The CERC is considering a proposal to introduce market coupling for power exchange transactions, in a bid to maximize the economic surplus for all participants by ensuring the most optimal utilization of the available transmission capacity. Cheaper electricity on offer in one region or bid area can meet demand and reduce prices in another region or bid area and prices wil level out wherever there is sufficient transmission capacity.
- Bidding areas may be coupled by means of either “volume coupling” or “price coupling”. “Price-coupling” is a system in which the system operator sends to each power exchange the complete set of results, which are then considered by all power exchanges as final market results.
- On the other hand, “Volume coupling” is a concept in which the system operator computes the whole set of results, but only sends the results of the coupling to the power exchanges. The power exchanges then determine within themselves the bids to accept or reject, along with prices, on the basis of these volumes.
- The CERC now plans to simulate both the options with actual historic bid data to analyze the effect of market coupling on the total volume cleared and the effects on market prices. Based on the results of this study, the regulator may take a decision to implement the measure.