Bidding zones reconfiguration — Current issues literature review, criterions and social welfare

Abstract

The aim of this paper is to introduce methods of solution regarding current issues of electricity markets integration in Europe. The focus is pointed on bidding zones overview and bidding zones reconfiguration process in general, meantime the situation in central Europe will be analysed more deeply. Bidding zone can be defined as an area without internal business congestion. It means that transaction can be completed between any two points inside this area and electricity can be transferred without requirement of transmission capacity allocation. Bidding zones borders in many countries are the same as the political borders because countries were more isolated in the past than in present time. This situation is changing with the increase of international cooperation. Countries like Czech Republic, Slovakia, Poland, Hungary and France are examples of bidding zones that are identical with political borders. On the other hand, there is a single bidding zone that includes Germany, Austria and Luxembourg (DE-AT-LU). The most scrutinous issue of bidding zones configuration covers DE-AT-LU zone where the problems with internal congestion occur and correspondingly affect surrounding bidding zones, especially Czech Republic and Poland. Transmission capacities inside this zone are insufficient. Electricity flows through neighbouring grids and constrains transmission capacities for local market participants. This article presents criteria that might be used for bidding zones reconfiguration with the main accent on social welfare concept applicability. Social welfare is a wide term which is investigated in this paper under bidding zones reconfiguration problem.