Efficient use of transmission capacity for cross-border trading: Available Transfer Capacity versus flow-based approach

The European Union strives towards an integrated European electricity market. Achieving this objective while preserving a zonal pricing approach in combination with market coupling, requires an efficient cross-border transmission capacity calculation and allocation mechanism. In this context, a new flow-based algorithm is developed in the CWE region for the day-ahead time frame. The idea is to accurately take into account the impact each trade has on the grid by translating cross-border contractual exchanges into physical flows. This paper compares this flow-based approach to the conventional ATC mechanism for the four steps that can be distinguished in the daily cross-border coordination process. To this end, market reports concerning the operation of the flow-based method are studied. While flow-based market coupling is beneficial to ATC from a theoretical point of view, operational challenges before, during and after market coupling are identified. These have to be considered as well in assessing the overall improvement of flow-based compared to ATC.