Glossary

Area Control Error. A measure of the imbalance in a control area, calculated as the difference between actual and scheduled power flows, adjusted for frequency deviation. TSOs use ACE to determine how much balancing energy to activate.

Automatic Frequency Restoration Reserves. Balancing energy that is automatically activated within 5 minutes to restore system frequency to 50 Hz after an imbalance event. Must be fully available within this timeframe according to European regulations.

Available Transfer Capacity. The remaining cross-border transmission capacity available for commercial electricity trade after accounting for security margins and already allocated capacity. Used in the NTC (Net Transfer Capacity) method.

Services necessary for the operation of the transmission system, including frequency control, voltage control, and black start capability. Provided by generators, storage, and demand response.

Alternative capacity calculation methods used when the standard Flow-Based or coordinated NTC process fails or cannot be completed in time. Fallbacks ensure continuous market operation by using previously calculated values or simplified assumptions, though they may result in less efficient capacity allocation.

Agency for the Cooperation of Energy Regulators. The EU body that coordinates the work of national energy regulators and ensures the proper functioning of the internal energy market.

The real-time market where TSOs procure energy to maintain grid frequency at 50 Hz. Operates after the day-ahead and intraday markets close, typically within one hour of delivery.

An entity that provides balancing energy or capacity to the TSO. Can be a generator, storage facility, or aggregator of demand response.

The minimum level of electricity demand over a 24-hour period. Typically met by nuclear and coal plants that run continuously at low marginal cost.

A geographical area where electricity can be traded without transmission constraints. Usually corresponds to a country (e.g., France) but some countries are split into multiple zones (e.g., Sweden: SE1, SE2, SE3, SE4).

The ability of a power plant to restart without external electricity supply after a total grid blackout. Essential for system restoration.

Balance Responsible Party. An entity responsible for balancing its portfolio of supply and demand. If actual consumption/production deviates from the schedule, the BRP pays an imbalance charge.

Capacity Allocation and Congestion Management Regulation. The main EU regulation (2015/1222) that established the framework for day-ahead and intraday market coupling (SDAC/SIDC).

A scheme where generators are paid to be available, not just for energy produced. Used to ensure adequate generation capacity during peak demand periods.

Critical Network Element and Contingency. A specific power line monitored under a particular outage scenario in Flow-Based market coupling. Each CNEC has a maximum allowed flow (Fmax) and a PTDF sensitivity.

A situation where demand for cross-border electricity trade exceeds the physical capacity of transmission lines. Results in price differences between bidding zones.

Revenue collected by TSOs when electricity prices differ between bidding zones. Calculated as the price difference multiplied by the volume of cross-border flow. Must be used to maintain or increase interconnection capacity.

The process by which TSOs jointly calculate available cross-border capacity, either using NTC or Flow-Based methods. Coordinated at the regional level (e.g., Core, Nordic).

The central European electricity market region using Flow-Based market coupling. Includes Austria, Belgium, Croatia, Czech Republic, France, Germany, Hungary, Luxembourg, Netherlands, Poland, Romania, Slovakia, and Slovenia.

The deliberate reduction of renewable energy generation (wind, solar) when supply exceeds demand or grid capacity. Can result in negative prices in the day-ahead market.

See SDAC. The market where electricity is traded for delivery the next day. Gate closure is typically at 12:00 CET (D-1), with results published around 12:45 CET.

The adjustment of electricity consumption in response to price signals or grid needs. Can be used for balancing (e.g., reducing load during high prices) or providing ancillary services.

The process of activating power plants to meet electricity demand. In a market-based system, dispatch follows the merit order, with the cheapest plants activated first.

Distribution System Operator. The entity responsible for operating the low and medium voltage distribution network that delivers electricity to end consumers.

An imbalance settlement method where deviations from schedule are always penalized, regardless of system state. Short BRPs pay a high price, Long BRPs receive a low price. Discourages passive balancing.

Electricity Balancing Guideline (EU 2017/2195). The regulation that harmonizes balancing markets across Europe, mandating single pricing and cross-border balancing platforms.

European Network of Transmission System Operators for Electricity. The association of 39 European TSOs responsible for coordinating grid operations, developing network codes, and publishing transparency data.

Pan-European Hybrid Electricity Market Integration Algorithm. The algorithm used by NEMOs to calculate day-ahead prices and cross-border flows for the entire European market. Maximizes social welfare subject to transmission constraints.

Frequency Containment Reserves. The fastest balancing reserves, activated automatically within seconds to stabilize frequency after a sudden imbalance. Also called Primary Reserves.

The guarantee level of transmission rights. Firm rights must be compensated if curtailed, while non-firm rights can be reduced without compensation when grid security requires it.

An advanced capacity calculation method that models the physical grid instead of using fixed border limits (NTC). Considers the impact of cross-border trades on all monitored lines (CNECs) using PTDFs. Used in the Core region.

The multi-dimensional safe trading space defined by Flow-Based constraints. Each CNEC constraint is a linear inequality: Σ(PTDF × NetPosition) ≤ RAM. Also called the Flow-Based Polytope.

