SDAC Interim Coupling: We Analyse and Visualise the First Two Weeks
On 18 June we celebrated the launch of the Interim Coupling project – the work done since December 2018 to integrate the 4MMC (Czech-Slovak-Hungarian-Romanian market coupling) area in the Single Day-Ahead Coupling (SDAC) auction.
Thanks to the successful launch, most of Europe is now part of the Single Day-Ahead Coupling which allocates cross-border transmission capacity in the most efficient way through the Euphemia algorithm (an acronym for Pan-European Hybrid Electricity Market Integration Algorithm).
The SDAC auction now includes the Nordics, CWE, Iberia, Italy, Slovenia, Poland, Slovakia, Hungary, Romania, the Czech Republic, Greece and Bulgaria.
The explicit auctions and nominations of the following six borders were substituted with implicit allocations in the Euphemia algorithm: HU-AT, PL-CZ, PL-SK, PL-DE, CZ-DE, CZ-AT.
Explicit auctions imply acquisitions of cross-border capacities from TSOs and physical nominations according to market prices expectations. In contrast, implicit allocations are performed directly from the market algorithm that simultaneously calculates and optimizes energy prices and cross border flows.
Analysis of the first two weeks
The available transfer capacity and cross-border data related to the new borders are available in the Insight by Volue API and in our app under “Exchange TSO Numbers”.
In the graph below, we observe the day-ahead spot results for the main hubs in continental Europe. We observe a large degree of coupling across the whole area.
The graph shows the hourly delivery of the so-called CORE area between 18 and 29 June.
Below is the daily delivery of the so-called CORE area between 18 and 29 June. The closer the lines, the higher the coupling effect on a daily basis.
The strong convergence in this period is also driven by fundamentals such as the relatively low wind and the current levels of carbon and fuel complex reflected in the Short Run Marginal Costs of the main thermal technologies. In the short term, the mid-efficiency Combined Cycles (CCGT) are slightly more competitive than mid-efficient coal units. All in all, coal and gas plants – depending on the efficiency and the age of the units – compete fairly in a range between 70 and 80 Euro/MWh.
In terms of flows, we observe a higher and more logical utilization of the available capacities (NTC). This is a consequence of implicit XB coupling optimization that determines always optimal flows, whereas explicit allocations allow suboptimal commercial exchanges.
DE-CZ border analysis
In the graph below, we analyze the border DE-CZ in the period 1 – 29 June. We show:
In yellow, the hourly spread between CZ and DE (when positive, CZ > DE).
In blue, the corridor of the NTC DE-CZ.
In grey, the commercial flows from DE to CZ (positive means flows into CZ).
When the grey line and the yellow bars have the same sign, then the XB flow is coherent with the spread.
Between 18 and 29 June, the hours of full coupling are above 80% of the total. The red arrows on the graph show some of the hours when in the past (before the Interim Coupling project) commercial flows occurred in the opposite direction indicated by the spread. This dynamic can often be observed on explicitly optimized borders where flows are nominated according to market expectations. Since 18 June we observe that the direction of the commercial flows is constantly consistent with the sign of the price spread.
Clear benefits of Interim Coupling
Our analysis of both price convergence and optimization on the borders shows the clear benefits of the introduction of Interim Coupling in terms of pan-European integration.
It also points to the importance of the choice of market design in order to maximise the utilisation of the grid across Europe.
We look forward to the next step: the extension of the Flow-Based Market Coupling to the whole CORE area.
* A note on Poland: in the graphs we show the Polish prices from NordPool. These reflect better the dynamics of SDAC. However, in our app we publish – as a benchmark for our spot model – the TGE spot prices. This is because the national auction still settles circa 80% of the total volumes. The NordPool result for the Polish prices can be found in the Insight by Volue API.
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