Cross-Border Interconnection Capacity Allocation Rules

1. Introduction

Cross-border interconnection capacity allocation rules are the legal and technical rules used to decide how much electricity transmission capacity is available between two or more countries and how that capacity is allocated among market participants.

An electricity interconnector allows electricity to move between different national or regional electricity systems. Because transmission capacity is limited, especially during periods of high demand, a legal system is required to decide who can use the available capacity and under what conditions.

In the EU, the principal framework is Commission Regulation (EU) 2015/1222 (CACM Regulation), which establishes rules for cross-zonal capacity allocation and congestion management. Its objective is to create harmonised rules for day-ahead and intraday electricity trading, improve use of the network and facilitate cross-border electricity trade. (Eur-Lex)

2. Meaning of Interconnection Capacity

Interconnection capacity means the maximum amount of electricity that can safely be transferred between two bidding zones or electricity systems.

For example:

Country A → Interconnector → Country B

If the interconnector can safely transfer 1,000 MW but market participants want to transfer 1,500 MW, there is a capacity constraint or congestion.

The law therefore has to determine:

how available capacity is calculated;

how capacity is allocated;

how congestion is managed;

how capacity is priced;

how unused capacity is treated; and

how participants are compensated if allocated capacity is curtailed.

3. Non-Discriminatory Access

A fundamental principle is non-discriminatory access.

Market participants should have access to available cross-border capacity according to transparent and objective rules rather than preferential treatment.

The EU framework was specifically designed to harmonise capacity allocation and congestion-management rules and facilitate Union-wide electricity trade. (Eur-Lex)

This is important because preferential access could distort competition between electricity producers and suppliers.

4. Capacity Calculation

Capacity must be calculated before it can be allocated.

EU rules require TSOs to coordinate their calculations and use a common grid model containing information about generation, demand and network conditions.

The CACM Regulation provides for a flow-based capacity calculation approach, particularly important in highly interconnected electricity networks. This recognises that electricity does not necessarily follow one simple commercial path; physical electricity flows can affect several network elements simultaneously. (Eur-Lex)

Therefore:

Generation + Demand + Network Conditions → Available Cross-Zonal Capacity

The calculation must also maintain secure network operation.

5. Day-Ahead and Intraday Allocation

Two major timeframes are important.

Day-Ahead Market

Electricity is traded for the following day. Available cross-border capacity is incorporated into the market-coupling process.

Intraday Market

Participants can trade closer to real time when forecasts of demand, renewable generation or system conditions change.

The CACM Regulation establishes harmonised arrangements for both day-ahead and intraday cross-zonal capacity allocation. (Eur-Lex)

6. Market Coupling

Market coupling connects electricity markets so that available transmission capacity is considered when matching bids and offers.

In simplified form:

Low-price area → Interconnector → High-price area

Where capacity is available, electricity can generally flow toward the higher-price area. The market-coupling mechanism uses available cross-border capacity when matching bids and offers. (Eur-Lex)

This can reduce unnecessary price differences between interconnected markets and improve the economic use of transmission infrastructure.

7. Congestion Management

Congestion occurs when the desired electricity flows exceed the safe transmission capability of the network.

The legal framework therefore requires mechanisms such as:

redispatching;

countertrading;

coordinated capacity calculation;

congestion-income arrangements; and

restrictions or curtailment in emergency circumstances.

Regulation 2015/1222 specifically provides for common methodologies concerning redispatching and countertrading costs where they have cross-border relevance. (Eur-Lex)

The aim is to manage congestion while maintaining security of supply and efficient cross-border trading.

8. Role of TSOs, Regulators and ACER

Cross-border capacity allocation involves several institutions.

Transmission System Operators (TSOs)

TSOs calculate available capacity, operate transmission networks and coordinate system security.

National Regulatory Authorities (NRAs)

National regulators supervise compliance and approve or participate in approving relevant methodologies.

ACER

The Agency for the Cooperation of Energy Regulators (ACER) has an important role where national regulators cannot reach agreement on certain regional methodologies.

For example, under the CACM framework, ACER has adopted decisions concerning regional capacity-calculation methodologies when agreement between national regulators was not achieved. (Eur-Lex)

9. Important Case Laws

Baltic Cable AB v Energimarknadsinspektionen, Case C-454/18

This CJEU case concerned the Baltic Cable electricity interconnector between Sweden and Germany.

The Court examined the legal treatment of revenues resulting from the allocation of interconnection capacity. It emphasised that cross-border interconnection capacity is governed by harmonised EU principles designed to establish fair rules for electricity exchanges and promote competition. (Eur-Lex)

The judgment also considered how congestion revenues should be used. The relevant framework requires such revenues to support the availability of allocated capacity or maintain and increase interconnection capacity through network investment. (Eur-Lex)

Relevance: The case demonstrates that interconnection capacity is not simply a commercial asset. Its allocation and related revenues are subject to EU regulatory objectives.

Germany v ACER, Case T-283/19

This case concerned cross-zonal capacity allocation and congestion management under Regulation 2015/1222, particularly regional methodologies for day-ahead and intraday capacity calculation. (Eur-Lex)

The litigation demonstrates the institutional difficulty of establishing common regional methodologies where national regulators have different views.

Relevance: It shows the importance of ACER's role in resolving disagreements concerning common cross-border electricity methodologies.

The procedural position has subsequently evolved, and in June 2026 the General Court recorded that the proceedings had become devoid of purpose following developments concerning the ACER Board of Appeal decision. (Eur-Lex)

BNetzA and Germany v ACER, Cases T-600/23 and T-612/23

In October 2025, the General Court partially annulled an ACER Board of Appeal decision concerning common methodologies for calculating day-ahead and intraday cross-zonal capacity in the Core capacity-calculation region. (Eur-Lex)

The case involved issues including:

internal critical network elements;

economic efficiency;

power-transfer distribution factors (PTDFs); and

the methodology for calculating available cross-zonal capacity.

Relevance: The case demonstrates that capacity calculation is not merely a technical exercise. It involves legally reviewable decisions concerning how network constraints and cross-border electricity flows should be treated.

10. Major Challenges

Different National Interests

A country may want to maximise domestic transmission security, while neighbouring countries want greater cross-border capacity.

Physical Electricity Flows

Commercial transactions do not always correspond to physical electricity paths. Electricity may flow through several countries, making capacity calculation complex.

Renewable Energy

Large volumes of wind and solar generation can suddenly change cross-border flows and create congestion.

Network Investment

Increasing interconnection capacity requires substantial investment, while regulators must determine who should bear the costs.

Regulatory Coordination

Different national regulators may disagree about methodologies, requiring ACER-level intervention.

11. Conclusion

Cross-border interconnection capacity allocation rules provide the legal foundation for sharing limited electricity transmission capacity between interconnected markets.

The main principles include:

non-discriminatory access;

coordinated capacity calculation;

day-ahead and intraday market coupling;

effective congestion management;

transparent use of congestion revenues;

coordination between TSOs and regulators; and

ACER involvement where regional agreement cannot be reached.

The cases Baltic Cable (C-454/18), Germany v ACER (T-283/19), and BNetzA and Germany v ACER (T-600/23 and T-612/23) show how cross-border capacity allocation involves both technical electricity-grid questions and significant legal issues concerning competition, regulatory authority, network investment and regional cooperation.

For PhD-level energy law, the central question is how legal systems can allocate scarce interconnection capacity fairly and efficiently while maintaining grid security and allowing electricity to move across national borders.