Electricity Markets Integrations - What is the Current Status and Future Outlook of Bidding Zones Reconfiguration?

The aim of this paper is to summarize the current status of the EU Electricity Market Integration, especially address the highly discuss issue of Bidding Zones Reconfiguration, analyse proposed criterions for the potential reconfiguration and also discuss possible future development. Speaking of Bidding Zones Reconfiguration the mainly discussed issue is the German-Austria-Luxemburg trading zone (DE-AT-LU) where the problems with internal congestion occur and correspondingly affect surrounding bidding zones, especially Czech Republic, Slovakia and Poland. Transmission capacities inside this zone are insufficient and unscheduled electricity flows through neighbouring grids and constrains transmission capacities for local market participants. This has resulted, among others, into installation of phase shifting transformer at Czech-German and Polish-German borders. There is therefore an urgent pressure to solve this situation and most promising and investigated option is to split the DE-AT-LU zone in to two and even the Germany's power grid regular address all 4 Germany TSO to prepare the introduction of capacity allocation on the border with Austria. On the other hand, there are arguments that go against this and they support the idea of even larger bidding zones (further integration) rather than division of current bidding zones (that is especially the case of DE-AT-LU zone). These arguments are mainly based on the liquidity of the market. If divided there is also a problem of current traders' open positions on derivate contracts (within DE-AT-LU zone these contracts are estimated at over (sic)20 bn.). This article is therefore investigating the whole process of proposed splitting process with the focus on presented criterions that should be used to find the optimal configuration. The special focus is paid to the applicability of social welfare as one of the "unclear" criterion that has the potential to strongly influence the whole decision making process. Based on the analyses we can conclude that the main approach to the process of reconfiguration is solid however, the results will strongly depend on the final settings (limiting values) of individual criterions and final weights of each criterion. Without this information, the whole process can be rightfully opposed by any involved participant. (Abstract)