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Day-ahead market bidding taking the balancing power market into account

Author

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  • Gro Klæboe

    (Norwegian University of Science and Technology)

  • Jørgen Braathen

    (Norwegian University of Science and Technology)

  • Anders Lund Eriksrud

    (Norwegian University of Science and Technology)

  • Stein-Erik Fleten

    (Norwegian University of Science and Technology)

Abstract

Generation companies with controllable units put considerable analysis into the process of bidding into the day-ahead markets for electricity. This article investigates the gain of coordinating price-taking bids to the day-ahead electricity market (DA) and sequentially cleared energy-only markets, such as the Nordic balancing market (BM). A technically detailed case study from the Nordic market is presented. We find that coordinated bidding is hardly worthwhile under current market conditions, but that only a modest increase in the demand for balancing energy will make coordination profitable. If the supply curve for balancing energy is convex, so that the cost of balancing energy is asymmetric, the gains will be even higher. Finally, we find that day-ahead market bid curves that result from coordinated instances provide extra supply at low prices, and lower supply at high prices, compared to sequential bids. This is rational given the anticipated opportunities that the balancing market offers; however, it makes day-ahead bidding appear to exploit market power.

Suggested Citation

  • Gro Klæboe & Jørgen Braathen & Anders Lund Eriksrud & Stein-Erik Fleten, 2022. "Day-ahead market bidding taking the balancing power market into account," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 30(3), pages 683-703, October.
    • Handle: RePEc:spr:topjnl:v:30:y:2022:i:3:d:10.1007_s11750-022-00645-1
    DOI: 10.1007/s11750-022-00645-1
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    References listed on IDEAS

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    Cited by:

    1. Klyve, Øyvind Sommer & Klæboe, Gro & Nygård, Magnus Moe & Marstein, Erik Stensrud, 2023. "Limiting imbalance settlement costs from variable renewable energy sources in the Nordics: Internal balancing vs. balancing market participation," Applied Energy, Elsevier, vol. 350(C).

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