Cross-border electricity trading depends not only on demand, generation and weather, but also on the availability of transmission capacity between markets. With flow-based coupling and more detailed capacity calculations, the border itself can affect price spreads as strongly as local fundamentals. When transmission is unconstrained, arbitrage tends to drive prices toward convergence, while limited capacity can allow neighbouring markets to separate.
Transmission capacity can be treated as an economic option on whether price convergence occurs. A megawatt of available capacity may have limited value when two markets clear at similar prices, but it can become more valuable when price differences widen. For Southeast European traders, network conditions therefore become part of the price forecast alongside national fundamentals.
ACER highlights cross-zonal capacity in Southeast Europe
ACER’s 2026 analysis of Southeast European electricity markets points to cross-zonal capacity as an important element in regional price formation. The same assessment calls for greater availability of transmission capacity for cross-border trading and improved utilisation of the network. The focus extends beyond individual borders to how capacity availability shapes outcomes across the region.
In commercial terms, a trader can forecast a Bulgarian surplus while also expecting a Greek shortage, but the size of the eventual BG-GR spread depends partly on how much Bulgarian power can be transferred south. The same mechanism applies to other interconnected pairs including Hungary-Romania and Hungary-Croatia. These relationships contribute to what is described as capacity surprise risk.
Capacity surprise risk from changing interface limits
Capacity surprise risk can arise when expected commercial capacity across a relevant interface changes after initial calculations. For example, a trader might start with an expectation of 1,000 MW, then see a later calculation reduce that figure to 600 MW. In that scenario, national demand, solar output and fuel prices remain unchanged.
Even without changes in those fundamentals, the expected price spread can widen because reduced transfer capability limits arbitrage between markets. Conversely, additional capacity can make previously isolated spreads tradable or remove attractive differences once more power can flow. This shifting value is one reason cross-border capacity is increasingly treated alongside weather and generation forecasts.
Flow-based coupling and Core Advanced Hybrid Coupling
The forecasting challenge increases under flow-based market coupling because transactions are assessed in relation to critical network elements across a wider system. Rather than treating each border independently, flow-based calculations consider how trades affect network constraints beyond the direct physical boundary between bidding zones. As a result, trades between two zones can consume capacity on network elements not physically located on their direct border.
The approach is intended to support more efficient grid use because market coupling reflects physical behaviour across the interconnected system more accurately. However, it also reduces the usefulness of traditional bilateral ATC-style analysis for traders. In June 2026, the implementation of Core Advanced Hybrid Coupling adds further coordination by incorporating selected Core external borders into a more coordinated flow-based framework.
Three-layer forecasting model for regional trading desks
For SEE trading desks interacting with Core markets, border behaviour is increasingly linked to regional network optimisation rather than a single bilateral capacity figure. That shift requires changes in trading models used to anticipate market outcomes. The first layer remains a fundamentals forecast covering load, renewable generation, hydro conditions, thermal availability and fuel economics.
The second layer focuses on expected price formation in each bidding zone. The third layer is network-state forecasting, including which critical network elements are likely to become constrained and which borders could receive additional capacity. It also covers where remedial actions might alter available margins and how much capacity may remain after wider European optimisation.
Not every desk needs to build a full transmission-system-operator-grade grid model. Still, ignoring capacity calculations carries risks comparable to ignoring weather forecasts. Alongside day-ahead planning, there is an intraday dimension because day-ahead capacity calculations rely on system assumptions that may change as delivery approaches.
Intraday reassessment and capacity-event trading
As delivery nears and network conditions become clearer, available capacity can be reassessed using more recent information than was available at the day-ahead auction. Cross-border optionality can therefore change significantly after day-ahead results are set. A spread that appears trapped may become arbitrageable, while another that looks attractive may become inaccessible.
The economic value of the border can thus vary throughout the trading day. This supports a short-term strategy category described as capacity-event trading. In this framing, the key signal is not only whether Market A is cheaper than Market B, but whether new information about transmission capacity changes the probability that the price difference will persist.
This approach links fundamentals-driven divergence with whether that divergence can survive given evolving transfer capability across borders. Capacity determines whether divergence persists when market conditions change after initial forecasts based on demand and generation inputs.
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