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External effects can be triggered through trade and depend on the locations of buyers and sellers who are matched. Inspired by electricity markets, we experimentally investigate markets in which net trades between two locations induce social costs. Based on a modified double auction setting, we compare the performance of market platforms that are location-blind with those where information on the location of (potential) trading partners or the level of the externality is given. We demonstrate that locational information is sufficient to reduce the externality. Imposing the full external costs on individual trades leads to maximal price differentiation between locations and further reduces net trades, while welfare improvements are limited. Reasons for not achieving the typically high efficiency of double auctions are discussed. [ABSTRACT FROM AUTHOR]

Continuous trading is currently becoming the standard for intraday electricity markets. In this paper, we propose frequent auctions as a viable alternative. We argue that batching orders in auctions potentially leads to lower liquidity cost, more reliable, less noisy price signals, and allows for better alignment of market outcomes with the technical realities of the transmission grid. In an empirical study, we compare the German continuous intraday market with counterfactual outcomes from frequent auctions. We find that traded volumes tend to be higher for continuous trading; however, the auction market benefits from lower liquidity costs and less noisy price signals. Furthermore, we critically discuss the suitability of continuous trading in the presence of network constraints and technical restrictions of conventional units. Taken together these findings suggest that in sparsely traded intraday markets, pooling orders in frequent auctions may be beneficial. [ABSTRACT FROM AUTHOR]

The emissions trading scheme (ETS) has piqued substantial interest among economists and policymakers. China officially launched the electricity sector's national carbon emissions trading market in 2021, making it the world's largest compliance carbon market. In contrast to the cap-and-trade (C&T) system prevalent in other economies, China's national carbon market employs a rate-based mechanism that implicitly subsidizes the output of regulated entities; however, is it effective? This study uses a market-design theoretical framework to explore whether China's national carbon market functions effectively and, more critically, what leads to its (slight) underperformance. We discover that policy design, policy conflicts, policy uncertainty, inexperienced market regulation, and excessive or inappropriate government intervention are the primary constraints on this emerging market, resulting in shrinking market thickness, congested market transactions, and lack of safety. For China to establish a better national carbon market, stronger market-oriented rules, appropriate market regulation, improved policy coordination, and greater electricity market reforms are required. [ABSTRACT FROM AUTHOR]

Copyright of Informacion Comercial Espanola Revista de Economia is the property of S.G.E.E.I.P.C., Secretaria de Estado de Comercio, Ministerio de Industria, Comercio y Turismo and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

On 14 March 2023, the European Commission presented its proposals for reforming the EU's electricity market design, supporting hedging and market-based price mechanisms to address volatility of wholesale electricity prices. Besides PPA, energy sharing and forward markets, the reform promotes especially the recourse to two-way CfD to allow the generator for a revenue guarantee for the electricity produced but with an upward limitation when market prices are high. The Commission also announced the probable end of inframarginal cap and recommends revaluing the importance of OPEX, in order to encourage further non-fossil flexibility services for renewable integration. Consumers are also at the centre of the reform with the Commission allowing for limited national price setting intervention, mandatory offer of fixed contract and a designated supply of last resort. [ABSTRACT FROM AUTHOR]

Frequency Containment Reserve (FCR) Cooperation is a European effort to integrate several countries in an integrated international electricity market platform for FCR procurement. In this market, Balancing Service Providers (BSPs) are on the supply side and Transmission System Operators (TSOs) on the demand side. This paper proposes a novel settlement scheme for sharing costs among TSOs; it proposes no changes to existing market clearing rules or to the existing settlement of the BSPs' revenues. It is shown that the current TSO settlement scheme is an inequitable mechanism that originates negative costs for some TSOs in specific conditions, which are extensively discussed. The proposed TSO settlement scheme overcomes these inequities. In the proposed scheme, TSOs begin paying the local BSPs for the cleared bids needed locally, and the remaining imports are calculated in a subsequent step. Doing so avoids using the so-called "import/export costs", which are demonstrated to be the source of the inequities in the current scheme. It is shown that if the proposed pricing scheme had been adopted from July 2019 to December 2022, all TSOs would have been affected. Specifically, the most negatively impacted TSO would have its accumulated costs increased by 16% and the most positively impacted TSO would have its accumulated cost decreased by 32%. The inequities of the current mechanism amount to more than 50 M€ or 7.4% of the total accumulated costs. Although the proposed mechanism is tested here under the FCR Cooperation, it can be applied to other markets where the rules allow different local settlement prices. • A new market mechanism is proposed to compute TSO costs in the FCR Cooperation. • The proposed scheme can be applied to other markets where local prices apply. • The proposed scheme is compared with the current scheme. • Distortions in the current scheme are quantified and discussed. [ABSTRACT FROM AUTHOR]

