Design of European balancing power markets

Abstract

This paper presents an empirical analysis for 24 European countries that procure balancing power with auctions. We find that there is no predominant market design in Europe but qualitatively identify three key drivers for the variety in market designs: the share of volatile renewable energy sources, shortterm flexibility and market coupling. The inconsistency of auction designs, however, cannot be traced back to the energy market framework conditions. We argue that this is a consequence of the applied multi-part auction mechanism and offer a brief review of auction-theoretic literature.

Bidding strategies in Austrian and German balancing power auctions

“…Hirth and Ziegenhagen () connect renewable energy sources to balancing power markets and demand for a “more rigorous evaluation of the price development.” Söder () analyses balancing challenges in sustainable and smart energy systems with 100% renewable power supply. Empirical analyses reveal a large heterogeneity among the European auction designs for balancing power markets, indicating that there is no predominant market design (Ocker, ; Ocker, Braun, & Will, ). Ocker et al () provide a game‐theoretic model for the current Austrian and German aFRR auction as well as for the proposed European‐wide aFRR auction.…”

Bidding Into Balancing Markets in a Hydrodominated Electricity System

“…In a system with a high share of renewable energies, however, balancing requirements are also provided by renewable energies. Since renewable technologies are dependent on natural circumstances like weather or hydrology but have variable cost of zero or close to zero, balancing prices can differ from conventional systems (Ocker, 2017;Ocker et al, 2016). In addition, renewable energies may have an impact on the need of balancing service requirements (Hirth and Ziegenhagen, 2015).…”

A cyber-physical systems perspective on decentralized energy management

“…Therefore, most countries have implemented intraday markets to balance production of RES closer to the moment of actual delivery, such that more accurate predictions can be incorporated [119]. The integration of more RES results in an increased need of flexibility to balance the grid using the power plants.…”

“…A BRP can also act on these markets to recuperate some of the costs made by deviating from the program. Note that a minimum power bid is required to act in these balancing market, such as 1 MW for FCR, 4 MW for FRR and 20 MW for RR in the Netherlands [119].…”

“…At the end of the day, a BRP has to pay a time-dependent penalty to the TSO for the deviations in energy consumption from the previously submitted programs. The ENTSO-E has defined three balancing reserve pools [119]. The frequency containment reserve (FCR) is used to limit grid frequency deviation by automatically activating reserve capacity to balance mismatches between supply and demand and a bit later, the frequency restoration reserve (FRR) kicks in to restore the frequency.…”