  Flow-based market coupling is substantially altering the computation of
cross-zonal capacities for the trade of electricity in the vast majority of
European markets. The main benefit of the flow-based method is improved
accuracy by better representing the impact of cross-zonal trade on the power
flows in transmission grids. Some borders, adjacent to flow-based capacity
regions, are represented through net transfer capacities during market
coupling. Under the current standard hybrid coupling, the utilization of grid
elements in the flow-based regions due to the predicted trade across such
borders is not available for trades between flow-based zones. The flow-based
representation is not limited to the given capacity calculation region, but can
be extended to also model the impact of trade with other regions. This
so-called advanced hybrid coupling replaces the priority inherently given to
trade across net transfer capacity-coupled borders by introducing virtual
bidding zones. These map the effect of non-flow-based borders on line
capacities in the flow-based regions, enabling the market coupling optimization
to prioritize trade between flow-based bidding zones and trade across
non-flow-based borders. This paper explains the mechanism of advanced hybrid
coupling and how it is modeled mathematically. Based on a test network, a case
study shows to what extent and why advanced hybrid coupling leads to welfare
gains during market coupling and lower congestion management costs in the
flow-based region.
