Flow-Based Market Coupling Revised - Part II: Assessing Improved Price Zones in Central Western Europe

HEMF Working Paper No. 07/2019

44 Pages Posted: 21 Jun 2019

See all articles by Tim Felling

Tim Felling

University of Duisburg-Essen

Björn Felten

University of Duisburg-Essen

Paul Osinski

University of Duisburg-Essen

Christoph Weber

University of Duisburg-Essen

Date Written: June 11, 2019

Abstract

Part I of this two-part paper has presented flow-based market coupling (FBMC), the implicit congestion management method used to couple the Central Western European (CWE) electricity markets. It has also introduced a large-scale model framework for FBMC assessments, focusing on modeling the capacity allocation and market clearing processes. The paper at hand lays the focus on the newly developed redispatch model, thereby completing the description of the overall model framework. Furthermore, we provide a case study assessing improved price zone configurations (PZCs) for the extended CWE electricity system. Our case study is motivated by the ineffectiveness of managing congestion of intra-zonal lines described in Part I and by the possibility to reduce their relevance by improved PZCs. The importance of this study is substantiated by the controversial discussions on the currently-existing PZC. Thus, we assess the existing PZC and five novel PZCs determined by a cluster algorithm. Our results show that improved PZCs can reduce redispatch quantities and overall system costs significantly. Notably, we show that substantial improvements are possible when redesigning PZCs while maintaining a similar or slightly increased number of price zones. Moreover, under use of the theoretical considerations in Part I, we explain that increasing the number of price zones may not always increase welfare when using FBMC.

Keywords: price zone, zonal pricing, flow-based market coupling, hierarchical clustering, redispatch

JEL Classification: D47, L51, Q40, Q41, Q48

Suggested Citation

Felling, Tim and Felten, Björn and Osinski, Paul and Weber, Christoph, Flow-Based Market Coupling Revised - Part II: Assessing Improved Price Zones in Central Western Europe (June 11, 2019). HEMF Working Paper No. 07/2019. Available at SSRN: https://ssrn.com/abstract=3404046 or http://dx.doi.org/10.2139/ssrn.3404046

Tim Felling

University of Duisburg-Essen ( email )

Universitätsstraße 2
Essen, 45141
Germany

HOME PAGE: http://www.ewl.wiwi.uni-due.de

Björn Felten

University of Duisburg-Essen ( email )

Universitätsstraße 2
Essen, 45141
Germany

HOME PAGE: http://www.ewl.wiwi.uni-due.de

Paul Osinski

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Christoph Weber (Contact Author)

University of Duisburg-Essen ( email )

Universitätsstraße 2
Essen, 45141
Germany

HOME PAGE: http://www.ewl.wiwi.uni-due.de

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