Flow-based market coupling in the nordic power market :  implications for power generators in NO5

2019

The aim of this thesis is to study the effect of the introduction of flow-based market

coupling in the Nordic power market, with specific focus on the impact on power generators

in the NO5 price area. The analysis is conducted using an optimization model of the

Nordic synchronous area. In the model, flow-based market coupling is implemented based

on the preliminary simulations and regulations by relevant authorities. The discussion is

supported by relevant literature and theory on the topic, evaluating the currently chosen

implementation strategies.

This thesis argues that generators in NO5 are expected to benefit from higher prices and

more export opportunities after the introduction of flow-based market coupling. However,

the net impact is more unclear. If the methodology is implemented without ensuring

sufficient transparency in its design parameters, the uncertainty for generators increases.

Furthermore, this thesis finds that generators will be important in the transition process.

The determination and calculation of design parameters will largely impact the efficiency

of the flow-based model, and successful implementation depends on the contribution of

generators. However, the parameters must be designed in a way that limits opportunistic

behaviour of generators and other actors in the Nordic power market. Power regulators

will have to play a crucial role on both a local and European level, facilitating transparency

of processes and ensuring fair market conditions.

Keywords – Flow-Based Market Coupling, Nordic Power Market, NO5, Transmission

Network, Electricity Prices, Power Generators, Cross-Border Interconnectors