The Flow-Based methodology was successfully run for the first time in the CWE Day-Ahead market coupling process on 20 May (for delivery day 21 May). The CWE TSOs had jointly started the operational coordination process and the calculation of Flow-Based parameters already the day before.
Today’s launch of the new Flow-Based method marks a crucial milestone for European market integration and paves the way towards the completion of the European Internal Energy Market. Due to its innovative and dynamic nature, it allows for optimizing the capacity available for trading which in turn will translate into significant economic welfare gains.
Market Coupling optimizes the efficiency of power trading by allocating cross-border transmission capacity between the different coupled spot markets, while ensuring that the physical limits of the grid are respected. In so doing, market coupling narrows price spreads between national power markets and increases social welfare for the involved countries.
By using a more detailed grid description, taking into account the increased energy volatility resulting from the higher renewable production, Flow-Based is a more sophisticated method for capacity calculation. Compared to ATC-based methods, FB market coupling increases price convergence while ensuring the same security of supply as today.
The step to Flow-Based Market Coupling is essential in order to be prepared for accurate and secure capacity calculation in a European energy sector where further growth in renewables is to be expected. This method leads to a more efficient determination of commercial transactions and of resulting physical flows, helping the market participants to trade across borders and resulting in electricity prices that better reflect the actual grid situation. CWE Flow-Based Market Coupling provides a better representation of the actual grid situation and relevant information for proper price formation and, ultimately, investment decisions.
CWE TSOs and Power Exchanges have been working on delivering this project since June 2007 when the MoU of the Pentalateral Energy Forum on market coupling and security of supply in CWE was signed. Market Coupling in CWE then started in November 2010 by using ATC-based grid capacity calculation. The ATC-based method was relying on the so called “Available Transmission Capacities” which were defined by the TSOs for each border of the CWE zone. Since then, developing and implementing the Flow-Based method has required harmonisation of TSOs’ processes, organisation and systems.
Project partners started an intense preparation through the performing of a parallel run process: Flow-Based parameters and implied market results were calculated in parallel of the operational daily ATC process. Since 2013 the simulations were shared with the market and NRAs first on a weekly and then on a daily basis to provide optimal support in the transition.
“We are proud to be now live and using the new method, which enables the further integration of the European market against a background of the increased challenges we face due to more volatile system conditions”, say Wim Michiels, Jean Verseille, and Andrew Claxton, TSOs’ & Power Exchanges’ chairmen of the CWE Flow-Based steering groups. “This is an outstanding example of how Power Exchanges and TSOs contribute to a more competitive and reliable internal European energy market.”
Following the success of Flow-Based day-ahead market coupling in the CWE region, the Flow-Based method is expected to be deployed both at a larger European scale and also in different time windows for electricity trading (e.g., intraday application).
DownloadsFlyer: The pivotal role of TSOs in European energy market integration
The energy sector is developing rapidly. The process of European market integration began some years ago. Its purpose is to create a single European market that enables market parties to trade gas and electricity across national borders easily and efficiently.
