European internal electricity market

The aim of the European internal market in Electricity is to create a pan-European marketplace for free electricity trading. The objective is to have a pan-European, transparent and non-discriminatory trading system. The resulting economic advantages should benefit consumers (industry, households) in accordance with EU requirements, or contribute to the improvement of the generation and supply situation (e.g. by promoting renewable energy for climate protection or grid expansion). APG and other transmission system operators therefore play a decisive role in the energy transition as they provide the cross-border transmission capacity and support European market integration through efficient common procedures.

The mandatory integration of the European electricity markets is regulated by European regulations in the area of market integration. You will find a summary of all the basic principles of European law on the EU electricity market under “Legal framework”.

International cooperation of TSOs

The international cooperation with other European transmission system operators (TSOs) for the implementation of the European legal requirements is ensured via the European Network of Transmission System Operators (ENTSO-E). The capacity calculation must be coordinated at regional level in order to be able to safely provide the market with optimal capacities for trading. To implement these obligations, regions were stipulated within which such coordination must take place (“Capacity calculation regions”). APG is allocated to the regions Core and Italy North. There is intensive collaboration with the TSOs in the capacity calculation regions in particular.

Congestion and best bidder principle

For economic reasons and for reasons of public acceptance of high and extra high-voltage lines, it is not possible to establish arbitrarily high cross-border transmission capacities. Therefore, in many cases, market participants demand a greater transmission capacity than available – this is referred to as a congestion at the border. “Border” in this context refers to the border between electricity market areas (also known as bidding zones), which often – but not always – correspond to national borders. Cross-border transmission capacities therefore have to be reserved for international electricity trading at congested borders. These shall be made available for trading by market participants using market-based procedures.

In principle, capacities are allocated in different time horizons as annual, monthly, day-ahead and intraday products. Day-ahead trading is trading of electricity for the following day. Intraday trading is trading of electricity that will be delivered on the same day.

When allocating cross-border transmission capacities, a distinction is made, in principle, between two forms of allocation, namely explicit and implicit allocation. In the case of explicit allocation, the available cross-border line capacities and the energy are traded separately from one another. Energy is purchased or sold on a trading platform (e.g. power exchange) or over the counter (OTC, bilaterally), while cross-border line capacities have to be auctioned off in a separate step with the transmission system operators. For those Austrian borders or time horizons that are managed explicitly, this capacity allocation has been carried out since 2016 by the Joint Allocation Office (JAO). In the case of implicit allocation, the available cross-border transport capacities and the energy are traded together (and thus simultaneously) via power exchanges, thereby avoiding potential inefficiencies. Implicit allocation represents the mandatory European target model for day-ahead and intraday trading.

Allocation procedure

In order to implement a common internal electricity market, transmission system operators and electricity exchanges in Europe are obliged to couple the electricity markets throughout Europe. To achieve this, the transmission system operators provide the available line capacities in a coordinated process and the electricity exchanges optimise supply and demand – in compliance with the available capacities. The primary objective is to maximise pan-European welfare (i.e. cost-efficient electricity generation) and reduce the price differences within the coupled area.

Single Day-Ahead Coupling (SDAC)

For the day-ahead market, market coupling is implemented by way of Single Day-ahead Coupling (SDAC). A total of 30 transmission system operators and over 15 power exchanges are collaborating on this pan-European project. Market coupling has been successfully implemented at APG’s borders with Germany, Italy, Slovenia, Hungary and the Czech Republic. Capacities at these borders do not have to be auctioned off separately for international electricity trading, but, rather, are allocated implicitly together with electricity trading by the power exchanges. In Austria there are three power exchanges active on the European day-ahead market: EPEX Spot, EXAA and NordPool.

At the border with Switzerland the day-ahead capacities continue to be allocated explicitly via the Joint Allocation Office (JAO). More detailed information on participation in auctions and the prevailing auction rules can be found on the JAO website. If you have any questions please contact the JAO Service Desk.

In the Core Capacity Calculation Region, the mandatory Core Flow-Based Market Coupling was implemented within the framework of SDAC in June 2022 after several years of intensive preparations in cooperation between TSOs and power exchanges. The core region comprises the bidding zone borders between Austria, Belgium, Croatia, the Czech Republic, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Romania, Slovakia and Slovenia. The load flow-based capacity calculation is a complex procedure that maps the actual physical congestion in the network as best as possible. This allows the available marginal capacities to be used more efficiently by the market. Further information on the Core Flow-Based Market Coupling project can be found on the JAO homepage under „Projects“ and at ENTSO-E.

Single Intraday Coupling (SIDC)

European continuous intraday trading is implemented within the framework of Single Intraday Coupling (SIDC) (formerly Cross Border Intraday or XBID). Here, too, transmission system operators and power exchanges are working together in a Europe-wide project.

Intraday capacities at the border with Switzerland continue to be managed by way of explicit allocation. Capacities are allocated on the capacity allocation platform Intraday Capacity Service (ICS). According to the availabilities mentioned, each balancing group representative (BGR) has the option to allocate capacities based on the “first come – first served” principle via the respective allocation platforms.

Registration is via the Swissgrid customer portal at: bg-registration@swissgrid.ch

The current allocation rules for the Austria–Switzerland border can be viewed here.

Allocation of long-term capacity

The long-term market for cross-border transmission capacities (annual and monthly products) serves in particular to hedge the transactions of the market participants against the volatilities of short-term trading, and is regulated by the provisions of the Forward Capacity Allocation (FCA) regulation (EU) 2016/1719. The allocation rules for long-term products (harmonised allocation rules or EU HAR) are harmonised across Europe and are available on the JAO website. They are revised every two years.

	Border with the APG control area (export/import)
Allocation time horizon	Switzerland	Czech Republic	Hungary	Slovenia	Italy	Germany
Long Term (annually and monthly)	Joint Allocation Office (JAO)	Joint Allocation Office (JAO)	Joint Allocation Office (JAO)	Joint Allocation Office (JAO)	Joint Allocation Office (JAO)	Joint Allocation Office (JAO)
Daily (day-ahead)	JAO	SDAC	SDAC	SDAC	SDAC	SDAC
Intraday	ICS	SIDC	SIDC	SIDC	SIDC	SIDC

Current European projects and initiatives

Within the scope of the SDAC and the SIDC, transmission system operators and power exchanges are also obliged to continuously implement further developments in market design in order to meet the requirements of the market for international electricity trading. The following further developments are planned within the cooperations:

launch of 15-min-products in European day-ahead trading;
launch of 3 additional intraday auctions in addition to the daily day-ahead auction and continuous intraday trading;
implementation of a flow-based capacity calculation also for the intraday time frame; and
implementation of a flow-based allocation also for the long-term market.

We provide you with regular updates on ongoing and new implementation projects and further developments on the APG market forum.

Further information