Advanced Hybrid Coupling: a practical guide for power traders and modellers

What is Advanced Hybrid Coupling? 

AHC is an enhanced form of coupling that combines both Flow-Based (FB) and Available Transfer Capacity (ATC) constraints (by the way: this is why it is called “hybrid”) within the Single Day-Ahead Coupling (SDAC) market.  

Unlike SHC, which relies on forecasts of cross-border exchanges, AHC uses Power Transfer Distribution Factors (PTDFs) and Remaining Available Margins (RAMs) to allocate capacity more efficiently.  

It is designed for borders between bidding zones inside and outside a CCR, ensuring non-discriminatory competition for scarce network capacity. By treating external borders similarly to internal Core CCR borders, AHC is expected to improve both socio-economic welfare and operational grid security. 

The graphic below, adapted from David Schönheit and Ivan Marjanović (Source: Introducing advanced hybrid coupling: Non-discriminatory coalescence of flow-based and net transfer capacity calculation regions), illustrates the key differences between the two approaches.

From forecast-based reservations to market-based competition 

Under the existing SHC model, the transmission capacity on critical network elements and contingencies (CNECs) is reserved based on D-2 forecasts of cross-border exchanges. Because these forecasts are made before the market coupling takes place, this can either constrain the market unnecessarily or create operational risks when the forecasts are wrong. 

1. If actual exchanges exceed the forecast, additional security margins are required to prevent network overloads. 

2. If exchanges are lower than forecasted, transmission capacity remains unused, leading to welfare losses. 

AHC takes a different approach and introduces virtual bidding zones within the flow-based market model. This allows exchanges over external interconnectors to compete directly with all other cross-zonal trades for available network capacity during the market coupling process. As a result, transmission capacity becomes an optimisation variable rather than a fixed forecast input. 

How does it work? 

For every border where AHC is applied, a Virtual Hub is introduced to represent imports and exports between the Core CCR and neighbouring regions. The net position of this Virtual Hub reflects cross-border exchanges on a given interconnector and is linked to the use of transmission capacity on the corresponding border within the SDAC.  

What is the go-live configuration and what are the concrete changes? 

On top of the bidding zones of the Core CCR, new entities have now appeared in the JAO publication tool for the parallel run since April 17th, as displayed in the below figure.

For all the above bidding zone borders (reflecting the HVDC interconnections from today´s Hansa CCR towards Nordics CCR and additionally RO-BG & PL-LT), new Net Positions will be calculated – reflecting the flows on the bidding zone border. As a result of these new virtual hub additions, the total number of hubs in the Core FBMC calculation will become 23. Therefore, the new FBMC domain after AHC will be of 23 dimensions.  

Note: the borders towards Italy North CCR (with FR, AT & SI) and SWE CCR (with ES) have not been included due to the upcoming merger (Core -> Central CCR) & low sensitivities of Core CNECs with ES-FR flows. 

Another impact is the addition of new columns in the PTDF Matrix as displayed below comparing before and after go live. New columns are added to take into account the sensitivity of CNECs towards the new virtual hubs that will be modelled after the AHC go live.

Challenges and network impacts 

The transition to AHC introduces greater complexity. The dimension of the flow-based domain is increasing, and the bidding zones have to be modelled separately. More network elements become relevant for capacity calculation because additional internal grid constraints exceed the PTDF threshold of 5%. This increases the number of CNECs considered in the market process and can, in certain situations, reduce the flexibility of the flow-based domain.  

Analysis of minimum and maximum net positions 

One useful indicator is the minimum and maximum feasible net position of a given hub. This should not be confused with the final market outcome; rather, it provides an indication of the theoretical range of feasible outcomes. Comparing AHC and SHC therefore offers insight into the potential changes following AHC implementation. 

Important note: for any comparison before/after implementation of AHC, one should make sure that the perimeter and corresponding Net Positions are matching together to compare “apples with apples”, which does require a bookkeeping exercise. As an example: due to the addition of many interconnections in Germany under AHC, the former net position of Germany had to be extended in the second graph by the additional non-Core ATC for external borders (DE<>DK1 from PuTo, e.g. DE<>DK2, DE <> SE4; DE<>NO2 from ENTSO-E). To demonstrate this, please find the comparison below on the two charts for Germany.

Between Figure 7 & 8, the gap between SHC and AHC has narrowed. For Germany on Figure 8, we do observe an improvement of the situation (higher possible exports & imports) due to the implementation of AHC. This was to be expected as four different interconnectors are now being modelled via virtual hubs instead of SHC. 

Note: on the above graph, we can still identify some data problem which led to the triggering of Default Flow-Based parameters and therefore reduced imports/exports for ex. on June 1st.  This is can also be identified directly in the PuTo, see Figure 9 below.

On the other hand, for countries geographically far away (and also without direct change of modelling in their interconnectors) AHC does not seem to have an important impact of the Max/Min Net Position. AT is taken as an example in the graph below.

For the additional charts other that DE & AT, which were used to make the assessment in the following table, please refer to the Annex at the end of this article.

Table 1:  Expected impacts of AHC (summary)

Expected benefits

The primary objective of AHC is to create a more non-discriminatory allocation of scarce transmission capacity. By allowing all eligible power exchanges to compete on equal terms, the methodology is expected to increase socio-economic welfare while simultaneously improving operational grid security.   

The good news is that AHC shall generally enable higher capacities (not on every MTU of course, it will depend on the specific situation). This is due to the additional degrees of freedom in the flow-based domain, which are now better utilised. The associated expansion of the solution space can theoretically result in greater potential for cross-border exchange. Despite these expanded possibilities at the capacity level, we will see in the future if they materialise in additional cross border flows. 

More importantly, due to the better grid modelling in the market coupling algorithm, the implementation is expected to lower both redispatch volumes and costs, especially in Germany, compared with SHC. This is because many of the added CNECs are located in northern Germany. In that sense, this could potentially reduce the countertrading volumes at the DE-DK1 border in the future, as those would not be necessary to the same extent anymore. 

Conclusion

AHC represents a significant step in the ongoing integration of European electricity markets. By replacing forecast-based capacity reservations with a market-driven optimisation framework, AHC aims to improve the efficiency, transparency, and security of cross-border electricity trading. While its implementation will require market participants to adapt to a more complex set of network constraints, the expected gains in welfare and congestion management make it an important market design development in the European power sector in recent years. 

As the Danish borders are among those most affected by the change due to the presence of several HVDC interconnectors, some rerouting of flows between interconnectors may occur, including DE<>DK1, DE<>NO2, NL<>DK1, and DK1<>NO. 

Annex: 

Additional charts: