emcc: Press Releases

Parallel to the start of CWE-Nordic Interim Tight Volume Coupling on 9 November, European Market Coupling Company (EMCC) celebrated its first year in operation, looking back at an exciting and successful year.

A year ago, on 9 November 2009, EMCC started tight volume coupling between Denmark and Germany. After some teething problems, which were quickly solved, operations have functioned smoothly since then. In May 2010, market coupling on Baltic Cable was included, proving good results and stable operations from the beginning. 

Within the first year in operation, more than 9 TWh were traded on the two interconnectors between Denmark and Germany and on Baltic Cable between Sweden and Germany. 92% of the transferred electricity was sent in the right direction in line with the price signal, flowing from the low-price area into the high-price area. Flows in the seemingly wrong direction are mainly due to ramping constraints, currency conversion and rounding issues, which are inherent to volume coupling. Ramping is a restriction of the electricity flow when it changes direction between two hours. This is applied for security reasons on many interconnectors. 

Market prices in the different areas have converged significantly through tight volume coupling. The average price differences between DK1, traded on Nord Pool Spot, and Germany, traded on EPEX, averaged around 1,40 €/MWh. Likewise, the price spread between Sweden and Germany decreased to below 2,00 €/MWh. Since DK2 saw comparably high prices leading to large price spreads especially in winter 2009/2010, the average deviation between DK2 and Germany was around 9,00 €/MWh in the past twelve months. 

Interim Tight Volume Coupling between CWE and the Nordic region 

In January 2010, the transmission system operators and power exchanges in the Central Western European and Nordic regions agreed to introduce Interim Tight Volume Coupling between the two regions. EMCC was asked to develop the market coupling system, which was launched on 9 November, together with CWE price coupling. 

Throughout the first year in operation, the cooperation between the power exchanges and EMCC has been very positive and this collaboration was strengthened even further during the development of ITVC. Coupling the two largest regional electricity markets, EMCC is pleased to be able to contribute to the advancement of market integration. 

Successful joint launch of the Central West European price market coupling and the Central West European-Nordic tight volume coupling

The partners of Central Western European (CWE ) and Nordic countries  are pleased to announce that a decisive step towards the integration of the European electricity market has been taken. This innovation entails the simultaneous launch of two new initiatives on 9 November: the CWE price market coupling and the CWE-Nordic region Interim Tight Volume Coupling (ITVC). European consumers will thus benefit from the economic optimisation resulting in a more efficient use of the power system in the region, convergence or equalization of prices, improving social welfare and security of supply.

The market coupling method, developed jointly by the power exchanges and the transmission system operators (TSOs), aims at a more efficient use of available cross-border capacities and further price harmonisation across the regions. It creates a single platform for day-ahead electricity trading, allowing power exchange members to find a counterpart in any of these countries without taking care of cross border capacity reservation.

The first initiative launched, the CWE price coupling, covers Belgium, France, Germany, Luxembourg and the Netherlands. It is based on a coordinated capacity calculation performed by the transmission system operators and a coordinated price calculation performed by the power exchanges.

The second initiative launched, the Interim Tight Volume Coupling solution, is based on the existing EMCC (European Market Coupling Company) tight volume coupling model connecting the German borders, and thus as of now the entire CWE region, with the Nordic market via the interconnectors between Germany and Denmark and Sweden respectively. Further information on the integration of the NorNed interconnector into this common North-West European power market will be given on 19 November.

On the first day of operations, day-ahead baseload prices set by the power exchanges in the CWE region have fully converged in all hours, recording a day-ahead baseload price of 51.21 €/MWh for electricity delivered for 10 November. Day-ahead baseload prices set in Nord Pool Spot’s Elspot market for the two Danish bidding areas were 51.69 €/MWh and 51.75 €/MWh and for Sweden 51.34 €/MWh. Flows on ITVC interconnectors between Nordic and CWE areas were fully utilised within 23 hours. Ramping constraints were considered according to market rules as usual.

The two initiatives integrate a day-ahead market of 1,816 Terawatt hours of power production, being the largest of its kind in the world and covering approximately 60% of electricity consumption in Europe. This result has been achieved thanks to the close cooperation between the 17 partners involved.

About Price Coupling:
Price coupling between different countries allows creating a single exchange zone – and consequently single price zones when interconnection capacities do not limit cross-border power exchanges. It contributes to improve the market liquidity and participates in the creation of a single European electricity market. Nord Pool Spot have organised price splitting since the start in 1993 and in 2006, price coupling was first implemented between France, Belgium and the Netherlands.

About Volume Coupling:
Volume coupling is a coordinated day-ahead auction involving two or more power markets. Cross-border volumes computed by an Auction Office are transferred to the power exchanges, which consider them as price inelastic bids into their local system. The calculated flows are based on anonymous order books and the available transmission capacities, while the pricing authority remains with the involved power exchanges. Volume coupling was introduced on the Nordic-German border in November 2009.

