Co-optimizing energy and reserve interconnection capacity in coupled EU electricity markets

A. Rodrigues de Oliveira, S. Doménech, J. Villar, J.P. Tomé Saraiva, F.A. Campos

Energy Vol. 356, pp. 141256

Summary:

The European Union Internal Electricity Market is undergoing major reforms to support the transition to a fully decarbonized energy system by 2050, where non-dispatchable renewable energy sources play a central role. To enhance market efficiency, renewable energy sources integration, and power system balancing, the European Union promotes increased cross-border interconnection and cooperation among Member States. This paper reviews existing literature and market models addressing multi-zone interconnection capacity allocation and proposes a novel inter-zonal co-optimization mechanism for the joint allocation of energy and automatic balancing reserve capacity based on system cost minimization. Unlike previous approaches that treat energy and reserve coordination separately or sequentially, this study introduces a unified optimization framework that captures the interdependencies of intra- and inter-zonal dispatch. The proposed mechanism is implemented within the CEVESA market model and applied to a realistic Iberian case study, assessing its economic and operational impacts under varying interconnection capacity scenarios. Results show that while energy coordination alone achieves significant cost reductions, joint coordination of energy and reserves delivers further efficiency gains, reduces reserve price volatility, and enhances cross-border system flexibility.

Spanish layman's summary:

Para mejorar el mercado eléctrico europeo, la integración de renovables y el equilibrio energético por las interconexiones son aspectos relevantes para la UE. Este paper propone un mecanismo de asignación de capacidad interzonal para la energía y la reserva secundaria basado en el modelo CEVESA.

English layman's summary:

To improve the EU Electricity Market, RES integration and power balancing through cross borders interconnections are main EU goals. This paper proposes an inter-zonal capacity allocation mechanism for energy and secondary reserve based on CEVESA market model and applied to a realistic case study.

Keywords: Electricity market; Interconnections capacity allocation; Market coupling; Balancing reserves coordination

JCR-JIF Impact Factor and WoS quartile: 10,100 - Q1 (2025)

DOI reference: https://doi.org/10.1016/j.energy.2026.141256

Published on paper: August 2026.

Published on-line: May 2026.

Citation:
A. Rodrigues de Oliveira, S. Doménech, J. Villar, J.P. Tomé Saraiva, F.A. Campos, "Co-optimizing energy and reserve interconnection capacity in coupled EU electricity markets", Energy, Vol. 356, pp. 141256, August 2026. [Online: May 2026] doi: 10.1016/j.energy.2026.141256