Flow Based Market Coupling with Michiel Kenis

Hello, and welcome to the Energy Observed Tree podcast. I'm your host Sebastian Gonzato, and in this podcast I'll be interviewing researchers from KO-Lovans Energy Systems Integration and Modeling Group and the Vleric Energy Institute to talk about their research and the policy discussions surrounding them. We're academics, so we hate being wrong. If you think we did get something wrong, then please send an email to [email protected] and we'll include your comment on a narrator that will accompany each episode on our website. So I'm here with Micheal Keenees, that was my attempt at a Flemish accent, who was graciously accepted to talk to us about flow-based market coupling. Hello. Hi, Sebastian. How are you doing? I'm doing great. You actually beat me to that question. I was going to ask how you're doing. Well, I'm super excited to be here and to be the first guest. I'm very curious how we can give our message of the research that we perform in our daily basis towards a more broad public, so I'm very curious. Yeah, and I hope we can make it interesting for those of you at home. And yes, indeed, thank you for being - I like to think of you as my first victim, not guest. So thank you very much for agreeing to this. So we're going to talk about flow-based market coupling, which is a big part of your PhD. And so to get into that topic, I think you need to explain to us how electricity works. How on earth do we get electricity? Yeah, that's a valid question. Let's go back to the basics. One of the reasons, actually, why the electricity sector is so interesting, I would say, is that we simply can't tell electricity to flow directly from point A to point B. Instead, the Geekhofs laws that most of us start in secondary school, they tell us how electricity flows through a network. As such, electric powers spread across all parallel paths between point of injection, so with very generous, it's located, and the point of withdrawal where the consumers are. So we don't have that much control about how electricity flows through the network. So I think you're going to talk to us about how that impacts. Yeah, you could indeed wonder, why does it matter, that we have a lot of parallel paths in which electricity spreads. Well, there are two things actually important to consider here. Firstly, every transmission line has its capacity. And we have to prevent the electricity to flow, to exceed the capacity of the transmission lines they flow through. So otherwise, damages occur. Secondly, why it is important to consider is that it is essential to continuously balance the electricity network. We have to inject an equal amount of electric power in the network as we extract electrical power from the network. Otherwise, electricity starts to take weird shapes, causing damages to, for example, some appliances that is powering. So as you might have guessed by now, the flow of electricity in network is not super simple as one might intuitively think, but the real challenge, however, is on one starts trading electricity. And I think that's what we're going to talk about today, trading electricity internationally. Yes, exactly. So I guess we should then start talking about nodal versus zonal pricing. So what is nodal pricing and what is zonal pricing? How they different? Yes. So when we want to start trading electricity, we need a market for that. But if we look at those markets, there are typically two options. You have zonal markets and nodal market designs. And these are two fundamentally different ways to organize your market. And nodal market design is in place, for example, in some parts of the U.S. and definitely outperforms a zonal market design. That'd be clear. That is because it implies that at each node, so a point of injection or withdrawal of electricity, at each node there is an individual price. And that is beneficial because pricing yields can be given in a most detailed way there can be. And so you're talking about price signals there, what do you mean by price signals and what do you mean by having different price signals and different nodes and why is that important action? Price signals that the market gives is especially important for investments. Firstly, for generation capacity, if there exists, for example, a high price and a specific node in the network, this gives a signal that investment in a novel power plant at that node might be beneficial. And not just a power plant, right, I mean, it signals that something needs to be done to manage. Yeah, it can go to consumption as well. It's just an example. It goes on generation. Storage indeed is also an agent that can be addressed with these price signals. Secondly, it's also the investments for transmission capacity. If there is a price difference between two nodes that are directly interconnected, this indicates that the interconnecting transmission line is used up to its full capacity, hence the price difference signals that investment in additional transmission capacity could be beneficial. And that's what you have with nodal pricing. You have at each node a different price and all these prices give nice signals to market participants. However, in Europe, as you know, we have a zonal market design. It's totally different because in every country in a zonal market design, or I would say actually in every market zone, as you like, there is a single wholesale electricity price. However, the characteristic of the zonal market is that thousands of nodes are grouped in zones and thousands of transmission lines are reduced to only a few dozen of interconnections when considering these zonal markets. So the basic thing is nodal information, so for example, on the position of generators and consumers within a zone, is lost