Flexibility trading, information flow and imbalance settlement design in real time energy markets

Abstract

This work studies the operational effects of market participants responding to price incentives for spillage and shortage positions in electricity balancing markets. Based upon different forecast methods, optimal real time decisions by of flexible asset holders (physical and non-physical) are considered and analyzed. This research contributes to forecasting methodology and imbalance prediction, it provides case studies in the evaluation of density and point forecasts through decision-making performance, and analyses the consequences of statistical arbitrage positions from the system operators and market participants perspective. Furthermore the effect of information flow on the decision making quality is studied. Finally this work suggests a new approach a hybrid imbalances settlement design, instead of single or dual pricing systems to increase the performance of balancing markets. Results suggest that permitting additional intraday flexibility from physical or non-physical agents can be beneficial for the agents themselves, the system operator and that it increases market efficiency. In integrated energy markets with higher shares of demand response, the hybrid imbalance settlement design can have positive effects compared to the single or dual pricing system.