Agent-based analysis of the impact of the imbalance pricing mechanism on market behavior in electricity balancing markets

Authored by Reinier A. C. van der Veen, Alireza Abbasy, Rudi A. Hakvoort

Date Published: 2012-07

DOI: 10.1016/j.eneco.2012.04.001

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Flow charts

Model Code URLs: Model code not found

Abstract

The imbalance pricing mechanism is an important design variable within European-type electricity balancing markets that determines the incentives given to so-called Balance Responsible Parties (BRPs) to balance their electricity production and consumption portfolio. To analyze the impact of alternative imbalance pricing mechanisms on balancing market performance, an agent-based model has been built, in which the BRPs are the agents that decide autonomously in each round on their balancing strategy based on results in past rounds. Six alternative mechanisms are analyzed. It is concluded that aiming for a small long position is generally the preferable BRP strategy. Different imbalance pricing mechanisms lead to comparable system imbalances, but single pricing results in the lowest imbalance costs for the BRPs and for the market as a whole. (C) 2012 Elsevier B.V. All rights reserved.

Tags

Agent-based modeling electricity markets Settlement Balancing market Imbalance pricing mechanism