In Part 1 of this series, we looked at how Europe's balancing markets work - from the three-tier reserve structure of FCR, aFRR and mFRR, to the two-stage nature of balancing markets and the PICASSO and MARI platforms that allow TSOs to activate the cheapest available balancing energy across borders. But activating balancing energy in real time only gets us halfway to our destination.
Before that energy can flow, TSOs need to know if it will be available when required. That means procuring balancing capacity in advance by securing commitments from providers to hold flexibility in reserve. And when that capacity is sourced across national borders, a new layer of complexity enters the picture: How do you guarantee that the cross-border transmission capacity needed to deliver that energy will actually be there at activation time?
That is the challenge this article explores - and it is one that goes to the heart of Europe's ambition for a truly unified balancing market.
And while TSOs participating in cross-border balancing capacity markets need to understand such details, they are not the only ones. Storage and generation assets and flexible loads are being moved to a multi-market optimization approach. As a result, traders can no longer afford to treat balancing markets as a black box.
How do cross-border capacity platforms support balancing?
The cross-border exchange of balancing capacity is more complicated than the exchange of balancing energy. However, pooling balancing reserves across several countries has three main benefits for TSOs:
Increased access to available flexibility
Lower procurement costs
Reduced overall reserves as capacity is shared rather than reserved country by country
Due to the relative simplicity described above, FCR has been procured across borders for quite some time through the FCR Cooperation.
Three newer regional initiatives have recently begun operating more complex coordinated capacity markets (including aFRR and mFRR) between groups of TSOs:
Allocation of Cross-zonal Capacity and Procurement of aFRR Cooperation Agreement (ALPACA): Germany and Austria have jointly procured aFRR capacity since 2020. In 2025, Czechia joined to form ALPACA, with ‘observer’ TSOs, including those from Hungary, Switzerland, and France, potentially joining in the future.
Baltic Balancing Capacity Market: The BBCM, which we delivered together with partners, went live in 2025 across Estonia, Latvia, and Lithuania. TSOs use a joint cross-border auction to procure balancing capacity for FCR, aFRR and mFRR.
Nordic Balancing Model (NBM): In a gradual rollout begun in 2022, this platform procuresFCR, aFRR and mFRR capacity across the Nordic region, with one exception. Norway still operates its own national mFRR capacity market on the shared platform, which will join the common market later.
These initiatives are successfully securing reserved capacity and delivering economic benefits. For instance, the Nordic TSOs estimate the NBM will deliver annual net benefits of approximately €50m across the region, while Baltic TSOs, who have to cope with substantially different constraints, put their number at an astonishing €470m annually.
How is cross-zonal capacity allocated for balancing services?
One of the main reasons that regional aFRR and mFRR capacity platforms are so complicated is the allocation of transmission capacity. When capacity is sourced within a zone, the TSO is able to make sure that internal transmission capacity is available, and deals with its own traffic management as needed. However, when a TSO buys capacity from a BSP in another TSO, cross-zonal transmission capacity (CZC) allocation must be secured when balancing capacity is procured across borders. This process ensures sufficient lane capacity for the energy “cars” to cross the border.
And cross-border energy traffic is rapidly increasing. As Europe’s energy system becomes more interconnected, limited cross-border transmission capacity risks becoming a bottleneck. While new interconnections are a key part of the EU’s strategy, they take time to build. In the meantime, there is more competition for the limited transmission infrastructure to carry the traded energy across national borders.
CZC is allocated by the regional balancing capacity markets ALPACA, BBCM and NBM, each using its own approach within EU regulations.
How do regional balancing energy platforms handle CZC?
To determine when and where the activation of cross-border balancing energy is possible, balancing energy platforms need to know how much CZC has been allocated to balancing and how much space on the road is still free. The TSO communicates this information to PICASSO and MARI in real time.
Since manually activated reserves require a longer ramp-up time than automated reserves, MARI gets priority over PICASSO to lock in residual “free” capacity. Balancing energy bids with pre-allocated capacity - those made by winners of capacity auctions to fulfill their obligations - are not favored over “free” bids. Rather, bids are placed in the Common Merit Order List and activated based solely on price.
What is the role of the COBRA project?
While the process described above works reasonably well most of the time, the use of multiple different methods for CZC allocation can cause inconsistency. For instance, if two different algorithms make conflicting assumptions about available CZC, there might not be enough capacity available to PICASSO and MARI at activation time, creating a gap between promised and deliverable cross-border balancing energy delivery.
The COBRA Project (Common Optimization of Balancing Reserves and Cross-Zonal Capacity (CZC) Allocation) aims to develop a harmonized algorithm that all capacity platforms can use for CZC allocation, based on overall market welfare. With all traffic managers following the same rules, congestion can be kept to a minimum.
In a follow-up article, we’ll explain how exactly it works, how its approach compares to existing methods, and why it yields better outcomes for the overall market.
The road to harmony
Europe's balancing system has come a long way from isolated national markets. Today, TSOs across the continent are coordinating across borders through regional platforms, each representing hard-won progress in the complex work of harmonization.
Yet the full promise of a pan-European balancing market depends on resolving the final, critical bottleneck: how to allocate limited cross-border transmission capacity fairly and efficiently across all the platforms competing to use it. Right now, the process is fragmented with gaps that only show up in real time.
That is precisely the problem COBRA is designed to solve, and in part 3, we will explore different CZC allocation methods and how COBRA would increase the efficiency and fairness of European energy balancing. By establishing a single, welfare-maximizing algorithm for cross-zonal capacity allocation, COBRA would ensure that every platform is working from the same map - not just sharing the same road, but finally agreeing on the rules of the road. When it does, Europe's balancing markets will be positioned to function as the unified, resilient system the energy transition demands.