• Markets can be studied at the actor, resource and institutional level. • Current electricity markets operate on a logic of scale and professionalism. • Conflicting logics hinder community participation in electricity markets. • Adaptation to the market regime weakens the transformative power of communities. • Community collaborations and aggregation are promising for the energy transition. Energy communities are considered important drivers of the energy transition. While they have mainly focused on collective energy generation, they are increasingly getting involved in the provision and trading of energy and in flexibility services. This change of focus creates opportunities to participate in electricity markets but proves to be challenging because of the current electricity markets serving incumbency. In this study, we conduct an in-depth analysis of how broader market organisation impacts participation of energy communities in electricity markets. Drawing from transition studies and economic market literature, we develop a framework for analysing market organisation. Based on a literature review, observations and semi-structured interviews with communities and market actors, we conclude that, as a result of conflicting community and market logic, communities often adjust their business models to participate in the markets, which could jeopardize their potential to contribute to radical system change. [ABSTRACT FROM AUTHOR]

Electricity markets are going through a comprehensive transformation that includes the large-scale appearance of intermittent renewable generators (RGs). To handle the local effects of new RGs on the distribution grid, the more efficient utilization of distributed local flexibility (LF) resources is necessary. However, the optimal market design is not yet known for LF products. This paper investigates a novel cost allocation mechanism in the context of this market challenge. The mechanism is designed to provide several important advantages of peer-to-peer trading without creating barriers to practical application. It provides partial disintermediation. The acquisition of LF remains the responsibility of the DSO, while the financial costs of the transaction are covered on power exchanges (PXs). To provide this functionality, the clearing algorithm of the PX in question has to incorporate a novel feature we call the Payment Redistribution Technique. This technique allows the buyers' expenses to be larger than the sellers' income, and the difference is used to finance flexibility costs. Its mathematical formulation is presented and analyzed in detail, considering computational efficiency and accuracy. Afterward, a realistic case study is constructed to demonstrate the operation of the algorithm and its energy market effects. [ABSTRACT FROM AUTHOR]

The design of electricity imbalance pricing mechanisms is internationally controversial. Policies on whether to permit virtual trading for market participants and whether, or how, to impose penalty incentives on the imbalance volumes vary widely. Furthermore, market designs vary depending whether the imbalance prices are obtained directly from real-time trading or based upon the offer and demand functions from the day-ahead energy markets. This paper develops an analytical framework for evaluating designs for imbalance settlement mechanisms and we have selected the Japanese electricity market, which has undergone several revisions in its imbalance mechanism, as a good example to assess such variations. We develop a predictive approach for the imbalance volumes and price densities using two-step quantile regressions and derive a new trading optimization for a virtual trader's arbitrage position. We construct supporting models to estimate prediction errors for renewable power and demand as drivers of imbalance volume. The empirical analysis reveals that even in a mechanism with imbalance penalties based upon day-ahead reference prices, virtual trading may still be beneficial to market participants as well as to the system operator. We also find that greater market transparency is crucial for increased benefits. The insights generalize beyond the Japan case study. [ABSTRACT FROM AUTHOR]

We present a convex model describing risk-averse strategies for electricity producers in congested electricity networks. Extending prior work on Cournot-Bertrand equilibria in Poolco-style spot markets with locational marginal pricing, we propose a formulation which integrates uncertainty through robust convex optimization. We find that producers uniformly benefit from robust strategies under small uncertainty intervals, and explore the impacts of congestion and network effects on strategic behavior. We demonstrate our results on a simple example and explore the impacts of robust strategies on social welfare, finding that these risk-averse strategies reduce welfare by restricting output and increasing prices. By formulating the equilibrium conditions as a convex optimization problem, we are able to scale our results to large networks and accommodate many sources of uncertainty.

