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NWE electricity market coupling to spread renewable volatility

04 Feb 2014 17:45:32 | edem

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Day-ahead market coupling will go some way to spreading volatility from renewable generation across markets which is expected to boost prompt liquidity, said traders on Tuesday – the launch day of the North Western Europe (NWE) Day-ahead market coupling project.

“When markets are coupled, the volatility of renewables is better communicated to surrounding markets,” said one trader.

Market coupling, which aims to increase day-ahead price convergence between markets as electricity and interconnector transmission capacity are traded together, will also lead to greater convergence of curve prices, traders said.

The NWE market coupling project, brings together the already coupled Central Western Europe (CWE) markets of France, Germany, Belgium, Netherlands and Luxembourg with the UK, Poland and the Nordic and Baltic countries, launched successfully on Tuesday.

According to a spokeswoman from UK electricity exchange APX, the launch was conducted successfully bar a small delay of a few minutes in the results validation step.

NWE is the first region to implement the price coupling of regions (PCR), which determines the day-ahead price in coupled markets using a new single algorithm known as Euphemia.

Price coupling on the Iberian market was also successfully conducted using PCR on Tuesday, although full price coupling on the French-Spanish border will be launched at a later stage, according to a statement published by French and German power exchange EPEX Spot on Tuesday.

Convergence

The outturn of the EPEX Spot Day-ahead Baseload auction in France for delivery on Wednesday was €43.89/MWh, compared with a £44.65/MWh UK Day-ahead outturn on the N2EX and APX exchanges, collectively referred to as the GB hub, after a domestic algorithm has been applied. In euro terms, this meant the UK price was around €10.00/MWh higher than the French price.

The previous day’s auctions at the same exchanges produced €47.77/MWh for France and £47.03/MWh for the UK, a rough €9.00/MWh spread between the two markets in euro terms.

The premium held by the UK reflects a relative lack of transmission capacity between the two markets, which are linked by the 2GW IFA interconnector.

The countries covered by the NWE market coupling project account for more than 75% of European electricity consumption. The project is a step towards achieving full European power market integration.

“A more closely connected European power market will improve the efficient use of energy across national borders and lead to a more transparent market, “ said a NordPool Spot spokesman on Tuesday. Beatrice Mavroleon

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