An Offshore Hybrid Interconnector in the Coupled Dayahead Market of Europe-a Case Study for the Baltic Sea

Europe's net-zero targets rely on interconnectors to support an integrated electricity market, with high volumes of offshore wind energy. This study evaluates the impact of an additional offshore hybrid interconnector in the Baltic Sea on Europe's day-ahead electricity market. Using the Euphemia algorithm and historical order books (2023-2024), a counterfactual analysis compares two alternative topology setups to a reference case with no such additions. Results demonstrate that a Baltic States-Germany hybrid interconnector would yield greater European welfare benefits than a radial wind farm connection, with significant price effects and commercial flows beyond the hosting countries. The analysis highlights distinct surplus distributions between offshore generators and transmission operators under different setups, emphasizing the complexities of setting up offshore bidding zones. These findings affirm theoretical predictions with real-world data, advocating for sea basin-wide planning and cost-sharing frameworks to address distributional issues and optimize interconnector benefits in Europe's energy transition.