Market Coupling in Europe – Principles and Characteristics

Abstract

This paper investigates the evolution of the European electricity markets that are leading to the development of the internal European market for electricity (IEM). Focusing on the wholesale electricity spot markets (day-ahead and intraday), the work presents the fundamental concepts and the state-of-the-art of the IEM. The IEM results from the coupling of different European electricity markets, with the goal of increasing the global efficiency in sharing resources among a large number of countries, by promoting competition, increasing liquidity and enabling a more efficient use of the electricity generation and transmission resources across Europe. The architecture, operation and products of the coupled day-ahead and intraday markets are described, and an analysis of the single day-ahead coupling prices is done, exposing that there are regions within Europe where price converge often but the persistence of different market designs within the IEM is a barrier for the European-wide price coupling and market integration.