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Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets

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  • Arthur Henriot

Abstract

This paper evaluates the benefits for an agent managing the wind power production within a given power system to trade in the intraday electricity markets, in a context of massive penetration of intermittent renewables. Using a simple analytical model we find out that there are situations when it will be costly for this agent to adjust its positions in intraday markets. A first key factor is of course the technical flexibility of the power system: if highly flexible units provide energy at very low prices in real-time there is no point in participating into intraday markets. Besides, we identify the way wind production forecast errors evolve constitutes another essential, although less obvious, key-factor. Both the value of the standard error and the correlation between forecasts errors at different gate closures will determine the strategy of the wind power manager. Policy implications of our results are the following: low liquidity in intraday markets will be unavoidable for given sets of technical parameters, it will also be inefficient in some cases to set discrete auctions in intraday markets, and compelling players to adjust their position in intraday markets will then generate additional costs.

Suggested Citation

  • Arthur Henriot, 2014. "Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets," The Energy Journal, , vol. 35(1), pages 99-118, January.
    • Handle: RePEc:sae:enejou:v:35:y:2014:i:1:p:99-118
    DOI: 10.5547/01956574.35.1.6
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    References listed on IDEAS

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    1. Frieder Borggrefe & Karsten Neuhoff, 2011. "Balancing and Intraday Market Design: Options for Wind Integration," Discussion Papers of DIW Berlin 1162, DIW Berlin, German Institute for Economic Research.
    2. Weber, Christoph, 2010. "Adequate intraday market design to enable the integration of wind energy into the European power systems," Energy Policy, Elsevier, vol. 38(7), pages 3155-3163, July.
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