The Achievement of the EU Electricity Internal Market through Market Coupling
AbstractThe achievement of the internal market for energy is going ahead in the EU 15 since a model is emerging for “coupling the national markets for electricity”. For about 15 years the EU 15 was made up of national markets open to each other through rules of access to the grids while organized market pricing was kept national. The main exception was in the Nordic countries (Sweden, Finland and Denmark plus Norway –not a member of the EU). In this region the coupling of national markets is obtained through a single Power Exchange being a common subsidiary of the Nordic transmission system operators (TSOs). This single PX runs a single Day Ahead market pricing zone when the grid is not constrained and splits itself into different pricing areas when structural constraints arise. This model is known as “market splitting”. The Netherlands, Belgium and France did later create a less centralized single pricing mechanism by “coupling” their three national PXs with a common pricing algorithm coordinating the price formation among the three national exchanges. The empirical success of this new model has validated it as an EU model for other regional markets. A counter-model has been experimented between Germany and Denmark. It consisted of a coupling of “volumes” linking the quantities offered and demanded in the two exchanges while keeping the price formation in these two markets separated. That experiment failed and started to work again only when elements of price coupling have been introduced. Having now three workable models of market coupling, the European Union (at least EU 15) should be able to successfully achieve one layer of its internal market soon. However, several further questions are kept open such as how to successfully bridge several regional markets all over the EU 15 or how to integrate more and more PXs having different regulatory frames. A centralized approach (known as CMU) is advocating creating a single pan-European trading entity by a mandatory restructuring of all existing PXs plus a clubbing of all TSOs and the extensive harmonization of all existing national regulatory frames. An alternative approach is the one known as PCR (“Price Coupling of Regions”). It allows building a less demanding common pricing mechanism to coordinate existing PXs in a decentralized network. It is permitting grid access and trading to keep a national flavour when requested by particular local preferences.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European University Institute in its series RSCAS Working Papers with number 2010/87.
Date of creation: 10 Dec 2010
Date of revision:
market coupling; market splitting; power exchange; electricity internal market; day ahead market;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-23 (All new papers)
- NEP-ENE-2011-01-23 (Energy Economics)
- NEP-EUR-2011-01-23 (Microeconomic European Issues)
- NEP-REG-2011-01-23 (Regulation)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jean-Michel Glachant & Haikel Khalfallah & Yannick Perez & Vincent Rious & Marcelo Saguan, 2013. "Implementing incentive regulation through an alignment with resource bounded regulators," Post-Print halshs-00767872, HAL.
- Jean-Michel Glachant, Haikel Khalfallah, Yannick Perez, Vincent Rious and Marcelo Saguan, 2012.
"Implementing Incentive Regulation and Regulatory Alignment with Resource Bounded Regulators,"
RSCAS Working Papers
2012/31, European University Institute.
- J-M- Glachant & H. Khalfallah & Y. Perez & V. Rious & M. Saguan, 2013. "Implementing Incentive Regulation and Regulatory Alignment with Resource Bounded Regulators," Competition and Regulation in Network Industries, Intersentia, vol. 14(3), pages 265-291, September.
- Jean-Michel Glachant & Sophia Ruester, 2013. "The EU Internal Electricity Market: Done Forever?," RSCAS Working Papers 2013/66, European University Institute.
- Tanguy Janssen, Yann Rebours and Philippe Dessante, 2012. "Tight Volume Coupling: Analytical Model, Adverse Flow Causality and Potential Improvements," RSCAS Working Papers 2012/09, European University Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RSCAS web unit).
If references are entirely missing, you can add them using this form.