Chapter 3: How to calculate border trade constraints?
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In the third chapter of this book, we show how border trade constraints are calculated. We answer five questions. First, why do we focus so much on these constraints? We explain that transmission planning is challenging and safe transmission operation is critical to avoid blackouts. Second, why do we calculate trade constraints on virtual borders? It seemed natural to define virtual trade borders between countries and assign limited transmission rights to these borders. We also introduce the concept of flow-based market coupling. Third, who is best placed to do these virtual border calculations? Regional collaboration among transmission system operators (TSOs) started voluntarily and evolved into more formalized regional coordination centres (RCCs). Fourth, how to organize the data exchange to support the calculations? We introduce the process related to the pan European common grid model. And fifth, why are there still open issues? One of the most pressing issues today is that the real constraints are no longer at the virtual borders but within bidding zones. The chapter ends with a conclusion in which we summarize our main points.