ECONOMIC AND MARKET IMPACTIntegration of the Polish market with European markets

Integration of the Polish energy market with European markets (Market Coupling) takes place in several key areas:

  • Single Day-Ahead Coupling (SDAC); 
  • Single Intraday Coupling (SIDC); 
  • Coupling of balancing markets; 
  • Bidding Zone Review. 

PSE's involvement in the areas mentioned includes implementation and development activities at the European, regional and local levels. Coordination of activities aimed in particular at ensuring that the required business capabilities in the area of Market Coupling are achieved in a timely manner is carried out within the framework of a dedicated business task set up in the company and carried out by subject-matter staff supported by an organisational and competence team set up for this purpose. This way, in addition to the ongoing tasks in the area of Market Coupling, competences are being built up in our organisation to enable smooth implementation of changes in the future.

In addition, PSE is involved in the Bidding Zone Review (BZR) process, which is important for the operation of combined markets. The main objective of the BZR is to identify the optimal configuration of market areas in Europe, i.e. one that fulfils the criteria set out in the CACM.


SDAC is a mechanism for uniform pooling of European-wide Day-Ahead Markets whereby complex orders are pooled in a simultaneous process, within available transmission capacity. 

The central segment of the European electricity market model is to be a Day-Ahead Market based on the Market Coupling (MC) process, with a trading gate at 12:00 p.m. This is a mechanism whereby exchange prices for each market area in Europe are to be determined in a coordinated manner, in a common process, and with a single calculation point. Transmission capacity allocation is to be based on the price differential between market areas. It is therefore an implicit auction model, i.e. combining trading of transmission rights and electricity. Market participants do not book transmission capacities to execute their cross-border transactions, but only to buy/sell energy in the market to which they are geographically assigned. The allocation of transmission capacity by the MC mechanism takes place automatically when energy is traded, in a way that maximises the total market surplus. A graphic illustration of Market Coupling can be found below.

The implementation of the European Market Coupling takes place through regional projects, which are then combined into a pan-European project (SDAC). For PSE, the most important project implemented in June 2022 was the CORE FBMC project, consisting of Market Coupling based on implicit capacity allocation methodology according to the FBA (Flow-Based Allocation) in the area of Continental Europe. The FBA mechanism enables the Day-Ahead Markets to be coupled in a manner that is based on electricity distribution.

The Core Region (CCR Core) is the Capacity Calculation Region (CCR) covering the borders of the market areas between the following EU Member States: Austria, Belgium, Croatia, Czech Republic, France, Germany, Hungary, Luxembourg, Netherlands, Poland, Romania, Slovakia and Slovenia.

The operational launch of the DA Core FBMC took place on 8 June 2022.

Following the implementation of the FBA method, the next step in the development of the SDAC will be the implementation of 15-minute market products.

Price Coupling of Regions

Price Coupling of Regions (PCR) is an initiative of European power exchanges to create a single market coupling solution for electricity pricing across Europe and the allocation of cross-border day-ahead transmission capacity. Such an integrated European electricity market is expected to provide increased liquidity and efficiency of trade and increased social welfare.

The power exchange initiative originally included day-ahead markets in: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The initiative itself was established in 2009 and the PCR parties signed a cooperation agreement in June 2012. It is open to other European power exchanges that want to join. In 2016, the Polish Power Exchange joined the PCR.


SIDC is a mechanism for uniform pooling of European-wide Day-Ahead Markets whereby complex orders are pooled in a simultaneous process, within available transmission capacity.

The Polish market area has been operationally integrated into the SIDC since 19 November 2019.

Activities currently underway are intended to ensure proper operational performance and proper development of the SIDC. These include European-wide initiatives. In parallel, local initiatives are implemented, with the primary goal of expanding SIDC's reach into additional market areas.

  • European initiatives 

Our company is involved in European-wide initiatives through participation in steering committees and SIDC expert groups. Major SIDC development initiatives over the horizon of the next few years include:

i.introduction of an Intraday Auctions (IDA) mode, whereby prices will be set for individual market areas as the basis for determining the congestion rent for each border, 
ii.implementation of 15-minute market products, 
iii.implementation of a solution to automatically take into account transmission losses on HVDC connections, 
iv.implementation of the FBA method as the target solution for the SIDC. 

The implementation of the FBA in the SIDC will be preceded by several phases of Intraday Capacity Calculation (IDCC) implementation, whereby NTC capacity for each border will be extracted from the Flow-Based domain designated for the Intraday market.

  • Local initiatives 

Italy was included in the SIDC mechanism in September 2021. In Q4 2022, as part of the so-called fourth wave of implementation, the market areas of Slovakia and Greece are planned to join the SIDC. 
Joining the Slovakian market area to SIDC will mean that the PL-SK border will be added to the four Polish borders (CZ-PL, DE-PL, LT-PL, PL-SE) currently covered by the SIDC mechanism, thus ending the temporary solution for the Intra-Day Market based on the explicit auction mechanism.

Fig. Evolution of coupling individual market areas to the SIDC mechanism. 

