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Short-term electricity trading for system balancing: An empirical analysis of the role of intraday trading in balancing Germany's electricity system

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  • Koch, Christopher
  • Hirth, Lion

Abstract

Previous studies have noted that, unexpectedly, Germany's dramatic expansion of wind and solar energy coincided with a reduction of short-term balancing reserves. This observation has been dubbed the “German Balancing Paradox”. This paper provides further and updated evidence: since 2011, wind and solar energy have nearly doubled while both reserve requirements and reserve use have declined by 50%. The paper quantitatively explores one reason for reduced balancing needs: increased and improved short-term wholesale electricity trading on the intraday market. Trading is now commonly done around the clock and based on quarter-hour, rather than full-hour, contracts. The shift to quarter-hourly products alone explains a decrease in balancing energy by 17%. There is also strong evidence that market parties respond efficiently to imbalance charges, suggesting that incentive-based approaches to electricity balancing work.

Suggested Citation

  • Koch, Christopher & Hirth, Lion, 2019. "Short-term electricity trading for system balancing: An empirical analysis of the role of intraday trading in balancing Germany's electricity system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    • Handle: RePEc:eee:rensus:v:113:y:2019:i:c:9
    DOI: 10.1016/j.rser.2019.109275
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