The impact of Flow-Based Market Coupling on the Nordic region

Abstract

The primary objective of capacity calculation is to reflect physical transmission limits in the power grid into limits on commercial trades at the electricity markets. The Nordic capacity calculation methodology is currently based on a Coordinated Net Transmission Capacity (CNTC) approach. This paper investigates a structural change of the power supply, in conjunction with the introduction of Flow-Based Market Coupling (FBMC) in the Nordic region. Overall, the results indicate that total welfare increases and differences between average prices are smaller when using FBMC instead of CNTC, especially on a power system with increased wind power capacity.