Market coupling is a good way to allocate cross-border transmission capacity, better for example than explicit auctions. But it is not the same as a single power market. Nor does it inevitably lead to one. Jan Ondrich takes a look. What is market coupling and why is it beneficial? There are various ways to couple markets, such as tight or loose volume coupling, price coupling or market splitting. Each has its own advantages and drawbacks, but all seek the same end, which is to allocate scarce cross border grid capacity in the most efficient way. Here we will focus on price coupling, being the method used to couple markets in Central and Western Europe. Simply put, market coupling is an agreement between transmission system operators and market operators of two or more countries. They use a common algorithm for settling market transactions, given cross border grid constraints. The term ‘interconnector’ describes the connection between two transmission systems. Each market operator collects the corresponding bids for their market areas and sets its own area price based on … Continue reading Will market coupling lead to one European power market?