Market Design Options for Scarcity Pricing in European Balancing Markets
(2021) IEEE Transactions on Power Systems — Vol. 36, n° 5, p. 4410-4419 (2021)
Files
Market_Design_Options_for_Scarcity_Pricing_in_European_Balancing_Markets.pdf
Open Access - Adobe PDF
- 1.01 MB
Details
- Authors
- Abstract
- The European balancing market is undergoing rad- ical transformation through numerous market design initiatives. These initiatives aim at improving geographical coordination among European transmission system operators, and better po- sitioning the European system for integrating renewable resources through short-term operational efficiency and long-term invest- ment in flexible resources. However, the European design is char- acterized by a missing market for real-time reserve capacity, that has been inherited from a failure to recognize the central role of real-time operations as the spot market of the electric power industry. This missing market undermines the valuation of reserve capacity, and the back-propagation of price signals to forward reserve markets that can support investment in reserves. The goal of the present paper is to develop a methodology that exposes the implications of this missing market. The methodology relies on analytical insights that can be derived under an assumption of price-taking behavior. These insights are validated by a sim- ulation model which represents the European balancing market as a Markov Decision Process. The simulation model is used for validating the analytical insights and testing the ability of various balancing market design options to back-propagate the real-time value of reserve to forward reserve markets
- Affiliations
Citations
Papavasiliou, A., & Bertrand, G. (2021). Market Design Options for Scarcity Pricing in European Balancing Markets. IEEE Transactions on Power Systems, 36(5), 4410-4419. https://doi.org/10.1109/tpwrs.2021.3058414 (Original work published 2021)