[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/1044.html
   My bibliography  Save this paper

Locational-based Coupling of Electricity Markets: Benefits from Coordinating Unit Commitment and Balancing Markets

Author

Listed:
  • van der Weijde, A.H.
  • Hobbs, B.F.
Abstract
We formulate a series of stochastic models for committing and dispatching electric generators subject to transmission limits. The models are used to estimate the benefits of electricity locational marginal pricing (LMP) that arise from better coordination of day-ahead commitment decisions and real-time balancing markets in adjacent power markets when there is significant uncertainty in demand and wind forecasts. The unit commitment models optimise schedules under either the full set of network constraints or a simplified net transfer capacity (NTC) constraint, considering the range of possible real-time wind and load scenarios. The NTC-constrained model represents the present approach for limiting day-ahead electricity trade in Europe. A subsequent redispatch model then creates feasible real-time schedules. Benefits of LMP arise from decreases in expected start-up and variable generation costs resulting from consistent consideration of the full set of network constraints both day-ahead and in real-time. Meanwhile, using LMP to coordinate adjacent balancing markets provides benefits because it allows intermarket flow schedules to be adjusted in real-time in response to changing conditions. These models are applied to a stylised four-node network, examining the effects of varying system characteristics on the magnitude of the locational-based unit commitment benefits and the benefits of intermarket balancing. Although previous www.eprg.group.cam.ac.uk EPRG WORKING PAPER studies have examined the benefits of LMP, these usually examine one specific system, often without a discussion of the sources of these benefits, and with simplifying assumptions about unit commitment. We conclude that both categories of benefits are situation dependent, such that small parameter changes can lead to large changes in expected benefits. Although both can amount to a significant percentage of operating costs, we find that the benefits of balancing market coordination are generally larger than the unit commitment benefits.

