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Assessing Improved Price Zones in Europe: Flow-Based Market Coupling in Central Western Europe in Focus

Author

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  • Tim Felling
  • Björn Felten
  • Paul Osinski
  • Christoph Weber

Abstract

Theoretical papers have identified several sources of inefficiencies of flow-based market coupling (FBMC), the implicit congestion management method used to couple the Central Western European (CWE) electricity markets. These inefficiencies ultimately lead to welfare losses. In this paper, a large-scale model framework is introduced for FBMC assessments, focusing on modeling the capacity allocation and market clearing processes. The present paper completes this framework by presenting a newly developed redispatch model. Furthermore, we provide a case study assessing improved price zone configurations (PZCs) for the CWE electricity system, motivated by the debate on the currently-existing PZC. Our results show that improved PZCs—even while maintaining the number of price zones—can significantly reduce redispatch quantities and overall system costs. Moreover, making use of the insights of (Felten et al., 2021), we explain why increasing the number of price zones may not always increase welfare when using FBMC.

Suggested Citation

  • Tim Felling & Björn Felten & Paul Osinski & Christoph Weber, 2023. "Assessing Improved Price Zones in Europe: Flow-Based Market Coupling in Central Western Europe in Focus," The Energy Journal, , vol. 44(6), pages 71-112, November.
    • Handle: RePEc:sae:enejou:v:44:y:2023:i:6:p:71-112
    DOI: 10.5547/01956574.44.6.tfel
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    References listed on IDEAS

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    2. Löschel, Andreas & Flues, Florens & Pothen, Frank & Massier, Philipp, 2013. "Den Strommarkt an die Wirklichkeit anpassen: Skizze einer neuen Marktordnung," ZEW Discussion Papers 13-065, ZEW - Leibniz Centre for European Economic Research.
    3. Schönheit, David & Weinhold, Richard & Dierstein, Constantin, 2020. "The impact of different strategies for generation shift keys (GSKs) on the flow-based market coupling domain: A model-based analysis of Central Western Europe," Applied Energy, Elsevier, vol. 258(C).
    4. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems," Journal of Regulatory Economics, Springer, vol. 50(3), pages 290-327, December.
    5. Löschel, Andreas & Flues, Florens & Pothen, Frank & Massier, Philipp, 2013. "Den deutschen Strommarkt an die Wirklichkeit anpassen: Skizze einer neuen Marktordnung," ZEW policy briefs 7/2013, ZEW - Leibniz Centre for European Economic Research.
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