A decomposition-based approach to European electricity market clearing

Abstract

This work proposes a methodology to calculate the price of the single pan-European day-ahead electricity market through an iterative process between the markets of two zones: the Iberian Peninsula and the rest of Europe. The motivation for this decomposition-based market clearing procedure is twofold: on the one hand, the two zones considered are weakly connected, due to the peninsular nature of Iberia, electrically connected to the rest of Europe only through the few tie-lines between Spain and France; on the other hand, the types of bids and related constraints are quite heterogeneous in both areas. The proposed algorithm has shown to provide virtually the same results as the official EU Pan-European Hybrid Electricity Market Integration Algorithm (EUPHEMIA), while improving convergence rates and often reducing solution times. The aim is not to replace EUPHEMIA, but rather to provide a more robust alternative that can be run in parallel, capable of providing a solution in cases of difficult convergence caused by the interactions of the complex constraints arising in the markets involved.