Bidding strategy of storage hydropower plants in reserve markets

Laureen Deman (), Quentin Boucher, Sonia Djebali, Guillaume Guérard and Cédric Clastres ()
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Laureen Deman: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, SuperGrid Institute SAS
Quentin Boucher: SuperGrid Institute SAS
Sonia Djebali: DVRC - De Vinci Research Center - DVHE - De Vinci Higher Education
Guillaume Guérard: DVRC - De Vinci Research Center - DVHE - De Vinci Higher Education
Cédric Clastres: GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes

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Abstract: The increasing share of intermittent sources of energy will increase the need for frequency-control reserves. However, the supply from gas and coal-fired power plants might decrease in the following years. Being the procurement of reserves mostly market-based in Europe, the market design should send price signals to encourage participation in these markets. This paper analyses the incentives provided by the French market design for seasonal storage and pumped storage hydropower plants to participate in reserve markets. To that end, a deterministic mixed-integer linear optimization model is presented. The objective is to maximize profits in the energy and reserve markets according to 2019 market prices. By optimising the trade-offs between the day-ahead and the reserve markets, the storage hydropower plant increase its profits. The pumped storage hydropower plant sometimes chooses the Frequency Containment Reserve market or the day-ahead market only. The apparition of some hours of FCR participation with the pumped storage plant is explained by its higher number of generating hours and by the higher volatility of reserve energy prices. These two factors also explain the greater response of the pumped storage plant to the incentive measures on the FCR market.

Keywords: Incentives; Storage; Reserve markets; Hydropower; Market design; Marchés de réserve; Hydroélectricité; Design de marché; Incitations; Stockage (search for similar items in EconPapers)
Date: 2023
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Published in Economics and Policy of Energy and the Environment, 2023, 2023/2, pp.77-101. ⟨10.3280/EFE2023-002004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04327920

DOI: 10.3280/EFE2023-002004

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