Maximum Flow. The physical limit on the amount of power that can flow through a CNEC without violating thermal or stability constraints.

Flow Reliability Margin. A safety buffer subtracted from available capacity in Flow-Based calculations to account for forecast errors and unscheduled flows.

Financial Transmission Right. A purely financial contract that pays the holder the price difference between two bidding zones. Does not confer the right to physically move power.

The deadline for submitting bids in a market. For SDAC, gate closure is typically 12:00 CET (D-1). For SIDC, gate closure is typically 1 hour before delivery.

Technical requirements that generators, consumers, and grid users must meet to connect to and operate on the transmission or distribution network.

The common rules for allocating long-term transmission rights across Europe, established by ENTSO-E and implemented by regional allocation platforms like JAO.

The price paid or received by Balance Responsible Parties for deviations from their scheduled position. Reflects the cost incurred by the TSO to restore system balance.

The process of financially settling energy deviations between scheduled and actual positions. Can use Single Pricing (one price for all) or Dual Pricing (separate prices for long/short).

A capacity allocation method where transmission rights are allocated automatically as part of the energy market clearing process. Used in SDAC and SIDC. Contrasts with explicit auctions where capacity is sold separately.

The kinetic energy stored in rotating generators (synchronous machines). Automatically released when frequency drops, providing immediate resistance to frequency changes. Measured in seconds (H) or MWs.

A high-voltage transmission line that connects the electricity grids of two countries or bidding zones, enabling cross-border electricity trade.

See SIDC. The continuous market for trading electricity closer to real-time, typically from D-1 15:00 until 1 hour before delivery. Used to adjust positions based on updated forecasts.

Joint Allocation Office. The single allocation platform for long-term transmission rights in Europe. Conducts yearly, monthly, and daily auctions for cross-border capacity on behalf of TSOs.

The application of Flow-Based capacity calculation methodology to long-term transmission rights allocation (monthly, quarterly, yearly). Instead of using fixed NTC values, LT FB uses PTDFs and CNECs to calculate available capacity for long-term auctions. Provides more efficient capacity allocation and better reflects physical grid constraints over longer timeframes. Implemented by JAO in coordination with TSOs.

Physical or financial transmission rights allocated for periods of one month to one year ahead. Provide hedging against congestion costs for long-term contracts. Allocated through explicit auctions by JAO and other allocation platforms.

Unscheduled electricity flows that take circuitous paths through neighboring countries' grids due to the laws of physics (Kirchhoff's Laws). Can cause congestion on lines not directly involved in a bilateral trade. A major challenge in Flow-Based market coupling.

Long-Term Allocation. The process of allocating transmission capacity for periods beyond the day-ahead timeframe, typically monthly, quarterly, or yearly. Managed by regional allocation offices like JAO.

The ability of a power plant to adjust its output to match changes in electricity demand. Important for balancing variable renewable generation.

Contracts that give the holder the right to use cross-border capacity for a year, month, or other long-term period. Can be Physical (PTR) or Financial (FTR).

The 'Pay-as-Clear' price in electricity markets. All generators receive the price of the most expensive unit needed to meet demand (the marginal unit). Also called System Marginal Price.

The integration of national electricity markets through a common algorithm (EUPHEMIA) that simultaneously calculates prices and allocates cross-border capacity. Implemented in SDAC and SIDC.

See NEMO. The entity that operates the day-ahead and intraday electricity markets.

The ranking of available power generation sources by ascending marginal cost. Determines the dispatch order: cheapest plants (nuclear, renewables) first, most expensive (gas peakers) last.

Manual Frequency Restoration Reserves. Balancing energy manually activated by TSO operators, typically within 15 minutes. Used to free up aFRR for the next imbalance event.

Generation capacity that must remain online for grid stability reasons (e.g., voltage support) even if not economically dispatched. Can result in negative prices.

The process by which a capacity rights holder notifies the TSO of their intention to use allocated transmission capacity for physical power flow. Required for physical transmission rights but not for financial rights.

Market prices below zero, occurring when supply exceeds demand and inflexible generators (nuclear, renewables with subsidies) prefer to pay to keep producing rather than shut down.

Nominated Electricity Market Operator. The power exchange designated by a country to operate day-ahead and intraday markets. Examples: EPEX SPOT (France, Germany), Nord Pool (Nordic), GME (Italy).

The scheduled import or export of a bidding zone. Calculated as generation minus consumption plus cross-border flows. Used in Flow-Based calculations with PTDFs.

EU-wide technical rules for the operation and development of electricity grids. Developed by ENTSO-E and adopted by the European Commission. Examples: CACM, EBGL, SO GL.

Net Imbalance Volume. The total system imbalance in a settlement period, calculated as the sum of all TSO balancing actions (aFRR, mFRR). If NIV > 0, the system is Short (TSO bought energy).

