Abstract
The European Union Internal Electricity Market is undergoing major reforms to support the transition to a fully decarbonized energy system by 2050, where non-dispatchable renewable energy sources play a central role. To enhance market efficiency, renewable energy sources integration, and power system balancing, the European Union promotes increased cross-border interconnection and cooperation among Member States. This paper reviews existing literature and market models addressing multi-zone interconnection capacity allocation and proposes a novel inter-zonal co-optimization mechanism for the joint allocation of energy and automatic balancing reserve capacity based on system cost minimization. Unlike previous approaches that treat energy and reserve coordination separately or sequentially, this study introduces a unified optimization framework that captures the interdependencies of intra-and inter-zonal dispatch. The proposed mechanism is implemented within the CEVESA market model and applied to a realistic Iberian case study, assessing its economic and operational impacts under varying interconnection capacity scenarios. Results show that while energy coordination alone achieves significant cost reductions, joint coordination of energy and reserves delivers further efficiency gains, reduces reserve price volatility, and enhances cross-border system flexibility.

Abstract
Hydrogen is becoming a key energy carrier in the transition toward decarbonization, as electrolysis creates strong interdependencies between electricity and hydrogen markets. Accurately representing strategic behaviour in these coupled markets is essential, yet current models fail to capture price-responsive bidding. To address this, a joint hybrid Cournot-Linear Supply Function Equilibria (CLSFE) model is developed and reformulated as an equivalent optimization problem, enabling tractable large-scale analysis. The model is applied to the Iberian system for 2030 and compared with perfect competition and Cournot benchmarks. Results show that hydrogen prices are lowest under CLSFE, with a reduction of about 44% relative to perfect competition and 10% to Cournot, while hydrogen demand increases by up to 58%. Electrolytic hydrogen production rises up to 92%, displacing grey hydrogen and reducing hydrogen-sector emissions. However, renewable self-curtailment reaches 82 TWh, indicating increased market power. These results highlight cross-sector trade-offs and support market design and policy analysis.

Abstract