emcc: The Concept of Market Coupling

The Concept of Market Coupling

Principle

By definition, market coupling is the use of so-called implicit auctioning involving two or more power exchanges (PX). Market coupling can in practice be implemented in several ways; the scheme developed by EMCC is called tight volume coupling.

ATC

The owners of the interconnectors between the market areas put all or part of their capacity at the disposal of EMCC the morning day-ahead. The available transmission capacity (ATC) takes into account all nominations from players with capacities bought in explicit auctions. The capacities put at EMCC´s disposal are called market coupling capacities (MCC).

OBK

At noon the exchanges receive bids from the players in their market area and transmit anonymous order books (OBK) to EMCC. On the basis of market coupling capacities and prices, EMCC calculates the optimal flow between the market areas. These flows are called market coupling flows (MCF). The algorithm uses the economic welfare criterion. After the calculation, EMCC submits additional price-independent bids/offers to the power exchanges. These bids and offers reflect the calculated market coupling flow. The exchanges then calculate their own prices taking the bids from EMCC into account.

Market coupling flows

EMCC also nominates the market coupling flow on the interconnectors by sending it to the transmission system operators (TSOs). In hours with different prices on the power exchanges EMCC will collect a congestion rent equal to the MCF multiplied with the difference in prices. The congestion rent is subsequently paid to the owners of the interconnectors. It shall be used to enhance grid quality or extend the transmission network.

In absence of further constraints there is a simple relationship between the optimal flow and the power exchange prices:
Either there is no congestion (MCF) or there is congestion (MCF=MCC) and the prices in the adjacent market areas are different. The market coupling flow is normally in the direction from the low-price area to the high-price area. However, this simple relationship does not always apply, e.g. in case of constraints on the change in the flow direction from hour to hour (“ramping”) or if the gridloss on the interconnector has to be taken account.

For more information, please click Daily Operations.