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Glossary · Energy industry & energy transition

CACM, Capacity Allocation and Congestion Management

CACM Capacity allocation Congestion management electricity market EU market coupling congestion management

CACM stands for Capacity Allocation and Congestion Management. The term refers to Commission Regulation (EU) 2015/1222 of 24 July 2015, which establishes a guideline on capacity allocation and congestion management in the internal electricity market. The Regulation was published in the Official Journal on 25 July 2015 and entered into force on the twentieth day thereafter, i.e. on 14 August 2015. It applies directly in all Member States and is relevant for the EEA. It governs how cross-border transmission capacities for the day-ahead market and the intraday market are calculated, made available and integrated into European market coupling. It was amended by Implementing Regulation (EU) 2021/280. A more comprehensive revision, referred to as "CACM 2.0", was at the draft stage in 2025 (see below).

The term links two areas that are often considered separately in the power sector: the physical operation of the transmission grid and price formation in coupled electricity markets. Electricity can only be traded across borders if the grid allows it to be transported. How much can be transported is not a freely selectable trading quantity. It results from line loadings, grid security limits, load flows and operational security margins. CACM lays down procedures that make these limited capacities usable in the market. According to the Regulation, its objectives include: effective competition in generation, trading and supply, optimal use of the transmission infrastructure, ensuring operational security, and optimised calculation and allocation of cross-zonal capacity.

Scope

The Regulation applies to all transmission systems and interconnectors in the Union. Excluded are transmission systems on islands that are not connected to other transmission systems via interconnectors. In substantive terms, CACM covers the day-ahead and intraday timeframes. Besides capacity calculation and allocation, it also contains rules on the review of bidding zone configurations. The obligations under the Regulation are addressed primarily to transmission system operators, nominated electricity market operators (NEMOs) and regulatory authorities, not directly to individual generating plants or consumers.

Capacity allocation and congestion management

In the CACM context, capacity allocation does not mean that individual power plants or consumers are assigned a particular line. What is allocated is the possibility to trade electricity between bidding zones, to the extent that the transmission grid allows. A bidding zone is a market area in which, in principle, a uniform wholesale price applies. Price differences arise between bidding zones when the available cross-zonal capacity becomes scarce.

Congestion management describes how this scarcity is dealt with. Congestion exists when a network element such as a line or a transformer would exceed its permissible loading limit because of additional power flows. In the European market design, such congestion is to be taken into account already in price formation. If the capacity between two bidding zones is exhausted, no further trade across that border is permitted. The zones then receive different prices. The price difference shows that electricity is scarcer in one zone than in the other.

Both timeframes need rules on how much cross-border trade is possible. In the day-ahead market, electricity volumes are traded for the following day. In the intraday market, market participants adjust their positions at short notice, for example when wind or solar forecasts change or plants fail unexpectedly. The calculation is based on a common grid model that represents the European interconnected system, including the location of relevant generation units and loads. For this, all transmission system operators must provide accurate and timely data.

Market coupling as a set of rules, not merely a platform

A central element of CACM is single European market coupling. In the day-ahead timeframe it is called Single Day-Ahead Coupling (SDAC), in the intraday timeframe Single Intraday Coupling (SIDC). In SDAC, bids from all participating bidding zones are processed together with the network constraints in a common algorithm. The algorithm determines prices, trade flows and awarded volumes in such a way that overall societal benefit (welfare) is maximised without violating grid limits. Since the delivery day of 1 October 2025, SDAC has operated in all participating bidding zones with a market time unit of 15 minutes instead of one hour.

Responsibility is distributed among several actors. Transmission system operators calculate grid capacities and coordinate them within capacity calculation regions. Coordinated capacity calculators consolidate the calculations. They must report every three months to the regulatory authorities of the region on capacity reductions made during validation. NEMOs, in practice usually power exchanges, carry out the market processes. A NEMO designated in one Member State may also offer day-ahead and intraday services for delivery in other Member States. Regulatory authorities approve methodologies and monitor implementation.

CACM is therefore neither a single IT system nor another word for the power exchange. The guideline is a regulatory framework in which market bids, grid calculations, regulatory approvals and European coordination interact. Trade flows therefore do not arise from price differences alone, but from price differences within the limits of the available grid capacity.

Capacity calculation: NTC and flow-based approach

The choice of capacity calculation methodology shapes market outcomes. CACM recognises two approaches: a coordinated approach based on net transmission capacity (NTC) and the flow-based approach. Under the NTC approach, a maximum value for exchange is set for each border. By contrast, flow-based capacity calculation determines how trades affect critical network elements in the meshed alternating-current grid. This is because electricity also physically flows along indirect paths through neighbouring grids. The consolidated version of the Regulation provides that neighbouring capacity calculation regions in the same synchronous area are to be merged if each of them applies a flow-based methodology. A well-known example of a flow-based region is the Core capacity calculation region in Central Europe. The flow-based approach represents the physics more accurately, but is more complex and harder for outsiders to follow. Transparent methodologies are therefore a prerequisite for market participants to understand the results and for authorities to review them.

Since 2020 there has also been an additional requirement under the Internal Electricity Market Regulation (EU) 2019/943: under its Article 16(8), transmission system operators must make minimum shares of their capacity available for cross-zonal trade. This is known as the 70 per cent criterion. This obligation does not derive from CACM itself, but it directly affects the capacity values that enter the CACM processes.

