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Competition in Germany's minute reserve power market: An econometric analysis

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  • Haucap, Justus
  • Heimeshoff, Ulrich
  • Jovanovic, Dragan

Abstract

The German reserve power market was subject to important regulatory changes in recent years. A new market design was created by synchronization and interconnection of the four control areas. In this paper, we analyze whether or not the reforms led to lower prices for minute reserve power (MRP). In contrast to existing papers, we use a unique panel dataset to account for unobserved heterogeneity between the four German regional markets. Moreover, we control for endogeneity by using weather data as instruments for electricity spot market prices. We find that the reforms were jointly successful in decreasing MRP prices leading to substantial cost savings for the transmission system operators. --

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 75.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:75

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Keywords: Competition; Frequency Control; Minute Reserve Power; Regulation; Productive Efficiency; Welfare;

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  1. Christopher F Baum, 2005. "Stata: The language of choice for time-series analysis?," Stata Journal, StataCorp LP, StataCorp LP, vol. 5(1), pages 46-63, March.
  2. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  3. Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, Elsevier, vol. 59(2), pages 175-182, May.
  4. Swider, Derk J. & Weber, Christoph, 2007. "Bidding under price uncertainty in multi-unit pay-as-bid procurement auctions for power systems reserve," European Journal of Operational Research, Elsevier, Elsevier, vol. 181(3), pages 1297-1308, September.
  5. Perron, Pierre & Vogelsang, Timothy J, 1992. "Testing for a Unit Root in a Time Series with a Changing Mean: Corrections and Extensions," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(4), pages 467-70, October.
  6. Müller, Gernot & Rammerstorfer, Margarethe, 2008. "A theoretical analysis of procurement auctions for tertiary control in Germany," Energy Policy, Elsevier, Elsevier, vol. 36(7), pages 2620-2627, July.
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Cited by:
  1. Lion Hirth & Inka Ziegenhagen, 2013. "Control Power and Variable Renewables A Glimpse at German Data," Working Papers, Fondazione Eni Enrico Mattei 2013.46, Fondazione Eni Enrico Mattei.
  2. Chaves-Ávila, José Pablo & van der Veen, Reinier A.C. & Hakvoort, Rudi A., 2014. "The interplay between imbalance pricing mechanisms and network congestions – Analysis of the German electricity market," Utilities Policy, Elsevier, Elsevier, vol. 28(C), pages 52-61.

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