Bidding Zone - statnett/Talk2PowerSystem GitHub Wiki

Bidding Zone Definitions

A Bidding Zone is a market-based method for managing power transmission congestion. It defines an area within which electricity can be traded without accounting for internal transmission constraints. Bidding Zones are central to electricity market design in Europe and other liberalized electricity markets. They are typically composed of one or more Scheduling Areas, which are operated by a single System Operator, usually a Transmission System Operator (TSO).

The definition for Bidding Zone used in the CGMES Network Code Profile (NCP) extension is:

"A bidding zone is a market-based method for handling power transmission congestion. It consists of scheduling areas that include the relevant production (supply) and consumption (demand) to form an electrical area with the same market price without capacity allocation."

The definition for Scheduling Area used in the CGMES NCP extension is:

"An area where production and/or consumption of energy can be forecasted, scheduled, and measured. The area is operated by only one system operator, typically a Transmission System Operator (TSO). The area can consist of a sub-area, which has the same definition as the main area, but can be operated by another system operator (typically a DSO or CDSO). A substation is the smallest grouping that can be included in the area. The area size should be considered in terms of the possibility of accumulated reading (settlement metering) and the capability of operating as an island."

Origin and Evolution

The concept of Bidding Zones originated from the Norwegian electricity market design back in the early 1990s. Norway introduced dynamic Bidding Zones (Elspotområder) as a regulatory mechanism to manage transmission constraints and improve market efficiency. Uniquely, the Norwegian system allows Bidding Zones to be redefined with as little as two weeks’ notice based on congestion patterns—though in practice, the market is usually given a longer lead time.

Over time, the concept was adopted and formalized within the European electricity market, especially under the coordination of ENTSO-E. Multiple studies and consultations have been carried out to define rules for establishing, maintaining, or splitting Bidding Zones based on evolving grid and market conditions.

Current Usage

Most European countries define their Bidding Zones along national borders. In these cases, the Bidding Zone typically corresponds to both the Control Area and the Transmission Boundary of the country. However, there are key exceptions:

  • Sweden and Italy are divided into multiple fixed Bidding Zones based on structural congestion.
  • Denmark operates with two fixed Bidding Zones (East and West), although it is one Control Area.
  • Norway uses dynamic Bidding Zones that can shift depending on operational congestion.
  • Germany is a special case: although it is one Bidding Zone, it is operated by four TSOs, each responsible for a Scheduling Area within that Bidding Zone. A complete list of the Bidding Zone can be found here: https://www.entsoe.eu/data/energy-identification-codes-eic/eic-area-codes-map/

Congestion Management and Zonal Design

Bidding Zones are designed to manage mid-term congestion constraints. These constraints do not necessarily align with political borders. The Bidding Zone concept aims to internalize grid constraints that are structural and persistent, while market coupling and cross-zonal capacity allocation are used for inter-zonal trade.

ENTSO-E has published multiple studies and proposals to guide Bidding Zone reviews, with the goal of aligning market zones with actual congestion patterns. These reviews are critical to ensuring that energy prices reflect locational scarcity and physical network limitations.

Area Role in Power Flow and Modeling

For operational planning, Bidding Zones are used in power flow algorithms to control inter-area exchanges, helping guide power flow to meet exchange targets between areas.

For example, in the Nordic44 model—originally developed in PSS®E—inter-area exchanges were modeled using GeographicalRegion as a proxy for Bidding Zones, since PSS®E does not natively support the Bidding Zone concept.

In Common Information Model (CIM) extensions:

  • CIM15 (Statnett extension) introduced sn:BiddingArea to represent Bidding Zones.
  • In CIM16 / CGMES 2.4, this was replaced with entsoe2:EnergyCongestionZone.
  • In the CGMES Network Code Profile (NCP), the standard representation is now nc:BiddingZone.

CIM Modeling Perspective

Concept Description
GeographicalRegion "A geographical region of a power system network model." Typically represents countries, as required by CGMES.
SubGeographicalRegion "A subset of a geographical region." Used for grouping substations for navigation or visualization purposes only.
ControlArea <"def to big to be included"> Represents the equipment under the control of a System Operator and is associated with operational power flow.

The Common Grid Model (CGM) defined in the Network Code relies primarily on the concept of Bidding Zones. However, a clear distinction between Bidding Zone, Control Area, and Scheduling Area is essential in modeling, market design, and regulatory compliance.

Conclusion

Bidding Zones are both a technical and a political issue. While the ideal design is based on system constraints and efficient congestion management, real-world implementation often reflects national interests, market integration goals, and historical practices.

As the power system evolves with increased variable generation and cross-border exchanges, the structure and role of Bidding Zones will continue to be a vital and dynamic part of the European electricity market design.