Valuable perspective and background to the whole issue in the context of the target model for the Internal Electricity Market provides Supporting document to the ENTSO-E Draft Network Code on Forward Capacity Allocation of 28 March 2013 (besides, responses to the public consultation on the Forward Capacity Allocation network code are requested by 28 May 2013). Pursuant to the said document:
For day ahead and intraday timeframes flow based or coordinated NTC Capacity Calculation approaches are allowable by the target model. However, for the Forward Capacity Allocation timeframe the coordinated NTC approach is preferable, although the flow based approach is acceptable provided there is evidence that it can deliver higher efficiency.
Regarding the Forward market, which refers to timeframes prior to day-ahead (e.g. monthly, quarterly, yearly, multi-yearly periods), the target model generally prescribes that transmission capacity should be allocated in explicit auctions via Physical Transmission Rights (PTRs) with the "use-it-or-sell-it" principle or via Financial Transmission Rights (FTRs).
The target model for the Day Ahead market is based on implicit auctions, which means that cross-zonal capacity is allocated implicitly with the matching of the most competitive energy bids and offers. This process is commonly known as Market Coupling. More in detail, it was agreed that the target model should be based on a single price coupling EU algorithm.
In the Intraday market, where market participants trade energy to adjust their positions after the day-ahead market phase and before the balancing market, the target model also prescribes implicit allocation of capacity. However, unlike the day-ahead market, this should be based on continuous trading rather than auctions. Reliable pricing of scarce capacity complements the target model, while regional auctions can be implemented where appropriate.
In respect of the Balancing market, while the long term solution foresees a TSO-TSO model with a common merit order, its features and interim models are still part of the ongoing discussions around the Framework Guidelines on Balancing, published by ACER on 20 September 2012.