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Spot and reserve market equilibria and the influence of new reserve market participants

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  • Furtwängler, Christian
  • Weber, Christoph

Abstract

There is a broad consensus that the energy transition planned in Europe demands a sufficient number of flexibility providers. This contribution proposes to analyse effects of reserve flexibility from CHP, encompassing both the price effects on spot and secondary reserve markets in an endogenous market equilibrium model. Through the analysis of contrasting cases it highlights how the specific nature of CHP plants, and in particular their heat restrictions, lower the cost at which they contribute to the reserve and spot markets due to implied must-run conditions. A somewhat stylized fundamental market model based on input data for Germany in 2016 is used to analyse the price effects of reserve flexibility from Combined Heat and Power (CHP) entering both markets.

Suggested Citation

  • Furtwängler, Christian & Weber, Christoph, 2019. "Spot and reserve market equilibria and the influence of new reserve market participants," Energy Economics, Elsevier, vol. 81(C), pages 408-421.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:408-421
    DOI: 10.1016/j.eneco.2019.03.023
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    References listed on IDEAS

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    1. Kumbartzky, Nadine & Schacht, Matthias & Schulz, Katrin & Werners, Brigitte, 2017. "Optimal operation of a CHP plant participating in the German electricity balancing and day-ahead spot market," European Journal of Operational Research, Elsevier, vol. 261(1), pages 390-404.
    2. Just, Sebastian & Weber, Christoph, 2008. "Pricing of reserves: Valuing system reserve capacity against spot prices in electricity markets," Energy Economics, Elsevier, vol. 30(6), pages 3198-3221, November.
    3. Haakana, Juha & Tikka, Ville & Lassila, Jukka & Partanen, Jarmo, 2017. "Methodology to analyze combined heat and power plant operation considering electricity reserve market opportunities," Energy, Elsevier, vol. 127(C), pages 408-418.
    4. Jiménez Navarro, Juan Pablo & Kavvadias, Konstantinos C. & Quoilin, Sylvain & Zucker, Andreas, 2018. "The joint effect of centralised cogeneration plants and thermal storage on the efficiency and cost of the power system," Energy, Elsevier, vol. 149(C), pages 535-549.
    5. Kallabis, Thomas & Pape, Christian & Weber, Christoph, 2016. "The plunge in German electricity futures prices – Analysis using a parsimonious fundamental model," Energy Policy, Elsevier, vol. 95(C), pages 280-290.
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    7. Ocker, Fabian & Ehrhart, Karl-Martin & Belica, Matej, 2018. "Harmonization of the European balancing power auction: A game-theoretical and empirical investigation," Energy Economics, Elsevier, vol. 73(C), pages 194-211.
    8. Christoph Weber, 2005. "Uncertainty in the Electric Power Industry," International Series in Operations Research and Management Science, Springer, number 978-0-387-23048-1, December.
    9. Sebastian Just, 2011. "Appropriate contract durations in the German markets for on-line reserve capacity," Journal of Regulatory Economics, Springer, vol. 39(2), pages 194-220, April.
    10. Fridrik Mar Baldursson & Julia Bellenbaum & Ewa Lazarczyk & Lenja Niesen & Christoph Weber, 2017. "Welfare optimal reliability and reserve provision in electricity markets with increasing shares of renewable energy sources," EWL Working Papers 1703, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised May 2017.
    11. Philip Beran & Christian Pape & Christoph Weber, 2018. "Modelling German electricity wholesale spot prices with a parsimonious fundamental model – Validation and application," EWL Working Papers 1801, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Mar 2018.
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    Cited by:

    1. Jahns, Christopher & Podewski, Caroline & Weber, Christoph, 2020. "Supply curves for hydro reservoirs – Estimation and usage in large-scale electricity market models," Energy Economics, Elsevier, vol. 87(C).
    2. Andreas Dietrich & Christian Furtwängler & Christoph Weber, "undated". "Thesenpapier: Managing combined power and heat portfolios in sequential spot power markets under uncertainty," EWL Working Papers 2003, University of Duisburg-Essen, Chair for Management Science and Energy Economics.

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