Market Coupling
What effect will market coupling have on the European power market? Nord Pool Spot, operator of Europe’s leading power markets, may appear at first sight to be a very Nordic business. But they carry forward a vision that goes beyond country borders.
By Hans Randen
WITH A DECADE’S experience drawn from the Nordic market developments which we have driven, Nord Pool Spot aims to play a lead role in accelerating integration of European energy markets. And the continued integration of European markets under the auspices of the EU gives us an excellent opportunity to do just that. Norway was, after all, one of the first countries in Europe to deregulate its power market, stepping away from state control and introducing free competition. What is abundantly clear to many of those involved in market integration
projects is that this will be a long term and complex process involving a wide variety of participants. If all goes according to plan – and the signs are very positive – 2014 will
see the European power market finally realising the ambition that was first set out in a strategy paper of 2005. That paper identified the need for a single, pan-European energy market. Just two years later the European Commission put meat on the bones of its
declared ambition, by following up on its report with the publication of an integration package. This, among other things, set out a series of steps that needed to be taken to create a competitive and open European electricity market by the target year of 2014. In this way, the ambitious architecture of European power market integration was set out.
It was this pioneering work by Nord Pool that created the concept of market coupling
Prior to 2010, the majority of European countries found that power
transmission was constrained, sometimes severely, at their borders. This was due largely to existing structural bottlenecks in the transmission system, or in the wider network. Traditionally it was the Transmission System Operators (TSOs) that would determine the available amount of capacity on an interconnector independently at each border, prior to any trading of power having taken place. It was clear to many in the European power sector that this was a
hugely inefficient setup. And equally obvious was the paramount role that interconnectors were destined to play in the ability with which European market integration targets were set, to deliver the required balance between power supply and demand across borders. And that role would become of even greater importance with the increase in intermittent generation as a result of the rise of renewables within the European power production mix. Though its importance has undoubtedly risen in light of the drive
towards market coupling, the concept of managing network congestion is not a new one. The Scandinavian market has been pioneering this very process since 1993. Nord Pool AS (as it was then called) dedicated a great deal of time and expertise to developing, and delivering on, the concept of handling network constraints. Initially Nord Pool’s focus in this work was solely on Norway, but success bred wider ambition and it was expanded to incorporate Sweden, Finland
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