Structural Models for Coupled Electricity Markets

One of the major changes in European electricity markets is – besides the increasing share of renewable infeed – the fact that previously independent market areas have been connected. Day-ahead auctions are no longer done separately and available interconnector capacity is not always auctioned independently from electricity. Instead, interconnector capacity is implicitly auctioned in the day-ahead auction of electricity such that price differences between market areas are minimized, respectively overall welfare is maximized. The latest cornerstone in this evolution of the European electricity market is the so called North-Western European Market Coupling (NWE) which is online since February 4, 2014.

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