Every day, European power exchanges run a tightly choreographed process to determine tomorrow's electricity prices. From the moment the bidding window closes at noon to the publication of results just 42 minutes later — here's what happens, step by step.
When you flip a light switch, electricity has already been bought and sold — usually the day before. The day-ahead market is where power producers (like wind farms and gas plants) and consumers (like utilities and large factories) agree on prices and quantities for each hour of the following day. Across Europe, several regional exchanges coordinate to form one unified auction, accounting for how much electricity can flow between countries via the transmission grid.
Follow the clock from gate closure to results publication — roughly 42 minutes that determine billions of euros in electricity transactions across Europe.
Transmission system operators across Europe send updated information about how much electricity can physically travel across borders. This is called available transfer capacity — essentially the bandwidth of the power grid between countries and pricing zones.
This is the final moment for market participants — generators, traders, utilities — to submit their buy and sell orders to the exchange. After 12:00, no new bids or modifications are accepted. Everything that will go into the auction is now locked in.
The exchange immediately begins checking all submitted orders for mistakes or invalid data. This is a quality control step — catching issues now avoids costly errors in the pricing algorithm. It's done quickly so no time is lost on bad data.
The heart of the auction: a powerful optimization algorithm — called EUPHEMIA in Europe — starts processing all buy and sell orders across the entire continent. It tries to find the combination of prices and cross-border flows that maximizes overall welfare (i.e., matches supply and demand as efficiently as possible).
If the algorithm can't find a fully linked solution — for example, because grid connections between certain regions are overloaded — a partial decoupling can occur. This means those zones set prices independently rather than as one connected market. This is rare, but the system is designed to handle it gracefully.
Once the algorithm produces final prices, these are distributed to each participating regional exchange for verification and confirmation. Each exchange checks that the prices are consistent with its own market rules and the bids it received.
The official day-ahead prices for all 24 hours of tomorrow are published and sent to all market participants. These prices are what traders, utilities, and ETRM systems use to value positions, schedule generation, and plan procurement. The entire market now knows what tomorrow's power costs.
With prices confirmed, the exchange handles the financial settlement between buyers and sellers. At the same time, power generation schedules are finalized: generators now know exactly how much electricity they need to produce tomorrow, and at what hours.
Starting from midnight (hour 1) through to the final hour (hour 24) of the following day, the electricity physically flows through the grid. Power plants generate, transmission lines carry, and consumers use the energy — all according to the volumes and prices set during yesterday's auction.