Trading power instead of energy in day-ahead electricity markets

Rens Philipsen, Germán Morales-España, Mathijs de Weerdt and Laurens de Vries

Applied Energy, 2019, vol. 233-234, 802-815

Abstract: Day-ahead electricity markets are inefficient due to their coarse discretisation of time and their representation of electricity production and consumption in energy per time interval. This leads to excessive costs and infeasible schedules in the market clearing results. Some real-world systems have increased the resolution to improve accuracy, but this comes at a high computational cost. We propose an alternative, based on using linear power trajectories in the day-ahead scheduling process, which represent the momentary electricity production. Changing from a traditional energy-based to such a power-based formulation of the scheduling method can reduce cost by several percentage points, leading to a cost reduction of millions of euros in real-world systems on a yearly basis. Attempting to do so by increasing the resolution of the schedule would be accompanied by large increases in computational demands. Furthermore, we provide market design options to implement power-based bidding and pricing in day-ahead electricity markets, showing that pricing and market rules which encompass existing markets are readily available for implementation, and illustrate these with examples.

Keywords: Unit commitment; Power-based scheduling; Market design; Day-ahead market (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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DOI: 10.1016/j.apenergy.2018.09.205

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