Day-Ahead Market Bidding Taking the Balancing Power Market Into Account

21 Pages Posted: 12 Aug 2019 Last revised: 31 Aug 2022

See all articles by Gro Klæboe

Gro Klæboe

Norwegian University of Science and Technology (NTNU)

Jørgen Braathen

Norwegian University of Science and Technology (NTNU)

Anders Eriksrud

Norwegian University of Science and Technology (NTNU)

Stein-Erik Fleten

Norwegian University of Science and Technology (NTNU)

Date Written: August 8, 2019

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.

Keywords: hydroelectric power, bidding, balancing power, market power, stochastic optimization

JEL Classification: C44, C61

Suggested Citation

Klæboe, Gro and Braathen, Jørgen and Eriksrud, Anders and Fleten, Stein-Erik, Day-Ahead Market Bidding Taking the Balancing Power Market Into Account (August 8, 2019). Available at SSRN: https://ssrn.com/abstract=3434318 or http://dx.doi.org/10.2139/ssrn.3434318

Gro Klæboe

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Jørgen Braathen

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Anders Eriksrud

Norwegian University of Science and Technology (NTNU) ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Stein-Erik Fleten (Contact Author)

Norwegian University of Science and Technology (NTNU) ( email )

NO-7491 Trondheim
Norway

HOME PAGE: http://www.iot.ntnu.no/users/fleten

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