Identification of the Efficiency Gap by Coupling a Fundamental Electricity Market Model and an Agent-Based Simulation Model

Laura Torralba-Díaz, Christoph Schimeczek, Matthias Reeg, Georgios Savvidis, Marc Deissenroth-Uhrig, Felix Guthoff, Benjamin Fleischer and Kai Hufendiek
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Laura Torralba-Díaz: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Christoph Schimeczek: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Matthias Reeg: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Georgios Savvidis: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Marc Deissenroth-Uhrig: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Felix Guthoff: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Benjamin Fleischer: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany
Kai Hufendiek: Stuttgart Research Initiative on Integrated Systems Analysis for Energy (STRise), Keplerstraße 7, 70174 Stuttgart, Germany

Energies, 2020, vol. 13, issue 15, 1-19

Abstract: A reliable and cost-effective electricity system transition requires both the identification of optimal target states and the definition of political and regulatory frameworks that enable these target states to be achieved. Fundamental optimization models are frequently used for the determination of cost-optimal system configurations. They represent a normative approach and typically assume markets with perfect competition. However, it is well known that real systems do not behave in such an optimal way, as decision-makers do not have perfect information at their disposal and real market actors do not take decisions in a purely rational way. These deficiencies lead to increased costs or missed targets, often referred to as an “efficiency gap”. For making rational political decisions, it might be valuable to know which factors influence this efficiency gap and to what extent. In this paper, we identify and quantify this gap by soft-linking a fundamental electricity market model and an agent-based simulation model, which allows the consideration of these effects. In order to distinguish between model-inherent differences and non-ideal market behavior, a rigorous harmonization of the models was conducted first. The results of the comparative analysis show that the efficiency gap increases with higher renewable energy shares and that information deficits and policy instruments affect operational decisions of power market participants and resulting overall costs significantly.

Keywords: efficiency gap; model coupling; electricity system; power market; agent-based; uncertainty; decision theory (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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