Auctions & Cross-Border Capacity

How transmission capacity is allocated between European bidding zones through explicit and implicit auctions.

Market Timeline: From Long-Term to Real-Time

Understanding when and how capacity is allocated

Long-Term (Explicit)

Yearly and monthly auctions conducted by JAO. Traders buy Physical or Financial Transmission Rights (PTR/FTR) to secure capacity in advance.

Day-Ahead & Intraday (Implicit)

Capacity is allocated automatically as part of energy trading through SDAC and SIDC. No separate capacity auction needed.

What Are Cross-Border Auctions?

Cross-border auctions allocate the limited transmission capacity available on interconnectors between European bidding zones. Without coordination, traders in different countries might schedule conflicting power flows that exceed physical line limits, causing grid instability.

Why Auctions Matter

When demand for cross-border trade exceeds capacity, prices split between zones. Auctions ensure capacity goes to those who value it most, maximizing economic efficiency while maintaining grid security.

Two Allocation Methods:

Explicit Auctions

Capacity is sold separately from energy. Traders buy transmission rights (PTR/FTR) in advance, then nominate (use) them or resell them. Used for long-term contracts.

Implicit Auctions

Capacity is allocated automatically as part of energy market clearing (SDAC/SIDC). EUPHEMIA algorithm optimizes both energy and transmission simultaneously.

Key Stakeholders in Capacity Allocation

TSOs (Transmission System Operators)

Calculate available capacity based on grid state, weather forecasts, and outages. Provide capacity data to JAO and NEMOs. Examples: RTE (France), TenneT (Netherlands/Germany), National Grid (UK).

JAO (Joint Allocation Office)

The single platform for long-term explicit auctions in Europe. Conducts yearly, monthly, and daily auctions for cross-border capacity on behalf of 28 TSOs across 28 borders.

NEMOs (Nominated Electricity Market Operators)

Power exchanges that run implicit auctions (SDAC/SIDC). Use EUPHEMIA algorithm to allocate capacity as part of energy market clearing. Examples: EPEX SPOT, Nord Pool, GME.

Market Participants (Traders, BRPs)

Buy transmission rights to hedge price differences or enable cross-border arbitrage. Balance Responsible Parties (BRPs) use capacity to optimize their portfolios across zones.

Lesson 3 of 6: Auctions & Flow-Based Allocation

Disclaimer: This guide is provided for educational purposes only and is not an authoritative source. While we strive for accuracy, some definitions and figures may be simplified or approximate. For professional or regulatory purposes, please cross-check information with official documents from ENTSO-E, national regulators, or academic publications.