Day-ahead market bidding taking the balancing power market into account

Abstract

Generation companies with controllable units put considerable analysis into the process of bidding into the day-ahead markets for electricity. This article investigates the gain of coordinating price-taking bids to the day-ahead electricity market (DA) and sequentially cleared energy-only markets, such as the Nordic balancing market (BM). A technically detailed case study from the Nordic market is presented. We find that coordinated bidding is hardly worthwhile under current market conditions, but that only a modest increase in the demand for balancing energy will make coordination profitable. If the supply curve for balancing energy is convex, so that the cost of balancing energy is asymmetric, the gains will be even higher. Finally, we find that day-ahead market bid curves that result from coordinated instances provide extra supply at low prices, and lower supply at high prices, compared to sequential bids. This is rational given the anticipated opportunities that the balancing market offers; however, it makes day-ahead bidding appear to exploit market power.

Predictions of prices and volumes in the Nordic balancing markets for electricity

“…The literature on balancing volumes and imbalance prices in the Norwegian and Nordic power markets is scarce [8,10,11,18]. Klaeboe et al [10] found that coordinated bidding between the day-ahead and balancing market is currently not profitable, but it might become so with increased volumes and imbalance price premiums, i.e., differences between dayahead price and imbalance price. However, their study focused on imbalance prices and not on predicting balancing volumes for production planning.…”

Balancing the Norwegian Regulated Power Market Anno 2016 to 2022

“…However, the authors hypothesize that weather may be influential for models incorporating consumption forecasts together with temperature forecasts or if the power systems had a greater share of renewable wind or solar production. Klaeboe et al (2022) studied bidding strategies between dayahead and balancing markets for hydro-power producers in Norway. They concluded that coordinated bidding between the two markets is currently not profitable, but might be with increased volumes and price premiums.…”

Balancing the Norwegian Regulated Power Market Anno 2016 to 2022

“…Klaeboe et al [15] studied bidding strategies between day-ahead and balancing markets for hydro-power producers in Norway. They concluded that coordinated bidding between the two markets is currently not profitable, but might be with increased volumes and price premiums.…”