Implementation methods for the European day-ahead electricity market integration

Summary form only given. The route towards an efficient cross-border congestion management in Europe leads to the creation of a truly competitive Internal Electricity Market (IEM), which requires the full integration of the participating national and regional markets. In view of the “Target Model” that will be enforced in all European markets, the three possible integration methods (namely, price coupling, volume coupling and market splitting) are initially discussed. A centralized market splitting algorithm is developed, respecting the standard market regulatory framework of European Power Exchanges, including (a) block offers/bids, linked block offers/bids, flexible hourly offers/bids and convertible block offers. The problem is formulated as a Mixed Integer Linear Programming model, and it is solved using commercial MILP solvers. The performance and computational requirements of an implementation in pan-European level is presented; the model is tested in terms of problem solvability to its limits, considering a day-ahead market clearing time threshold equal to one hour. The results demonstrate that a viable solution to the clearing of the IEM can be attained with the current state-of-the art of computers´ processing power. Further discussion is made concerning the viability of the proposed approach and other harmonization issues that should be considered for successful market integration.