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Agent-based analysis of the impact of the imbalance pricing mechanism on market behavior in electricity balancing markets

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Listed:
  • van der Veen, Reinier A.C.
  • Abbasy, Alireza
  • Hakvoort, Rudi A.

Abstract

The imbalance pricing mechanism is an important design variable within European-type electricity balancing markets that determines the incentives given to so-called Balance Responsible Parties (BRPs) to balance their electricity production and consumption portfolio. To analyze the impact of alternative imbalance pricing mechanisms on balancing market performance, an agent-based model has been built, in which the BRPs are the agents that decide autonomously in each round on their balancing strategy based on results in past rounds. Six alternative mechanisms are analyzed. It is concluded that aiming for a small long position is generally the preferable BRP strategy. Different imbalance pricing mechanisms lead to comparable system imbalances, but single pricing results in the lowest imbalance costs for the BRPs and for the market as a whole.

Suggested Citation

  • van der Veen, Reinier A.C. & Abbasy, Alireza & Hakvoort, Rudi A., 2012. "Agent-based analysis of the impact of the imbalance pricing mechanism on market behavior in electricity balancing markets," Energy Economics, Elsevier, vol. 34(4), pages 874-881.
    • Handle: RePEc:eee:eneeco:v:34:y:2012:i:4:p:874-881
    DOI: 10.1016/j.eneco.2012.04.001
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Electricity markets; Balancing market; Settlement; Agent-based modeling; Imbalance pricing mechanism;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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