A New Market Design For Balancing and Redispatch
Evaluation of New Market Design Options for Integrating Balancing and Redispatch in the Dutch Electricity Market
L. Stok (TU Delft - Technology, Policy and Management)
Pieter Bots – Mentor (TU Delft - Policy Analysis)
S. Renes – Graduation committee member (TU Delft - Economics of Technology and Innovation)
M. Ophuis – Graduation committee member (TenneT)
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Abstract
The integration of non-dispatchable renewable energy and the electrification of society pose significant challenges to maintaining grid stability and efficiency. Currently, balancing and redispatch services in the Dutch electricity market operate as two separate markets, each managed by the Transmission System Operator (TSO). However, this separation leads to inefficiencies such as conflicting price signals, competition for the same flexible capacity, and increased congestion. This thesis evaluates three new market design options aimed at integrating redispatch and balancing services: 1) Simultaneous co-optimization 2) Separate two-step optimization with net capacity use, and 3) Separate two-step optimization with gross capacity use. A simulation model was developed using a simplified small-scale electricity network, testing the impact of these market designs under different pricing approaches: Marginal Pricing (MP), Pay-As-Bid (PAB), and Locational Marginal Pricing (LMP). The results demonstrate that while co-optimization can reduce capacity requirements by 21%, up to 81% of this improvement can be achieved by integrating redispatch and balancing with net capacity usage, without co-optimization. The study concludes that net capacity usage offers a practical alternative to co-optimization, with significant cost and capacity improvements. Further research should explore the operational feasibility of these new designs and the impact of network scale on market performance.