Welfare optimal reliability and reserve provision in electricity markets with increasing shares of renewable energy sources
Fridrik Mar Baldursson (),
Julia Bellenbaum (),
Lenja Niesen () and
Christoph Weber ()
Additional contact information
Fridrik Mar Baldursson: Reykjavik University
Julia Bellenbaum: University Duisburg-Essen
Lenja Niesen: University Duisburg-Essen
Christoph Weber: University Duisburg-Essen
Journal of Regulatory Economics, 2022, vol. 62, issue 1, No 3, 47-79
Abstract We develop an analytical model to derive the competitive market equilibrium for electricity spot and reserve markets under uncertain demand and renewable electricity generation. The first-best market equilibrium of the model resembles the result of a centralized co-optimization of the markets involved. We then derive the welfare-optimal provision of reserves. At first-best, cost of reserve capacity is balanced against expected cost of outages. Comparative statics and a numerical application based on German secondary reserve provision imply an increase of reserve provision with a growing share of renewable generation. Furthermore, a growing share of renewable generation decreases the level of reliability as measured in energy not served since required reserves to balance higher expected deviations will be more expensive, resulting in a trade-off between higher reserve costs and costs of energy not served.
Keywords: Renewable energy sources; Electricity reserves; Reliability; Electricity market; TSO (search for similar items in EconPapers)
JEL-codes: D81 L52 Q41 Q42 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s11149-022-09454-7 Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:regeco:v:62:y:2022:i:1:d:10.1007_s11149-022-09454-7
Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2
Access Statistics for this article
Journal of Regulatory Economics is currently edited by Menaham Spiegel
More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().