This article summarizes key changes in market and regulatory governance arrangements in the electricity sector in Brazil over the last three decades. The Brazilian reform process during this period can be described as a series of attempts to move toward a market-driven system, interrupted by ad hoc interventions of a political nature or to respond to specific crises. This series of events reveals the pathway of a system that managed to significantly expand and diversify its electricity power mix by harnessing its renewable endowment. The historical role played by hydropower plants with reservoirs—along with a highly integrated electricity system—in smoothing production over time has been considerably diminished and will continue to be as climate change takes its toll. Thus, improvements in market and governance arrangements are required to promote a more diverse electricity mix, with variable renewable energy and demand management playing much more significant roles. [ABSTRACT FROM AUTHOR]

We study the optimal design of demand response and peak-time rebate programs in the electricity sector. Load-serving entities (LSEs) frequently use demand response or peak-time rebate programs to reduce consumption during peak hours. However, LSEs have imperfect information, so they typically estimate a customer’s counterfactual energy consumption—often referred to as ‘baseline’— and offer compensations for reductions below this threshold. Due to the inherent variability and uncertainty of demand, this approach may lead to generous incentives to customers who make no effort to reduce their demand, and underpayment to those who do. We show that the estimated baseline is not necessarily the optimal threshold for calculating rebates in demand response programs. The LSE needs to learn about customers’ demand patterns and also customers’ propensity for reductions over time. We bring in tools and methodologies from online learning to formulate and solve the LSE’s optimization problem in designing demand response program. By appropriately tuning the parameters, the LSE can use this framework to balance multiple objectives to determine the appropriate rebate threshold for customers. Using the data from a ToU pricing experiment in London, we show that compared to a conventional demand response program, our approach significantly improves the targeting of demand response payments. [ABSTRACT FROM AUTHOR]

We study Peak-Time-Rebates (PTR) contracts in day-ahead electricity markets. Such contracts reward customers for reducing their consumption when wholesale prices are high. We start by pointing out that these market designs create arbitrage opportunities which, under asymmetric information, incentivize strategic consumers to inflate their baseline. We then show that an incentive compatible PTR design is equivalent to a variable Critical-Peak-Pricing design (vCPP), in which customers have to purchase their peak consumption at the spot price. Under asymmetric information, a relevant question is thus to design vCPP contracts optimally in order to achieve high enrollment rates under voluntary opt-in. This problem has different solutions depending on whether policy-makers choose to maintain existing cross-subsidies or not. [ABSTRACT FROM AUTHOR]

This paper provides the first EU wide analysis of the variation in Capacity Remuneration Requirements throughout Europe which aim to resolve the "missing money" problems in various member states. The findings of this analysis point to an asymmetric investment case for gas-fired peaking power plants throughout the EU. Under the assumptions of the European Commission Reference Scenario, pan-European power optimisation and investment models are specified for 2030. The results show that future investment in gas generators will depend on the availability of capacity payments. Capacity remuneration mechanisms can provide this "missing money," but we show that capacity remuneration requirements vary considerably across countries. We consider and model the impacts of country specific climate policy targets, sovereign risk, capital allowances, corporate taxes and future gas network tariffs on investor returns and therefore remuneration requirements. In the context of harmonised energy trading, this raises questions of how generation adequacy should be achieved, particularly in the context of higher penetrations of renewables. [ABSTRACT FROM AUTHOR]

The article traces the development of "spot pricing" for electrical power, which has provided the technique for calculating electricity prices in wholesale markets in most of the United States, and is rapidly becoming the standard in many other countries. The model was first formalized by a group of engineers and economists associated with the engineering professor Fred Schweppe, at MIT. From his position as a leading control theorist, well known in the industry, Schweppe proposed an expansion of control theory that he argued would help break the deadlock in regulatory politics and benefit producers and consumers of power alike. He introduced the approach, which he called "homeostatic control," around 1978 in a seminar of the MIT Energy Lab. Derived by way of a biological metaphor, homeostatic control conceives of a self-correcting system that maintains its equilibrium state in the face of a changing environment. Schweppe's group envisioned bringing consumers of power into the control system by constantly feeding them signals in the form of prices. The MIT team discovered through the contact between economists and engineers that the calculation for determining efficient prices is identical to the calculation used by engineers for meeting system load while minimizing costs. The Lagrange multipliers, or lambdas, derived from the engineering optimization are the best estimates of the marginal cost, and therefore the efficient prices, at each node of the system. [ABSTRACT FROM AUTHOR]

