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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.
