Description of the model
IT-SI Market Coupling is a decentralised price coupling under which the parties involved coordinate their operations with no prejudice to their respective activities.In this respect, the contractual scheme and the governance of the IT-SI MC reflect competences and responsibilities already held by each party. The cross-border schedules are the import/export quantities, as calculated by the GME and BSP, through a common matching algorithm, reflecting the differences between the prices of neighbouring zones of Italy and Slovenia, under the technical limitation provided by TSOs.
In order to guarantee a high quality of results, GME and BSP will adopt a common matching algorithm and apply the same matching rules on the respective day-ahead markets. This common algorithm relies on the following features: Hourly implicit auction with no inter-temporary constraint. Results of each hour will be computed independently from the results of the remaining hours of the same day; Market splitting algorithm. The common matching algorithm includes the overall structure of the grid model defined by the Italian and Slovenian TSO, including a total number of 18 zones; 17 zones for the Italian market (6 physical zones; 5 constrained zones consisting only of generating units whose interconnection capacity with the grid is lower than their installed capacity; 6 virtual zones adopted to give separate evidence to the import/export from/to Italian electrical borders) and 1 zone for the Slovenian market. Clearing market price is defined by the system marginal price given by the intersection of demand and supply curves. If resulting cross-border schedules among the zones do not violate any transmission limit, the clearing price is a single price in all zones and it is equal to the marginal price given by the overall demand and supply curves. On the contrary, if at least one grid limit is violated, the algorithm “splits” the market in two market zones – one export zone including all the zones upstream of the constraint and one import zone including all the zones downstream of the constraint. In each market zone, the algorithm repeats the above-mentioned intersection process and, for each market zone, it builds a zonal supply curve and a demand curve. The result is a zonal clearing price, which is different in each market zone and that is higher in the importing market zone and lower in the exporting one. If, as a result of this solution, additional constraints within each market zone have been violated, the market splitting process is iteratively repeated within this zone until obtaining a result which is consistent with grid constraints. With regard to the price of electricity allocated for consumption in Italy it shall be evidenced that - in order to have a real price coupling, which takes into proper consideration market rules applied both in the Slovenian power market and in the Italian power market, and which is capable to determine an appropriate power flow with a correct direction consistent with and reflecting the “real” price difference between Italy and Slovenia, in case of price difference between Italian physical zones - the algorithm applies a national single purchasing price (PUN) limited to the 6 Italian physical zones, which is equal to the average of zonal prices weighted by zonal consumption.
The above-described market splitting mechanism is adopted with an ATC grid model but it supports also a flow-based grid model. Stepwise bid/offer curve. Supply and demand curves processed by the matching software are stepwise. Each step of the curve consists of a pair of values indicating the volume of electricity offered to the market and the related price. In order to build the overall curves, in first place, all supply offers are ranked in increasing price order on the aggregate supply curve and all demand bids are ranked in decreasing price order on the aggregate demand curve. In second place, the ranking between bids and offers submitted at the same price is defined on a rotational monthly basis, giving the priority to bids and offers coming from one PX.In third place, in case of bids or offers submitted at the same price and coming from the same PX, local rules are applied in order to define the priority.