Market integration is the process of progressively harmonising the rules of two or more markets. The creation of the Internal Electricity Market will eventually require the harmonisation of all cross-border market rules so that electricity can flow freely in response to price signals. This will reduce prices by increasing competition, creating more market liquidity (which lowers risk) and reducing the need for back-up generation. Market integration will also increase system security by allowing balancing energy to be drawn from more sources and will assist the integration of renewable energy sources.
Market integration is already well advanced in several areas of Europe, especially in day-ahead markets. However, the adopted approaches are not yet fully consistent and further convergence is necessary. Therefore, a key challenge for market integration is to find ways of harmonising regional rules and market platforms to eventually achieve a common EU approach. The network codes, pave the way for an integrated energy market.
Markets across Europe operate in various time-scales that allow capacity and energy (either individually or combined) to be bought or reserved by companies that wish to use it, thus allowing generators and companies to manage their portfolios. Hence, market integration requires the development of solutions to harmonise forward markets, day-ahead markets, and intra-day and balancing markets.
Market integration also requires solutions to identify and effectively manage network congestion. Network congestion occurs when electricity is unable to flow where it is needed due to physical (e.g. not enough capacity) or contractual (all available capacity has been reserved) issues. Part of the solution to congestion is often investment, yet appropriate rules for determining the amount of available capacity at a border, and making that capacity available on a non-discriminatory basis is also vital.
ENTSO-E’s Market Integration Working Group
ENTSO-E’s Market Integration Working Group is the focal point for all network code work related to capacity allocation and congestion management (including the network codes on Capacity Allocation & Congestion Management and on Forward Capacity Allocation) and the timely implementation of the Target Model agreed by the European Commission, ACER, ENTSO-E and stakeholders of the Florence Forum.
For more information on market integration and congestion management, please contact