Introduction

Flow-Based Market Coupling (FBMC) represents a key development in the European electricity markets, optimising cross-border electricity trading through a more precise calculation of interconnector capacities. This approach is grounded in the EU Capacity Allocation and Congestion Management (CACM) guidelines, which prefer the flow-based method for regions with highly interdependent cross-zonal capacities. It necessitates thorough market consultation and preparation for a seamless transition, distinguishing itself from the coordinated net transmission capacity (NTC) approach.

The EU's endorsement of FBMC underscores its commitment to integrating European power markets and maximising the potential of renewable energy sources. First implemented in Central Western Europe (CWE) in May 2015, this methodology expanded to the CORE region in 2022, encompassing a vast area including countries in CWE, CEE, and SEE. Its success in these regions sets a precedent for its anticipated implementation in the Nordic area, aligning with the CACM's principles.

The Nordic TSOs are now exploring FBMC as a viable option for setting transmission capacities between their bidding zones. Significantly, on March 7, 2022, the Nordic TSOs and the Nordic Regional Coordination Centre (RCC) commenced an external parallel run (EPR) of the Nordic flow-based methodology, comparing market outcomes derived from the NTC methodology with simulations based on the FB approach. This initiative marked a critical step toward the expected go-live of the Nordic Flow-based Market Coupling in October 2024, a revised target following the postponement from Q1 2024 due to the complexity of integrating diverse Nordic IT systems into the European Single Day-Ahead Market Coupling (SDAC).

Insights from Volue's Internal Parallel Run

Volue's SpotEx, a comprehensive Pan-European short-term price model, is adapting to this evolving landscape. SpotEx, offering hourly price forecasts across Europe, factors in a myriad of elements and various fundamental forecasts, thereby providing a holistic view of market dynamics. In light of the Nordic FBMC methodology, SpotEx has been conducting an internal parallel run (IPR) for the last seven months, refining its Power Transfer Distribution Factor (PTDF) forecast and model to accommodate the new market structure in the Nordics.

Our IPR, in principle, is running in parallel to our in-production models. However, the following results a stemming from a backcast extending over the entire EPR period. In this regard, it's retrained every five days to forecast the next five days. For the EPR, we have used the available data from the TSOs, spanning from Week 50 2022 (Dec 12th, 2022) to Week 45 2023 (Nov 11th, 2023). The network topology has been updated to incorporate the characteristics of Nordic FBMC:

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Volue ASA published this content on 02 January 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 January 2024 11:11:04 UTC.