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Market Coupling A Major Step Towards Market Integration

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Market Coupling optimizes of the allocation process of cross-border capacities thanks to a coordinated calculation of prices and flows between countries.

Market Coupling uses so-called implicit auctions in which players do not actually receive allocations of cross-border capacity themselves but just bid for energy on their Exchange. The Exchanges then use the available cross-border transmission capacity to minimize the price difference between two or more areas.

In so doing, market coupling maximizes the social welfare, avoids any artificial splitting of the markets, and sends the most relevant price signal for investment in cross-border transmission capacities. The efficiency of the mechanism is furthermore revealed by an increasing price convergence between market areas. Market coupling mechanisms are based on the reference prices emerging from liquid markets such as the one managed by EPEX SPOT.

EPEX SPOT has a long-standing experience in day-ahead market coupling projects. Between November 2006 and November 2010, the EPEX SPOT French auction has been involved in the successful Tri-Lateral Market Coupling (TLC), integrating the French, Belgium and Dutch day-ahead markets. The next step of market harmonization was achieved on 9 November 2010, with the launch of market coupling in Central West Europe (covering Benelux, France and Germany), known as CWE. In parallel, CWE has been volume coupled since November 2010 with the Nordic region via the Interim Tight Volume Coupling ITVC. In May 2015, the calculation of cross-border capacities in CWE has switched to a more efficient process called flow-based methodology.
 
The most important step of European market integration took place on 4 February 2014, when Price Coupling in North Western Europe (NWE) went live. It was the first initiative to use the pan-European PCR solution for the calculation of prices and flows - the starting point for all other regions to join. At the time of the launch, NWE stretched from France to Finland and from Great Britain to German/Austria, covering the region of CWE, Great Britain, the Nordics and the Baltics. EPEX SPOT has provided a crucial role to this project, in close cooperation with other Exchanges and transmission system operators.
 
Since the launch of NWE, two extensions of the PCR-coupled area have taken place: In May 2014, Spain and Portugal joined; in February 2015, Italy coupled with France, Austria and Slovenia. As a result, the now-coupled area is called Multi-Regional Coupling and covers now 19 countries, standing for about 85% of European power consumption.
 
To learn more about Price Coupling in North-Western Europe, please click here.
 
NWE relies on the Price Coupling of Regions solution. More information can be found here.
 
To learn more about the functionality of CWE Market Coupling, please click here.
 
Learn more on ELIX, the European Electricity Index, on the this page.
 
To learn more about the functionality of Trilateral Market Coupling, please click here.
 
 

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