Strategic Behavior in the German Balancing Energy Mechanism: Incentives, Evidence, Costs and Solutions

Just, Sebastian

doi:10.2139/ssrn.2170311

Cited by 3 publications

(2 citation statements)

References 13 publications

(6 reference statements)

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“…Literature on BP auction design also widens, e.g. an examination of arbitrage opportunities between the wholesale market and the BP markets (Haucap et al 2014;Just and Weber 2015;Ocker et al 2018a). The massive subsidization of wind and solar generation yields to an investigation of renewables and the BP market.…”

Section: Related Literaturementioning

confidence: 99%

Design and regulation of balancing power auctions: an integrated market model approach

Ehrhart

Ocker

2021

J Regul Econ

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We present an integrated market model which considers the dependencies between the wholesale market and the highly regulated balancing power markets. This fosters the understanding of the mechanisms of these markets and, thus, allows the evaluation of the designs of these markets and their interplay. In contrast to existing literature, in our model the prices on the different markets are interdependent and endogenously determined, which also applies to the switch from inframarginal suppliers to extramarginal suppliers. Linked to this, the implementation of a specific assignment of the suppliers to the different markets is according to their production costs and their ability to provide balancing power. We prove the existence of a market equilibrium, analyze its outcome and contrast this with German market data. Based on this model, we assess design changes, partly stipulated by recent European regulation. This includes uniform pricing as a common settlement rule (effect: no truthful bidding in general), standardized prequalification criteria (promising measure for cost reduction), market flexibilization via “free energy bids” (no increased competition) and the alternative score “mixed-price rule” (no effect on the equilibrium).

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Section: Related Literaturementioning

confidence: 99%

Design and regulation of balancing power auctions: an integrated market model approach

Ehrhart

Ocker

2021

J Regul Econ

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“…Typically, the TSOs oversee this guaranteeing the supplier a feed-in-tariff. The production forecast for renewable energy has a horizon of up to 36 hours before delivery (Graeber and Kleine, 2013;Just and Weber, 2015).…”

Section: The German Electricity Marketmentioning

confidence: 99%

The impact of renewable energy forecast errors on imbalance volumes and electricity spot prices

2019

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This paper contributes to the general consideration of whether a policy of incentivising improved forecasts for renewable energy outputs, and making them more available in the daily electricity market, would be beneficial. Using data from the German electricity market, we investigate the effect of wind and solar energy forecasts errors on imbalance volumes and intraday spot electricity prices. We use ordinary least square regression, quantile regression and autoregressive moving averages to identify these relationships using variables that have a quarter-hourly data granularity. The results show a positive relationship between wind forecast errors and imbalance volumes. We find that wind forecast errors impact spot prices more than solar forecasting errors. Policy incentives to improve the accuracy and availability of renewable energy forecasts should therefore be encouraged.

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Econometric Analysis of 15-Minute Intraday Electricity Prices

Kiesel

Paraschiv

2015

SSRN Journal

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The trading activity in the German intraday electricity market has increased significantly over the last years. This is partially due to an increasing share of renewable energy, wind and photovoltaic, which requires power generators to balance out the forecasting errors in their production. We investigate the bidding behaviour in the intraday market by looking at both last prices and continuous bidding, in the context of a fundamental model. A unique data set of 15-minute intraday prices and intraday-updated forecasts of wind and photovoltaic has been employed and price bids are modelled by prior information on fundamentals. We show that intraday prices adjust asymmetrically to both forecasting errors in renewables and to the volume of trades dependent on the threshold variable demand quote, which reflects the expected demand covered by the planned traditional capacity in the day-ahead market. The location of the threshold can be used by market participants to adjust their bids accordingly, given the latest updates in the wind and photovoltaic forecasting errors and the forecasts of the control area balances.

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Strategic Behavior in the German Balancing Energy Mechanism: Incentives, Evidence, Costs and Solutions

Cited by 3 publications

References 13 publications

Design and regulation of balancing power auctions: an integrated market model approach

Design and regulation of balancing power auctions: an integrated market model approach

The impact of renewable energy forecast errors on imbalance volumes and electricity spot prices

Econometric Analysis of 15-Minute Intraday Electricity Prices

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