North-Western European price coupling is key for future energy market integration

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30 August 2013, Gas, Electricity

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Despite delays, steady progress has been made by European regulators, transmission grid operators, and price exchanges toward the creation of an integrated energy market. Three of the seven regional blocks are due to price couple their day-ahead power markets in a project called the North-Western European (NWE) day-ahead coupling.

Datamonitor notes that there has already been significant price convergence between the markets involved. In our brief, titled "European Regional Power Market Integration" (August 2013, EN00066-004), we provide a view of wholesale market prices for the 2013-14 winter. We expect some further price convergence between the UK and Central-Western Europe (CWE), and between the CWE and the Nordic markets, as well as less volatility in price movements across the whole NWE in the long term.

This is undeniably a crucial step to achieve an integrated energy market. If it is delayed, the other target models managed by the Agency for the Cooperation of Energy Regulators, such as planned intra-day market coupling, will also suffer setbacks.

Divergent prices can and will still occur, due to unplanned generation outages, interconnector congestion, or unforeseen changes in demand. To further reduce price volatility, co-ordinated investment planning in grid capacity across Europe would be needed, in particular taking into account renewable generation. This is a very long way off, however, and in the meantime there will continue to be periods of price decoupling and congestion on interconnectors.


www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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