Single Intraday Coupling: what it is and why it is so important for the electric system

From 21 September 2021 Terna has been connected to the pan-European XBID platform, which allows market operators from all over Europe to trade electricity continuously within the day, 24 hours a day, 365 days a year. The Italian grid, which due to its geographical position is already an essential European electricity hub, thus becomes fundamental for the integration of European electricity markets in a market configuration that will further promote the ecological transition underway. Let's try to understand why and what exactly is meant by “single intraday coupling”.

What is the Single Intraday Coupling?

The Single Intraday Coupling (SIDC) is a European project aimed at the implementation of a mechanism, in line with the requirements of the European CACM Regulation ("guideline on Capacity Allocation and Congestion Management"), which allows the negotiation of electricity continuously in the intraday timeframe. In particular, this mechanism allows market operators from all over Europe to exchange energy through a continuous trading process starting after the Day-Ahead Market (MGP) closure up to one hour before the start of the delivery period. This means that, at any time during the negotiation period, an offer submitted in Sicily could be matched with a bid submitted in Norway, depending on the bid prices and the availability of transmission capacity.

This is possible through a centralized European platform (called XBID), with a zonal model, capable of simultaneously allocating ("coupling") the energy flow and the transit capacity. In particular, XBID receives inbound:

• bids and offers in each market area, uploaded in real time by the Nominated Electricity Market Operators (NEMO) of the different areas of the European market;

• available transmission capacity between the different market areas, calculated and submitted by the relevant Transmission System Operators (TSO).

Trade is done on a first-come first-served principle, where the highest buy price and the lowest sell price get served first. When a market participant submits an order for a different market area, it can be matched as long as there is enough available capacity, which is assigned free of charge until saturation. Therefore, this mechanism does not allow to give a price to the transmission capacity and, consequently, to collect a congestion rent from its allocation. To overcome this drawback, European regulations foresee the introduction of a complementary mechanism to continuous trading: implicit Intraday Auctions for Pricing (IDA).

The implementation of the IDA (which have a principle very similar to the day-ahead market) at European level is expected in 2023, but on the Italy-Slovenia, Italy-Greece borders and between the internal areas of the Italian market it was decided to adopt an early implementation of this mechanism, which started in parallel with the SIDC. In this way, it is possible to provide price signals relating to the value of the transmission capacity on the intraday timeframe and at the same time collect a congestion income for the benefit of end users.

How does the SIDC improve the electrical system?

An integrated intraday market at European level presents several advantages. First, an increased sharing of resources of energy generation among European countries boosts competition and market liquidity: a higher number of participants in the electricity market promotes the efficiency of the market itself, as offered prices will likely tend to reflect the costs of generating energy. But the clearest benefit of a continuous trading up to one hour before delivery is in "unlocking" the potential of intermittent renewable energy sources, such as wind and photovoltaic. Indeed, the possibility to balance their positions on the market as close as possible to energy delivery allows market operators to cope with sudden changes in the generation forecast of renewable plants, minimizing imbalance costs. This is also reflected in a better network management: with a more balanced market, the volume of reserve margins that TSOs must procure (and the associated costs) also decreases. In a nutshell, the Italian grid, being in a geographical position to act as European electric hub, becomes an essential asset to facilitate the European Market integration, fostering and accelerating the energy transition.

How was SIDC integrated with Terna’s ancillary services market?

In the ancillary services market (“MSD”) Terna procures all the necessary resources to ensures a reliable and secure use of the electrical grid, maintaining the balance between consumption and generation of electricity on the grid. The first phase of MSD is the scheduling phase (MSD ex-ante), in which Terna verifies the adequacy of the energy markets’ results, schedules the required start-ups of generation units and procures reserve margins in preparation of the second phase of MSD - real-time operation. In real-time, all procured resources are used to keep the balance of the grid, while respecting the safety limitations of all its components.

The introduction of the SIDC represents a new challenge for Terna: how can one verify that energy markets’ results – available only one hour prior to delivery – are compatible with a safe operation of the grid? The most immediate option would seem to refer all scheduling tasks to the real-time operation, which takes place after the closing of the energy markets. But what about all those actions that need to be planned in advance – such as unit start-ups and reserve procurement? A new model of MSD ex-ante was therefore necessary.

The new MSD ex-ante does not exclusively operate correcting the results of the energy markets, but it runs in parallel with them, partially correcting the schedules resulting from negotiations which already took place, and additionally constraining future ones with the so-called “feasibility ranges” – only for generators enabled to the MSD. So, the ancillary services market has been renewed in its processes, but it still preserves its main goal of efficiently safeguarding a reliable electricity supply for Italian consumers.