Strategic interaction between wholesale and ancillary service markets

David Brown, Andrew Eckert and Douglas Silveira

Competition and Regulation in Network Industries, 2023, vol. 24, issue 4, 174-198

Abstract: In electricity markets, ancillary services (AS) are vital to ensuring system reliability through the instantaneous balancing of supply and demand. An important current policy question is whether AS markets clear simultaneously or sequentially with wholesale markets. We develop a model to study the strategic implications of market timing. We demonstrate that a strategic incentive to reduce AS and, consequently, lower marginal cost in the wholesale market arises when markets clear sequentially. Using data from Alberta, we find that the strategic effect has a small impact on wholesale outcomes but a large impact on the AS market.

Keywords: Electricity market ancillary services; market power; strategic commitment; L13; L50; L94; Q40 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: Strategic Interaction Between Wholesale and Ancillary Service Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:crnind:v:24:y:2023:i:4:p:174-198

DOI: 10.1177/17835917231217125

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