if you have a certain zonal market clearing procedure. And therefore, the network model that is used in European electricity markets is strongly simplified compared to the actual physical network, just because we have this zonal market design. And it goes with that saying that the simplification of the physical grid into a market model that is zonal, comes with a loss of accuracy resulting in disconnect between physical flows on the one hand and commercial flows on the other hand. And that might lead to line overloadings. And that's what we want to avoid, right? Yeah. So you mentioned commercial and physical flows, but before we get on to that, so concretely, the issue, let's say, with zonal pricing, correct me if I'm wrong, is that if you have two nodes within a zone, and there's congestion between those two nodes, you should get a difference in price, which signals investments, but zones force the same price with on those two nodes. Yeah. Exactly. Okay. So that's cleared up. But you mentioned physical and commercial flows. So go. I want to talk about it. Yeah. It's super interesting to talk about, because it brings us, for example, to concepts like loop flows, I think loop flows is a, is a term that one often hears when, when talking on flow with market coupling, so you're doing a PhD and energy market, you're doing a PhD and energy market. You're a bit in the field. Yeah. Loop flows is a term that you often hear. And that's also a consequence of the difference between commercial and physical flows. For example, if two nodes are in the same market zone, like you mentioned, and an intrasonal commercial transaction between those nodes, takes place. It also results in physical flows through the neighboring market zones. And these flows are referred to as loop flows. So pretty differently, loop flows are physical flows between market zones, which are not seen by the market as they result from intrasonal transactions. And the flow based market coupling methodology attempts to account for these loop flows to some extent. Yeah. So that's quite a, I have to say, I'm sure that most people can't picture what's happening there. So, yeah, please just, you have an example lined up for us. Yeah. Indeed. The typical example to mention here is that one of Germany, indeed. And I hope that makes things a bit more clear, indeed. What's the situation in Germany? You have a lot of wind generation in the north, because there's a lot of wind available there. And consumption in Germany typically is concentrated in the south. So there needs to be some transactions from the north to the south. That's both in terms of trading. So there's a commercial trade from the north to the south. But there's also electricity transmission from the north to the south. But the fact that we have a zonal market design here enforces this to have one price in whole Germany, because that's just one zone. And because there is one price both in the north and the south, insufficient price signals for, for example, generation investments in the south are given. And this would have, if we would have those price signals, this would have to, this would have allowed for a decreased need of interconnection capacity, or at least a transmission capacity could at least be used for something else that's more economically efficient. Yeah. And so actually, I mean, we'll get back to this later, but the obvious solution to this is just split Germany into two zones, right? For example, yeah, that would split off the zone in Germany, we'd give more proper signals indeed. And we'd also see decreased loop loads that we have, because we just talked on it. And Germany is a perfect example to illustrate loop loads as well. Because there is quite some limited transmission capacity between the north and the south, while there is still trade between the north and the south. So what happens? Some flows go through the Netherlands, Belgium, France, to arrive at the south of Germany. And crucially, that stops trade from happening within those countries, or it causes congestion in these, in those countries potentially, in all the time. Majorly reduces the ability for trade in those countries, and from a welfare perspective, we could question whether that's optimal indeed, correct? And actually, I looked up, and at one point, I looked this up before the podcast, and at one point, the Craig was, or someone from the Craig, so the Belgian energy regulator was talking to the Belgian parliament, and it, in some sense, complaining about these loop flows, because they mean that Belgium, during times of stress, has less transmission capacity available for it. And when there was issues with nuclear availability, so Belgium was relying more on trade. So this is why these issues are interesting, I guess, because it's very interesting, because they also have a lot of consequences, and I mean, I think you can get people quite riled up if you would really want to, but so that's loop flows. But how, let's say you're trading on a market, how do you know how much you're producing in one zone, Belgium, and how much can you trade with Germany? How do you? Yeah. Yeah. So there are two things, basically. You're trading electricity on the one hand, but you're also using transmission capacities. So those transmission capacities need to be traded somehow with it, and how it happens in Europe is that transmission capacity typically is implicitly auctioned together with electricity or the energy itself. But before one can trade, that transmission capacity, when you first know how much transmission capacity one can trade, because an essential thing is here that the commercial capacity, the commercial transmission capacity, I must say, that is traded in the market, differs from the physical capacity that is