Designing Multinational Electricity Balancing Markets

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.