Coupling European Long-Term Electricity Market with Joint Energy and Transmission Right Auction – Institutional Setting, Market Mechanism and Grid Modelling Comparison between Nodal Pricing and Flow Based Zonal Pricing

In the wake of recent energy crisis, the importance of stable prices from long-term cross-border markets for consumers and instruments for market players to hedge against spot market volatility is greater still. This research proposes the Joint Energy and Transmission Right Auction (JETRA) developed by O’Neill et al for the European long-term cross-border market. JETRA supports both wholesale energy and a combination of forward/future contracts with cross-border transmission rights. A stylized network case compares the performance of JETRA under nodal pricing and zonal pricing. The study discusses the institutional setting and market mechanism of JETRA under each pricing method and adapts JETRA to connect the long-term and spot markets under zonal pricing using flow-based market coupling parameters. The compatibility of the current European zonal market design and governance with JETRA is evaluated. The conclusion is that zonal pricing needs to be reformed to nodal pricing for efficient long-term cross-border electricity market due to higher uncertainties in the long-term market and the flexibility of different products in JETRA