installed in our grid. Why is that? Let's show it through some examples that physical flows typically differ from commercial flows that we have. Such that commercial transmission capacity that can be traded should be less than the physical transmission capacity that is available. And this is to avoid dangerous overloadings because we know that the actual physical flows can be larger than the commercial transmission capacity that we gave to the market. And calculating this commercial transmission capacity for trade is a task that lays with the transmission system operators or the TSOs, if you like. So to bring that back to the loop flows question, you would tell the market, hey, you can only use 50% of this interconnector to avoid, well, to deal with the fact that you might get loop flows, which mean that you can actually trade less than yours. You're basically saying you use 50% of this when trading, because we know that if you trade in the end, you will still observe a full capacity usage of that line indeed. Yeah. Okay. So I think at this point, we're ready to understand what flow based market coupling is. Yeah. Hopefully. We get to the topic indeed. Because sizely phrased flow based market coupling is nothing more than a methodology to organize wholesale electricity markets. Very. So simple. So simple. So clear. I get it all now. Thank you. And the methodology allows that multiple zones or countries, if you like, to be involved in one market clearing procedure. Second thing is the flow based market coupling methodology is the reason. Or it came into our lives because it is specifying how to take into account direct the characteristics of the grid into the markets, because we know there is a difference between the physical and commercial flows. And it comes specifically, it comes with a way to calculate the commercial transmission capacity that is given to the market for trade. And that's basically it. How it's done. That's quite complex. But the goal of flow based market coupling is this. All right. And I mean, before flow based market coupling, there was still trade between countries or market zones in the EU, right? So how did that work? So previously before the introduction of flow based market coupling in Europe, we had an approach we called the net transfer capacity, which wasn't placed before the 20th of May in 2015 when the, when this shift was made, at least in central Western Europe, from NTC to flow based market coupling. By the way, it might also be useful to mention that the central Western Europe I'm talking about covers a Belgium, the Netherlands, France, Germany, Austria, and Luxembourg, and we also say that because it's part of the German zone as well. So in essence, the flow based market coupling in flow based market coupling, there is a reduction of a full description of the physical grid to a simplified market model. And this reduction, I would summarize it in two steps. Firstly, there's a reduction of the full network into a set of equivalent zones and interconnectors with a relationship between injections and flows. And secondly, there is a calculation of the transmission capacity that can be used by the market for commercial transactions on these selected network elements that we selected in the first step. Now this calculation process is a very complex procedure. It's executed by TSOs and it's regulated by the, by the national regulators. What is new though compared to the old NTC approach is the, the first step that I mentioned in which the set of critical transmission lines is identified on which one will try to estimate the flow as a result of the market. And in NTC, as you probably know, one typically only took cross-border transmission lines into one count. Well, now actually in theory, any transmission line could be considered or with limits could be considered and we say, maybe you can give us another more tangible example of what changes from NTC to FPMC. So we've already talked about Germany, maybe. It's that for Germany again. Okay, time for our favorite, another victim. So focusing on Germany, we know there's often domestic trade from the north to the south with limited transmission capacity directly from the north to the south as I mentioned before. But thanks to flow-based market coupling, we can take into account the limited transmission capacity within Germany into connecting the north and the south. On top of that, the loop flows that it causes true Belgium, the Netherlands and France can also be taken into account by the TSOs in Belgium and the Netherlands and France. One can just have a more accurate estimation of the commercial transmission capacity for trades in Germany's neighbors as well. So it's beneficial for all players from a well-prespective indeed, at least in theory. This is a complex procedure, right? What are the key parameters that TSOs have to decide or maybe not decide as the right word, but calculate? Yeah. How is this done? I would say both decide and calculate is quite an accurate description though. So we already know it's a bit subjective, I guess, that's where you're. Yeah, it's a bit subjective and definitely predictive as well. So yeah, we become quite technical right now, but I will try to stay high level and understandable. Basically the physical capacity of selected critical transmission lines is reduced with two factors to obtain a commercially available capacity. Firstly we have the loop flow margin to account for flows to the grid that are not seen, quote unquote, by the markets. Secondly, there is a safety margin to deal with unforeseen events such as unplanned altitudes of transmission lines or power plans. And if we take that loop flow margin and the safety margin, we have the resulting commercial capacity, also referred to as