CWE, EMCC and Nordic Parties

The project partners of the Central-West European Market Coupling (CWE MC) and the CWE-Nordic Interim Tight Volume Coupling (ITVC) are pleased to announce that they have confirmed the launch date of their projects of 9th November to the regulators of the CWE-Nordic regions, at their meeting on 17th September 2010. The expected launch of the NorNed cable in the ITVC solution is scheduled on 14th December. The effective go-live of the projects is still subject to the successful completion of the remaining testing phases and to regulatory approval.

The CWE-Nordic TSOs, Power Exchanges and EMCC (European Market Coupling Company) have made an important step forward in the planning of the combined projects. Significant progress has been reached in the testing phases during the last months and current analyses show promising results.

CWE, EMCC and Nordic parties

On 7th May 2010, in Bonn and in presence of the CWE-Nordic Regulators, the CWE-Nordic TSOs, Power Exchanges and EMCC committed to prepare for a simultaneous go-live (launch) of the CWE-Nordic Interim Tight Volume Coupling (ITVC) solution and the CWE Price Coupling solution, as close as possible to 7th September 2010, the initial target launch date for the CWE region.

The ITVC solution is based on the existing EMCC tight volume coupling model on the German borders with Denmark and Sweden. It is scheduled to be implemented in two steps, with the NorNed cable being integrated in the second step. The ITVC is an interim solution that will be replaced by an enduring price coupling solution covering at least the entire CWE and Nordic regions. The CWE and Nordic parties have established a detailed project planning, including alignment of business processes and testing of the solution according to the necessary quality standards. The planning also caters for testing of the operational fall back mechanism, i.e. shadow auctions performed by CASC-CWE which is planned to be in place from the start of ITVC.

According to this planning, the combined target launch date of the ITVC step 1 solution and CWE Price coupling is 9th November 2010. The target launch date of ITVC step 2, including NorNed capacity, is 14th December. Both target launch dates are subject to successful completion of all necessary tests and subject to regulatory approval of the solution. Confirmation of a firm launch date for step 1 is expected to be given by mid September.

CWE, EMCC and Nordic parties

Since European Market Coupling Company (EMCC) launched market coupling on Baltic Cable on 10 May 2010, the results have been satisfactory. Smaller technical deficits, which had appeared the first day, could be resolved quickly.

Within the first seven calendar weeks in operation, almost 516 GWh were traded on Baltic Cable between Sweden and Germany. 94% of the total electricity were sent in the direction according to the price signal. Considering the financial turnover on the interconnector, 99.81% went in the right direction.

The average price difference between Sweden, traded on Nord Pool Spot, and Germany, traded on EPEX Spot, ranged around 2.3 €/MWh. As this resembles the price deviation between Denmark and Germany, for example on DK1, it shows that market coupling can lead to a convergence of prices in different market regions.

During the first day of market coupling on Baltic Cable, EMCC’s website showed some incorrect price spreads. This was due to a programming error which was resolved within two hours. Since then, the system worked faultlessly.

“The results are even better than on our two Danish-German interconnectors,” Enno Böttcher, Managing Director of EMCC comments, adding “our system proved its productivity.”

Before the launch of market coupling on Baltic Cable, EMCC has already carried out day-ahead congestion management services on the two interconnectors between Denmark and Germany. With the introduction of market coupling on Baltic Cable, EMCC’s market coupling is now covering all interconnectors between the Nordic market and Germany.

Yesterday, 10 May 2010, market coupling was introduced on Baltic Cable. The total electricity flow traded between Sweden and Germany for delivery days 11th and 12th of May was 21,469 MWh. The average price difference between Sweden, traded on Nord Pool Spot, and Germany, traded on EPEX Spot, ranged around 3.20 €/MWh.

EMCC is applying the market coupling mechanism by buying and selling on the two power exchanges on behalf of Baltic Cable AB. Baltic Cable remains the owner of the capacity. The determination of the power flow follows the price signals on the two exchanges, thus leading to a flow from the low price area to the high price area. This leads to an optimal utilisation of available capacity, improving the efficiency of cross-border congestion management.

In order to achieve this, many contractual and technical issues had to be solved by Baltic Cable AB, EMCC and the involved power exchanges. Moreover, extensive tests were carried out to prove the functionality of the coupling mechanism on the cable.

Before the launch of market coupling on Baltic Cable, EMCC has already carried out day-ahead congestion management services on the two interconnectors between Denmark and Germany. With the introduction of market coupling on Baltic Cable, EMCC’s market coupling is now covering all interconnectors between the Nordic market and Germany.

Baltic Cable is a 600 MW HVDC (high voltage direct current) interconnector between Sweden and Germany. It is operated by the merchant company Baltic Cable AB. Baltic Cable AB has decided to introduce market coupling on a voluntary basis.

Baltic Cable AB and European Market Coupling Company GmbH (EMCC) have signed an agreement to introduce market coupling on Baltic Cable. The target date to start market coupling is Monday, 10 May 2010 (for delivery on 11 May 2010).