In April 2015, Singapore introduced an anonymous futures market for wholesale electricity. Using data on prices and other observable characteristics of all competitive retail contracts signed from October 2014 to March 2016, a larger average quantity of open futures contracts that clear during the term of the retail contract a month before the retail contract starts delivery predicts a lower price for the retail contract. This outcome is consistent with increased futures market purchases by independent retailers causing lower retail prices. Consistent with the logic in Wolak (2000) that a larger volume of fixed-price forward contract obligations leads to offer prices closer to the supplier's marginal cost of production, a larger volume of futures contracts clearing against short-term wholesale prices predicts lower half-hourly wholesale prices. Both empirical results support introducing purely financial players to improve both retail and wholesale market performance. The paper then outlines how a regulator-mandated standardized futures market can be used as a long-term resource adequacy mechanism for the wholesale market regime. [ABSTRACT FROM AUTHOR]

This paper introduces a decentralized market design, which allows a distribution system operator to manage local demand constraints by obtaining flexibility from competing aggregators, which must in-turn incentivize prosumers to provide this flexibility. The novel networked market structure accounts for distribution system operator-to-aggregator and aggregator-to-prosumer ICT infrastructure and contractual arrangements, which may limit which participants can negotiate transactions with one another. The proposed flexibility market is opt-in for prosumers, which continue to obtain energy within the existing retail electricity market. At the same time, it is underpinned by bilateral energy transactions, and could be integrated into future peer-to-peer electricity markets. Through the market, the distribution system operator, aggregators, and prosumers reach agreement on a stable outcome–a set of individually beneficial transactions no group wishes to mutually deviate from. Market outcomes also satisfy Pareto efficiency, meaning that it is not possible to make a participant better off, without making another worse off. [ABSTRACT FROM AUTHOR]

There is an ongoing debate on the introduction of capacity markets in most European countries while a few of them have already established capacity markets. Since the implementation of independent national capacity markets is not in line with the target of a pan-European internal electricity market we investigate the impacts of uncoordinated capacity markets compared with coordinated capacity markets. A probabilistic approach for the determination of capacity requirements is proposed and a European electricity market model (E2M2s) is applied for evaluation. The model simultaneously optimizes investments and dispatch of power plants. Besides the impact on generation investments, market prices and system costs we analyze effects on production and security of supply. While coordinated capacity markets reveal high potentials for cross-border synergies and cost savings, uncoordinated and unilateral implementations can lead to inefficiencies, in particular free riding effects and endanger security of supply due to adverse allocation of generation capacity. [ABSTRACT FROM AUTHOR]

This paper proposes bilateral contract networks as a new scalable market design for peer-to-peer energy trading. Coordinating small-scale distributed energy resources to shape overall demand could offer significant value to power systems, by alleviating the need for investments in upstream generation and transmission infrastructure, increasing network efficiency and increasing energy security. However, incentivising coordination between the owners of large-scale and small-scale energy resources at different levels of the power system remains an unsolved challenge. This paper introduces real-time and forward markets, consisting of energy contracts offered between generators with fuel-based sources, suppliers acting as intermediaries and consumers with inflexible loads, time-coupled flexible loads and/or renewable sources. For each type of agent, utility-maximising preferences for real-time contracts and forward contracts are derived. It is shown that these preferences satisfy full substitutability conditions essential for establishing the existence of a stable outcome—an agreed network of contracts specifying energy trades and prices, which agents do not wish to mutually deviate from. Important characteristics of energy trading are incorporated, including upstream–downstream energy balance and forward market uncertainty. Full substitutability ensures a distributed price-adjustment process can be used, which only requires local agent decisions and agent-to-agent communication between trading partners. [ABSTRACT FROM AUTHOR]

