How do you evaluate the functioning of the electricity markets in Europe? The outcome of a number of market processes does not reflect the laws of physics prevailing within the electricity grids. We cannot call the market functional, if its mechanisms do not allow the rejection of trades, which do not respect physical constraints inherited in the very design of the power grids. Every good textbook on the economics of power systems, states that certain combinations of bids placed on both sides, supply and demand, cannot be accepted if they result in the overloading of the lines. A lot of arguments have arisen, in the case of loop-flows, from the trading within the German-Austrian price zone. The fact that the border between the two countries has not been drawn, is often indicated as the culprit. ACER (the Agency for the Co-operation of Energy Regulators) is concerned with the fact that TSOs reserve an unreasonably high margin between the capacity of interconnectors offered and their theoretical thermal capacity. However, only a few experts realise the actual root cause of those problems. [Tweet "The price development process on the markets is the main cause for loop flows"]The price development process on the markets is the main cause for loop flows, and we have struggled with costly remedial actions for some time. Have a look at Platts’ quotations for fuels and other commodities. In terms of their pricing, what is the main difference between electricity and other commodities? In fact, the prices of other commodities are localised. They are also shown separately for different ports of destination. In contradiction, electricity is traded [...]
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We represent the widely understood Central Europe energy sector (electricity generation, distribution and transmission, renewables, gas, oil, heat generation and distribution, chemical industries, etc.), universities and scientific institutions.