IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v16y2023i13p5106-d1185145.html
   My bibliography  Save this article

Factors Affecting Market Participant Decision Making in the Spanish Intraday Electricity Market: Auctions vs. Continuous Trading

Author

Listed:
  • Shilpa Bindu

    (Institute for Research in Technology, ICAI School of Engineering, Comillas Pontifical University, Alberto Aguilera, 23, 28015 Madrid, Spain)

  • José Pablo Chaves Ávila

    (Institute for Research in Technology, ICAI School of Engineering, Comillas Pontifical University, Alberto Aguilera, 23, 28015 Madrid, Spain)

  • Luis Olmos

    (Institute for Research in Technology, ICAI School of Engineering, Comillas Pontifical University, Alberto Aguilera, 23, 28015 Madrid, Spain)

Abstract

Intraday markets can be organized as continuous trading or discrete auction sessions. While many studies have attempted to compare the liquidity of these two models, additional external factors specific to each system, such as the balancing market design and number of bidding zones, affect overall market liquidity. In this regard, the Spanish hybrid intraday markets seem like an excellent case study to compare the two market models. Since the two intraday models are implemented in the same system (the Spanish one), the same conditions apply to their implementation. However, a direct comparison of liquidity is still challenging due to two factors: (1) differences exist in market architecture (timing, pricing scheme, bidding formats, etc.) between the two models, which create preferences among market players for one or the other; (2) the opportunistic behavior of market players in the system responding to the market price signals may affect the liquidity dynamics. We demonstrate the relevance of these two factors coming into play in the Spanish intraday markets, first carrying out a qualitative analysis of the market architecture of both models and then empirically analyzing a market manipulation attempt, which we refer to as the 15:10 rush. Our analysis points towards the need for more efficient regulation governing the interaction of the continuous intraday market with intraday auction markets and the potential risks from increased algorithmic trading.

Suggested Citation

  • Shilpa Bindu & José Pablo Chaves Ávila & Luis Olmos, 2023. "Factors Affecting Market Participant Decision Making in the Spanish Intraday Electricity Market: Auctions vs. Continuous Trading," Energies, MDPI, vol. 16(13), pages 1-23, July.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:13:p:5106-:d:1185145
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/16/13/5106/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/16/13/5106/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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, vol. 28(C), pages 52-61.
    2. Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, vol. 23(2), pages 109-123, March.
    3. Kahn, Alfred E. & Cramton, Peter C. & Porter, Robert H. & Tabors, Richard D., 2001. "Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond," The Electricity Journal, Elsevier, vol. 14(6), pages 70-79, July.
    4. Ignacio Herrero & Pablo Rodilla & Carlos Batlle, 2020. "Evolving Bidding Formats and Pricing Schemes in USA and Europe Day-Ahead Electricity Markets," Energies, MDPI, vol. 13(19), pages 1-21, September.
    5. Scharff, Richard & Amelin, Mikael, 2016. "Trading behaviour on the continuous intraday market Elbas," Energy Policy, Elsevier, vol. 88(C), pages 544-557.
    6. Ignacio Herrero, Pablo Rodilla, and Carlos Batlle, 2018. "Enhancing Intraday Price Signals in U.S. ISO Markets for a Better Integration of Variable Energy Resources," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    7. Karsten Neuhoff & Nolan Ritter & Aymen SalahAbou-El-Enien & Philippe Vassilopoulos, 2016. "Intraday Markets for Power: Discretizing the Continuous Trading?," Working Papers EPRG 1609, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    8. Ocker, Fabian & Jaenisch, Vincent, 2020. "The way towards European electricity intraday auctions – Status quo and future developments," Energy Policy, Elsevier, vol. 145(C).
    9. Chaves-Ávila, J.P. & Fernandes, C., 2015. "The Spanish intraday market design: A successful solution to balance renewable generation?," Renewable Energy, Elsevier, vol. 74(C), pages 422-432.
    10. Frey, Stefan & Sandås, Patrik, 2009. "The impact of iceberg orders in limit order books," CFR Working Papers 09-06, University of Cologne, Centre for Financial Research (CFR).
    11. Simon Hagemann & Christoph Weber, 2015. "Trading Volumes in Intraday Markets - Theoretical Reference Model and Empirical Observations in Selected European Markets," EWL Working Papers 1503, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Apr 2015.
    12. Bower, John & Bunn, Derek, 2001. "Experimental analysis of the efficiency of uniform-price versus discriminatory auctions in the England and Wales electricity market," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 561-592, March.
    13. Weber, Christoph, 2010. "Adequate intraday market design to enable the integration of wind energy into the European power systems," Energy Policy, Elsevier, vol. 38(7), pages 3155-3163, July.
    14. Kuppelwieser, Thomas & Wozabal, David, 2021. "Liquidity costs on intraday power markets: Continuous trading versus auctions," Energy Policy, Elsevier, vol. 154(C).
    15. Eric Budish & Peter Cramton & John Shim, 2014. "Implementation Details for Frequent Batch Auctions: Slowing Down Markets to the Blink of an Eye," American Economic Review, American Economic Association, vol. 104(5), pages 418-424, May.
    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. Ibrahim Ali Kachalla & Christian Ghiaus, 2024. "Electric Water Boiler Energy Prediction: State-of-the-Art Review of Influencing Factors, Techniques, and Future Directions," Energies, MDPI, vol. 17(2), pages 1-32, January.