This paper examines optimal energy market bidding behavior for stochastic resources when energy imbalance payments are determined endogenously from market clearing conditions. Some electricity markets require wind producers to settle day-ahead offers based on their real-time energy production. This is usually justified by economic and cost-causation principles, without considering the effects of these policies on curtailment and system balancing costs. Under these real-time settlement requirements, demand and wind forecast errors impact the effective penalty price, so strategic behavior affects the penalty price paid by producers. This paper formulates a two-stage game where producers place energy bids in the day-ahead market and then choose a curtailment level in real-time, and it derives the symmetric subgame perfect equilibrium strategy for producers. It details how supply curve convexity and resource correlation can lead wind producers to bid conservatively even when they are not risk averse. The results show that market-based pricing mechanisms improve tradeoffs between system efficiency and mean squared bid error as compared to the case where penalty levels are determined by alternative policies, suggesting additional benefits of market-based penalty prices beyond those previously studied. [ABSTRACT FROM AUTHOR]

Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency—making the best use of existing resources—and long-run efficiency—promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges. [ABSTRACT FROM AUTHOR]

• We used EMIS-AS model to explore various market structures and clean energy targets. • Energy-only markets can achieve same clean energy goals as capacity markets. • ORDC scarcity pricing exhibits substitutional relationship with capacity markets. • Even one well-designed market mechanism can achieve desired clean energy targets. • Capacity/reserve eligibility rules for one technology or product can impact others. Competitive wholesale electricity markets can help facilitate energy system decarbonization by incentivizing investments in clean energy technologies that meet evolving system needs. We explore market structure impacts on generator operations and deployment by risk-averse, heterogeneous investor firms using the Electricity Markets and Investment Suite – Agent-based Simulation (EMIS-AS) model. We apply clean energy targets of 45%–100% by 2035 considering energy, ancillary services, capacity, and clean energy credit products and pricing and eligibility rules. Results highlight a complexity conundrum, whereby finding the "right" market design to achieve decarbonization goals and avoid unintended consequences can be a highly-nuanced, non-incremental challenge. Carefully designed energy-only markets can achieve the same clean energy targets as capacity market structures but with different revenue and profitability outcomes. Operating reserve demand curve-based scarcity pricing can substitute capacity markets for similar deployment outcomes. Carbon pricing alone is most effective at achieving decarbonization levels at low clean energy targets, and clean energy credit markets and carbon pricing are substitutionary at high clean energy targets. Restricting technology participation in capacity and operating reserve markets can impact deployment and operations, even for nonrestricted technologies. Adding an inertia product with fast frequency response yields insufficient provision at high clean energy targets, but work is needed to understand frequency requirements and capabilities. [ABSTRACT FROM AUTHOR]

The gradual commercial opening of electricity markets to keep pace with technological evolution and promote the active participation of players to increase their efficiency is recognized as one of the best practices in most developed markets in the world. The same principle applies to the Brazilian electricity sector, which increasingly demands intelligent mechanisms that serve as instruments to optimally face the increasingly complex challenges. Demand response (DR), a mechanism not widely used in Brazil, can offer many advantages to the electric system, such as increasing its competitiveness and improving the reliability of the electric energy supply through the active participation of the energy consumer. This study presents different paths and proposals by which the load side can contribute to increased energy security and avoid the increase in the system operating costs in Brazil. This study tracks the progress of the DR programs adopted in several international markets, observing their remuneration for the services provided to the electricity system, as well as the motivation of the operator, utilities, or market administrator to offer programs that allow the participation of consumers, resulting in benefits for the participant, programs, and system. • Demand Side Management Best Practices. • Active Participation of the Consumer in the Electricity Markets. • Demand Response and the Benefits for the Electrical System. • Ancillary Services, Capacity, Coincident Peak, and Price Response. • Proposals to Accelerate the Demand Response. [ABSTRACT FROM AUTHOR]