Suggested Citation

  • van der Weijde, A.H. & Hobbs, B.F., 2010. "Locational-based Coupling of Electricity Markets: Benefits from Coordinating Unit Commitment and Balancing Markets," Cambridge Working Papers in Economics 1044, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1044
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1044.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June.
    2. Jonathan F. Bard, 1988. "Short-Term Scheduling of Thermal-Electric Generators Using Lagrangian Relaxation," Operations Research, INFORMS, vol. 36(5), pages 756-766, October.
    3. Vandezande, Leen & Meeus, Leonardo & Belmans, Ronnie & Saguan, Marcelo & Glachant, Jean-Michel, 2010. "Well-functioning balancing markets: A prerequisite for wind power integration," Energy Policy, Elsevier, vol. 38(7), pages 3146-3154, July.
    4. Angarita-Marquez, Jorge L. & Hernandez-Aramburo, Carlos A. & Usaola-Garcia, Julio, 2007. "Analysis of a wind farm's revenue in the British and Spanish markets," Energy Policy, Elsevier, vol. 35(10), pages 5051-5059, October.
    5. Benjamin F. Hobbs & Fieke A.M. Rijkers & Maroeska G. Boots, 2005. "The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 69-98.
    6. Adriaan Weijde & Benjamin Hobbs, 2011. "Locational-based coupling of electricity markets: benefits from coordinating unit commitment and balancing markets," Journal of Regulatory Economics, Springer, vol. 39(3), pages 223-251, June.
    7. Meeus, Leonardo & Purchala, Konrad & Belmans, Ronnie, 2005. "Development of the Internal Electricity Market in Europe," The Electricity Journal, Elsevier, vol. 18(6), pages 25-35, July.
    8. Hsu, Michael, 1997. "An introduction to the pricing of electric power transmission," Utilities Policy, Elsevier, vol. 6(3), pages 257-270, September.
    9. Ehrenmann, Andreas & Smeers, Yves, 2005. "Inefficiencies in European congestion management proposals," Utilities Policy, Elsevier, vol. 13(2), pages 135-152, June.
    10. Chao, Hung-po & Peck, Stephen & Oren, Shmuel & Wilson, Robert, 2000. "Flow-Based Transmission Rights and Congestion Management," The Electricity Journal, Elsevier, vol. 13(8), pages 38-58, October.
    11. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Ricardo Bessa & Carlos Moreira & Bernardo Silva & Manuel Matos, 2014. "Handling renewable energy variability and uncertainty in power systems operation," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 3(2), pages 156-178, March.
    3. Jessica Raasch & Christoph Weber, 2017. "Decentralized Local Pricing – Improving Network Usage in a Smart-Grid Environment under Limited Informationation," EWL Working Papers 1704, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised May 2017.
    4. Triolo, Ryan C. & Wolak, Frank A., 2022. "Quantifying the benefits of a nodal market design in the Texas electricity market," Energy Economics, Elsevier, vol. 112(C).
    5. Mirjam Ambrosius & Jonas Egerer & Veronika Grimm & Adriaan H van der Weijde, 2019. "The role of expectations for market design - on structural regulatory uncertainty in electricity markets," Working Papers EPRG1915, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "The impact of the North Atlantic Oscillation on electricity markets: A case study on Ireland," Energy Economics, Elsevier, vol. 58(C), pages 186-198.
    7. Curtis, John & Lynch, Muireann Á. & Zubiate, Laura, 2016. "Carbon dioxide (CO2) emissions from electricity: The influence of the North Atlantic Oscillation," Applied Energy, Elsevier, vol. 161(C), pages 487-496.
    8. Karsten Neuhoff & Loredana Sasso & Christian Winzer, 2013. "Policies for International Transmission Investment: Unlocking North Africa's Renewable Energy Portfolio - for Local Use and International Exchange ; Final Report," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 74, number pbk74.
    9. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    10. Van den Bergh, Kenneth & Bruninx, Kenneth & Delarue, Erik, 2018. "Cross-border reserve markets: network constraints in cross-border reserve procurement," Energy Policy, Elsevier, vol. 113(C), pages 193-205.
    11. Adriaan Weijde & Benjamin Hobbs, 2011. "Locational-based coupling of electricity markets: benefits from coordinating unit commitment and balancing markets," Journal of Regulatory Economics, Springer, vol. 39(3), pages 223-251, June.
    12. E. Allevi & A. Gnudi & I. V. Konnov & G. Oggioni, 2022. "Dynamic Spatial Equilibrium Models: an Application to the Natural Gas Spot Markets," Networks and Spatial Economics, Springer, vol. 22(2), pages 205-241, June.
    13. Simshauser, P., 2021. "Renewable Energy Zones in Australia’s National Electricity Market," Cambridge Working Papers in Economics 2119, Faculty of Economics, University of Cambridge.
    14. Lynch & John Curtis, 2016. "The effects of wind generation capacity on electricity prices and generation costs: a Monte Carlo analysis," Applied Economics, Taylor & Francis Journals, vol. 48(2), pages 133-151, January.
    15. Fridrik M. Baldursson & Ewa Lazarczyk & Marten Ovaere & Stef Proost, 2018. "Cross-Border Exchange and Sharing of Generation Reserve Capacity," The Energy Journal, , vol. 39(4), pages 57-84, July.
    16. Simshauser, Paul & Billimoria, Farhad & Rogers, Craig, 2022. "Optimising VRE capacity in Renewable Energy Zones," Energy Economics, Elsevier, vol. 113(C).
    17. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    18. Geoffrey Mabea, 2023. "Simulating Generalised Locational Marginal Pricing for Power Markets in East Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 450-460, September.
