IDEAS home Printed from
   My bibliography  Save this paper

The impact of intraday markets on the market value of flexibility–Decomposing effects on profile and the imbalance costs


  • Christian Pape

    () (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen))


An increasing share of variable renewable energy sources (VREs) basically affects the electricity price formation in two ways: (1) The so-called merit order effect tends to lower the base price level and challenges conventional plants to remain profitable. (2) Due to the variable nature of renewable energy infeed, the shortterm demand for flexibility increases and changes the volatility of electricity prices. The more variable prices offer opportunities for controllable electricity producers (CEPs) to provide up- and down-ramping flexibility to increase their revenues. In contrast, the VREs with high degrees of simultaneity tend to pay for this flexibility in the electricity spot market to reduce their imbalance exposure. The intraday market (IDM) for electricity has gained importance for the market value of different technologies lately and continues to expand due to the increasing efforts to balance within-day deviation from day-ahead schedules. This article presents a combination and extension of two existing models to capture the peculiarities of the intraday price formation and to analyse the impact of the IDM on the market value of VREs and CEPs. Doing so, the paper suggests an adjustment of the classical market value factor metric and to go beyond classical day-ahead market (DAM) information. The article shows that market value factors (MVFs) can be stabilized if the IDM delivers ‘marketbased’ price signals for the costs of flexibility, that are sufficient to activate flexibilities prior to the usually more expensive imbalance mechanism (IBM). Yet, the MVFs from single VRE technologies will worsen if their market share is high enough to outweigh forecast errors from other technologies and if they become a permanent price maker in the IDM and the IBM.

Suggested Citation

  • Christian Pape, 2017. "The impact of intraday markets on the market value of flexibility–Decomposing effects on profile and the imbalance costs," EWL Working Papers 1711, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Dec 2017.
  • Handle: RePEc:dui:wpaper:1711

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Arthur Henriot, 2014. "Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    2. Kallabis, Thomas & Pape, Christian & Weber, Christoph, 2016. "The plunge in German electricity futures prices – Analysis using a parsimonious fundamental model," Energy Policy, Elsevier, vol. 95(C), pages 280-290.
    3. Karakatsani, Nektaria V. & Bunn, Derek W., 2008. "Forecasting electricity prices: The impact of fundamentals and time-varying coefficients," International Journal of Forecasting, Elsevier, vol. 24(4), pages 764-785.
    4. Winkler, Jenny & Gaio, Alberto & Pfluger, Benjamin & Ragwitz, Mario, 2016. "Impact of renewables on electricity markets – Do support schemes matter?," Energy Policy, Elsevier, vol. 93(C), pages 157-167.
    5. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    6. Huber, Matthias & Dimkova, Desislava & Hamacher, Thomas, 2014. "Integration of wind and solar power in Europe: Assessment of flexibility requirements," Energy, Elsevier, vol. 69(C), pages 236-246.
    7. Bueno-Lorenzo, Miriam & Moreno, M. Ángeles & Usaola, Julio, 2013. "Analysis of the imbalance price scheme in the Spanish electricity market: A wind power test case," Energy Policy, Elsevier, vol. 62(C), pages 1010-1019.
    8. Sebastian Just & Christoph Weber, 2012. "Strategic Behavior in the German Balancing Energy Mechanism: Incentives, Evidence, Costs and Solutions," EWL Working Papers 1204, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2012.
    9. Frieder Borggrefe & Karsten Neuhoff, 2011. "Balancing and Intraday Market Design: Options for Wind Integration," Discussion Papers of DIW Berlin 1162, DIW Berlin, German Institute for Economic Research.
    10. Rafal Weron & Florian Ziel, 2018. "Electricity price forecasting," HSC Research Reports HSC/18/08, Hugo Steinhaus Center, Wroclaw University of Technology.
    11. Sebastian Just & Christoph Weber, 2015. "Strategic behavior in the German balancing energy mechanism: incentives, evidence, costs and solutions," Journal of Regulatory Economics, Springer, vol. 48(2), pages 218-243, October.
    12. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo, 2008. "The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany," Energy Policy, Elsevier, vol. 36(8), pages 3076-3084, August.
    13. Wichser, Corinne & Klink, Katherine, 2008. "Low wind speed turbines and wind power potential in Minnesota, USA," Renewable Energy, Elsevier, vol. 33(8), pages 1749-1758.
    14. Lamont, Alan D., 2008. "Assessing the long-term system value of intermittent electric generation technologies," Energy Economics, Elsevier, vol. 30(3), pages 1208-1231, May.
    15. Van den Bergh, Kenneth & Delarue, Erik & D'haeseleer, William, 2013. "Impact of renewables deployment on the CO2 price and the CO2 emissions in the European electricity sector," Energy Policy, Elsevier, vol. 63(C), pages 1021-1031.
    16. Myhr, Anders & Bjerkseter, Catho & Ågotnes, Anders & Nygaard, Tor A., 2014. "Levelised cost of energy for offshore floating wind turbines in a life cycle perspective," Renewable Energy, Elsevier, vol. 66(C), pages 714-728.
    17. 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.
    18. Chaves-Ávila, José Pablo & Hakvoort, Rudi A. & Ramos, Andrés, 2013. "Short-term strategies for Dutch wind power producers to reduce imbalance costs," Energy Policy, Elsevier, vol. 52(C), pages 573-582.
    19. Larson, David P. & Nonnenmacher, Lukas & Coimbra, Carlos F.M., 2016. "Day-ahead forecasting of solar power output from photovoltaic plants in the American Southwest," Renewable Energy, Elsevier, vol. 91(C), pages 11-20.
    20. Hahn, Heiko & Meyer-Nieberg, Silja & Pickl, Stefan, 2009. "Electric load forecasting methods: Tools for decision making," European Journal of Operational Research, Elsevier, vol. 199(3), pages 902-907, December.
    21. Richard Green & Nicholas Vasilakos, 2011. "The Long-term Impact of Wind Power on Electricity Prices and Generating Capacity," Discussion Papers 11-09, Department of Economics, University of Birmingham.
    22. Bjørndal, Endre & Bjørndal, Mette & Midthun, Kjetil & Zakeri, Golbon, 2016. "Congestion Management in a Stochastic Dispatch Model for Electricity Markets," Discussion Papers 2016/12, Norwegian School of Economics, Department of Business and Management Science.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sergei Kulakov & Florian Ziel, 2019. "The impact of renewable energy forecasts on intraday electricity prices," Papers 1903.09641,

    More about this item


    intraday markets; imbalance mechanism; market value; renewable energy;

    JEL classification:

    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:dui:wpaper:1711. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andreas Fritz). General contact details of provider: .

    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 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.