Table of Contents
List of Figures ix
List of Tables xi
Acknowledgements xiii
1 Introduction 1
1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1.1 Power system operation and balance management . . . . . . . . . . . 1
1.1.2 The liberalized electricity market and the balancing market . . . . . 2
1.1.3 Electricity market design and balancing market design . . . . . . . . 3
1.1.4 Electricity market integration and balancing market integration . . 4
1.2 Research topic: Balancing market internationalization . . . . . . . . . . . . . . 5
1.3 Research scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 Research question . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.6 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.7 Readers’ guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2 Literature study 13
2.1 Literature on national balancing market rules . . . . . . . . . . . . . . . . . . . 13
2.1.1 Regulations in Northern Europe . . . . . . . . . . . . . . . . . . . . . . 13
2.1.2 Regulations elsewhere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Literature on balancing market design . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.1 Design variables in literature . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.2 National balancing market design variables . . . . . . . . . . . . . . . . 26
2.3 Literature on balancing market integration . . . . . . . . . . . . . . . . . . . . . 26
2.3.1 Technical possibilities for balancing service exchange in Europe . . 27
2.3.2 Alternative integration models for Europe . . . . . . . . . . . . . . . . 29
2.3.3 Integration in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3.4 Need for harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.3.5 Performance criteria and impact . . . . . . . . . . . . . . . . . . . . . . . 38
2.3.6 Multinational balancing market design variables . . . . . . . . . . . . 41
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3 Balancing market design framework 45
3.1 Reference model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.1.1 National balancing market concept . . . . . . . . . . . . . . . . . . . . . 46
3.1.2 Multinational balancing market concept . . . . . . . . . . . . . . . . . . 50
3.1.3 Standard terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.2 Evaluation set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.2.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.2.2 Performance criteria set . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
3.2.3 Performance indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
3.3 Design space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4 Analysis of national balancing market design and harmonization 69
4.1 Factors and interactions within the balancing market . . . . . . . . . . . . . . 70
4.1.1 System factors and causal links . . . . . . . . . . . . . . . . . . . . . . . . 70
4.1.2 Balancing market processes . . . . . . . . . . . . . . . . . . . . . . . . . . 72
4.1.3 Links between design variables and processes . . . . . . . . . . . . . . . 74
4.1.4 Links between system factors and performance indicators . . . . . . 77
4.1.5 Influence of design variables on performance criteria . . . . . . . . . 78
4.2 Importance of design variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
4.3 Importance of performance criteria . . . . . . . . . . . . . . . . . . . . . . . . . . 82
4.4 Detailed study of national design variables . . . . . . . . . . . . . . . . . . . . . 82
4.4.1 Schedule Time Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
4.4.2 Timing of markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
4.4.3 Imbalance pricing mechanism . . . . . . . . . . . . . . . . . . . . . . . . 86
4.5 Context dependence of impact of design . . . . . . . . . . . . . . . . . . . . . . . 99
4.6 Multi-criteria analysis of national design variables . . . . . . . . . . . . . . . . . 104
4.7 Case study of Northern Europe: impact of harmonization . . . . . . . . . . . 111
4.7.1 Current design and performance in Northern Europe . . . . . . . . . 111
4.7.2 Impact of harmonization for Northern Europe . . . . . . . . . . . . . 113
4.8 Impact of harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
5 Analysis of multinational balancing market design and integration 117
5.1 Detailed study of multinational design variables . . . . . . . . . . . . . . . . . . 117
5.1.1 Control area boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
5.1.2 Reservation of interconnection capacity for balancing . . . . . . . . . 119
5.1.3 Cross-border balancing arrangements . . . . . . . . . . . . . . . . . . . 121
5.2 Multi-criteria analysis of multinational design variables . . . . . . . . . . . . . 125
5.3 Multi-criteria analysis of cross-border balancing arrangements . . . . . . . . . 132
5.4 Case study of Northern Europe: impact of integration . . . . . . . . . . . . . 138
5.5 Impact of integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
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Contents
6 Synthesis 153
6.1 Internationalization drivers and barriers . . . . . . . . . . . . . . . . . . . . . . . 153
6.1.1 Drivers to harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
6.1.2 Drivers to integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
6.1.3 Barriers to harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
6.1.4 Barriers to integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
6.2 Impact of balancing market design . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
6.2.1 Impact of design variables . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
6.2.2 Context dependence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
6.3 Impact of balancing market internationalization . . . . . . . . . . . . . . . . . . 166
6.3.1 Impact of harmonization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
6.3.2 Impact of integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
6.4 Design recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
6.4.1 General recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
6.4.2 Recommendations for Northern Europe . . . . . . . . . . . . . . . . . 170
7 Decision-making process of internationalization 173
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
7.2 Design phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
7.2.1 Problem formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
7.2.2 Design alternatives formulation . . . . . . . . . . . . . . . . . . . . . . . 179
7.3 Analysis phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
7.3.1 Qualitative analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
7.3.2 Quantitative analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
7.4 Decision phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
7.4.1 Decision on internationalization . . . . . . . . . . . . . . . . . . . . . . . 183
7.4.2 Decision on transition process . . . . . . . . . . . . . . . . . . . . . . . . 183
7.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
8 Conclusions and recommendations 187
8.1 Conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 188
8.2 Answer to research question . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
8.3 Reflection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
8.4 Future work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
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Contents
Appendices 195
A Acronyms 197
B Balancing market definitions 199
C Balancing market design and performance in Northern Europe 205
D Overview of criteria and variables 209
E Expert validation of performance criteria 215
F Details of imbalance pricing mechanism analysis 221
G Details of cross-border balancing arrangement analysis 227
H Effect estimation of national design variables 231
I Effect estimation of multinational design variables 255
J Effect estimation of cross-border balancing arrangements 269
Bibliography 283
Summary 291
Samenvatting 297
Curriculum Vitae 303
NGInfra PhD thesis series on infrastructures 305
Abstract
In today’s unbundled electricity markets, the balancing market is an intricate institutional arrangement that makes sure that the balance between electricity supply and demand is maintained. In the light of the development of a single electricity market in Europe, harmonization and integration of currently national balancing markets have received an increasing attention from governments, system operators, and regulators. This dissertation provides a systematic overview of the possibilities and effects of balancing market design and internationalization in a European market context. A balancing market design framework is presented, including a reference model, a design space, and a set of performance criteria. A multi-criteria analysis is carried out to estimate the effects of individual balancing market design variables. Also, a decision-making process design for decision making on balancing market internationalization is outlined. It is concluded that well-considered multinational balancing market designs have the potential to highly improve balancing market performance. For the region of Northern Europe, the introduction of a single regional balancing energy market has the potential to halve the balancing costs, due to the cross-border exchange of hydropower-based balancing services from the Nordic region.
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