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Tender Frequency and Market Concentration in Balancing Power Markets

Author

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  • Knaut, Andreas

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Obermüller, Frank

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Weiser, Florian

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

Balancing power markets ensure the short-term balance of supply and demand in electricity markets and their importance may increase with a higher share of fluctuating renewable electricity production. While it is clear that shorter tender frequencies, e.g. daily or hourly, are able to increase the efficiency compared to a weekly procurement, it remains unclear in which respect market concentration will be affected. Against this background, we develop a numerical electricity market model to quantify the possible effects of shorter tender frequencies on costs and market concentration. We find that shorter time spans of procurement are able to lower the costs by up to 15%. While market concentration decreases in many markets, we – surprisingly – identify cases in which shorter time spans lead to higher concentration.

Suggested Citation

  • Knaut, Andreas & Obermüller, Frank & Weiser, Florian, 2017. "Tender Frequency and Market Concentration in Balancing Power Markets," EWI Working Papers 2017-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2017_004
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    References listed on IDEAS

    as
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    2. Heim, Sven & Götz, Georg, 2021. "Do Pay-As-Bid Auctions Favor Collusion? Evidence from Germany's market for reserve power," Energy Policy, Elsevier, vol. 155(C).
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    6. Sebastian Just, 2011. "Appropriate contract durations in the German markets for on-line reserve capacity," Journal of Regulatory Economics, Springer, vol. 39(2), pages 194-220, April.
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    11. Wolf-Peter Schill & Michael Pahle & Christian Gambardella, 2016. "On Start-up Costs of Thermal Power Plants in Markets with Increasing Shares of Fluctuating Renewables," Discussion Papers of DIW Berlin 1540, DIW Berlin, German Institute for Economic Research.
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    Cited by:

    1. Fabian Ocker & Karl‐Martin Ehrhart & Marion Ott, 2018. "Bidding strategies in Austrian and German balancing power auctions," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 7(6), November.
    2. Merten, Michael & Rücker, Fabian & Schoeneberger, Ilka & Sauer, Dirk Uwe, 2020. "Automatic frequency restoration reserve market prediction: Methodology and comparison of various approaches," Applied Energy, Elsevier, vol. 268(C).
    3. Çam, Eren, 2020. "Optimal Dispatch of a Coal-Fired Power Plant with Integrated Thermal Energy Storage," EWI Working Papers 2020-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 10 Aug 2021.
    4. Casimir Lorenz & Clemens Gerbaulet, 2017. "Wind Providing Balancing Reserves: An Application to the German Electricity System of 2025," Discussion Papers of DIW Berlin 1655, DIW Berlin, German Institute for Economic Research.
    5. Schillinger, Moritz, 2019. "Balancing Market Design and Opportunity Cost - The Swiss Case," Working papers 2019/14, Faculty of Business and Economics - University of Basel.
    6. Brändle, Gregor & Schönfisch, Max & Schulte, Simon, 2020. "Estimating Long-Term Global Supply Costs for Low-Carbon Hydrogen," EWI Working Papers 2020-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 10 Aug 2021.
    7. 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.
    8. Schillinger, Moritz, 2020. "Balancing-market design and opportunity cost: The Swiss case," Utilities Policy, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Balancing Power; Market Design; Market Concentration; Tender Frequency; Provision Duration; Mixed Integer Programming;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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