Title
The effect of flow-based market coupling on cross-border exchange volumes and price convergence in Central Western European electricity markets
Author
Ovaere, Marten (Universiteit Gent; Yale University)
Kenis, Michiel (Katholieke Universiteit Leuven; Flemish Institute for Technological Research; EnergyVille)
Van den Bergh, Kenneth (Katholieke Universiteit Leuven)
Bruninx, K. (TU Delft Energie and Industrie; Katholieke Universiteit Leuven) 
Delarue, Erik (Katholieke Universiteit Leuven; EnergyVille)
Date
2023
Abstract
Since 2015 available cross-border transmission capacity is determined using flow-based market coupling (FBMC) in the day-ahead electricity markets of Central Western Europe. This paper empirically estimates the effect of introducing FBMC on day-ahead electricity price convergence and cross-border exchange volumes. In the month following the introduction of FBMC, hourly cross-border exchange volumes increased by 1,700 MWh/h, while prices between countries converged by 10.4 €/MWh. Since then, observed cross-border exchange volumes decreased to 400 MWh/h below their levels before the introduction of FBMC by the end of 2017. However, when controlling for changing market conditions in the years following the introduction of FBMC, we find that FBMC still has a persistent positive effect of around 1,150 MWh/h on hourly cross-border exchange volumes and of 2 €/MWh on price convergence. Finally, we provide suggestive evidence that decreased commercial transmission capacity on critical branches might have contributed to the decline of the benefits over time. This paper is useful for policymakers, regulators, TSOs, and other stakeholders in light of the extension of FBMC to other regions as it is the target methodology for coupling market zones in the European single electricity market.
Subject
Congestion management
Electricity prices
Electricity transmission
Flow-based market coupling
Power systems
Regression discontinuity
To reference this document use:
http://resolver.tudelft.nl/uuid:c12686d7-90eb-4ef6-839f-45a2ab5367c6
DOI
https://doi.org/10.1016/j.eneco.2023.106519
Embargo date
2023-07-21
ISSN
0140-9883
Source
Energy Economics, 118
Bibliographical note
Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project https://www.openaccess.nl/en/you-share-we-take-care Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.
Part of collection
Institutional Repository
Document type
journal article
Rights
© 2023 Marten Ovaere, Michiel Kenis, Kenneth Van den Bergh, K. Bruninx, Erik Delarue