Harmonization of the European balancing power auction: A game-theoretical and empirical investigation

Ocker, Fabian; Ehrhart, Karl‐Martin; Belica, Matej

doi:10.1016/j.eneco.2018.05.003

Cited by 22 publications

(13 citation statements)

References 45 publications

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“…They describe essential elements for scoring rules to ensure an efficient allocation. As shown in Ocker et al (2018), the Austrian and German aFRR auctions, with the two attributes power and energy, theoretically ensure an efficient market outcome. Nevertheless, empirical auction results point at a more rigorous investigation regarding the interplay of these two bid elements since they are not in line with the theoretic predictions.…”

Section: Related Literaturementioning

confidence: 99%

Bidding strategies in Austrian and German balancing power auctions

Ocker

Ehrhart

Ott³

2018

WIREs Energy & Environment

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Balancing power markets involve complex procurement auction mechanisms that are challenging both to design for auctioneers and to take part in for suppliers. Recent empirical work indicates that auction results from Austria and Germany do not match game-theoretic predictions. Instead, suppliers adjust their bids to previous auctions results and do not reveal their actual costs within their bids. Therefore, this work focuses on bidding strategies of suppliers in the Austrian and German automatically-activated Frequency Restoration Reserve auctions. First, the operating principle of the auctions is analyzed and the cost and profit structures are illustrated. Then, a theoretic approach for the derivation of optimal bidding strategies is presented, that allows the integration of price expectations based on historical market data. We validate our approach by a numerical application of the bidder's calculus. Finally, our theoretic results are confronted with Austrian and German auction outcomes. We find evidence that the identified bidding strategies are applied by the suppliers.

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Section: Related Literaturementioning

confidence: 99%

Bidding strategies in Austrian and German balancing power auctions

Ocker

Ehrhart

Ott³

2018

WIREs Energy & Environment

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“…Further, spot market prices are typically well explainable by fundamental factors (see, e.g., Bublitz et al, 2017; Kiesel & Paraschiv, 2017; Weron, 2014). Conversely, a challenge in forecasting balancing reserve market prices lies in the fact that they are hardly explainable by fundamental drivers (Kraft, Keles, & Fichtner, 2018; Ocker, Ehrhart, & Belica, 2018). However, Ocker and Ehrhart (2017) find evidence for collusion among market participants and serial correlation in the auction results of the secondary reserve market.…”

Section: Related Literaturementioning

confidence: 99%

Modeling of frequency containment reserve prices with econometrics and artificial intelligence

Kraft

Keles

Fïchtner

2020

Journal of Forecasting

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The forecasting of prices for electricity balancing reserve power can essentially improve the trading positions of market participants in competitive auctions. Having identified a lack of literature related to forecasting balancing reserve prices, we deploy approaches originating from econometrics and artificial intelligence and set up a forecasting framework based on autoregressive and exogenous factors. We use SARIMAX models as well as neural networks with different structures and forecast based on a rolling one-step forecast with reestimation of the models. It turns out that the naive forecast performs reasonably well but is outperformed by the more advanced models. In addition, neural network approaches outperform the econometric approach in terms of forecast quality, whereas for the further use of the generated models the econometric approach has advantages in terms of explaining price drivers. For the present application, more advanced configurations of the neural networks are not able to further improve the forecasting performance.

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“…Literature on balancing markets is diverse. Since balancing market are still highly heterogeneous across countries (see, e.g., Ocker et al, 2016) a lot of studies address the different national balancing market designs (e.g., Müsgens et al, 2014;Ocker, 2017), the harmonization of market designs (e.g., Dallinger et al, 2018;Ocker et al, 2018a), the integration of balancing markets (e.g., Farahmand and Doorman, 2012) or whether the market design is suitable for participation of variable renewable energies (VRE, e.g., Fernandes et al, 2016). Regarding VRE, other studies focus on the interaction of an increasing share of VRE and the balancing requirements and costs (e.g., Gianfreda et al, 2018;Hirth and Ziegenhagen, 2015;Holttinen et al, 2011;Ocker and Ehrhart, 2017) or hydropower's ability and value in contributing to balance an increasing share of VRE (e.g., Dujardin et al, 2017;Graabak et al, 2019).…”

Section: Balancing Markets and Hydropower In The Literaturementioning

confidence: 99%

“…By taking into account price expectations based on historic market outcomes in their theoretical model, they formulate a theoretical bidding strategy, which matches empirical balancing market results in these markets. Built upon this, Ocker et al (2018a) analyse if a change from pay-as-bid to uniform pricing as proposed by the European Commission would incentivise suppliers to reveal their true costs. However, their results show that under both pricing regimes (i.e., pay-as-bid and uniform pricing) suppliers do not reveal their actual cost.…”

Section: Balancing Markets and Hydropower In The Literaturementioning

confidence: 99%

Bidding Into Balancing Markets in a Hydrodominated Electricity System

Schillinger

Weigt

2019

SSRN Journal

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In an electricity system, demand and supply have to be balanced in real time. Since most energy is traded before real time already in forward, day-ahead and intraday markets imbalances can occur. To ensure the balance between demand and supply even if power plants deviate from their schedules, the system operator procures balancing capacity and energy in balancing markets. The market outcomes may significantly differ from one country to the other depending on the underlying generation technologies and market design. In this paper, we have a look at the balancing market prices of a hydro-dominated electricity system using Switzerland as a case study. By using a short-term hydropower operation model and a set of Swiss hydropower plants, we are able to identify a competitive benchmark for Swiss balancing market prices defined by the opportunity costs of hydropower for providing balancing capacity. Our results show that Swiss balancing market prices are influenced by several drivers but do not hint at any market imperfections.

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Harmonization of the European balancing power auction: A game-theoretical and empirical investigation

Cited by 22 publications

References 45 publications

Bidding strategies in Austrian and German balancing power auctions

Bidding strategies in Austrian and German balancing power auctions

Modeling of frequency containment reserve prices with econometrics and artificial intelligence

Bidding Into Balancing Markets in a Hydrodominated Electricity System

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