a remaining available margin, a rum. People in the field will know what I mean. So this would be the equivalent of NTC. Exactly. Exactly. And this rum, this commercially available capacity is then implicitly auctioned in the day ahead markets. So then it comes down to calculating estimating the loop flow margin that needs to be there. So estimating what you need to estimate, why don't you know exactly, I'm just not smart enough yet. Indeed, it's quite predictive because as we just said, the parameters are said two days before delivery, while the market takes place one day before delivery. So we're still in a very predictive environment. Secondly, there is this fundamental flaw of flow based market coupling that the parameters or most of the parameters we're deciding on are part of some sort of circular, circular problem. And I might maybe explain that better with discussing one particular parameter for example. You basically need to know what the flows in your network will be. So what the market clearing will be in order to properly give the capacity that the market can use. Yeah. And then it will then use the exactly what you predicted. That's a great way of explaining it indeed. Maybe you're two days before delivery, but you need information that you only have at the day of delivery. So that's indeed a circular problem and that displays or that shows that it's super complex to come up with these commercially transmission capacity. Yeah. And actually, so we said that this is also a bit of a subjective, it's more of a decision rather than calculation and that's, I think, to clarify on that. Is this tradeoff between security and trade basically, right? That's what we mean by subjective. Yeah, correct. You could say that to some extent, it's indeed a complex calculation methods and there's a tradeoff and that's maybe or it can maybe be best explained by zooming a bit out or zooming out a bit, I must say, by saying that the actions of the TSOs in determining the parameters, the TSOs have quite some freedom, but they are still regulated by some national regulators. However, and I think that's then maybe also a fundamental problem in there, TSOs and regulators might have partly conflicting interests where regulators strive to maximize cross-border transmission capacity to increase price convergence while keeping TSO tariffs at acceptable levels. There are also TSOs that are primarily concerned with system reliability and stability and may therefore be more conservative or have some sort of risk of various attitudes to phrase it properly. Because if something goes wrong, that's the problem. Yeah. In the end, it's a TSO that is responsible for a reliable operation of the grid and the more commercial capacity that you give to the market to trade, the more you put that reliability and stability at risk and probably there is some sort of tradeoff in between, an optimal value in between, but we must acknowledge that that's very, very hard to do so, but it doesn't mean because of the right for the objective element as well. Also indeed, yeah, indeed, so in the end, it's just a tradeoff between real-time security and reliability of the system on the one hand and the welfare that can be generated in the head market on the other hand. And that's quite a task indeed. But we maybe distracted you a bit from, you wanted to explain one of the, to give an example of the key parameters used in FBMC and how that works. Ah, yeah. So you mentioned GSKs, I think. Yeah, for the interest that listeners indeed, the GSKs are indeed a quite popular parameter to discuss also by the players in industry. So let's look indeed at the generation shift keys or GSKs as we abbreviate them. To put it concisely, GSKs measure how the injection at a note impacts the net expert position of a zone. For example, imagine two notes A and B in a zone. You could maybe expect that an increase of one megawatt of injection at note A determines 50 percent of the increase in an expert position of the zone and then 50 percent for the other note B. But that's not the case. If there are super cheap generators at note A, for example, and super expensive ones at note B, then the generators at note A will have priority in the market to produce and cover the demand. And therefore an increase of one megawatt of injection at note A would have a contribution to the net expert position of the zone with more than 50 percent. And to make this complex story then complete one anticipates basically on information that is only available after the market clearing. So after the GSKs are actually set. And this is the circular problem I was referring to before. Just to say that it's quite hard to come up with these parameters. And we're gonna zoom out a bit and we're going to stop talking about technical things which I don't know how many people must understand GSK is honestly. Well, in Europe there must be at least six I think. Hopefully, at least there's one guy in Belgium or a person in Belgium, Austria, the rest of CW, he understands. But okay, we're gonna zoom out and ask ourselves, well, I'm gonna ask you me here, what's the goal of FBMC? So we hear about price convergence as a metric. Yeah. What does that mean? What is price convergence, first of all? Yeah, price convergence is an interesting element. Price convergence basically tells us something on the price differences that are there between the market zones in our flow-based region. If there is price convergence, that means that the transmission lines or the interconnectors between the countries are not congested. And we want price convergence. We want the same electricity price in Germany and Belgium. Is that correct? We, as in, from the legislators, yeah. I would say, well, legislators indeed wanted, we want to push