|Single day-ahead coupling (SDAC)|
|European Union Electricity Market Glossary|
Single day-ahead coupling (SDAC) is a coordinated electricity price setting and cross-zonal capacity allocation mechanism, which simultaneously matches orders from the day-ahead markets per bidding zone, respecting cross-zonal capacity and allocation constraints between bidding zones.
According to Article 2(26) of the Regulation establishing a Guideline on Capacity Allocation and Congestion Management - the CACM Regulation (Regulation on market coupling) ‘single day-ahead coupling’ means the auctioning process where collected orders are matched and cross-zonal capacity is allocated simultaneously for different bidding zones in the day-ahead market.
Single day-ahead coupling uses a common price coupling algorithm to calculate electricity prices across Europe and to implicitly allocate auctions based on cross-border capacity (ENTSO-E Market Report 2019 of August 2019, p. 5).
Single day-ahead market coupling was envisaged to be applied throughout the EU and Norway.
As of November 2017 single day-ahead market coupling was used with respect to 30 out of the 42 EU borders, i.e. Austria, Belgium, the Czech Republic, Germany, Denmark, Estonia, Spain, Finland, France, Hungary, Italy, Lithuania, Latvia, the Netherlands, Norway, Poland, Portugal, Romania, Sweden, Slovenia, Slovakia and Great Britain (Annex 2 to the European Commission Third Report of 24 November 2017 on the State of the Energy Union).
Remaining EU borders in November 2017 were still applying explicit day-ahead auctions.
According to Article 8(1) of the CACM Regulation all TSOs in EU Member States electrically connected to another Member State must participate in the single day-ahead (and intraday) coupling.
Maximum and minimum clearing price limits for single day-ahead coupling
For the purposes of setting the clearing price limits for single day-ahead coupling the following definitions are used:
1. ‘harmonised maximum clearing price for SDAC’ means the maximum clearing price value which is applied in all bidding zones which participate in SDAC; and
2. ‘harmonised minimum clearing price for SDAC’ means the minimum clearing price value which is applied in all bidding zones which participate in SDAC.
The harmonised maximum clearing price limit for SDAC was proposed by NEMOs to be set at +3000.00 Euro/MWh, while the respective harmonised minimum clearing price limit was proposed at -500.00 Euro/MWh (All NEMO’s proposal for harmonised maximum and minimum clearing prices for Single Day Ahead Coupling in accordance with Articles 41(1) of Commission Regulation (EU) 2015/1222 of July 2015 establishing a guideline on capacity allocation and congestion management, 14 February 2017).
Overall, the were three options considered for the harmonised maximum clearing price limit for SDAC:
- Option 1: 3000 EUR/MWh,
At least one national regulatory authority opposed to the value of 3000 EUR/MWh arguing that it will give insufficient incentive for a well functioning energy only market and proposed a value of 5000 EUR/MWh instead.
However, the stakeholders also argued that a higher harmonised maximum clearing price for SDAC may have an impact on the collaterals required for participation in the SDAC (see the reasons to the ACER’s Decision No 04/2017).
The opinions were also voiced that in case of increasing the maximum price above 3000 EUR/MWh it would be risky to trade if errors or other unforeseeable events occur.
Such high maximum price would induce, moreover, excessive risks for market participants, which do not possess a large perimeter of flexible assets that can be activated to compensate any imbalance.
In turn, ACER considered it necessary:
1. to implement a more dynamic automatic adjustment rule for maximum clearing prices for Single Day Ahead Coupling (PmaxDA), such that it allows for a faster alignment of the PmaxDA towards the Value of Lost Load (VoLL);
In line with the above insight ACER, moreover, proposed the new text in point 5.2 of the Harmonised maximum and minimum clearing prices for SDAC as follows:
"The Harmonised Maximum Clearing Price Limit shall be increased by an increment of 1000 €/MWh in the event the hourly Clearing Price in an individual or multiple Bidding Zones has exceeded a value of 60 percent of the Maximum Clearing Price Limit in at least one market time unit."
Finally, ACER in Article 3 of the Annex I to the Decision No 04/2017 of 14 November 2017 determined following harmonised clearing prices for SDAC:
1. The harmonised maximum clearing price for SDAC shall be +3000 EUR/MWh,
2. The harmonised minimum clearing price for SDAC shall be -500 EUR/MWh.
In addition, in Article 4 of the said Annex ACER envisaged the automatic adjustment mechanism, which stipulates the criteria and process for establishing and amending maximum price for SDAC (see the box).
In particular, the harmonised maximum clearing price for SDAC is to be increased by 1,000 EUR/MWh in the event that the clearing price exceeds a value of 60 percent of the harmonised maximum clearing price for SDAC in at least one market time unit in a day in an individual bidding zone or in multiple bidding zones.
The above increased harmonised maximum clearing price applies in all bidding zones, which participate in SDAC, from five weeks after the day, in which the respective event has taken place.
In the reasons to the above Decision 04/2017 ACER explained that the the main purpose of the requirement to take into account an estimation of the VoLL is that the harmonised maximum price for SDAC shall never restrict the free price formation.
Therefore, the automatic adjustment mechanism should ensure that the harmonised maximum price for SDAC be always above the clearing price that would occur in the absence of price limits or in the case of price limits equal to the VOLL.
It is the ACER’s view that additional, national price limits imposed on the market participants bidding prices should be removed or all at least aligned with the harmonised maximum and minimum clearing prices for SDAC established in the above ACER’s Decision 04/2017.
In order to avoid strategic bidding between different market time horizons and consider decreasing flexibility of generation units due to technical restrictions, the clearing price limit for the intraday day market should always be higher than day-ahead (ENTSO—E‘s stance quoted in the Annex II to the said ACER’s Decision 04/2017 -Evaluation of responses to the Public consultation on the proposal on harmonised maximum and minimum clearing prices).
Single day ahead coupling may be opened to market operators and TSOs operating in Switzerland on the condition that the Swiss national law implements the main provisions of EU electricity market legislation and that there is an intergovernmental agreement on electricity cooperation between the EU and Switzerland (Annual Report of the ACER and CEER on the Results of Monitoring the Internal Electricity and Gas Markets in 2016 (Electricity Wholesale Markets Volume) published in October 2017, p. 43).
Legal framework for the single day-ahead market coupling
Detailed rules for the single day-ahead market coupling are stipulated in Articles 38 - 50, Article 68 and Recital 29 of the Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling) - see box.
Regulation establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling), Articles 38 - 50, Article 68, Recital 29
Decision of the Agency for the Cooperation of Energy Regulators No 04/2017 of 14 November 2017 on the Nominated Electricity Market Operators proposal for harmonised maximum and minimum clearing prices for single day-ahead coupling
Annex I - Harmonised maximum and minimum clearing prices for single day-ahead coupling in accordance with Article 41(1) of Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management (CACM Regulation), 14 November 2017
Annex II - Evaluation of responses to the, Public consultation on the proposal on harmonised maximum and minimum clearing pricesPublic consultation on the proposal on harmonised maximum and minimum clearing prices
|Last Updated on Sunday, 10 November 2019 16:45|