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Extreme prices in electricity balancing markets from an approach of statistical physics

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  • Mario Mureddu
  • Hildegard Meyer-Ortmanns

Abstract

An increase in energy production from renewable energy sources is viewed as a crucial achievement in most industrialized countries. The higher variability of power production via renewables leads to a rise in ancillary service costs over the power system, in particular costs within the electricity balancing markets, mainly due to an increased number of extreme price spikes. This study focuses on forecasting the behavior of price and volumes of the Italian balancing market in the presence of an increased share of renewable energy sources. Starting from configurations of load and power production, which guarantee a stable performance, we implement fluctuations in the load and in renewables; in particular we artificially increase the contribution of renewables as compared to conventional power sources to cover the total load. We then forecast the amount of provided energy in the balancing market and its fluctuations, which are induced by production and consumption. Within an approach of agent based modeling we estimate the resulting energy prices and costs. While their average values turn out to be only slightly affected by an increased contribution from renewables, the probability for extreme price events is shown to increase along with undesired peaks in the costs.

Suggested Citation

  • Mario Mureddu & Hildegard Meyer-Ortmanns, 2016. "Extreme prices in electricity balancing markets from an approach of statistical physics," Papers 1612.05525, arXiv.org.
  • Handle: RePEc:arx:papers:1612.05525
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    4. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
    5. James Nicolaisen & Valentin Petrov & Leigh Tesfatsion, 2000. "Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing," Computational Economics 0004005, EconWPA.
    6. Nicolosi, Marco, 2010. "Wind power integration and power system flexibility-An empirical analysis of extreme events in Germany under the new negative price regime," Energy Policy, Elsevier, vol. 38(11), pages 7257-7268, November.
    7. Helyette Geman & A. Roncoroni, 2006. "Understanding the Fine Structure of Electricity Prices," Post-Print halshs-00144198, HAL.
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