Europe has long had a single market for many goods and services, but not for energy. Until recently, the price you paid per kilowatt was dictated by national factors, like the wholesale gas contract a utility had agreed to for the winter season.
That’s changing as Europe moves towards a single power trading system that should help flatten out prices and integrate renewables more easily. It’s all based around what’s been dubbed “the continent’s most important IT system”–the Pan-European Hybrid Electricity Market Integration Algorithm, or Euphemia for short.
Euphemia is designed to move power freely between countries, depending on gluts and shortages. If one country is producing more wind power than its own grid can handle, it will send out a sell bid to the marketplace. The algorithm then automatically finds a buyer.
A recent piece by Peter Fairley, in IEEE Spectrum, explains more:
Euphemia’s goal is to maximize what economists call the “social welfare” of the region by maximizing the use of its most efficient power supplies and thus minimizing overall costs to consumers. “Where there are price differentials in neighboring markets, the process is designed to make sure there’s full use of the transmission paths between them,” says Mark Bartholomew, an energy market specialist with the Birmingham, England–based law firm SGH Martineau.
The “market coupling” system is now used by 15 grid operators that represent 75% of the European market. At the moment, only about 11% of all power is transacted cross-border. But Fairley says the Euphemia system combined with investments in high-power direct-current transmission lines should raise that volume.
Long-term, the trading system could help Europe make the most of its renewable energy. Northern Europe has lots of wind, while the South has abundant solar. By coordinating the two–for example, sending wind power south when the north can’t use it all–the continent could improve energy independence and cut carbon emissions at the same time.