Flow-Based Market Coupling Revised - Part I: Analyses of Small- and Large-Scale Systems
HEMF Working Paper No. 06/2019
37 Pages Posted: 21 Jun 2019
Date Written: June 11, 2019
By interlinking power systems, signiﬁcant welfare gains can be achieved. However, diﬀerent approaches for coupling electricity markets exist. A recent development in this ﬁeld is the implementation of ﬂow-based market coupling (FBMC) in Central Western Europe (CWE). Indeed, FBMC has proven to be advantageous compared to the former situation in CWE Amprion et al. 2014 and to be operationally manageable under current market conditions. However, analyses of possible future adjustments of market areas ("bidding zones") have shown problems in assessing and even understanding FBMC Entso-E 2018. Therefore, Part I of this two-part paper contributes to resolving these problems. First, it presents key issues and eﬀects of all essential FBMC elements. This is done drawing the feasible regions of the FBMC constraints – a method that is well-known from optimization theory. However, in the way it is applied to FBMC it is novel and oﬀers signiﬁcant insights. These insights are presented on the basis of a stylized yet fully transparent and reproducible example. Thereby, we improve the understanding of beneﬁts and shortcomings of FBMC. Second, we introduce a large-scale model framework capable of assessing FBMC as implemented in CWE. This enables us to assess real-world power systems also when undergoing structural changes. This lays the foundation for the case study presented in Part II.
Keywords: Flow-based market coupling; Zonal pricing; Nodal pricing; Feasible regions; Flow-based domains; Electricity market modeling; Grid modeling
JEL Classification: C61, C80, D61, Q41, Q43, Q48
Suggested Citation: Suggested Citation