Impact of Flow-Based Market Coupling Parameters on European Electricity Markets

Market coupling is becoming increasingly important for the European electricity markets. The introduction of Flow-Based Market Coupling led to more efficient electricity exchange, but also entailed an increase in complexity. Grid elements are considered as a simplified model for market coupling. The parameterization has a significant impact on market results. This paper explains the modeling of Flow-Based Market Coupling in the context of an electricity market simulation and the determination of relevant input parameters. The associated simulation results and sensitivities concerning electricity exchange and generation are analyzed. From a modeling point of view, different parameterizations for a more precise mapping of the electricity exchange as well as possible simplifications are discussed, from a content perspective a trade-off between the highest possible trading and grid security is debated.