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The European internal electricity market lowers costs and strengthens security of supply
Electricity is sold on the wholesale market. It can be sold either within a country or across borders. The interconnected European grid, which links countries’ electricity grids using interconnection lines, is the basis of the cross-border electricity trade. The interconnected grid allows markets to be coupled to form a European internal electricity market.
The exchange price on the day-ahead market is set jointly for the coupled markets. The price in the bidding zone of Germany and Luxembourg, for example, is calculated together with the price in the French or Dutch bidding zone. Those offering and purchasing electricity place their bids in their own zone. The electricity demand in a bidding zone is then met by the cheapest electricity offer from other bidding zones and then the next cheapest offer, and so on until the connections between the bidding zones (cross-border interconnectors) are fully utilised. As long as the cross-border interconnectors have sufficient capacity, the market prices converge.
Market coupling refers to day-ahead and intraday trading between two or more bidding zones. It is already well established in the day-ahead market: Belgium, France and the Netherlands coupled their day-ahead markets back in 2006. Germany and Luxembourg joined them in 2010 and Austria in 2013. Nineteen European countries are now integrated in a comprehensive market coupling system with the help of the Price Coupling of Regions (PCR). The Scandinavian countries, the Baltic states, the UK, Poland, Slovenia, Italy, Portugal and Spain belong to the PCR in addition to the countries mentioned above. Market coupling of intraday trading is planned to start in 2018.
National electricity markets benefit from the ability to trade electricity across borders because they can better balance differences between consumption and generation: for example, it is not always windy at the same time everywhere in Europe, but installations elsewhere can make up for this. Also, peaks in demand do not always occur across Europe simultaneously. Because supply and demand can be balanced out across regions in the internal market, less capacity needs to be kept on standby. In addition, unplanned outages become less likely, because it is easier to manage supply and demand in a larger market and it is easier to compensate for individual lines that fail. This means that security of supply is strengthened and costs for Electricity generation in Europe go down.
Transmission capacity and network infrastructure used in trade between EU Member States, although limited at present, will be further expanded in the future to make it possible to further tap into the advantages of European electricity trading. Because of current limits, the right to use transmission capacity at borders is auctioned off or used in "market coupling". In market coupling, electricity markets of individual countries are coupled automatically. In a coordinated manner, electricity exchanges calculate how transmission capacity can be used optimally. As a result, market coupling has led to prices progressively harmonising across Europe.
The creation of an internal energy market is one of the key components of the Energy Union. The Energy Union strives to further develop the European internal market for electricity and gas in Europe and to make climate-friendly energy supply safe, emit low-emissions and be cost-effective in the long term. In addition to market coupling, this requires making transmission capacity between individual countries available for cross-border exchanges in electricity.
In the Market data visuals section, the cross-border electricity trade is clearly shown in the data category "commercial exchanges". The data comprise the planned import and export transmission volumes for each hour shown. The data for commercial exchanges are supplied broken down by hour and updated after each intraday session. Users may also be interested in the physical flows, which are made up of the interaction of all electricity physically fed into and taken off the system and the electrotechnical status of all interconnected grids – in short, the electrotechnical properties of the electricity system. The physical flow is shown on the SMARD website as well.
The graph shows the current exports and imports from Germany. The black line represents the net exports or imports (positive values show exports, negative ones show imports). The coloured bars show the electricity traded at the respective market area borders.