May 13 (Bloomberg) -- Day-ahead power markets were linked from Portugal to Finland today as the European Union seeks to integrate electricity markets by the end of this year across the 28-nation bloc.
Spain and Portugal joined the existing 15-country market coupling project, linked through an interconnector between Spain and France. Network operators and energy exchanges have held a single auction at noon Paris time since Feb. 4 to determine next-day power prices in the northwest of Europe.
Linking markets is part of the EU’s third package of legislation intended to remove national barriers to power and gas trading and reduce energy costs. Market coupling aims to smooth price differences between nations through better control of cross-border flows. Before coupling, traders selling power into another country had to buy cable capacity in advance, then make a separate trade on another exchange, exposing themselves to two sets of price risk.
This project “is a high priority,” David Merino, a spokesman for the Ljubljana, Slovenia-based Agency of the Cooperation of Energy Regulators said by e-mail. “Day-ahead market coupling is the core element in establishing a truly integrated EU electricity market.”
Day-ahead power market coupling links Austria, Belgium, Denmark, Estonia, France, Finland, Germany, Latvia, Lithuania, Luxembourg, Norway, the Netherlands, Poland, Portugal, Spain, Sweden and the U.K. excluding Northern Ireland, according to N2EX, a U.K. exchange.
“This is the first time a market coupling arrangement has been geographically expanded,” Andrew Claxton, director of business development at Dutch power exchange APX Group Holding BV, said by e-mail. “Previously this has involved implementing a whole new solution. This shows that we have a robust underlying solution that can be extended across Europe.”
The interconnection level between the Iberian Peninsula and central-west Europe, through the Pyrenees, is limited, Rafael Gomez-Elvira Gonzalez, a Madrid-based spokesman for Iberian exchange OMIE, said yesterday by e-mail. Market coupling makes sure existing capacity is used efficiently, he said.
The next step is to link Italy with France, Slovenia, Austria and Greece, known as the central-south region. This is scheduled to happen before the end of the year, Merino said.
Day-ahead markets in Romania will be linked to Slovakia, Hungary and the Czech Republic through the price coupling mechanism on Nov. 11, Czech power market operator OTE AS said April 9. These markets won’t be coupled with the rest of Europe until 2015 and the exact timetable hasn’t been decided, Merino said.
Plans to link Swiss day-ahead markets with European countries have stalled after the bloc halted talks on the Alpine nation joining its energy market. The EU suspended talks after Swiss voters on Feb. 9 approved immigrant quotas, a move contrary to market-opening pacts with the EU going back to 2002.
Europe’s plans to link intraday power markets ground to a halt after power exchanges failed to agree on who would develop a platform. The European Commission said on Feb. 6 that it would propose legally binding obligations to ensure the intraday platform is developed. Exchanges from APX to Epex Spot SE said on Feb. 10 they had reached an agreement and are working on an EU-wide platform.
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