Flow based cross border capacity allocation method is one of the recurring issue coming to the table in the international electricity trade business. It contains several challenges due to the fact that nobody ever worked with it so far in Europe. If it comes to real life it will change everyone’s life who wants to trade with electricity crossing national borders. The lesson to learn – how to bid, how much to bid, at what price to make a bid, etc. - could cost a lot in financial meaning.
The solution could be to simulate the whole procedure. IP Systems and ALPIQ have developed a software that could provide assistance to the trader to make his decision. In this system, the trader could see what the Capacity Allocation Office (CAO) would do if he puts several kinds of bids by using the same allocation algorithm as the CAO does. It also permits to calculate the border values, assigning the range where the trade is meaningful. On the top of those the software provides sensitivity analysis on different routes of the electricity flows in a function of a modified flow. That information gives a sound base of price and quantity range within to place the bid and provide a competitive advantage for the trader.