Size of markets- geographical scope. The starting point for a pan-European market where electricity can move freely across borders is to define the available transmission capacity for trading. Traditionally, this has been calculated before final flows are known, one border at a time and without considering bilateral trading impacts on neighboring systems (available transmission capacity (ATC) method). This causes TSOs to frequently prioritise flows inside zones over flows across borders under different security standards, even when restrictions are not justified by the physical flows of power. This can be alleviated by better coordination between TSOs, notably by harmonizing transmission capacity calculation and allocation methods that use a Common European Grid Model in which flow- based transmission capacity allocation can be carried out2. This method builds on technical power flow optimization models that take into account the relationship between commercial flows and physical congestion on affected transmission network elements (cf. critical branches). The benefits include: Increases in the capacity offered to the market participants, 2 Except in cases where the electricity networks are not meshed and where such a method would not add value compared to a coordinated Net Transmission Capacity scheme Improvements in price convergence and higher the social welfare by allocating capacity where it is most valuable3. The potential to significantly reduce unscheduled power flows (loop flows) through neighboring systems, The possibility of linking dynamic grid management (cf. dynamic line rating) with the market to maximize the use of new and existing assets. By 2020, transmission capacity calculation should be performed in all timeframes, including intra- day, following the implementation of the capacity calculation requirements (CACM regulation)4. Increasing cross-border interconnection capacity, as well as the capacity to transport electricity across the same bidding area is crucial to allow further integration of renewable energy sources. Such increased capacity is the basis to ensure cross-border competition in the various markets (e.g. intraday and balancing). This will impact positively the liquidity in the market and could reduce prices for consumers.
