Introduction of Advanced Hybrid Coupling in the Core Region of the European day-ahead market 

The European Day-ahead electricity market SDAC faced yet another major evolution on 10 June 2026, with the introduction of advanced hybrid coupling (AHC) in the Core Capacity Calculation Region (Core CCR). This follows the introduction of AHC in the Nordic CCR already in 2024, linked with the introduction of Nordic flow-based. In this blog post, we will discuss how AHC differs from standard hybrid coupling (SHC), what virtual bidding zones (VBZs) are, and how prices are set for such VBZs.

Before we get started, let us recall the function of capacity calculation regions. EUPHEMIA, the market coupling algorithm used in SDAC, processes orders from market participants and network constraints from transmission system operators (TSOs). However, TSOs do not compute the network constraints in isolation but in cooperation based on so-called capacity calculation regions spanning over multiple bidding zone borders. The Core CCR covers the borders between EU member states in Western and Central Europe, including Austria, Belgium, Croatia, the Czech Republic, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Romania, Slovakia, and Slovenia, which use flow-based (FB) market coupling (see Figure 1).

Figure 1: Core Capacity Calculation Region (Source: www.entsoe.eu/bites/ccr-map)

SDAC not only allows exchanges within a CCR but also across CCRs, and this is where SHC and AHC become relevant. With SHC, interconnectors linking bidding zones across CCRs are constrained by their available transfer capacity (ATC). However, the flows on these interconnectors are not directly constrained by the FB constraints in connected CCRs. Thus, FB constraints in the CCRs have to accommodate the forecasted flows over these interconnectors. This situation is depicted in Figure 2.

Under the AHC framework, the impact of interconnector flows on Critical Network Elements of CCRs using FB is explicitly integrated into the SDAC market clearing process via VBZs, as depicted in Figure 3. By replacing static forecasts with explicit modelling at the allocation stage, AHC ensures that the market solution aligns more closely with the physics of the grid. Here, a CCR adds a VBZ as the endpoint of an interconnector to integrate this border into its capacity calculation. This advanced modelling approach will, in particular, benefit the integration of the large and growing number of HVDC interconnectors in the North Sea and the Baltic Sea. A similar concept, named Evolved Flow-Based, is already used within the Core CCR to model the HVDC interconnector ALEGrO between Belgium and Germany.

Figure 2: Standard Hybrid Coupling (SHC) between two capacity calculation regions.

Figure 3: Advanced Hybrid Coupling (AHC) between two capacity calculation regions with the help of virtual bidding zones.

How does AHC work?

When using AHC, the VBZ behaves just like a regular bidding zone (BZ) but does not contain any orders. Thus, the net position of the VBZ is always zero. That means that all power entering the VBZ via the interconnector has to exit to the connected FB area. Thus, the inflow via the interconnector corresponds to the FB net position of the VBZ and can be directly considered in the FB constraints. Consequently, when considering Figure 3 from before, we see that the price difference between BZ C and BZ D consists of 3 components: the price difference between BZ C and C VH, driven by the shadow prices in CCR 1, the price difference between C VH and D VH, driven by the shadow price of the interconnector’s ATC, and the price difference between D VH and D, driven by the shadow prices in CCR 2. Naturally, all of this also comes at a cost of complexity as the introduction of Core AHC will create many additional VBZs and lead to an increase in FB constraints in Core CCR.

How is the VBZ price calculated?

An important question that might arise is how the price for a VBZ is computed. It is easy to set the price when the supply and demand curves meet at a single point. But how is the price computed in a bidding zone without supply and demand curves? It is important to recall here that if the flow between two bidding zones in the same FB area is not restricted by tight FB constraints, then the prices have to be the same. On the contrary, if some FB constraints are tight and have positive shadow prices, we can use the following formula to compute the prices in the VBZ, where PTDF is the PTDF matrix of the FB area, CNEC is the set of all rows of the PTDF matrix, and SP is a shadow price:

Note that the PTDF values and shadow prices are publicly available at https://publicationtool.jao.eu/core/ for the Core CCR. One must consider that LTA is currently still in place and complements the FB constraints, though it will soon be phased out and is therefore not covered here.

Conclusion

The introduction of Core AHC will limit the reliance on forecasts for cross-border flows, in particular to the Nordic CCR. However, interconnections to other CCRs, like between Romania and Bulgaria, will also build on the AHC approach. Cross-border flows over HVDC interconnectors will not be considered ex ante when computing the FB constraints of the Core CCR, but have to compete with other flows for usage of network capacity during market coupling. Due to the imperfection of the forecast, this frees network capacity for other flows in case of overestimation or avoids costly redispatch in case of underestimation of the flows. The go-live of Core AHC marks an important step in the evolution of European market coupling and ensures the efficient coupling of transmission capacity between the Core region and the Nordic region.