Day-ahead market coupling
CZ-SK-HU Market Coupling
The implicit auction is the basic method of Czech-Slovak-Hungarian Market Coupling. The capacity allocation is based on the simultaneous consideration of power flows and available cross-border capacity within the market coupling calculation algorithms, which was the Cosmos algorithm during the operation of CZ-SK-HU.
There are several goals of the CZ-SK-HU market coupling. In addition to contributing to the European power market integration and the improvement of the security of supply, it also aids the growth of market depth and the enhancement of liquidity may be expected. Market coupling should in addition result in more stable power prices in the regional markets, as well as in the narrowing of price spreads between relevant markets.
Czech-Slovak-Hungarian day-ahead market coupling
In order to implement the CZ-SK-HU MC, the regulators, the power exchanges and the transmission system operators of the Czech Republic, Slovakia and Hungary have signed a Memorandum of Understanding on 30 May 2011, in order for the market coupling to launch on the trading day of 11 September 2012. Continuous work and serious efforts were needed from all participants working on the project (PXs, TSOs and NRAs). In the process of organizing the market coupling, HUPX Ltd. filled the part of project manager, hence our company played an active role in ensuring that the project would be concluded by the target date without any issues.
The aforementioned market coupling was demanded by the market participants and the project was formed voluntarily by the PXs, TSOs and NRAs considering the European regulation. The Czech-Slovak-Hungarian market coupling ensured the possibility of efficiently joining the MRC region. The explicit flow-based capacity allocation model is a less efficient solution regarding the Single European Electricity Market, which is why it is less preferable.
For the Project Members an essential objective was to ensure that the modifications connected with the planned conversion met the expectations of the market participants and a smooth conversion would be achievable. Taking this into account, during the project several tests were executed by the Project Members. During the coordination of the procedures we made an effort to work out scenarios, which resulted in solutions for different situations after the go-live of MC and assured an unbroken trading on the organized power markets.
The successful execution of the Master Test Plan was an unequivocal precondition before the go-live of the Market Coupling. The Project Members – in a period of almost one year - have executed all of the 8 tests successfully. In these tests scenarios, fallback situations were also set up auspiciously besides the normal processes. The Project Members attended the Member Tests (on the beginning of August 2012) with high priority to assure the smooth transition to the go-live.
According to the requests of market participants to provide sufficient time to prepare for the new business situation, Project Members decided that the exact go-live date would be at the beginning of September 2012.
The Market Coupling is definitely an innovative and essential initiation concerning the planned complete market coupling of Europe. The benefits of the Czech-Slovak-Hungarian Market Coupling are similar to those of the future Single European Market model. The market liquidity is likely to grow further, the price volatility taking place on the smaller markets is likely to be moderated, which in turn should also increase the predictability of DAM prices.
A CZ-SK-HU-RO Market Coupling (4M MC)
On the 19th of November 2014, the PXs, TSOs and NRAs of the Czech Republic, Slovakia, Hungary and Romania started the operation of the day-ahead four markets market coupling (4M MC) with the PCR-based extension of cooperation with Romania. The 4M MC is an ATC based day-ahead auction with implicit allocation, which strives to be as compatible with the EU target model as possible. The 4M solution of the Central Eastern European (CEE) region can be seen as an intermediate step of the ”Core” regional market coupling solution.
The first test was the internal integration test, which was made between 02.09.2014 and 19.09.2014. After the internal integration test successfully finished the full integration test together the PXs’ Members conducted between 13.10.2014 and 26.10.2014. Members could participate through only those PXs where they were registered members. Acceptance tests were made between 02.11.2014 and 09.11.2014.
After the successful member and acceptance tests and the final regulatory approval, the introduction of the 4M Market Coupling was in 19.11.2014.
Market coupling theory
The primary target of the market coupling is to assure a deeper integration of regional power markets. Given the advantages for end-consumers, traders, security of supply etc. this integration serves both national and international interests.
The market coupling process aims at maximizing the energy flow from the low price area to the high price area by taking into account the available cross-border capacity. Consequently, price levels among individual market areas converge.
