EURO 2025 Leeds
Abstract Submission

611. Multi-Market Coupling Model: A Residual Demand Approach

Invited abstract in session WB-44: Network constraints in electricity market design, stream Energy Economics & Management.

Wednesday, 10:30-12:00
Room: Newlyn 1.01

Authors (first author is the speaker)

1. Tobias Kargus
Financial Engineering and Derivatives, Karlsruhe Institute of Technology (KIT)
2. Marliese Uhrig-Homburg
Financial Engineering and Derivatives, Karlsruhe Institute of Technology (KIT)

Abstract

The growing share of intermittent renewable infeed calls for further interconnection of electricity markets. The European commission defined one coupled European electricity market as the target model and aims for an expansion of the interconnecting capacities to cover at least 15 % of the electricity produced in each connected country. For Central Western Europe (CWE), we observe that the day-ahead prices are often identical and are influenced by transmission capacities implicitly allocated by the Flow-Based Market Coupling (FBMC) methodology. However, established electricity price models often do not consider market coupling and lack implementable solutions to integrate it. Existent coupling models often assume explicit capacity allocation not following the FBMC and do not account for more than two coupled price zones. Due to the expected growth of interconnecting capacities, an approach using structural information and the FBMC methodology is needed. With our multi-market coupling model we want to fill this gap and answer the following research question: How can we integrate FBMC in a residual demand framework to predict electricity day-ahead prices in a mid-term horizon? Core of the model is the iterative optimization to find the optimal interconnector flows and the corresponding supply functions. Hence, we develop a proxy of the EUPHEMIA coupling algorithm and take the Remaining Available Margins (RAMs) of every interconnector as side restrictions.

Keywords

Status: accepted

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