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Bidding strategies in Austrian and German balancing power auctions

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  • Fabian Ocker
  • Karl‐Martin Ehrhart
  • Marion Ott

Abstract

Balancing power markets involve complex procurement auction mechanisms that are challenging both to design for auctioneers and to take part in for suppliers. Recent empirical work indicates that auction results from Austria and Germany do not match game‐theoretic predictions. Instead, suppliers adjust their bids to previous auctions results and do not reveal their actual costs within their bids. Therefore, this work focuses on bidding strategies of suppliers in the Austrian and German automatically‐activated Frequency Restoration Reserve auctions. First, the operating principle of the auctions is analyzed and the cost and profit structures are illustrated. Then, a theoretic approach for the derivation of optimal bidding strategies is presented, that allows the integration of price expectations based on historical market data. We validate our approach by a numerical application of the bidder's calculus. Finally, our theoretic results are confronted with Austrian and German auction outcomes. We find evidence that the identified bidding strategies are applied by the suppliers. This article is categorized under: Energy Systems Analysis > Economics and Policy Energy Infrastructure > Economics and Policy Energy Policy and Planning > Economics and Policy Concentrating Solar Power > Economics and Policy

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  • Fabian Ocker & Karl‐Martin Ehrhart & Marion Ott, 2018. "Bidding strategies in Austrian and German balancing power auctions," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 7(6), November.
    • Handle: RePEc:bla:wireae:v:7:y:2018:i:6:n:e303
    DOI: 10.1002/wene.303
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    2. Felix Röben & Hans Schäfers & Anna Meißner & Jerom de Haan, 2021. "Smart Balancing of Electrical Power in Germany: Fuzzy Logic Model to Simulate Market Response," Energies, MDPI, vol. 14(8), pages 1-25, April.
    3. Kraft, Emil & Russo, Marianna & Keles, Dogan & Bertsch, Valentin, 2023. "Stochastic optimization of trading strategies in sequential electricity markets," European Journal of Operational Research, Elsevier, vol. 308(1), pages 400-421.
    4. Schillinger, Moritz, 2020. "Balancing-market design and opportunity cost: The Swiss case," Utilities Policy, Elsevier, vol. 64(C).
    5. Poplavskaya, Ksenia & Lago, Jesus & de Vries, Laurens, 2020. "Effect of market design on strategic bidding behavior: Model-based analysis of European electricity balancing markets," Applied Energy, Elsevier, vol. 270(C).
    6. Schillinger, Moritz, 2019. "Balancing Market Design and Opportunity Cost - The Swiss Case," Working papers 2019/14, Faculty of Business and Economics - University of Basel.
    7. Finhold, E. & Gärtner, C. & Grindel, R. & Heller, T. & Leithäuser, N. & Röger, E. & Schirra, F., 2023. "Optimizing the marketing of flexibility for a virtual battery in day-ahead and balancing markets: A rolling horizon case study," Applied Energy, Elsevier, vol. 352(C).
    8. Merten, Michael & Olk, Christopher & Schoeneberger, Ilka & Sauer, Dirk Uwe, 2020. "Bidding strategy for battery storage systems in the secondary control reserve market," Applied Energy, Elsevier, vol. 268(C).
    9. Leandro Lind & Rafael Cossent & José Pablo Chaves‐Ávila & Tomás Gómez San Román, 2019. "Transmission and distribution coordination in power systems with high shares of distributed energy resources providing balancing and congestion management services," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 8(6), November.
    10. Kuttner, Leopold, 2022. "Integrated scheduling and bidding of power and reserve of energy resource aggregators with storage plants," Applied Energy, Elsevier, vol. 321(C).
    11. Nitsch, Felix & Deissenroth-Uhrig, Marc & Schimeczek, Christoph & Bertsch, Valentin, 2021. "Economic evaluation of battery storage systems bidding on day-ahead and automatic frequency restoration reserves markets," Applied Energy, Elsevier, vol. 298(C).
    12. Poplavskaya, Ksenia & Lago, Jesus & Strömer, Stefan & de Vries, Laurens, 2021. "Making the most of short-term flexibility in the balancing market: Opportunities and challenges of voluntary bids in the new balancing market design," Energy Policy, Elsevier, vol. 158(C).
    13. Schillinger, Moritz & Weigt, Hannes, 2019. "Bidding into balancing markets in a hydro-dominated electricity system," Working papers 2019/13, Faculty of Business and Economics - University of Basel.

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