for more price convergence and from a well-pref perspective that makes sense, although you could argue that when you never have congestion and you always have price convergence, you also have an over-dimension system, for example, but for now, in the case where we are now, it's not a bad thing to focus on the price convergence. And I guess also, we hear a lot these days about, if we really do want to reach net zero, we will need more transmission capacity in Europe. Yeah. So, I guess the price convergence is good for that. And you talked about welfare there, social welfare, so I don't know if everyone's familiar with that, but it's this term that is used in economics to describe the sort of profits from producers and what's called the surplus of consumers, right? Yeah, that's basically economy indeed, that both producers and consumers are willing to partake in the market because they have something to gain, and that's what it is. So, yeah, producers, it's their profits, and we talk about surplus with consumers. Yeah. Exactly. Exactly, and benefit. But it's maybe interesting to point out that while this total welfare, the total social welfare increases, that's again, like you said, basic economics, there might be different people or different actors who gain more from trade than others or some who lose out. So I recently, we're talking about, there's these high electricity and gas prices in Europe, right? So, in France, because France has a lot of nuclear, electricity prices, there were lower comparatively to the rest of Europe, right? And then I remember watching a video where they were saying that there was movement in France to try and limit trade so that the low prices could be benefited by French people. I don't think this happened, and then eventually, I think those are the nuclear fleet that was more unavailable, so that argument quickly reversed, I guess. But the point, it's maybe worth mentioning that trade is overall beneficial from a system perspective. No, but you raised something interesting. I'm not sure whether the high prices in Germany are linked to the cross-border trade. I think it's also mainly linked to the availability of the nuclear reactions. Yes, in France. In France? Yes, in France. But indeed, also, and that's basic economy, if you have two countries, one is exporting, one is importing. When trading, the price in the exporting country is going to increase, and the price in the importing country is going to decrease, from a welfare perspective or from a system perspective, that is beneficial. But looking at the exporting country alone, you might question the price is going to raise, still is beneficial for the exporting countries, but then specifically for the generators at that specific exporting country, you could question how it impacts the consumers in that country because the price is increasing, but that's maybe politically to judge on that. These are arguments, the questions that come up. These are things that come up indeed, but maybe let's move on. Can you tell me where we are in terms of implementation? Where do we have FlowBest market coupling, how has it been going? Yes, since 2015, we have the FlowBest market coupling in central Western Europe. So Belgium, the Netherlands, France, Austria, Germany, and Luxembourg, and right after that introduction in 2015 results were actually super promising. So, the cross-border exchange has increased, price differences between the countries decreased, which is all super beneficial from a welfare perspective. However, after some time, one started noticing that the TSOs actually have a lot of freedom in setting the parameters that lead to the commercial transmission capacities for trade. So for example, these GSKs that we talked about. Yeah, for example, the GSKs, you can set them in different ways, and that impacts how the market outcome is, and it impacts the social welfare gain that we have of installing FlowBest market coupling, for example. Another example could be that there was this German TSO also in 2015 that suddenly included a new critical transmission line inside the German zone, making trade the way more restricted than before, and by now a lot of regulators and researchers among ourselves as well have now identified that they significantly impacted the welfare that FlowBest market coupling brought. Sorry, there are still some vulnerabilities, I would say, as a result of these potential incidents. So is that still the case today? Do we still see that TSOs are using the freedom they have in the same parameters to be more conservative to, again, be more reliable, operate the grid more reliably? Well, let's first look at the facts. What we observe is that the price differences on a longer term also continuously stayed below the levels of the period before the introduction of FlowBest market coupling. So we're doing at least better than NTC. So that's beneficial indeed. However, what we did observe as well were declining levels of cross-border exchange volumes over time, even below the levels of before the introduction of FlowBest market coupling. Researcher research from some academics among myself showed that this should be attributed to some changing market conditions, though. So there are a number of variables that also impact the amount of cross-border trade apart from the methodology FlowBest market coupling. For example, if there are a lot of nuclear power plants in France that need to shut down for some various reasons, which would increase trade. Yeah, or this also has an element or this is an important element to consider as well when assessing cross-border trade. There is also a gas price, it changes the merit order, it changes which trade is more beneficial. There are a lot of coal plants in Germany as well that