The electricity market region covering Denmark, Finland, Norway, and Sweden. Uses NTC for capacity calculation and Nord Pool as the NEMO.

Net Transfer Capacity. A traditional method for defining cross-border capacity as a fixed MW limit between two bidding zones. Simpler than Flow-Based but less efficient.

The planned or unplanned unavailability of a power plant or transmission line. Outages reduce available capacity and can cause congestion or price spikes.

Price Average Reference. The weighted average price of balancing energy used to calculate the imbalance price. Based on the marginal cost of the last activated balancing bid.

The maximum level of electricity demand over a given period (typically daily or annually). Met by flexible, high-cost generators like gas peakers.

See Market Coupling. The simultaneous calculation of electricity prices across multiple bidding zones using a single algorithm.

Power Transfer Distribution Factor. The sensitivity of flow on a CNEC to a 1 MW change in net position of a bidding zone. Used in Flow-Based calculations: ΔFlow = PTDF × ΔNetPosition.

Physical Transmission Right. A contract that gives the holder the right to physically nominate (use) cross-border capacity. Can be converted to FTR or sold in secondary markets.

Regional Coordination Centre. Entities established under the EU Clean Energy Package to support TSOs in coordinating capacity calculation, security analysis, and outage planning across regions. RCCs enhance grid security and efficiency by providing regional oversight and coordination services. Examples include TSCNET, Coreso, and SCC.

Remaining Available Margin. The capacity available on a CNEC for the market in Flow-Based calculations. Formula: RAM = Fmax - Fref - FRM - F0,core.

The rate at which a power plant can increase or decrease its output. Important for following load changes and integrating variable renewables.

The adjustment of generation schedules by the TSO to relieve congestion or maintain grid security. Generators are paid to increase or decrease output relative to their market schedule.

Electricity generated from sources that are naturally replenished: wind, solar, hydro, biomass, geothermal. Typically have low or zero marginal costs but are variable and intermittent.

Generation or demand response capacity held in reserve to respond to imbalances or outages. Includes FCR, aFRR, mFRR, and Replacement Reserves (RR).

Rate of Change of Frequency. The speed at which grid frequency changes, measured in Hz/s. High RoCoF can trip protection relays and cause cascading failures. Formula: RoCoF = ΔPower / (2 × H × SystemPower).

A Flow-Based phenomenon where a CNEC constraint becomes binding (active) in the market clearing, effectively limiting cross-border trade. The shadow price of a CNEC indicates how much social welfare would increase if that constraint were relaxed by 1 MW.

Single Day-Ahead Coupling. The pan-European day-ahead market where prices and cross-border flows are calculated simultaneously using EUPHEMIA. Gate closure at 12:00 CET (D-1).

High electricity prices during periods of tight supply-demand balance, signaling the need for additional generation or demand reduction. Can approach the Value of Lost Load (VoLL).

Single Intraday Coupling. The pan-European continuous intraday market for trading electricity from D-1 15:00 until 1 hour before delivery. Enables adjustment of positions based on updated forecasts.

An imbalance settlement method where all BRPs pay/receive the same imbalance price regardless of their deviation direction. Encourages passive balancing. Mandated by EBGL.

The total economic benefit of electricity trade, calculated as consumer surplus plus producer surplus. Market coupling algorithms like EUPHEMIA maximize social welfare subject to grid constraints.

See Marginal Price. The price of the most expensive unit needed to meet demand in a pay-as-clear market.

A physical limit on the amount of power that can flow through a transmission line or across a border. Causes congestion and price separation between bidding zones.

Transmission System Operator. The entity responsible for operating the high-voltage transmission grid, ensuring system security, and procuring balancing services. Examples: RTE (France), TenneT (Netherlands/Germany), National Grid (UK).

Use-It-Or-Lose-It. A mechanism that forces holders of long-term transmission rights to either use or resell their capacity, preventing hoarding. Unused capacity is automatically returned to the market for reallocation.

Use-It-Or-Sell-It. Similar to UIOLI, but capacity holders must actively sell unused rights in secondary markets. Promotes efficient capacity utilization and market liquidity.

The process of deciding which power plants to start up or shut down to meet forecasted demand. Considers start-up costs, minimum run times, and ramping constraints.

The process by which TSOs check whether scheduled cross-border exchanges and internal trades are physically feasible given grid constraints. Part of the coordinated security analysis performed before market results are finalized.

Renewable generation sources with variable and uncertain output: wind and solar. Require flexible backup capacity and accurate forecasting for grid integration.

Value of Lost Load. The price cap representing the economic cost of involuntary load shedding (blackouts). Typically set at €10,000-15,000/MWh in European markets.

The management of voltage levels on the grid through reactive power injection from generators, capacitors, or other devices. Essential for grid stability and power quality.

The market where electricity is traded in bulk between generators, suppliers, and large consumers. Includes day-ahead, intraday, and balancing markets.

A market design where a single price applies to an entire bidding zone, even if there are internal transmission constraints. Contrasts with nodal pricing (used in the US) where each network node has its own price.