Environmental concerns have spurred greater reliance on variable renewable energy resources (VERs) in electric generation. Under current incentive schemes, the uncertainty and intermittency of these resources impose costs on the grid, which are typically socialized across the whole system, rather than born by their creators. We consider an institutional framework in which VERs face market imbalance prices, giving them an incentive to produce higher-value energy subject to less adverse uncertainty. In this setting, we consider an 'aggregator' that owns the production rights to a VER's output, and also signs contracts with a population of demand response (DR) participants for the right to curtail them in real time, according to a contractually specified probability distribution. The aggregator bids a day ahead offer into the wholesale market, and is able to offset imbalances between the cleared day-ahead bid and the realized VER production by curtailing DR participants' consumption according to the signed contracts. We consider the optimization of the aggregator's end-to-end problem: designing the menu of DR service contracts using contract theory, bidding into the wholesale market, and dispatching DR consistently with the contractual agreements. We do this in a setting in which wholesale market prices, VER output, and participant demand are all stochastic, and possibly correlated. [ABSTRACT FROM AUTHOR]

Demand response could provide reserves to power systems and market designs should enable cost-efficient exploitation of these resources. In direct load control programs, consumers provide demand response in exchange for incentive payments. The success of such contracts is a function of level of information sharing, consumer costs, and power system constraints/costs. In this paper, we compare three approaches to contract design, each of which assumes different levels of consumer privacy. Our aim is to explore tradeoffs between privacy, resource exploitation, and the reward earned by the load aggregator. The first approach assumes full and truthful information exchange between the consumer and the system operator. We then develop a novel centralized approach in which an aggregator applies mechanism design to offer contracts to consumers who reveal partial cost information. A novel decentralized approach is developed in which consumers act cooperatively to pool demand response reserves, enabling them to keep individual cost information private. Through simulation studies, we find that, in the centralized approach, resource exploitation/rewards are highly sensitive to the accuracy of the load aggregator's consumer cost curves approximations. We also find that in the decentralized approach, rewards can be small, especially if information exchange is costly. [ABSTRACT FROM AUTHOR]

While the technical feasibility of power systems based on renewables has been established, there are concerns that a system with high shares of variable renewable electricity cannot be achieved through an energy-only market. At the root of these concerns is the merit order effect, which describes the price-depressing effect stemming from the deployment of wind and solar. More broadly speaking, this would imply a discrepancy between the way least-cost planning models select investments, and what investments are profitable in the energy-only market. The two perspectives align, however, quite well if meaningful pricing mechanisms for carbon emissions and involuntary load shedding are implemented. While meaningful carbon prices are largely sufficient to decarbonize the power system, achieving supply security through scarcity pricing requires careful market design, which fosters demand participation and storage investment, due to the threat of supply and price volatility. Both reduce volatility and induce a range of new price signals. These smooth out the price duration curve and, in turn, reduce risk in generation investments through more predictable prices. • + Large literature review on price signals and bidding behavior in low-carbon power markets. • + Energy-only market can be designed to remain fully functional. • + Volatility is a greater threat to supply security than merit-order effect. • + Price-volatility is the best business case for storage and demand participation. [ABSTRACT FROM AUTHOR]

The German reserve power market has been subject to important regulatory changes in recent years. A new market design has been introduced by synchro-nizing and interconnecting the four regional German control areas. We analyze whether the reforms have led to lower prices for minute reserve power (MRP). In contrast to existing papers, we use a unique panel dataset to account for un-observed heterogeneity between the four German regional markets. Moreover, we control for endogeneity by using weather data as instruments for electricity spot market prices. We find that the reforms were jointly successful in decreasing MRP prices leading to substantial cost savings for the transmission system operators. [ABSTRACT FROM AUTHOR]

Highlights: [•] We analyze the economic principles of balancing power provision. [•] We focus on interdependencies between different bid components & different markets. [•] We analyze the material in the context of the German electricity market. [•] We show that the market result is overall efficient. [Copyright &y& Elsevier]