also have availability from time to time that also impacts the cross-border trade that is there. So that also has a big impact, but if we just ignore that for a moment, or we don't ignore it, we take it to account the effect, then we can actually include that the methodology FlowBest market coupling was super beneficial on the longer term, increasing the price conversions as the cross-border exchange volumes as well. Very interesting to note, some time ago it was also announced that the region that adopts the FlowBest market coupling will actually expanse from the central western Europe region towards the core region of Europe, and that even goes towards Romania in Eastern Europe. So we have a much larger area in Europe that is adopting the FlowBest market coupling and that way is also interconnected more optimally, and if I'm not mistaken, this should happen next month, so there are exciting times ahead, I would say. Indeed, and I think it's maybe time to wrap this podcast up a bit. So can you leave us with the remaining challenges, not just for FlowBest market coupling, but also cross-border trade, yeah, for cross-border trade in general, I would maybe summarize the main challenges in two main points, firstly, current market zones are too large, secondly, there exists a lot of freedom for TSOs to set the parameters. These are two things that are highly challenging and things that should and could improve in the future. The parameters for FlowBest market coupling to be clear, yeah, yeah, yeah, I can see it. So you say the market zones are too large, yeah, for example, what, yeah, any particular example? Yeah, I think we shortly touched upon it in the beginning of the podcast, saying that large bidding zones could result definitely in the zone of market design and improper pricing yields to market participants, so normally price differences among countries should trigger investments in increased transmission capacity and increased generation capacities in zones with relatively high prices. So in two large bidding zones with uniform price in each zone, the price differences between the zones will not reflect the need for investments in sufficient detail, I think we can say that. Moreover, it also results in large loop flows, which have priority access to the grid, as we showed, and as such, reduce the cross-border exchange volumes. And actually, I kind of anticipated that we would discuss this in the podcast and I did some sort of research before coming here and I looked at the loop flows actually through Belgium between 2017 and 2021 and I took the average and then I compared it with the average cross-border trade in which Belgium is engaged in, so and then I actually saw that the average loop flow through Belgium is on that period is 57% of the cross-border trade in which Belgium is involved in so-called important expert and it's just to say that loop flows through Belgium, you can't neglect them, they're quite significant and the impact, but the same kinds for the Netherlands and France. So a more optimal configuration of the market zones would allow to limit loop flows and hence increase exchanges, price converges and social welfare. But besides some studies on new market zone configurations, actions in these fields, at least as far as I know, have been limited to a split of the market zone of Austria, Germany and also Luxembourg into one Austria, one for Austria only and one market zone for Germany and Luxembourg on the other hand and that split happened in 2018. But yeah, I'm curious to see that debate evolving indeed. Is there any movement there because I think we're both in a webinar where Acer was sort of doing a summary of how FBMC is going and the debate is ongoing and Acer is indeed dealing with debt and performing some studies on it. I'm not sure about specific road maps towards the future, but I think it's certain that this will be a political debate in the end as well and heavily debated by a lot of stakeholders. But it's good to have this discussion and to this debate we can only agree with that. And actually, why, because maybe this is implicit, but why is it that way, for example, North and South Germany is not being split into two zones, is what's the, because the other alternative is to also just install transmission until that congestion is dealt with, right? Installing transmission capacities is also indeed, that's not going to happen anytime soon. Well, I'm sure there are some projects planned, but I'm not aware of some significant large changes in that field, although I know in the next like three years it takes a while. Yeah, yeah, yeah, indeed, indeed, indeed. And also, yeah, it's politically sensitive to say that you're living in one country and producing or consuming electricity, at least from the wholesale electricity market. Is cheaper or more expensive depending on whether you live in an order to the South? Yeah, that's politically sensitive, and that's the challenge of translating academic research to, yeah, real life solutions. Yeah, indeed. It seems inherently unfair, but perhaps logical if you. Yeah, we could debate on that, because on the other hand, from a welfare perspective, from the system perspective, yeah, it benefits the society or the country as a whole. But intuitively, that's not maybe what you first think of. You go, "Oh, yeah, fair enough, social welfare is increased, I'm fine." Yeah, yeah, and it's. I don't know if everyone thinks in these terms, but sorry. It would be interesting, I think, to look into that, how the benefits are allocated of such a silky reconfiguration. But you mentioned your second point about freedom of TSOs to just run. Yeah, yeah, correct. That's the second big challenge, I think, in cross-water trade. So currently, as we extensively