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Degree of coordination in market-coupling and counter-trading

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  • Giorgia Oggioni and Yves Smeers

Abstract

Cross-border trade remains a contentious issue in the restructuring of the European electricity market. Difficulties stem from the lack of a common market design, the separation between energy and transmission markets and the insufficient coordination between Transmission System Operators (TSOs). This paper analyzes the cross-border trade problem through a set of models that represent different degrees of coordination both between the energy and transmission markets and among national TSOs.. We first present the optimal organisation, not implemented in Europe, where energy and transmission are integrated according to the nodal price paradigm and Power Exchanges (PXs) and Transmission System Operators (TSOs) are integrated. This is our reference case. We then move to a more realistic representation of the European electricity market based on the so-called market-coupling design where energy and transmission are operated separately by PXs and TSOs. When considering different degrees of coordination of the national TSOs' activities, we unexpectedly find that some arrangements are more efficient than the lack of coordination might suggest. Specifically we find that even without a formal coordination of the TSOs' counter-trading operations, non discriminatory access to common counter-trading resources for all TSOs may lead to a partial implicit coordination of these TSOs. In other words, an internal market of counter-trading resources partially substitutes the lack of integration of the TSOs. While a full access to counter-trading resources is a weaker requirement than the horizontal integration of the TSOs, it is still quite demanding. We show that quantitative limitations to the access of these resources decrease the efficiency of counter-trading. The paper supposes price taking agents and hence leaves aside the incentive to game the system induced by zonal systems..

Suggested Citation

  • Giorgia Oggioni and Yves Smeers, 2010. "Degree of coordination in market-coupling and counter-trading," RSCAS Working Papers 2010/24, European University Institute.
  • Handle: RePEc:rsc:rsceui:2010/24
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    References listed on IDEAS

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    1. Chao, Hung-Po & Peck, Stephen C, 1998. "Reliability Management in Competitive Electricity Markets," Journal of Regulatory Economics, Springer, vol. 14(2), pages 189-200, September.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. More on efficient trade between power markets
      by Michael Giberson in knowledge problem on 2010-05-13 01:06:36

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    Cited by:

    1. Kristiansen, T. & Rosellón, J., 2010. "Merchant electricity transmission expansion: A European case study," Energy, Elsevier, vol. 35(10), pages 4107-4115.

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