secure supply of both
commodities at competitive prices. The operation of both
markets is described briefly below.

Electricity
An electricity market was introduced in Spain in 1998 and
has been successfully operating ever since. This market
is managed by a market operator in charge of short-term
physical transactions and a system operator in charge of the
technical operation of the system. Long-term trading is carried out through an increasingly liquid futures market and
through over-the-counter (OTC) transactions. The electricity market relies mostly on a day-ahead spot market, as in the
United States and in contrast to other EU markets that rely
mostly on bilateral transactions. A number of adjustment
markets take place between the day-ahead and the balancing
november/december 2014

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2014