Interactions of Imbalance Settlement with Energy and Reserve Markets in Multi-Product European Balancing Markets

Jacques Cartuyvels, Gilles Bertrand and Anthony Papavasiliou
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Jacques Cartuyvels: Université catholique de Louvain, LIDAM/CORE, Belgium
Gilles Bertrand: ACER
Anthony Papavasiliou: NTUA

No 2024007, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper provides a framework for analyzing the interaction of imbalance settlement with the clearing of real-time energy and reserve markets. We characterize the optimal strategies of price-taking flexibility providers that can participate in sequential capacity auctions for automatic and manual frequency restoration reserves, followed by an auction that is conducted by the system operator for activating balancing energy. We establish equilibria based on three market features: (i) reserve demand curves, (ii) the activation strategy implemented by the system operator, and (iii) the imbalance settlement scheme. The optimal activation strategy is derived and the effect of the imbalance pricing scheme on bidding incentives, cost efficiency, and reserve prices is discussed.

Keywords: Electricity Markets Design; Balancing Markets; Multi-Product Markets; Reserve (search for similar items in EconPapers)
Pages: 36
Date: 2024-05-13
New Economics Papers: this item is included in nep-des and nep-ene
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