IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v67y2020ics0957178720301272.html
   My bibliography  Save this article

Design of regional flexibility markets for electricity: A product classification framework for and application to German pilot projects

Author

Listed:
  • Heilmann, Erik
  • Klempp, Nikolai
  • Wetzel, Heike

Abstract

With the growing role of distributed energy resources, the electricity network is challenged by numerous technical problems, such as capacity congestion and over- or under-voltage. An often-discussed response, especially in the European zonal electricity system, is to implement regional flexibility markets. We contribute to this discussion by providing a comprehensive classification framework for the design of flexibility products by combining technical requirements with classical auction theory. The framework structures 23 product parameters in four stages of abstraction. By applying the framework to five market approaches used in current German research projects, we demonstrate its usefulness for consistent comparison of flexibility products at a high level of detail. This framework can empower national and international policymakers and practitioners in assessing flexibility markets holistically, thereby facilitating the implementation of sound solutions.

Suggested Citation

  • Heilmann, Erik & Klempp, Nikolai & Wetzel, Heike, 2020. "Design of regional flexibility markets for electricity: A product classification framework for and application to German pilot projects," Utilities Policy, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:juipol:v:67:y:2020:i:c:s0957178720301272
    DOI: 10.1016/j.jup.2020.101133
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178720301272
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2020.101133?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Woo, C.K. & Sreedharan, P. & Hargreaves, J. & Kahrl, F. & Wang, J. & Horowitz, I., 2014. "A review of electricity product differentiation," Applied Energy, Elsevier, vol. 114(C), pages 262-272.
    2. Teich, Jeffrey E. & Wallenius, Hannele & Wallenius, Jyrki & Koppius, Otto R., 2004. "Emerging multiple issue e-auctions," European Journal of Operational Research, Elsevier, vol. 159(1), pages 1-16, November.
    3. Ramos, Ariana & De Jonghe, Cedric & Gómez, Virginia & Belmans, Ronnie, 2016. "Realizing the smart grid's potential: Defining local markets for flexibility," Utilities Policy, Elsevier, vol. 40(C), pages 26-35.
    4. Salah, Florian & Flath, Christoph M. & Schuller, Alexander & Will, Christian & Weinhardt, Christof, 2017. "Morphological analysis of energy services: Paving the way to quality differentiation in the power sector," Energy Policy, Elsevier, vol. 106(C), pages 614-624.
    5. Martin Bichler & Gregory Kersten & Stefan Strecker, 2003. "Towards a Structured Design of Electronic Negotiations," Group Decision and Negotiation, Springer, vol. 12(4), pages 311-335, July.
    6. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    7. Katz, Jonas, 2014. "Linking meters and markets: Roles and incentives to support a flexible demand side," Utilities Policy, Elsevier, vol. 31(C), pages 74-84.
    8. Höckner, Jonas & Voswinkel, Simon & Weber, Christoph, 2020. "Market distortions in flexibility markets caused by renewable subsidies – The case for side payments," Energy Policy, Elsevier, vol. 137(C).
    9. Wurman, Peter R. & Wellman, Michael P. & Walsh, William E., 2001. "A Parametrization of the Auction Design Space," Games and Economic Behavior, Elsevier, vol. 35(1-2), pages 304-338, April.
    10. Pär Holmberg and Ewa Lazarczyk, 2015. "Comparison of congestion management techniques: Nodal, zonal and discriminatory pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    11. Karsten Neuhoff & Carlos Batlle & Gert Brunekreeft & Christos Vasilakos Konstantinidis & Christian Nabe & Giorgia Oggioni & Pablo Rodilla & Sebastian Schwenen & Tomasz Siewierski & Goran Strbac, 2015. "Flexible Short-Term Power Trading: Gathering Experience in EU Countries," Discussion Papers of DIW Berlin 1494, DIW Berlin, German Institute for Economic Research.
    12. Gerard, Helena & Rivero Puente, Enrique Israel & Six, Daan, 2018. "Coordination between transmission and distribution system operators in the electricity sector: A conceptual framework," Utilities Policy, Elsevier, vol. 50(C), pages 40-48.