Balancing markets

In addition to the integration of the Day-Ahead and Intraday Market segments, PSE is also actively working on the integration of balancing markets in Europe, as required by Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing (hereinafter the EBGL).

The EBGL regulation provides for the integration of the European balancing market through the implementation of four platforms: 

  1. European platform for the exchange of balancing energy from replacement reserves 
    • Required activation time: 30 minutes.
    • Implemented under the TERRE project launched on January 15, 2020.
      2.  European platform for exchange of balancing energy from frequency restoration reserves with non-automatic activation 
        • Required activation time: 15 minutes.
      • Implemented as part of the MARI project, scheduled launch in July 2022.
        3.  European platform for exchange of balancing energy from frequency restoration reserves with automatic activation 
        • Activation via automatic controller in up to 5 minutes.
        • Implemented as part of the PICASSO project, with launch scheduled in June 2022.
          4.  European platform for the imbalance compensation process 
          • Based on avoiding activation of balancing energy from automatic reserves in opposite directions by neighboring TSOs.
          • Implemented as part of the IGCC project (operating in Germany and neighbouring countries).
          • The European launch of the IGCC process took place in June 2021.

Our organisation actively participates in all implementation projects of European balancing platforms. As part of our work at ENTSO-E, we participate in the preparation of detailed methodologies required under the EBGL Regulation. Since February 2020, our organisation has been operationally active in the IGCC project. Joining the TERRE platform is planned for 2023, and the MARI and PICASSO platforms for July 2024.

Bidding Zone Review

PSE is actively participating in the European Bidding Zone Review process, launched under Article 14 of EP and Council Regulation (EU) 2019/943. A market area review is the TSO's task that consists in simulating, analysing and comparing the performance of the energy market for the current and alternative market area configurations. The task aims to identify opportunities to improve the operation of these areas by creating new market areas that are more economically efficient and cross-zonal trade opportunities, while maintaining the security of energy supply. The new market areas should reflect energy supply and demand, enable efficient management of network congestion, and improve the overall efficiency of the market and its operational security.

According to the methodology adopted by ACER for the Bidding Zone Review process, ENTSO-E, in cooperation with the TSOs, determined Locational Marginal Prices (LMPs) for the development of the aforementioned alternative market area configurations by ACER. ACER is currently working on determining alternative market area configurations in Europe. Once these alternative market area configurations have been received from ACER, Transmission System Operators will have 12 months to complete the Bidding Zone Review.

The market area review concludes with a joint proposal by the involved TSOs to change or maintain the market area configuration. The proposal of the TSOs involved is subject to adoption by unanimous decision of the TSOs and is then be submitted to competent Member States or competent authorities designated by them.

Key achievements of international cooperation

Operational launch of Interim Market Coupling (SDAC) 

The operational launch of the Interim Market Coupling project took place on 17 June 2021. The project connected the Day-Ahead Capacity Markets in Poland and 4MMC countries (Czech Republic, Slovakia, Hungary, Romania) with Europe's largest MRC market by introducing implicit capacity allocations on six borders (PL-DE, PL-CZ, PL-SK, CZ-DE, CZ-AT, HU-AT). The Interim MC project did not change the manner of determining cross-zonal capacity, which is still determined by the TSO using the NTC (Net Transfer Capacity) method, but changed its allocation method.

The implementation of the project resulted in the implementation of Single Day-Ahead Coupling almost across Europe. This implies the introduction of a single common auction on the power exchanges for market participants in all countries covered by the MRC and 4M MC areas as part of the Day-Ahead Market Coupling mechanism.

Thanks to the Interim MC project, Poland is fully integrated in the European mechanism of the Day-Ahead Market Coupling. The target solution for the Polish Day-Ahead Market will be to switch to the Flow-Based method of capacity determination, which is planned to be operational in June 2022.

Implementation of joint governance for SDAC and SIDC (SDAC/SIDC) 

The SDAC/SIDC joint governance was implemented to ensure proper coordination and improve the efficiency of decision-making process regarding the implementation, development and operational handling of the SDAC and SIDC. The first element of the SDAC/SIDC joint governance was the creation of a joint Steering Committee – the Market Coupling Steering Committee (MCSC) – which became operational in early 2022. As the next step, the implementation of Qualified Majority Voting (QMV) decision-making in the MCSC is planned. A forum has also been established for the exchange of knowledge and views between SDAC and SIDC stakeholders – the Market Coupling Consultive Group (MCCG). Entities that can participate in the MCCG are: Regulators (NRAs), ACER, EC, TSO, NEMO and market participants. .

Determination of Locational Marginal Prices in Europe 

ENTSO-E in cooperation with TSOs simulated the nodal market in Europe. The objective of the exercise was to determine Locational Marginal Prices (LMPs), which ACER will use to develop alternative market area configurations in Europe for the Bidding Zone Review process.

The nodal market in Europe was simulated for a representative eight weeks of 2025. This was the first LMP simulation to be so advanced and conducted on such a large scale. On 4 March 2022, its basic results were submitted to ACER, and a month later, supplementary simulations and a sensitivity analysis for changing the simulation assumptions were submitted to ACER.

