The European electricity market: instructions for use
As leader of France’s power system, RTE is in charge of implementing technical and economic mechanisms together with its European counterparts.
Designed to improve integration across Europe, the electricity market coupling mechanism is a way of sharing interdependent generation capacities and needs for electrical power by harmonising supply and demand on the different coupled markets. As a result, demand is covered more easily and more cheaply.
In order to make these exchanges possible, transmission system operators (TSOs) and electricity stock exchanges have teamed up. One group provides market players with exchange capacities between the different countries and manages the cross-border transmission of electricity , whilst the other coordinates the sharing of purchase and sale offerings. The volume of sharable transactions is proportional to physical interconnection capacities between each region: this results in daily market coupling which improves the economic efficiency of Europe’s power system. By taking full advantage of the interdependence between Europe’s energy mixes, this tool also supports the energy transition.
Since 2006, the French market has been successively coupled with most of Western Europe’s markets: first with the Benelux, followed by Germany and Austria in 2010. In 2014/2015, the coupling area was extended to the UK and the Nordic countries (Poland, Baltic states, Finland, Sweden, Norway), as well as to Spain, Portugal, Italy and Slovenia. Ireland and Croatia followed in 2018. In 2020, Hungary, Romania, Slovakia and the Czech Republic are expected to join this vast exchange area.
Driven by the success of these proactive initiatives, market coupling has been designated by network codes and the Clean Energy package as a targeted solution for the exchange of electricity.
Markets are now coupled in 19 countries accounting for more than 80% of European power consumption. More than 1000 TWh were exchanged in 2018 on the EPEX SPOT and Nord Pool day-ahead markets.
In order to rationalise exchanges by making the most of existing interconnection capacities, RTE has developed a new flow-based computation method which has been used since 2015 for the coupling of Central Western Europe’s markets. It is expected to be extended to the whole of Central Europe. It provides an accurate overview of the grid’s constraints and is designed to select, from all possible routes, a single solution for the distribution of flows. Featuring high-precision computation capabilities, this method increases exchange capacities at the borders while maintaining the necessary security margins.
The balancing market
Furthermore, transmission system operators (TSOs) are supporting each other in order to enhance the aggregate balance between supply and demand, thanks to the balancing market. The latter provides access to energy exchanges within very short time-frames. Through the Electricity Balancing regulation (2017), the European Union started setting up a number of exchange platforms enabling TSOs to share these balancing energy sources more effectively. RTE is planning to link up with the TERRE*, MARI** and PICASSO*** platforms for available energy reserves within 30 minutes, 15 minutes and 400 seconds respectively.
*TERRE = Trans European Replacement Reserves Exchange
**MARI = Manually Activated Reserves Initiative
***PICASSO = Platform for the International Coordination of the Automatic frequency restoration process and Stable System Operation