• Bundesnetzagentur considers flow-based allocation for trading
  • Possible limits could hamper liquidity in common market

Germany’s energy regulator is considering limits to trading electricity at the Austrian border after the European Union’s power market supervisor called for a plan to control power surges threatening neighboring grids with blackouts.
A favored option is a system that lets prices dictate where power flows between countries, known as flow-based market coupling, Jochen Homann, the president of German regulator Bundesnetzagentur, said in an interview. Germany and Austria currently share a single electricity market, Europe’s biggest.

The Austrian-German market allows unlimited trading between them that can exceed the capacity of interconnecting cables, forcing electricity to take indirect routes through neighboring countries and overload power lines. The EU’s Agency for the Cooperation of Energy Regulators gave grid operators and regulators in the region until the end of January to come up with a plan to control the surges.

“Unlimited trading with limited transport capacities isn’t a sustainable perspective,” Homann said.

In flow-based coupling, all cross-border paths between grids are taken into account to maximize capacity and send electricity to where prices are highest. Traditionally, flows are based on the available interconnection capacity at each border, which can hamper price convergence between national networks.

Austria’s energy regulator E-Control appealed against ACER’s opinion in November, saying that dividing its shared market with Germany is unlikely to significantly reduce power surges to neighboring grids.

A flow-based system may make it harder to trade electricity in the current Austrian-German price area, according to Thorsten Lenck, a consultant at analysts Energy Brainpool GmbH & Co.

“Flow-based capacity allocation could limit liquidity in the common market area, which is currently very high because you can trade freely between Germany and Austria,” Lenck said by phone from Berlin.

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