    13. Radecke, Julia & Hefele, Joseph & Hirth, Lion, 2019. "Markets for Local Flexibility in Distribution Networks," EconStor Preprints 204559, ZBW - Leibniz Information Centre for Economics.
    14. Schittekatte, Tim & Meeus, Leonardo, 2020. "Flexibility markets: Q&A with project pioneers," Utilities Policy, Elsevier, vol. 63(C).
    15. Jin, Xiaolong & Wu, Qiuwei & Jia, Hongjie, 2020. "Local flexibility markets: Literature review on concepts, models and clearing methods," Applied Energy, Elsevier, vol. 261(C).
    16. Jawad Abrache & Teodor Crainic & Michel Gendreau & Monia Rekik, 2007. "Combinatorial auctions," Annals of Operations Research, Springer, vol. 153(1), pages 131-164, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rebenaque, Olivier & Schmitt, Carlo & Schumann, Klemens & Dronne, Théo & Roques, Fabien, 2023. "Success of local flexibility market implementation: A review of current projects," Utilities Policy, Elsevier, vol. 80(C).
    2. Loisel, Rodica & Lemiale, Lionel & Mima, Silvana & Bidaud, Adrien, 2022. "Strategies for short-term intermittency in long-term prospective scenarios in the French power system," Energy Policy, Elsevier, vol. 169(C).
    3. Heilmann, Erik, 2023. "The impact of transparency policies on local flexibility markets in electric distribution networks," Utilities Policy, Elsevier, vol. 83(C).
    4. Carlo Schmitt & Felix Gaumnitz & Andreas Blank & Olivier Rebenaque & Théo Dronne & Arnault Martin & Philippe Vassilopoulos & Albert Moser & Fabien Roques, 2021. "Framework for Deterministic Assessment of Risk-Averse Participation in Local Flexibility Markets †," Energies, MDPI, vol. 14(11), pages 1-34, May.
    5. Tomasz Ząbkowski & Krzysztof Gajowniczek & Grzegorz Matejko & Jacek Brożyna & Grzegorz Mentel & Małgorzata Charytanowicz & Jolanta Jarnicka & Anna Olwert & Weronika Radziszewska & Jörg Verstraete, 2023. "Cluster-Based Approach to Estimate Demand in the Polish Power System Using Commercial Customers’ Data," Energies, MDPI, vol. 16(24), pages 1-21, December.
    6. Erik Heilmann, 2021. "The impact of transparency policies on local flexibility markets in electrical distribution networks: A case study with artificial neural network forecasts," MAGKS Papers on Economics 202141, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Olivier Rebenaque & Carlo Schmitt & Klemens Schumann, 2022. "Trading in local markets: A review of concepts and challenges," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2022(2), pages 25-47.
    8. Erik Heilmann & Nikolai Klempp & Kai Hufendiek & Heike Wetzel, 2022. "Long-term Contracts for Network-supportive Flexibility in Local Flexibility Markets," MAGKS Papers on Economics 202224, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Chun Xia-Bauer & Florin Vondung & Stefan Thomas & Raphael Moser, 2022. "Business Model Innovations for Renewable Energy Prosumer Development in Germany," Sustainability, MDPI, vol. 14(13), pages 1-17, June.
    10. Ajla Mehinovic & Matej Zajc & Nermin Suljanovic, 2023. "Interpretation and Quantification of the Flexibility Sources Location on the Flexibility Service in the Distribution Grid," Energies, MDPI, vol. 16(2), pages 1-18, January.
    11. Kara, Güray & Tomasgard, Asgeir & Farahmand, Hossein, 2022. "Characterizing flexibility in power markets and systems," Utilities Policy, Elsevier, vol. 75(C).
    12. Amra Jahic & Felix Heider & Maik Plenz & Detlef Schulz, 2022. "Flexibility Quantification and the Potential for Its Usage in the Case of Electric Bus Depots with Unidirectional Charging," Energies, MDPI, vol. 15(10), pages 1-18, May.
    13. Bellenbaum, Julia & Höckner, Jonas & Weber, Christoph, 2022. "Designing flexibility procurement markets for congestion management – investigating two-stage procurement auctions," Energy Economics, Elsevier, vol. 106(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erik Heilmann & Nikolai Klempp & Heike Wetzel, 2020. "Market design of regional flexibility markets: A classification metric for flexibility products and its application to German prototypical flexibility markets," MAGKS Papers on Economics 202002, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Erik Heilmann & Nikolai Klempp & Kai Hufendiek & Heike Wetzel, 2022. "Long-term Contracts for Network-supportive Flexibility in Local Flexibility Markets," MAGKS Papers on Economics 202224, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Heilmann, Erik, 2023. "The impact of transparency policies on local flexibility markets in electric distribution networks," Utilities Policy, Elsevier, vol. 83(C).