A Market coupling process model
The introduction of market coupling did not change the capacity allocation method. For the given cross-borders the adjacent TSOs calculate the ATC and the smaller value takes effect in connection with the result and publishing. The involved TSOs (CEPS, SEPS and MAVIR and TEL) are responsible for the cross-border capacity allocation as well. However, the handling of capacity is a modified TSO Management Function task which is held by SEPS.
The reception of the market participant orders remains the task of the Power Exchanges. This data, in anonymized form, is forwarded to the PMB (Price Matcher and Broker). To trade in the 4M MC region it is not necessary to register in all market areas. It is sufficient to register only on the local market. The Price Matcher and Broker, which assures the operation of Market Coupling, is based on the EUPHEMIA algorithm used in the Multi-Regional Coupling (MRC) region as well. mTMF (modified TSO Management Function) provides the available capacity for the PMB, and with the help of aggregated data runs the order matching process. This process is also known as the implicit auction regarding the capacities and orders. Sending the cross-border schedules in the relevant TSO system is now the responsibility of shippers – in the interim solution this is also a TSO task - as the transmission of electricity between the coupled markets. The parties agreed to implement a solution similar to the solution in MRC while adapting it to the 4M MC circumstances (e.g. in case of PXs adaptation to gate closure time (GCT) at 11). Furthermore, they decided to have same roles and responsibilities, where feasible and rational, stemming from CZ-SK-HU MC arrangement (e.g. centralized TSO system and TSO shipping).
In the project of market coupling, the processes and the timing were defined to give the biggest timeframe for solving possible problems. These are supported by the different backup modes, which were set up to ensure smooth operation at every level.
Our most important purpose is to have the market coupled and to assure adequate time for successful execution. If the market coupling process cannot be executed in due time, fallback processes will be used for the decoupling. The fallback steps are the following:
There are two reasons for decoupling. One, if it is impossible, for a specific day, to allocate the available transmission capacity via the normal daily implicit allocation. Two, if it is impossible, for a specific day, to fix severe problems in modified TSO Management Function system and/or ATC calculation/provision process. In this case decoupling is announced early, i.e. far before PXs order book gate closure.
In case of decoupling the capacities are allocated via explicit capacity auction (shadow auction) after the decoupling is announced. ČEPS and MAVIR are shadow auction organizers in CZ-SK-HU-RO MC. ČEPS organises for CZ – SK border in the DAMAS ENERGY system while MAVIR organises for SK – HU & HU – RO borders in the MAVIR KAPAR system.
- Shadow bids can be submitted for 30 consecutive days in advance;
- If decoupling is not announced, bids are not evaluated, no explicit allocation of capacity;
- By the time of announcing decoupling and switch to fallback, the bids are evaluated;
- After the publication of cross-border explicit auction results PX Order Books are still open for 20 min to update PX bids;
- There will not be any change in nomination process
Technical Details in market coupling
The harmonization of energy exchange processes are of the utmost importance since the CEE region is proposed to connect with the MRC region in a future market coupling project. The Members of the Coupling strived to create processes that reflected the standardizations in the western market regions. The harmonized parameters are the following:
The total available capacities are published every day at 9:15 am on the TMF webpage (www.sepsas.sk) (and on every PX webpage not later than 9:30). The values of ATC can be changed until 10:30 am by the TMF. The PX order book closure time is 11:00 am. The market results are published from 11:40 while the cross-border schedule deadline is 14:30.
It is important to highlight that in normal mode the Czech-Slovak-Hungarian-Romanian Market Coupling results can be published before the closing of the MRC region. HUPX also withholds the right to create a second auction in case of extreme prices, which are not explicable by normal market conditions. In these occasions, participants get the chance to shift the prices towards the normal prices in the given hours. One of the standardized parameters is the implementation of the negative prices on HUPX Day-ahead market with the start date of Market Coupling. From a technical point of view, trading with negative prices does not bring a significant change to the daily processes.