discussed by now, there is a lot of freedom left to TSOs in calculating and allocating the transmission capacity that is provided to the market. So regulatory intervention might be beneficial to guarantee that sufficient transmission capacity is made available for trade. So to put in a technical terms, sufficiently high ROMs, remaining available margins. And this is where the sort of FBMC equivalent of net transfer capacities, right? Yeah, exactly. That's equivalent to the market's trade, correctly, correctly. And if you look at the possibilities for regulatory intervention, we can think of two options that exist. Mineram criteria, so that's a minimal commercial transmission capacity that should be made available to the market, or at least that's imposed by legislation. And on the other end, another option to pursue regulatory intervention are monetary incentives. So looking at the minimum criteria, so the minimal trading capacities that should be made available to the market, since 2018, that's actually in place. So it demands a minimal transmission capacity on each critical transmission line of at least 20% of its physical transmission capacity. And now you could think 20% is really low, but actually it made a difference. So on some lines, the commercial transmission capacity was even lower than 20% of the physical transmission capacity. Legislators evaluated this and decided that by 2025, this will be expanded towards 70%. Yet, their efforts say it increases the care for consideration between reliability and allowing welfare gains from cross-border trade. I think that's a big challenge. And with this percentage, that puts stresses to perform a trade of more accurately. And actually, one thing that we didn't mention is that if you are forced to allow to give this capacity to the market, right? And then, well, you have flows which would violate limits on transmission lines. You then have to perform corrective actions, right? So asking generators to produce more or less, which costs TSO's money? Yeah, that gives a cost indeed. It's not only the cost component that counts, but it's also the, yeah, it's an effort to perform that congestion management. So that's indeed also an additional element in that trade of overall coming back to the minram criteria, so the minimal transmission capacities for trade. I think it could be an effective measure, but these measures are very static and they could therefore fail to stimulate a welfare optimal determination of the parameters. Instead, I think those criteria should be based on a careful technological analysis, which is currently not the case in Europe. Moreover, as we see in practice, this minram criteria was sort of plucked out of thin air. Would that be, is that maybe being a bit too blunt? I think it's rather a political optimum instead of a technological optimist, like that. And I didn't find any analysis on where that 70% is based on that, let's put it that way. But I was going to say, and a lot of deviations actually exist on that, on that measures in practice. And that's strongly lower the effectiveness of the measures that's in the first place. For example, because there are quite some loop flows in some countries, the results are allowed by regulators to deviate from it. For example, in Belgium, that's also the case, the transmission system operator, Ilya, is allowed to deviate from minimum criteria if it can prove that there are loop flows going through Belgium, mainly coming from Germany. So that's strongly lower the effectiveness of the measure. And so what's the other option? So the other option from my perspective are monetary incentives that are directly given from the regulator to the TSO. And I think you're very promising, in my opinion, as I directly stimulate TSOs to search for the welfare optimal determination of the TSO parameters, in which multiple objectives, such as price conversions, reliability, congestion management, could be taken into account. And for Belgium, for example, that's already the case, to stimulate TSOs. And that's also simply recognizing that TSOs have multiple tasks to do. And there's a careful trade of in what they, how they should do the things to serve all the goals that they have. And with monetary incentives, it's more easily for regulators. What do you mean by monetary incentives, exactly? So I pay you to have a mid-ram or. I pay you to behave. No. To be more specific, there are also performance indicators for the TSO that the regulator designs. So basically just paying for price conversions, for example. So it depends. Yeah, for example. So if there are. The regulator in Belgium at least sets some baselines on the rams that should be made available to the market. If that. If the actual rams on some lines is higher, then the TSO is rewarded by a monetary amount of money that can be charged in the TSO tariff that goes to the end bill. On the other hand, there is also a measure that wants to limit congestion management costs. So really speech costs. And if that costs that the TSO typically also passes through to the end consumer, if that's surpassed, then there is a penalty. So then the monetary gain it had is then decreasing. So designing that allows to look for the welfare optimum. But we must also say that the impracties, the procedure is a bit more complex with different budgets that need to be approved by regulators and so on. Fascinating stuff. So I think we've talked for quite a while. Thank you so much, Michiel, for. Thanks for having me. I hope everyone or most listeners enjoyed it, maybe understood something and maybe are taking away something from this, so very curious for the feedback that I will receive. Yeah, I'm, I'm, I'm curious and hopeful, so yeah, thank you once again, Michiel, I was going to be fine.