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
Date Written: June 11, 2019
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: Suggested Citation