Since 2015 available cross-border transmission capacity is determined using flow-based market coupling (FBMC) in the day-ahead electricity markets of Central Western Europe. This paper empirically estimates the effect of introducing FBMC on day-ahead electricity price convergence and cross-border exchange volumes. In the month following the introduction of FBMC, hourly cross-border exchange volumes increased by 1,700 MWh/h, while prices between countries converged by 10.4 €/MWh. Since then, observed cross-border exchange volumes decreased to 400 MWh/h below their levels before the introduction of FBMC by the end of 2017. However, when controlling for changing market conditions in the years following the introduction of FBMC, we find that FBMC still has a persistent positive effect of around 1,150 MWh/h on hourly cross-border exchange volumes and of 2 €/MWh on price convergence. Finally, we provide suggestive evidence that decreased commercial transmission capacity on critical branches might have contributed to the decline of the benefits over time. This paper is useful for policymakers, regulators, TSOs, and other stakeholders in light of the extension of FBMC to other regions as it is the target methodology for coupling market zones in the European single electricity market.@en

Kenneth Bruninx is an assistant professor at the Faculty of Technology, Policy & Management of the TU Delft. He is also a research fellow at the Faculty of Engineering Sciences of KU Leuven. His research focuses on energy policy and energy market design for integrated, decarbonized energy systems. He holds a MSc in management, a MSc in energy engineering, and a PhD in mechanical engineering from KU Leuven. Jorge A. Moncada is a postdoctoral research fellow of the Research Foundation-Flanders (FWO) at the KU Leuven and EnergyVille. His research interests focus on understanding the socio-technical dynamics of low-carbon transitions by combining insights from the behavioral sciences and neo-institutional economics with advances in agent-based modeling. He holds a MSc in chemical engineering from the National University of Colombia, a Professional Doctorate in engineering (PDEng) and a PhD in energy system analysis and modeling from TU Delft. Marten Ovaere is an assistant professor at the Department of Economics of Ghent University and is funded by the Research Foundation- Flanders ( FWO). He is also a fellow at the Yale Center for Business and the Environment. His research interests lie in energy and environmental economics, with a focus on electricity markets, carbon pricing, and renewable energy. Marten holds a MSc in economics, a MSc in energy engineering, and a PhD in economics from KU Leuven.@en