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Interactions of Imbalance Settlement with Energy and Reserve Markets in Multi-Product European Balancing Markets

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  • Cartuyvels, Jacques

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Bertrand, Gilles

    (ACER)

  • Papavasiliou, Anthony

    (NTUA)

Abstract

This paper provides a framework for analyzing the interaction of imbalance settlement with the clearing of real-time energy and reserve markets. We characterize the optimal strategies of price-taking flexibility providers that can participate in sequential capacity auctions for automatic and manual frequency restoration reserves, followed by an auction that is conducted by the system operator for activating balancing energy. We establish equilibria based on three market features: (i) reserve demand curves, (ii) the activation strategy implemented by the system operator, and (iii) the imbalance settlement scheme. The optimal activation strategy is derived and the effect of the imbalance pricing scheme on bidding incentives, cost efficiency, and reserve prices is discussed.

Suggested Citation

  • Cartuyvels, Jacques & Bertrand, Gilles & Papavasiliou, Anthony, 2024. "Interactions of Imbalance Settlement with Energy and Reserve Markets in Multi-Product European Balancing Markets," LIDAM Discussion Papers CORE 2024007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2024007
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    References listed on IDEAS

    as
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    5. Karl-Martin Ehrhart & Fabian Ocker, 2021. "Design and regulation of balancing power auctions: an integrated market model approach," Journal of Regulatory Economics, Springer, vol. 60(1), pages 55-73, August.
    6. Poplavskaya, Ksenia & Lago, Jesus & de Vries, Laurens, 2020. "Effect of market design on strategic bidding behavior: Model-based analysis of European electricity balancing markets," Applied Energy, Elsevier, vol. 270(C).
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