Short-Term Electricity Trading for System Balancing - An Empirical Analysis of the Role of Intraday Trading in Balancing Germany’s Electricity System

33 Pages Posted: 19 Nov 2018 Last revised: 9 Dec 2018

See all articles by Christopher Koch

Christopher Koch

Berlin University of Technology

Lion Hirth

Neon Neue Energieökonomik GmbH; Hertie School of Governance

Date Written: November 14, 2018

Abstract

Previous studies have noted that, surprisingly, Germany’s dramatic expansion of wind and solar energy coincided with a reduction of short-term balancing reserves. This paper provides further and updated evidence, supporting this “German Balancing Paradox”: since 2011 wind and solar energy nearly doubled while reserve requirements and reserve activation declined by around 50%. We quantitatively explore one reason for reduced balancing needs: increased and improved short-term wholesale electricity trading. Electricity trading is now commonly done around the clock and based on quarter hours, rather than hours. The shift to quarter-hourly products alone explains a decrease in balancing energy by 17%. We also find strong evidence for market parties to respond efficiently to imbalance charges, suggesting that market-based approaches to balancing work.

Keywords: balancing energy; intraday market; variable renewables; wind energy, solar energy; market design; renewables system integration

Suggested Citation

Koch, Christopher and Hirth, Lion, Short-Term Electricity Trading for System Balancing - An Empirical Analysis of the Role of Intraday Trading in Balancing Germany’s Electricity System (November 14, 2018). USAEE Working Paper No. 18-368. Available at SSRN: https://ssrn.com/abstract=3284262 or http://dx.doi.org/10.2139/ssrn.3284262

Christopher Koch

Berlin University of Technology ( email )

Einsteinufer 25
Berlin, 10587
Germany

Lion Hirth (Contact Author)

Neon Neue Energieökonomik GmbH ( email )

Karl-Marx-Platz 12
12043
Berlin, 12043
Germany

HOME PAGE: http://www.neon-energie.de

Hertie School of Governance ( email )

Friedrichstraße 180
Berlin, 10117
Germany

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