    4. Erik Heilmann, 2021. "The impact of transparency policies on local flexibility markets in electrical distribution networks: A case study with artificial neural network forecasts," MAGKS Papers on Economics 202141, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Jahns, Christopher & Stein, Tobias & Höckner, Jonas & Weber, Christoph, 2023. "Prevention of strategic behaviour in local flexibility markets using market monitoring – Concept, application example and limitations," Energy Policy, Elsevier, vol. 174(C).
    6. Bellenbaum, Julia & Höckner, Jonas & Weber, Christoph, 2022. "Designing flexibility procurement markets for congestion management – investigating two-stage procurement auctions," Energy Economics, Elsevier, vol. 106(C).
    7. Orlando Valarezo & Tomás Gómez & José Pablo Chaves-Avila & Leandro Lind & Mauricio Correa & David Ulrich Ziegler & Rodrigo Escobar, 2021. "Analysis of New Flexibility Market Models in Europe," Energies, MDPI, vol. 14(12), pages 1-24, June.
    8. Aikaterini Forouli & Emmanouil A. Bakirtzis & Georgios Papazoglou & Konstantinos Oureilidis & Vasileios Gkountis & Luisa Candido & Eloi Delgado Ferrer & Pandelis Biskas, 2021. "Assessment of Demand Side Flexibility in European Electricity Markets: A Country Level Review," Energies, MDPI, vol. 14(8), pages 1-23, April.
    9. Domagoj Badanjak & Hrvoje Pandžić, 2021. "Distribution-Level Flexibility Markets—A Review of Trends, Research Projects, Key Stakeholders and Open Questions," Energies, MDPI, vol. 14(20), pages 1-26, October.
    10. Rebenaque, Olivier & Schmitt, Carlo & Schumann, Klemens & Dronne, Théo & Roques, Fabien, 2023. "Success of local flexibility market implementation: A review of current projects," Utilities Policy, Elsevier, vol. 80(C).
    11. Karim L. Anaya & Michael G. Pollitt, 2021. "How to Procure Flexibility Services within the Electricity Distribution System: Lessons from an International Review of Innovation Projects," Energies, MDPI, vol. 14(15), pages 1-26, July.
    12. Lago, Jesus & Poplavskaya, Ksenia & Suryanarayana, Gowri & De Schutter, Bart, 2021. "A market framework for grid balancing support through imbalances trading," Renewable and Sustainable Energy Reviews, Elsevier, vol. 137(C).
    13. Nayeem Rahman & Rodrigo Rabetino & Arto Rajala & Jukka Partanen, 2021. "Ushering in a New Dawn: Demand-Side Local Flexibility Platform Governance and Design in the Finnish Energy Markets," Energies, MDPI, vol. 14(15), pages 1-23, July.
    14. Carlo Schmitt & Felix Gaumnitz & Andreas Blank & Olivier Rebenaque & Théo Dronne & Arnault Martin & Philippe Vassilopoulos & Albert Moser & Fabien Roques, 2021. "Framework for Deterministic Assessment of Risk-Averse Participation in Local Flexibility Markets †," Energies, MDPI, vol. 14(11), pages 1-34, May.
    15. Schittekatte, Tim & Meeus, Leonardo, 2020. "Flexibility markets: Q&A with project pioneers," Utilities Policy, Elsevier, vol. 63(C).
    16. Sevdari, Kristian & Calearo, Lisa & Andersen, Peter Bach & Marinelli, Mattia, 2022. "Ancillary services and electric vehicles: An overview from charging clusters and chargers technology perspectives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 167(C).
    17. Theo Dronne & Fabien Roques & Marcelo Saguan, 2021. "Local Flexibility Markets for Distribution Network Congestion-Management in Center-Western Europe: Which Design for Which Needs?," Energies, MDPI, vol. 14(14), pages 1-18, July.
    18. Andreas Zeiselmair & Simon Köppl, 2021. "Constrained Optimization as the Allocation Method in Local Flexibility Markets," Energies, MDPI, vol. 14(13), pages 1-21, June.
    19. Kara, Güray & Tomasgard, Asgeir & Farahmand, Hossein, 2022. "Characterizing flexibility in power markets and systems," Utilities Policy, Elsevier, vol. 75(C).
    20. Schnizler, Björn & Neumann, Dirk & Veit, Daniel & Napoletano, Mauro & Catalano, Michele & Gallegati, Mauro & Reinicke, Michael & Streitberger, Werner & Eymann, Torsten, 2005. "Environmental analysis for application layer networks," Bayreuth Reports on Information Systems Management 1, University of Bayreuth, Chair of Information Systems Management.

    More about this item

    Keywords

    Smart markets; Market design; Electricity product design; Flexibility market;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:67:y:2020:i:c:s0957178720301272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.