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Statistical analysis of negative prices in European balancing markets

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  • Brijs, Tom
  • De Vos, Kristof
  • De Jonghe, Cedric
  • Belmans, Ronnie

Abstract

The presence of renewable power generation technologies increases the need for system flexibility due to their variable nature. The increasing share of variable renewables in European power systems create a downward adequacy problem, which deals with the ability of power systems to cope with periods of excess generation. The occurrence of negative prices on Central Western European electricity markets confirms the relevance of this issue, which is referred to as “incompressibility of power systems” and is assessed as a barrier for further renewable power integration. The objective of this article is to identify the main drivers of negative price periods in European balancing markets, by means of both an empirical and regression analysis. Results confirm a positive relation with the scheduled generation of renewables and inflexible base load, as well as a negative relation with the scheduled system load. Furthermore, the occurrence of negative prices is related to the positive and negative forecast error of renewable generation and demand, respectively. It is concluded that negative balancing market prices provide a market signal for investments in flexibility sources such as flexible generation, demand response, electricity storage, and interconnector capacity.

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  • Brijs, Tom & De Vos, Kristof & De Jonghe, Cedric & Belmans, Ronnie, 2015. "Statistical analysis of negative prices in European balancing markets," Renewable Energy, Elsevier, vol. 80(C), pages 53-60.
    • Handle: RePEc:eee:renene:v:80:y:2015:i:c:p:53-60
    DOI: 10.1016/j.renene.2015.01.059
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    2. Tom Brijs & Daniel Huppmann & Sauleh Siddiqui & Ronnie Belmans, 2016. "Auction-Based Allocation of Shared Electricity Storage Resources through Physical Storage Rights," Discussion Papers of DIW Berlin 1566, DIW Berlin, German Institute for Economic Research.
    3. Kubik, M.L. & Coker, P.J. & Barlow, J.F., 2015. "Increasing thermal plant flexibility in a high renewables power system," Applied Energy, Elsevier, vol. 154(C), pages 102-111.
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    5. Gianfreda, Angelica & Parisio, Lucia & Pelagatti, Matteo, 2018. "A review of balancing costs in Italy before and after RES introduction," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 549-563.
    6. Azofra, D. & Saenz-Díez, J.C. & Martínez, E. & Jiménez, E. & Blanco, J., 2016. "Ex-post economic analysis of photovoltaic power in the Spanish grid: Alternative scenarios," Renewable Energy, Elsevier, vol. 95(C), pages 98-108.
    7. Khoshrou, Abdolrahman & Dorsman, André B. & Pauwels, Eric J., 2019. "The evolution of electricity price on the German day-ahead market before and after the energy switch," Renewable Energy, Elsevier, vol. 134(C), pages 1-13.
    8. Alexandre Lucas & Konstantinos Pegios & Evangelos Kotsakis & Dan Clarke, 2020. "Price Forecasting for the Balancing Energy Market Using Machine-Learning Regression," Energies, MDPI, vol. 13(20), pages 1-16, October.
    9. Brijs, Tom & De Jonghe, Cedric & Hobbs, Benjamin F. & Belmans, Ronnie, 2017. "Interactions between the design of short-term electricity markets in the CWE region and power system flexibility," Applied Energy, Elsevier, vol. 195(C), pages 36-51.
    10. Coninx, Kristof & Deconinck, Geert & Holvoet, Tom, 2018. "Who gets my flex? An evolutionary game theory analysis of flexibility market dynamics," Applied Energy, Elsevier, vol. 218(C), pages 104-113.
    11. Hu, Jing & Harmsen, Robert & Crijns-Graus, Wina & Worrell, Ernst & van den Broek, Machteld, 2018. "Identifying barriers to large-scale integration of variable renewable electricity into the electricity market: A literature review of market design," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2181-2195.
    12. V., Ernesto Guerra & H., Eugenio Bobenrieth & H., Juan Bobenrieth & Wright, Brian D., 2023. "Endogenous thresholds in energy prices: Modeling and empirical estimation," Energy Economics, Elsevier, vol. 121(C).
    13. Brown, Donal & Hall, Stephen & Davis, Mark E., 2019. "Prosumers in the post subsidy era: an exploration of new prosumer business models in the UK," Energy Policy, Elsevier, vol. 135(C).
    14. Glachant, Jean-Michel, 2016. "Tacking stock of the EU “Power Target Model”… and steering its future course," Energy Policy, Elsevier, vol. 96(C), pages 673-679.
    15. Angelica, Gianfreda & Lucia, Parisio & Matteo, Pelagatti, 2017. "The RES-induced Switching Effect Across Fossil Fuels: An Analysis of the Italian Day-Ahead and Balancing Prices and Their Connected Costs," Working Papers 360, University of Milano-Bicocca, Department of Economics, revised 03 Feb 2017.
    16. Jethro Browell, 2017. "Risk Constrained Trading Strategies for Stochastic Generation with a Single-Price Balancing Market," Papers 1708.02625, arXiv.org.
    17. Jethro Browell, 2018. "Risk Constrained Trading Strategies for Stochastic Generation with a Single-Price Balancing Market," Energies, MDPI, vol. 11(6), pages 1-17, May.

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