Distinction from redispatch, balancing energy and long-term capacity allocation

The distinction from redispatch is particularly important. Redispatch intervenes in power plant dispatch after market price formation if the market-based schedules would overload the grid. CACM starts earlier and takes congestion into account already when allocating cross-border trading capacity. However, the two areas are not entirely separate: CACM also requires coordinated methodologies for redispatch and countertrading with cross-border relevance. The mechanisms are therefore connected, but serve different functions.

Balancing energy is also something different. It compensates short-term deviations between generation and consumption and stabilises the grid frequency. It is governed by a separate guideline, Regulation (EU) 2017/2195 on electricity balancing. CACM, by contrast, organises energy trading across bidding zone borders and incorporates grid congestion into that trading. A functioning market coupling does not replace balancing energy. Conversely, balancing energy does not correct permanently misdimensioned trading capacities.

CACM must also be distinguished from long-term capacity allocation. Long-term transmission rights, for example for monthly or annual periods, are governed by a separate guideline, Forward Capacity Allocation. CACM concerns only the short-term timeframes of day-ahead and intraday. The separation is important because short-term capacity values depend more strongly on the current grid situation, on generation forecasts and on load assumptions.

Why CACM is relevant for the power system

European electricity supply increasingly relies on cross-border coordination. Wind power from northern Germany, hydropower from Scandinavia, nuclear energy from France, flexible generation in neighbouring countries and industrial loads in different regions interact through the market. Without regulated capacity allocation, price differences would not be used efficiently, or trade flows could exceed grid limits.

CACM makes scarcity at the borders between bidding zones visible. If an interconnection is fully utilised, additional demand in the more expensive zone can no longer be fully met by cheaper offers from the other zone. The resulting price difference is not a market failure, but a signal of limited transport capability. It may point to a need for grid expansion, to the spatial distribution of generation and consumption, or to the effect of the bidding zone configuration.

CACM is particularly important for the integration of renewable energy. Wind and solar power fluctuate spatially and over time. European market coupling can balance these fluctuations better because surpluses and shortages are spread over larger areas. However, this balancing remains tied to grid capacities: if lines are missing or security limits are reached, even a coupled market cannot eliminate physical congestion.

Typical misunderstandings

  • CACM is supposedly just a technical detail of power exchanges: The guideline affects prices, trading opportunities, congestion income, grid operation processes and regulatory responsibilities. It helps determine which volumes can be traded across borders and when scarcity shows up in zonal prices.

  • More trade supposedly automatically means more security of supply: Cross-border trade can support security of supply, but it requires reliable capacity calculations and coordinated security analyses. If grid limits are set too optimistically, the need for corrective action in grid operation increases. If they are set too cautiously, economically sensible trading opportunities remain unused.

  • Capacity supposedly means power plant output: In the CACM context, the issue is neither installed power plant capacity nor firm capacity, but transmission capacity between bidding zones. It depends on grid switching states, load flows, the distribution of generation, security criteria and calculation methodologies. It is therefore not a fixed property of a border that would be the same every day.

  • Bidding zones are supposedly national borders: Many bidding zones coincide with national market areas, but the concept must be understood in terms of the grid. If significant congestion occurs within a zone, it does not show up in price differences but is often resolved through redispatch. CACM therefore provides for a procedure by which the configuration of bidding zones can be reviewed.

Institutional and economic context

CACM distributes tasks between European and national institutions. Transmission system operators and NEMOs develop common methodologies, for example for the common grid model, capacity calculation or the products of market coupling. Regulatory authorities approve these methodologies. The agency ACER decides if the competent regulatory authorities cannot agree. Since the ACER Regulation (EU) 2019/942, certain Union-wide proposals are submitted directly to ACER, where they are reviewed and approved. One example is the harmonised maximum and minimum clearing prices for SDAC and SIDC, which ACER amended in February 2026. This multi-level arrangement is complex because electricity flows know no borders, while responsibility for grids and security of supply remains strongly national in character.

Congestion income is also economically relevant. If different prices arise between two bidding zones and electricity flows across the limited capacity, revenues result from this scarcity. They accrue to the transmission system operators concerned and are earmarked. Under Article 19 of Regulation (EU) 2019/943, they are to be used primarily to guarantee the actual availability of the allocated capacity or to maintain and expand interconnection capacities. Offsetting them against network tariffs is possible only under conditions. How the revenues are shared between the grid operators is governed by a separate methodology under CACM. Congestion is thus not only a technical constraint, but also triggers payment flows.

Revision ("CACM 2.0")

The European Commission is working on a revision of the CACM Regulation. According to the comitology register, a draft implementing act was submitted to the competent Committee on Cross-Border Electricity Exchanges in June 2025. Objectives include legal alignment with more recent EU law and adaptation to market developments. Among other things, the proposed establishment of a single market coupling operator (Single Market Coupling Operator) was contentious. Until a new version enters into force, Regulation (EU) 2015/1222 as amended in 2021 remains authoritative. Details may change as a result of the revision.

Conclusion

CACM is a regulatory framework that links the European electricity markets with the limits of the transmission grid. The term does not by itself explain the level of electricity prices or the cause of every grid congestion. It does, however, show where physical grid constraints are translated into short-term market processes. Used precisely, CACM does not denote the European electricity market as a whole, but the rules under which cross-zonal trading capacity for day-ahead and intraday is calculated, allocated and limited in the event of congestion.

Sources

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Edited by eCMS on 11.11.2026 16:40

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