    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. 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.
    2. 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.
    3. Ocker, Fabian & Jaenisch, Vincent, 2020. "The way towards European electricity intraday auctions – Status quo and future developments," Energy Policy, Elsevier, vol. 145(C).
    4. Le, Hong Lam & Ilea, Valentin & Bovo, Cristian, 2019. "Integrated European intra-day electricity market: Rules, modeling and analysis," Applied Energy, Elsevier, vol. 238(C), pages 258-273.
    5. Alangi, Somayeh Rahimi & Bjørndal, Endre & Bjørndal, Mette, 2022. "Can the European intraday market be designed as a congestion management tool?," Energy Economics, Elsevier, vol. 113(C).
    6. Eicke, Anselm & Schittekatte, Tim, 2022. "Fighting the wrong battle? A critical assessment of arguments against nodal electricity prices in the European debate," Energy Policy, Elsevier, vol. 170(C).
    7. Hohl, Cody & Lo Prete, Chiara & Radhakrishnan, Ashish & Webster, Mort, 2023. "Intraday markets, wind integration and uplift payments in a regional U.S. power system," Energy Policy, Elsevier, vol. 175(C).
    8. Märkle-Huß, Joscha & Feuerriegel, Stefan & Neumann, Dirk, 2018. "Contract durations in the electricity market: Causal impact of 15min trading on the EPEX SPOT market," Energy Economics, Elsevier, vol. 69(C), pages 367-378.
    9. 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.
    10. Hu, Xiao & Jaraitė, Jūratė & Kažukauskas, Andrius, 2021. "The effects of wind power on electricity markets: A case study of the Swedish intraday market," Energy Economics, Elsevier, vol. 96(C).
    11. Karsten Neuhoff & Nolan Ritter & Aymen SalahAbou-El-Enien & Philippe Vassilopoulos, 2016. "Intraday Markets for Power: Discretizing the Continuous Trading?," Working Papers EPRG 1609, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    12. Pär Holmberg, 2009. "Supply function equilibria of pay-as-bid auctions," Journal of Regulatory Economics, Springer, vol. 36(2), pages 154-177, October.
    13. Kuppelwieser, Thomas & Wozabal, David, 2021. "Liquidity costs on intraday power markets: Continuous trading versus auctions," Energy Policy, Elsevier, vol. 154(C).
    14. Joos, Michael & Staffell, Iain, 2018. "Short-term integration costs of variable renewable energy: Wind curtailment and balancing in Britain and Germany," Renewable and Sustainable Energy Reviews, Elsevier, vol. 86(C), pages 45-65.
    15. Spodniak, Petr & Ollikka, Kimmo & Honkapuro, Samuli, 2019. "The Relevance of Wholesale Electricity Market Places: The Nordic Case," Working Papers 126, VATT Institute for Economic Research.
    16. Hakan Acaroğlu & Fausto Pedro García Márquez, 2021. "Comprehensive Review on Electricity Market Price and Load Forecasting Based on Wind Energy," Energies, MDPI, vol. 14(22), pages 1-23, November.
    17. Silva-Rodriguez, Lina & Sanjab, Anibal & Fumagalli, Elena & Virag, Ana & Gibescu, Madeleine, 2022. "Short term wholesale electricity market designs: A review of identified challenges and promising solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    18. Lina Silva-Rodriguez & Anibal Sanjab & Elena Fumagalli & Ana Virag & Madeleine Gibescu, 2020. "Short Term Electricity Market Designs: Identified Challenges and Promising Solutions," Papers 2011.04587, arXiv.org.
    19. Viehmann, Johannes & Lorenczik, Stefan & Malischek, Raimund, 2021. "Multi-unit multiple bid auctions in balancing markets: An agent-based Q-learning approach," Energy Economics, Elsevier, vol. 93(C).
    20. Viehmann, Johannes & Lorenczik, Stefan & Malischek, Raimund, 2018. "Multi-unit multiple bid auctions in balancing markets: an agent-based Q-learning approach," EWI Working Papers 2018-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

    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:gam:jeners:v:16:y:2023:i:13:p:5106-:d:1185145. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.