In the face of growing balancing requirements, there is increased interest in cross-border coordination of balancing capacity markets. Despite improved coordination of balancing energy, only limited progress has been made on coordinating balancing capacity procurement and sizing. That is in part because the coordination of procurement and sizing is more complex as it requires the reservation of cross-zonal transmission capacity. In this paper, a model to simulate a joint day-ahead energy and balancing capacity market clearing is presented, with coordinated procurement and sizing of balancing capacity, and co-optimized allocation of cross-zonal transmission capacity. We apply this model to a highly renewable Central Western European-based case study to illustrate how regional coordination of balancing capacity markets generates benefits. Results show that balancing capacity coordination enables a more cost-effective day-ahead scheduling of electricity production. Notably, the scheduling of peak-load technologies is impacted. Potentially, the greatest benefit of balancing capacity coordination lies in its ability to substantially reduce the need for back-up capacity. Sharing infrequently used generation capacity across borders rather than having individual self-sufficient control areas, especially when paired with alternative sources of balancing capacity (e.g., demand response), could greatly reduce generation capacity needs. • Model to study the coordination of the procurement and sizing of balancing capacity. • Explicit allocation of cross-zonal capacity for balancing capacity transfers. • We apply this model to a highly renewable Central Western European-based case study. • Balancing capacity coordination enables more cost-effective day-ahead scheduling. • Back-up capacity needs can be substantially reduced by sharing balancing capacity. [ABSTRACT FROM AUTHOR]

Saudi Arabia and other Gulf Cooperation Council (GCC) members have a parallel agenda of electricity market reforms together with ambitious goals of renewable energy deployment. The motivation for this agenda is multifaceted and extends beyond increasing economic efficiency. Renewable integration raises market and regulatory design issues for countries transitioning to markets and high levels of renewables though. This difficulty or perhaps even incompatibility may undercut both policies' objectives. This paper analyses the implications of deploying new energy storage in this context. Although storage services would facilitate the integration of renewables and market restructuring policies, deploying this novel technology would raise additional regulatory issues in the electricity sector. Ignoring these regulatory challenges could not only lead to unnecessary costs of transition but also make it more difficult to obtain the full benefits of other economic policy objectives such as the removal of subsidies to relieve public finances and the release oil for sale in international markets. [ABSTRACT FROM AUTHOR]

This paper examines the market rules implemented within the Electric Reliability Council of Texas (ERCOT) zonal and nodal market designs related to the integration of wind generation. Currently, there is almost 10 000 MW of wind generation installed and operating in the ERCOT market. Total ERCOT summer peak load is in excess of 65 000 MW and wind generation penetration has exceeded 25% on several instances. This paper discusses the various rules and market mechanisms put in place to effectively deal with a high penetration of variable wind generation while maintaining adequate system reliability and creating proper market price signals for wind generation. Specifically, the paper includes treatment of wind generation in both the zonal and nodal markets, including day-ahead markets and real-time operations and describes the actual market outcomes which have been realized through several years of increasing penetration of wind generation on the ERCOT system. [ABSTRACT FROM PUBLISHER]

This paper analyzes timing issues on the German balancing power market. We focus the analysis on the length of the bidding period, i.e. the length of the time period a supplier has to provide balancing power capacities, and the question of how far before the beginning of a bidding period the auction should be carried out. We show that different load levels require different plants for the optimal provision of balancing power. In a longer bidding period, the power plants that have the lowest average cost in the bidding period are unlikely to be efficient in all hours of the bidding period. Hence, shortening bidding periods can increase efficiency. Furthermore, we show that an early commitment on a power plant's mode of operation (when uncertainty about resulting spot prices is still relatively high) also reduces efficiency. This suggests that the auction should be held relatively close to the beginning of the bidding period. Furthermore, we discuss some advantages of a liquid real time market. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Energiewirtschaft is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

A framework is proposed for an electrical power microgrid, such as for a colony or small township of homes that generate electrical power from solar energy and use it directly when possible, and via stored battery power at other times. The situation is described as a demand and supply problem in a multi-agent system with many consumers and suppliers and no explicit communication or coordination among the agents. Such a demand and supply problem is modeled as a Potluck Problem, a generalization of the Santa Fe Bar Problem. Power produced by PV panels and batteries may be used in the local market, in addition to being consumed locally. The proposed microgrid system model is able to determine the optimum operation of a solar-powered microgrid with respect to load demand, environmental requirements, PV panel and battery capacities. The results indicate the effect of various such parameters on the performance of these micro-grids. This paper also analyzes and proposes, based on auction theory, the most efficient and competing pricing mechanism in the proposed microgrid system model. Two important market bidding techniques, single bidding and discriminatory bidding, are considered. The microgrid is made to participate in the bidding process to serve the consumers at a reduced price and to provide better revenues. The viability of the model proposed is illustrated with analyses using realistic assumptions and published historical data. [ABSTRACT FROM PUBLISHER]

