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More Market Coupling or more Market Splitting: which is better for the integration of EU power systems?

June 2016

FSR-RTE executive seminar Integrating the Operation of EU Power Systems?

Vincent Rious, Vice-President Energy & Regulation at Microeconomix, discussed the solutions for the integration of the EU power systems.

Until now, the debate has focused on market coupling and market splitting. Market coupling has revealed very powerful for an efficient management of cross-border congestion. Nevertheless, with more and more question on the precise location of congestion on the European network, market splitting is more and more considered, all the more that a case law now exists from Sweden. At the same time, it also raises a lot of unanswered questions about its efficiency, its impact on the local market power, the quality of hedging on smaller bidding zones and the resulting operational difficulties.

Whatever the choice between coupling and splitting, more transparency on location and cost of congestion is essential to foster the integration of the EU market because it will give the market new alternatives. Market power would be reduced because generators in load pockets will be pointed out and competitors would be able to locate where it is most beneficial for them and the power system.

From the operational point of view, if regional solutions would be needed to help the development of regional operation centers easing the management of network constraints at the regional scale, a European supervision, e.g. from ACER, will be needed to avoid that the regional specificities be used a boogeyman to prevent integration, while recognizing that liabilities are set at the national level in the current framework.

Other questions were also highlighted, among others about the efficient strategies to harmonise the European market design for real time exchanges were also highlighted, the target for the real time market design, in particular to organize reserves or the development of market platform at the very local scale and the question of their interoperability with the European market as a whole.

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