Tracing-based unifying framework for transmission pricing of cross-border trades in Europe

Abstract

In this paper application of the tracing methodology to the transmission pricing of cross-border trades in Europe has been introduced. The methodology was shown to exhibit the following features: (i) the only information required are the flows in tie-lines connecting the countries; (ii) transmission prices can be calculated in a decentralised manner with only neighbouring countries exchanging information; (iii) transmission charges are based on the actual physical flows and are therefore cost-reflective; (iv) the transmission revenue is exactly recovered; (v) the scheme retains the subsidiarity principle; (vi) the methodology is simple, transparent and very fast; and (vii) the methodology can deal with circular flows. Application of the methodology has been illustrated using the load flows in Europe from 16/12/1998.