The Flow-Based Market Coupling (FBMC) has been in place for Central Western Europe since 2015. In June 2022, Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia will join the flow-based mechanism, impacting the current dynamics of the power market.

"With this change, the grid will be utilised more efficiently. More capacities will be freed up for trade and this is expected to increase social welfare overall," says Felix Hofmann from Volue.

With the new approach, European markets will get more intertwined.

"In the pan-European market, no country is isolated. This reflects the physical world where cables interconnect European countries."

But the power grid sets limitations to what can be traded.

"Cables have limited capacities. To give an example, in practice, not all off-shore wind energy produced on a stormy day can flow anywhere on the mainland without restrictions," says Felix Hofmann.

There are different approaches to allocating capacities and incorporating them into market algorithms.

"The flow-based market coupling is an approach that reflects the state of the grid on a more granular level. For example, it includes information on specific lines and transformers that restrict energy flows."

With this more granular view, market analysts can pin down which elements are constraining energy flows, in principle.

Volue AS published this content on 30 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 May 2022 19:38:52 UTC.