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Study for ACM into Flow-based Market Coupling for the North-western European Electricity Market

The Netherlands Authority for Consumers & Markets (ACM) asked Berenschot Energy & Sustainability to conduct a study into competition issues relating to ACM’s decision concerning Flow-based Market Coupling (FBMC) for electricity. The positive ACM decision, as well as Berenschot’s report were recently presented. The Berenschot report is available here (2.8 MB PDF), as well as on ACM’s website.

ACM regulates the energy market, as well as competition on the market in general. Pursuant to this responsibility, ACM evaluated the proposal submitted by TSOs and power exchanges concerning the introduction of a Flow-based Market Coupling (FBMC) among countries in the Central Western European (CWE) region. The current market coupling methodology is based on Available Transmission Capacity (ATC) and was implemented in 2006. This market coupling proved to be highly successful, with improvements in price convergence and economic prosperity in the CWE region. In comparison to the current ATC methodology, the FBMC provides additional benefits because even more efficient use is made of the electricity network’s transport capacity. This reduces price differences between countries in the CWE region; for example between the Netherlands and Germany.

The Berenschot study focused on the competitive aspects of the FBMC: the post-FBMC potential loss of the partial convergence and the impact of flow-factor competition for parties in different countries. The study shows that the loss of partial convergence does not form a major obstacle to competition among countries. The study into flow-factor competition shows that the benefits to the Dutch buyer in the form of a lower electricity price under conditions of congestion depend on the import and export positions of the countries participating in the flow-based construct. Under certain import and export configurations during a limited number of hours, flow-based does not result in lower prices. In general, flow-based market coupling makes a positive contribution to prosperity in the Netherlands. Proper monitoring of market conditions is therefore recommended.