IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v42y2021i5p19-40.html
   My bibliography  Save this article

Statistical Arbitrage and Information Flow in an Electricity Balancing Market

Author

Listed:
  • Derek W. Bunn
  • Stefan O.E. Kermer

Abstract

Motivated by the events following a natural experiment in 2015, when the market rules for electricity spot trading were changed in Britain, we analyse the operational effects of market participants responding to price incentives for spillage and shortage positions in a single price, real-time market. We develop an analytical model for optimal real-time decisions by generators and speculators based upon forecasts of the conditional distribution of the total system imbalance between instantaneous supply and demand. From this, we examine the effects of time delays in information transparency for the consequent statistical arbitrage positions. We backtested this model empirically to the Austrian system imbalance settlements process within the German/Austrian integrated market. Results suggest that permitting additional intraday flexibility from a physical generator or a non-physical trader can be beneficial for the agents themselves, the system operator and market efficiency.

Suggested Citation

  • Derek W. Bunn & Stefan O.E. Kermer, 2021. "Statistical Arbitrage and Information Flow in an Electricity Balancing Market," The Energy Journal, , vol. 42(5), pages 19-40, September.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:5:p:19-40
    DOI: 10.5547/01956574.42.5.dbun
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.42.5.dbun
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.42.5.dbun?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eicke, Anselm & Ruhnau, Oliver & Hirth, Lion, 2021. "Electricity balancing as a market equilibrium," EconStor Preprints 233852, ZBW - Leibniz Information Centre for Economics.
    2. Okur, Özge & Voulis, Nina & Heijnen, Petra & Lukszo, Zofia, 2019. "Aggregator-mediated demand response: Minimizing imbalances caused by uncertainty of solar generation," Applied Energy, Elsevier, vol. 247(C), pages 426-437.
    3. Wu, Zhaoyuan & Zhou, Ming & Zhang, Ting & Li, Gengyin & Zhang, Yan & Liu, Xiaojuan, 2020. "Imbalance settlement evaluation for China's balancing market design via an agent-based model with a multiple criteria decision analysis method," Energy Policy, Elsevier, vol. 139(C).
    4. Chaves-Ávila, José Pablo & van der Veen, Reinier A.C. & Hakvoort, Rudi A., 2014. "The interplay between imbalance pricing mechanisms and network congestions – Analysis of the German electricity market," Utilities Policy, Elsevier, vol. 28(C), pages 52-61.
    5. Brijs, Tom & De Jonghe, Cedric & Hobbs, Benjamin F. & Belmans, Ronnie, 2017. "Interactions between the design of short-term electricity markets in the CWE region and power system flexibility," Applied Energy, Elsevier, vol. 195(C), pages 36-51.
    6. Maria Laura Victoria Marques & Ronaldo Seroa da Motta & Daniel de Abreu Pereira Uhr & Julia Ziero Uhr, 2024. "45 Years of Publications in Energy Economics: Evolution and Thematic Trends," Papers 2407.05974, arXiv.org.
    7. Gro Klaeboe & Anders Lund Eriksrud & Stein-Erik Fleten, 2013. "Benchmarking time series based forecasting models for electricity balancing market prices," Working Papers 2013-006, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    8. Brijs, Tom & De Vos, Kristof & De Jonghe, Cedric & Belmans, Ronnie, 2015. "Statistical analysis of negative prices in European balancing markets," Renewable Energy, Elsevier, vol. 80(C), pages 53-60.
    9. Khojasteh, Meysam & Faria, Pedro & Lezama, Fernando & Vale, Zita, 2023. "A hierarchy model to use local resources by DSO and TSO in the balancing market," Energy, Elsevier, vol. 267(C).
    10. Weisi Deng & Buhan Zhang & Hongfa Ding & Hang Li, 2017. "Risk-Based Probabilistic Voltage Stability Assessment in Uncertain Power System," Energies, MDPI, vol. 10(2), pages 1-19, February.
    11. Glismann, Samuel, 2021. "Ancillary Services Acquisition Model: Considering market interactions in policy design," Applied Energy, Elsevier, vol. 304(C).
    12. Liu, Tingting & Xu, Jiuping, 2021. "Equilibrium strategy based policy shifts towards the integration of wind power in spot electricity markets: A perspective from China," Energy Policy, Elsevier, vol. 157(C).
    13. Eicke, Anselm & Ruhnau, Oliver & Hirth, Lion, 2021. "Electricity balancing as a market equilibrium: An instrument-based estimation of supply and demand for imbalance energy," Energy Economics, Elsevier, vol. 102(C).
    14. Micha{l} Narajewski, 2022. "Probabilistic forecasting of German electricity imbalance prices," Papers 2205.11439, arXiv.org.
    15. Oprea, Simona-Vasilica & Bâra, Adela & Ciurea, Cristian-Eugen, 2022. "A novel cost-revenue allocation computation for the competitiveness of balancing responsible parties, including RES. Insights from the electricity market," Renewable Energy, Elsevier, vol. 199(C), pages 881-894.
    16. Marc Deissenroth & Martin Klein & Kristina Nienhaus & Matthias Reeg, 2017. "Assessing the Plurality of Actors and Policy Interactions: Agent-Based Modelling of Renewable Energy Market Integration," Complexity, Hindawi, vol. 2017, pages 1-24, December.
    17. Koch, Christopher & Hirth, Lion, 2019. "Short-term electricity trading for system balancing: An empirical analysis of the role of intraday trading in balancing Germany's electricity system," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    18. Meysam Khojasteh & Pedro Faria & Fernando Lezama & Zita Vale, 2023. "A Robust Model for Portfolio Management of Microgrid Operator in the Balancing Market," Energies, MDPI, vol. 16(4), pages 1-12, February.
    19. Feng, Wenxiu, 2024. "Predictive day-ahead offering for renewable generators in uncertain spot and balancing markets," DES - Working Papers. Statistics and Econometrics. WS 44216, Universidad Carlos III de Madrid. Departamento de Estadística.
    20. Gro Klæboe & Jørgen Braathen & Anders Lund Eriksrud & Stein-Erik Fleten, 2022. "Day-ahead market bidding taking the balancing power market into account," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 30(3), pages 683-703, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:42:y:2021:i:5:p:19-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.