Analysis of Integrated Balancing Markets in Northern Europe under Different Market Design Options
Year: 2015
Type: dissertation
Abstract: In an electric power system, the instantaneous balance between demand and supply\nmust always be maintained. Due to the inherent stochasticity of certain types\nof generation sources and demand, as well as contingencies in the power system,\nimbalances occur. Hence, corrective actions are required to continuously keep the\nsystem in a balanced state. For this, the system needs reserve generation capacity\nwith a set of desired technical characteristics such as fast ramp up speed and short\nstartup time. By making use of market mechanisms, the System Operator ensures\nthe availability of enough reserve capacity ahead of time and activates the resources\nin response to system imbalances in real-time in a setting called balancing market.\nAn integrated European electricity market is expected to increase the efficiency,\noverall welfare, competition, and security of supply. With this understanding, the\nday-ahead market in Europe has undergone integration efforts with the long-term\ngoal of establishing a single European electricity market. Integration of the balancing\nmarket is also expected to bring a socio-economic benefit. This is due to\nthe sharing of balancing resources and the reduction of required balancing actions\nby netting of imbalances in adjacent areas. However, prior to the realization of a\nfully integrated balancing market, balancing market variables such as gate closure\ntimes, remuneration mechanisms, and the contract periods have to be harmonized\nfirst. This PhD work assumes that these variables are in place in the mathematical\nformulations and the associated results.\nThe main objective of this thesis is the modeling of integrated reserve procurement\nand balancing energy markets in a setting similar to the current sequential market\nclearance order in Europe. The models are used to analyze the impact of balancing\nmarket integration in the current European electricity market settings and allow the\ncomparison of different market designs. To assess the impact of balancing market\nintegration, optimization models addressing cross-border reserve procurement and\nbalancing energy market integration are developed. The first one is composed of\nthree interdependent blocks: Reserve bidding price determination, reserve procurement,\nand day-ahead market clearance. The other one is a formulation for balancing\nenergy market. In addition, a methodology for optimal cross-border transmission\ncapacity allocation is developed. The balancing market integration is implemented\nin both NTC based and flow-based market coupling settings.\nThe following are some of the main results obtained in this PhD work: \nUnit based upward and downward bidding prices for reserve provision are a\nfunction of the difference between the spot price forecasts and a unit’s marginal\ncost.\n• The total reserve procurement cost decreases with increased share of reserved\nNet Transfer Capacity (NTC), as a result of the possibility of procuring cheaper\ncross-border reserves. The day-ahead cost generally increases with increase in\nreserved capacity. However, for small shares of reserved transmission capacity,\nprocuring reserves from another system reduces the need to keep reserves in\nthe expensive system, increasing the flexibility and reducing the day-ahead\ncost.\n• Given the possibility of cross-border reserve procurement, more upward reserve\nis procured from Norway, Sweden, and the Netherlands. On the other hand,\nGermany imports some of its FRR requirement.\n• Using an NTC based methodology to optimally allocate transmission capacity\nfor FRR exchange for a planning period of 24 hours, a reduction of EUR\n26 million (≈ 8 %) in FRR procurement and EUR 53 million in total costs\nis obtained compared to the base case of no reservation. This result asserts\nthat optimal reservation of NTC for FRR exchange can reduce both FRR\nprocurement costs and day-ahead costs simultaneously.\n• For the model with NTC based optimal transmission capacity reservation,\nwhere a reservation period of 24 hours has been normally used, sensitivity\nanalyses using a 12 hours reservation period showed very significant cost reductions.\nThis emphasises the importance of short reservation periods for\nreserve procurement.\n• The implicit market clearance option, where the reserve requirement is implicitly\nconsidered as a constraint in the day-ahead market clearance, is generally\na more efficient market clearance option than the sequential market clearance\nwith optimal transmission capacity reservation. The flexibility due to short\nplanning period and efficiency of the market design option contribute to the\nsignificant total cost reduction offered by the implicit market clearance option.\nThe flow-based market coupling with implicit market clearance results in total\ncost savings of EUR 413 million compared to the case with no transmission capacity\nreservation. On the other hand, flow-based sequential market clearance\nwith optimal transmission reservation gives a saving of EUR 19 million.\n• The possibility of cross-border balancing energy exchange gives cost reduction\nbenefits in comparison to local balancing. The decrease in balancing costs is\ndue to the netting of imbalances and the use of cheaper balancing energy from\nneighbouring zones. Due to the general improvement in market efficiency,\nconsidering the IEEE 30-bus test system, the integrated flow-based balancing\nenergy market clearing results in 20 % lower balancing cost compared to the\nNTC based approach.
Author: Yonas T. Gebrekiros
Language: English
Subfield: Electrical and Electronic Engineering
Field: Engineering
Domain: Physical Sciences
Open Access status: green
OpenAlex ID: W2492848812