Implementation of activities under the TSC/TSCNET initiative 

We are actively working with European operators under the TSO Security Cooperation (TSC) initiative. TSC members include 14 operators from Central Europe. The goal of the initiative is to enhance the operational security of the interconnected power systems in the region, including the NPS, by intensifying regional inter-operator cooperation, which currently includes processes for identifying risks and applying appropriate inter-operator countermeasures.

We are a shareholder of TSCNET. We have a representative in the General Meeting and in the Supervisory Board of TSCNET, which currently consists of 5 members. Several PSE representatives are involved in the implementation of activities resulting from the tasks of the TSC decision-making and working structures.

Synchronisation of the Baltic states' systems 

PSE is actively involved in the process of extending the synchronous system of Continental Europe (CE) with the systems of the Baltic states (BS). In October 2018, the Plenary Meeting of the European Network of Transmission System Operators Regional Group Continental Europe (ENTSO-E RGCE Plenary) agreed to the launch of a relevant extension procedure. A working group to coordinate the process, headed by a representative of PSE, was set up.

In May 2019, an agreement specifying the conditions for the future synchronous connection of the BS system to the CE system entered into force. The agreement contains the so-called set of requirements – a list of detailed technical conditions required to be implemented by BS TSOs to ensure secure operation of the systems after synchronisation. One of the main infrastructural elements included in the set is the Poland–Lithuania DC submarine link (Harmony Link). In 2021, a number of studies were launched to prepare the systems and BS TSOs for synchronisation. PSE is the leader of the TSO Consortium established to implement this task. The completion of all works is planned for the end of 2022.

In December 2019, PSE and LITGRID received €10 million in funding from the EU's Connecting Europe Facility (CEF ) for activities carried out as part of the preparatory phase of this project.

In December 2020, PSE and the BS TSOs signed a grant agreement with the EU's Innovation and Networks Executive Agency (INEA) awarding EUR 719.7 million in funding for Phase II synchronisation projects, including EUR 492.5 million for Harmony Link's implementation phase. In May 2021, PSE and LITGRID took decisions on proceeding with the investment project. The project thus moved from the preparatory phase to the implementation phase. In July 2021, PSE announced a tender through competitive dialogue for the selection of a contractor for converter stations in Poland and Lithuania. In August 2021, LITGRID launched a tender to select the HVDC cable contractor. In Q3 and Q4 2021, most of the study work was completed, including marine, environmental, archaeological and geological studies. In 2021, all critical design work was on schedule for the project. In Q3 2022, the process of obtaining key permits and administrative decisions for the project was completed.  zakończono proces pozyskiwania kluczowych pozwoleń i decyzji administracyjnych dla projektu. In addition, a tender was launched in May 2022 for the Employer's Representative to support PSE and LITGRID in supervising the work of the main contractors.

Currently, BS systems operate under the IPS/UPS system, which geographically covers areas of the former Soviet Union Republics. The synchronisation of the BS systems with the CE scheduled for 2025 is part of the European Energy Union concept and an example of solidarity in the area of energy security. The implementation of the project is critical to completing the integration and increasing the scope of connecting BS system markets to the European system. This is confirmed by the roadmap implementing the synchronisation project signed in June 2019 by the President of the European Commission and Prime Ministers and Presidents of Poland, Lithuania, Latvia and Estonia.

Synchronisation of the systems of Ukraine and Moldova 

PSE was also involved in a project to expand the system of Continental Europe to include the systems of Ukraine and Moldova. We were a member of the TSO Consortium established to perform additional studies and work to align the technical operating standards of these systems, as well as to comply with applicable EC regulations on running the system operation and market rules. The PSE representative chaired a working group responsible for performing system dynamic analyses.

In December 2021, analytical work determining the feasibility of connecting the UA/MD system to Continental Europe was completed. The dynamic study indicated countermeasures to be implemented by UA/MD TSOs for oscillation suppression.

One of the conditions for synchronisation was an island operation test, confirming the UA/MD system's ability to maintain stable operation. The test for the winter period took place on 24-26 February 2022 and was successful. On the day the test began, Russia attacked Ukraine. The test for the summer was planned for June 2022.

On 27 February 2022, Ukrenergo (TSO in Ukraine) requested emergency synchronisation from TSOs in Continental Europe. On 28 February 2022, Moldelectrica joined this request. An extraordinary meeting of the ENTSO-E RGCE was held on 11 March 2022 approving the emergency synchronisation, which was carried out on 16 March 2022.

Cooperation between the AU/MD and Continental European systems is monitored on an ongoing basis by a task team operating in the ENTSO-E RGCE area. Based on the recommendations developed by the team, ENTSO-E RGCE decides, among other things, on the acceptable level of trade at the systems' borders.

Following an agreement signed in June 2022 between the governments of Poland and Ukraine─PSE and Ukrenergo launched activities on the reconstruction at 400 kV of the Rzeszów–Chmielnicka connection, which has been closed since mid-1990s. The launch of the connection will increase trade opportunities between Poland and Ukraine and strengthen the connection between UA/MD and Continental European systems.

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