    19. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems," Journal of Regulatory Economics, Springer, vol. 50(3), pages 290-327, December.
    20. Simshauser, Paul, 2021. "Renewable Energy Zones in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 101(C).
    21. Bertsch, Joachim & Hagspiel, Simeon & Just, Lisa, 2016. "Congestion management in power systems - Long-term modeling framework and large-scale application," EWI Working Papers 2015-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    22. Giorgia Oggioni & Yves Smeers, 2012. "Degrees of Coordination in Market Coupling and Counter-Trading," The Energy Journal, , vol. 33(3), pages 39-90, July.
    23. Giorgia Oggioni and Yves Smeers, 2012. "Degrees of Coordination in Market Coupling and Counter-Trading," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    24. Ambrosius, M. & Egerer, J. & Grimm, V. & Weijde, A.H. van der, 2020. "Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion," European Journal of Operational Research, Elsevier, vol. 285(1), pages 343-359.
    25. N. Gülpınar & F. Oliveira, 2014. "Analysis of relationship between forward and spot markets in oligopolies under demand and cost uncertainties," Computational Management Science, Springer, vol. 11(3), pages 267-283, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joachim Bertsch & Simeon Hagspiel & Lisa Just, 2016. "Congestion management in power systems," Journal of Regulatory Economics, Springer, vol. 50(3), pages 290-327, December.
    2. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    3. Bertsch, Joachim & Hagspiel, Simeon & Just, Lisa, 2016. "Congestion management in power systems - Long-term modeling framework and large-scale application," EWI Working Papers 2015-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    4. Pär Holmberg and Ewa Lazarczyk, 2015. "Comparison of congestion management techniques: Nodal, zonal and discriminatory pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    5. Triolo, Ryan C. & Wolak, Frank A., 2022. "Quantifying the benefits of a nodal market design in the Texas electricity market," Energy Economics, Elsevier, vol. 112(C).
    6. Holmberg, P. & Lazarczyk, E., 2012. "Congestion management in electricity networks: Nodal, zonal and discriminatory pricing," Cambridge Working Papers in Economics 1219, Faculty of Economics, University of Cambridge.
    7. Van den Bergh, Kenneth & Bruninx, Kenneth & Delarue, Erik, 2018. "Cross-border reserve markets: network constraints in cross-border reserve procurement," Energy Policy, Elsevier, vol. 113(C), pages 193-205.
    8. Leuthold, Florian & Weigt, Hannes & von Hirschhausen, Christian, 2008. "Efficient pricing for European electricity networks - The theory of nodal pricing applied to feeding-in wind in Germany," Utilities Policy, Elsevier, vol. 16(4), pages 284-291, December.
    9. Rious, Vincent & Glachant, Jean-Michel & Perez, Yannick & Dessante, Philippe, 2008. "The diversity of design of TSOs," Energy Policy, Elsevier, vol. 36(9), pages 3323-3332, September.
    10. Simshauser, Paul, 2024. "On static vs. dynamic line ratings in renewable energy zones," Energy Economics, Elsevier, vol. 129(C).
    11. Hiroux, C. & Saguan, M., 2010. "Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs?," Energy Policy, Elsevier, vol. 38(7), pages 3135-3145, July.
    12. Grimm, Veronika & Schewe, Lars & Schmidt, Martin & Zöttl, Gregor, 2017. "Uniqueness of market equilibrium on a network: A peak-load pricing approach," European Journal of Operational Research, Elsevier, vol. 261(3), pages 971-983.
    13. Paul Simshauser & Farhad Billimoria & Craig Rogers, 2021. "Optimising VRE plant capacity in Renewable Energy Zones," Working Papers EPRG2121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    14. Dijk, Justin & Willems, Bert, 2011. "The effect of counter-trading on competition in electricity markets," Energy Policy, Elsevier, vol. 39(3), pages 1764-1773, March.
    15. Jean-Michel Glachant, 2012. "Regulating Networks in the New Economy," Review of Economics and Institutions, Università di Perugia, vol. 3(1).
    16. Steffen, Bjarne, 2012. "Prospects for pumped-hydro storage in Germany," Energy Policy, Elsevier, vol. 45(C), pages 420-429.
    17. Ambrosius, M. & Egerer, J. & Grimm, V. & Weijde, A.H. van der, 2020. "Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion," European Journal of Operational Research, Elsevier, vol. 285(1), pages 343-359.
    18. Grimm, Veronika & Martin, Alexander & Weibelzahl, Martin & Zöttl, Gregor, 2014. "Transmission and Generation Investment in Electricity Markets: The Effects of Market Splitting and Network Fee Regimes," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 460, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    19. Fridrik M. Baldursson & Ewa Lazarczyk & Marten Ovaere & Stef Proost, 2018. "Cross-Border Exchange and Sharing of Generation Reserve Capacity," The Energy Journal, , vol. 39(4), pages 57-84, July.
    20. Simshauser, Paul, 2021. "Renewable Energy Zones in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 101(C).

    More about this item

    Keywords

    Electricity prices; international electricity exchange; electricity market model; electricity transmission;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:1044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.