Welcoming the New Era of Nordic Energy Market Integration

The expansion of Flow-Based-Market-Coupling (FBMC) into the Nordics this month is an important stepping-stone towards a fully integrated European energy market. 

It will generate substantial amounts of new data and market insights, providing valuable information for energy traders and grid operators alike. Insight by Volue is prepared for this change and has invested time in creating models that ensure seamless forecasting and operational excellence as the market evolves. 

Anamaria Toebe, Product Manager for short-term products, Insight by Volue, takes up the story below. 

Nordic Flow-Based Market Coupling  

In recent years, Europe's energy market has undergone significant transformations, driven by the need for enhanced efficiency, increased integration, and growing renewable energy production. One of the most critical innovations in this regard is FBMC, an advanced method for integrating electricity markets across different countries or regions. 

Unlike traditional price-based market coupling, FBMC offers a more accurate representation of grid transmission capacity by considering the physical flows and constraints of electricity grids. As a result, this mechanism promotes more efficient trading, while ensuring that the grid operates within its technical limits. 

The Purpose of Flow-Based Market Coupling 

At its core, the purpose of FBMC is to ensure that electricity markets operate as efficiently as possible, even when dealing with cross-border power exchanges. FBMC enables better management of grid constraints and unlocks more trading possibilities, leading to significant benefits. 

 The evolution of FBMC has been gradual: 

• May 2015: FBMC was first implemented in the Central Western Europe (CWE) region, connecting markets in Belgium, France, Germany, Luxembourg, and the Netherlands. 

• June 2022: the mechanism was expanded to more regions in Central and Southeast Europe, creating what is known as the CORE region. 

• October 2024: FBMC is set to expand into the Nordic regions, marking another milestone in the integration of European electricity markets. 

The benefits of FMBC 

 FBMC offers several key advantages: 

• Market Efficiency and Security of Supply: by considering real-time grid conditions, FBMC improves market efficiency and enhances security of supply 

• Cross-Zonal Exchanges: FBMC promotes increased cross-zonal electricity exchanges, resulting in lower energy prices and greater price convergence between regions 

• Market Liquidity: FBMC contributes to increased market liquidity, as the more accurate representation of available transmission capacity frees up additional capacity for trade, reducing bottlenecks and allowing for greater flexibility in cross-border energy flows. 

Insight by Volue: supporting FBMC integration 

As FBMC becomes the standard for market coupling across Europe, we have incorporated the algorithm into our Pan-European short-term price models. Our SpotEx model provides comprehensive forecasts for European electricity markets, and this will continue.  

With the upcoming expansion of FBMC into the Nordic regions, we have adapted our forecast model to ensure it reflects the new market dynamics. This adaptation includes: 

• Complete and Accurate Representation: the model now covers all coupled markets in Europe, incorporating the Nordic regions’ 12 bidding zones and their associated virtual zones. 

• Continuous Updates: the model is updated continuously throughout the day, ensuring real-time accuracy and relevance. 

• Detailed Forecasts: we will provide forecasts for key FBMC domain elements, including Power Transfer Distribution Factors (PTDFs), which help represent the impact of trades on the grid, and the Remaining Available Margin (RAM), which indicates how much additional power can be transferred without exceeding grid limits. 

Insight by Volue is a leading provider of comprehensive power market data and forecast analysis, designed to help energy professionals stay ahead of power market developments in real-time and optimise their decision-making processes.  

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