Strategic Behavior in the German Balancing Energy Mechanism: Incentives, Evidence, Costs and Solutions

Sebastian Just () and Christoph Weber

No 1204, EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics

Abstract: This paper investigates the incentives market participants have in the German electricity balancing mechanism. Strategic over- and undersupply positions are the result of existing stochastic arbitrage opportunities between the spot market and the balancing mechanism. This strategic behavior can be clearly identified in aggregate market data. These structural imbalances increase the need for reserve capacity, raise system security concerns, and thus burden significant cost on the customers. More effective market designs include changes in the balancing mechanism, the reserve capacity and the intraday spot markets.

Keywords: Electricity market design; balancing mechanism; reserve capacity; strategic behavior (search for similar items in EconPapers)
JEL-codes: L94 Q41 Q47 (search for similar items in EconPapers)
Date: 2012-10, Revised 2012-10
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:dui:wpaper:1204

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