Impact of Cross-Border Flow Forecast Alignment on Flow-Based Market Coupling Efficiency

This paper investigates the impact of forecast alignment on Cross-border (CB) flows within the Flow-based Market Coupling (FBMC) process, an essential aspect of capacity calculation in European power markets. We enhance existing FBMC simulation frameworks by incorporating realistic forecasts of corridor CB flows and Bidding Zone (BZ) Net Positions (NPs), mirroring operational practices used by Transmission System Operators (TSOs) and Regional Coordination Centers (RCCs). Our results indicate a nuanced trade-off: shifting from NP-based to CB-based forecasting and its proper integration into grid modeling, significantly increases the potential for more precise and efficient market outcomes, but concurrently elevates the risk and severity of forecast-induced errors. Counterintuitively, increased forecast errors lead to higher zonal price convergence, creating a false impression of improved system coordination. Sensitivity and explainability analyses further reveal that the accuracy of forecasts heavily influences FBMC outcomes, underscoring the complexity of optimizing capacity calculations. These findings highlight crucial considerations for TSOs, advocating for careful selection of forecast granularity and evaluation metrics in pursuit of market efficiency and system security