Local Electricity Markets (LEM) and peer-to-peer trading are new mechanisms to encourage the uptake of solar PV and to support the emergence of consumer-centric electricity markets. However, the coordination to trade between consumers and prosumers has different definitions depending on the context and features of the energy system. This paper introduces a new vision: creating virtual LEMs by cooperatively mixing (optimal matching) different load and renewable profiles that complement each other. Since consumer and prosumer profiles change every day (weather conditions or demand behaviors), the dynamic formation of virtual LEMs changes daily. To reward flexibility, Electric Vehicles (EV) are also pooled into forming a virtual LEM. That is, we investigate: What is the value of creating virtual local markets (via clustering)?, and what is the impact of EV flexibility on the creation of virtual LEMs? Through implementing a LEM optimization model with a clustering approach, we analyze the formation of LEMs for a set of end-users in London. Results indicate that a single large LEM (no clustering) is comparatively similar to multiple LEMs (clustering). EV flexibility obtains more revenue in this new marketplace. Findings are encouraging as dynamic virtual LEMs can enable, accelerate and bring scalability for a ubiquitous deployment of LEMs. • A new concept of creating virtual Local Markets (LEMs) by matching end-users & EVs. • Peer-to-Peer (P2P) model with a clustering approach applied to houses in London. • Virtual LEMs enable and bring scalability for a ubiquitous deployment of LEMs. • Virtual smaller LEMs show comparable results versus a single (large) LEM. • Virtual LEMs is a new marketplace for EVs flexibility, it creates 23% cost savings. [ABSTRACT FROM AUTHOR]

Variable renewable electricity generation presents challenges for traditional power markets. The island of Ireland has high levels of renewable generation by international standards, with even higher levels envisaged, and so must address these challenges. Market design to accommodate a growing share of variable renewable generation is informed and constrained by EU policy, and progress to date has been mixed. A qualitative review finds that market redesign is advised to address price cannibalisation, reveal consumer preferences for security and protect vulnerable households. Options for market design are presented, and recommendations for short and medium-term policy action are made. • Qualitative review of market design challenges for high renewable generation. • The Irish electricity market was chosen as a case study. • Price cannibalisation. • Market redesign options presented. • Vulnerable households are exposed to risks of market redesign. [ABSTRACT FROM AUTHOR]

Designing wholesale electricity spot markets even after three decades of experience in dozens of countries continues to be a challenging task. The challenges arise from a myriad of options that exist without adequate level of unbiased guidance, and experiences in real-life markets where successes and failures are also open to the interpretation of experts. This is particularly a critical issue in the developing world where wholesale spot markets are yet to be established in 80 % of the countries and the experience in the remaining 20 % countries with an operational market, is mixed. There are certain trends in selection of market design that leave significant room for improvement including fallacies that should be avoided. Implementation of markets have also been problematic in most cases including unrealistic timetable and inadequate consideration of transition mechanism that have also hampered market development. In this article, we present our views on how policy makers, stakeholders and development institutions should think about the choices around market design and some of the common pitfalls around its implementation. [ABSTRACT FROM AUTHOR]

To identify the trends in new flexibility markets, a set of market and aggregator platforms were selected and compared. The analyzed initiatives are relevant to consider alternative designs for European electricity markets. This review proposes a common methodology for analyzing these market models by comparing their description, market structure, market timing, and implementation. Furthermore, a range of policy implications and future research directions towards implementing these markets are presented. The results provide compelling evidence that the new market models represent a promising business with technical and economic justification, as they incentivize the uptake of flexibility from distributed resources by providing services to Distribution System Operators (DSOs) in coordination with Transmission System Operators (TSOs). Moreover, the interactions between these new market platforms and existing markets are of particular interest, and the contributions from aggregator platforms are also relevant to enhance the political vision of empowering the customers through their active participation in markets. [ABSTRACT FROM AUTHOR]