EMCC will apply the market coupling mechanism by buying and selling on the two power exchanges, Nord Pool Spot and EPEX Spot, on behalf of Baltic Cable AB. Baltic Cable remains the owner of the capacity on the interconnector.

Baltic Cable is a 600 MW interconnector between Sweden and Germany. Baltic Cable AB is a merchant company and has decided to introduce market coupling on a voluntary basis. Market coupling, also referred to as implicit auction, is a mechanism that leads to optimal utilisation of the available capacity in the day-ahead phase. The aim is to improve market efficiency of cross-border congestion management.

Before the launch of market coupling on Baltic Cable, EMCC has already carried out day-ahead congestion management services on the two interconnectors between Germany and Denmark, DK West (950 MW north and 1,500 MW south) and DK East (550 MW north and south).

Market coupling between Denmark and Germany produced positive results in February. Meanwhile, Mikael Lundin was elected chairman of EMCC General Assembly.

The total traded volume on the two interconnectors between Denmark and Germany amounted to 618 GWh from 1 to 28 February. In total, 91.5% of the volume was sent in the correct direction, i.e. in accordance with the price signal. On DK2 the correct flow even accounted for 99.3%. As remaining adverse flows result from very small price deviations, only 0.07% of the total congestion revenue was negative, down from 0.24% in the previous reporting period.

Amid an exceptional market situation with scarce supply, Elspot prices in Eastern Denmark climbed to an average of about 93 €/MWh. Thus, the average price difference between Germany and Denmark East ranged around 37 €/MWh. However, the interconnector between these two price areas was very well utilized with an average coupled capacity at 548 MW. The price difference between Germany and Denmark West was considerably lower, ranging around 2.44 €/MWh. Prices in Denmark West and Germany are equal in more than 60% of all hours.

EMCC’s operational performance was affirmed throughout the current market coupling period. The market coupling process and the cooperation with the exchanges, which perform the market coupling process on behalf of EMCC, are very well established and work faultlessly.

Mikael Lundin elected chairman of EMCC General Assembly

Mikael Lundin, CEO of Nord Pool Spot, is the new chairman of EMCC’s General Assembly. He was elected by all members in a meeting on 9 March 2010.

European Market Coupling Company

European Market Coupling Company GmbH was established as central auction office for market coupling between Germany and the Nordic countries. The company carries out day-ahead congestion management services on the two interconnectors between Germany and Denmark, DK West (NTC of 950 MW north and 1,500 MW south) and DK East (NTC of 550 MW north and south).The aim is to improve market efficiency of cross-border congestion management based on implicit auctions. EMCC was founded in Hamburg in August 2008 as a joint venture of European Energy Exchange AG Energinet.dk, transpower stromübertragungs gmbh, Nord Pool Spot and 50Hertz Transmission GmbH. It is designed to allow for the extension of its services to other interconnectors or markets.

Nordic-German tight volume market coupling has seen robust results in December and beginning of 2010. The desired effect of market coupling, namely the balancing of supply and demand across national borders, has set in. Also the daily routines with the involved power exchanges could be confirmed and consolidated.

In total, the traded volume on the two interconnectors between Denmark and Germany was very high, amounting to 1.2 TWh from 1 December 2009 to 15 January 2010. About 90% of the traded capacity went in the correct direction, i.e. in accordance with the price signal. On DK1, 86% of the volume was sent in the correct direction, on DK2 it even accounted for 94%. Most of the remaining adverse flows result from very small price deviations, accounting for minor financial turnover. Thus, considering both interconnectors, only 0,24% of the total congestion revenue were negative.

The average price difference between EPEX Spot and Nord Pool Spot on DK1 decreased to 1.51 €/MWh, this is down 2.70 €/MWh from the November results. In nearly 50% of all hours, the markets in Western Denmark and Germany saw identical prices. This shows that market coupling leads to a convergence of prices between market regions. An exception from this could be seen on DK2, where scarce supply and severe weather conditions tightened the market. In addition, Svenska Kraftnät reduced capacity during some hours on a couple of days. These are some reasons why the average price difference between Germany and Denmark East climbed to 27.02 €/MWh. In order to relieve the tight supply situation and thus avoid even higher prices, EMCC sent significant volumes from Germany to Denmark East. In this way, market coupling fulfilled its aim of a more efficient allocation of capacities.

Daily routines
Following the tight market situation, EMCC had to follow specific exchange rules during the past weeks, such as second auctions at EPEX Spot or activation of power reserves according to Nord Pool Spot market rules. The latter was utilised in trading for 17th December 2009 when the cold weather in Scandinavia triggered increased consumption and plant outages reduced supply. In order to avoid curtailment, reserves in Finland and Sweden were activated by Nord Pool Spot. Furthermore, EPEX Spot called for a second auction several times during the past six weeks. Also this specific routine worked well within EMCC, proving that all tested scenarios are functioning in live operation. Moreover, also the cooperation with the exchanges, which perform the market coupling process on behalf of EMCC, works perfectly. The average calculation time of EMCC’s system was around 6:30 minutes.