Simulation of day-ahead Nordic electricity market flow-based market coupling with BID3

Abstract

In this master’s thesis, the use of historical flow-based domains for simulating the Nordic electricity market’s flow-based market coupling with the Better Investment Development 3 simulation software is examined. The reliability of the simulation results produced by the software is evaluated by comparing them to the results from the External Parallel Run. Additionally, the thesis discusses, what flow-based parameter data electricity market participants would need in order to simulate future electricity markets with flow-based market coupling. The work was commissioned by the Finnish transmission system operator, Fingrid Oyj. The thesis presents the necessary electricity market and electrical engineering knowledge related to flow-based market coupling. Furthermore, it explains the information required about the simulation software for the purposes of this study.

In the simulations, historical flow-based domains from the period of June 6, 2023, to May 4, 2024, were used because the most recent flow-based domains represent best the flow-based parameters for the Nordic capacity calculation region that will be implemented on October 29, 2024. Flow-based domains are available for each hour of the year, but for this thesis, 12 and 52 domains were randomly selected for appropriate time due to data limitations in the software. A total of 32 historical weather years from 1982 to 2016 were considered, excluding 1984, 1988, and 2011. The market clearing prices for the electricity market bidding areas SE1, SE2, SE3, SE4, NO1, NO2, NO3, NO4, NO5, DK1, DK2, FI, EE, LT, PL, and DE/LU were analyzed on an annual basis for the mean and standard deviation. Finland’s electricity market bidding area, the market clearing price and the energy transfer amounts between the bidding areas FI-SE1 and FI-SE3 where analyzed on a monthly and weekly basis. In all cases, the flow-based market coupling results are compared to the results produced by the current method. Hourly simulation results are not presented, as it was decided to keep this information confidential within the company for which this thesis was conducted, Fingrid Oyj. These results cannot be used to predict how flow-based market coupling will impact future electricity market area prices, as the flow-based parameters and climate years used in this work are historical.

The thesis could not prove or disprove the reliability of the simulation results produced by the simulation software flow-based market coupling, as this would require further investigation that did not fit in this thesis. The results were significantly influenced by the randomly selected flow-based domains, but all results can be explained using flow-based theory. The reliability of the simulation software could be proven by using flow-based domains whose behavior is well-known. However, the main objective of this work was to enhance Fingrid Oyj’s flow-based market coupling capabilities, which was achieved successfully.