Abstract
The European power system is experiencing a massive renewable penetration, increased meshing of the grid, and electricity market integration. This calls for market design options that can cope with the challenges resulting from the ongoing developments. Based on a DC optimal power flow (DCOPF) formulation, this paper analyzes the impact of market design options on the optimal transmission allocation for Frequency Restoration Reserves (FRR) exchange in the Northern Europe power markets. We consider implicit and sequential electricity market clearance options and assess the findings according to the total costs, optimal transmission capacity allocation, and regional FRR procurement. The results show that, as a result of increased market efficiency obtained by applying the implicit market clearance option, it is less expensive, and results in comparatively lower transmission capacity allocation from the Nordic system to the interconnected regions.