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New Cross-Border Electricity Balancing Arrangements in Europe

Author

Listed:
  • Casimir Lorenz
  • Clemens Gerbaulet

Abstract

The European electricity system is undergoing significant changes, not only with respect to developments in generation and networks but also the arrangements for the operation of the system. These are specified in the Network Codes endorsed by regulators, network operators and the European Commission with the objective to create an \Internal Energy Market". In 2013, European network operators formulated the Network Code on Electricity Balancing (NC EB) which foresees arrangements to foster cross-border exchange of balancing services with the objective to lower overall costs and to increase social welfare. Assuming that Switzerland adopts the \Electricity Agreement" which would make EU Electricity rulings binding also in Switzerland, we perform an quantitative analysis of the region consisting of Switzerland, Austria, and Germany. To conduct our analysis, we use an electricity market model with a detailed representation of power plants, scheduled power withdrawals and localized imbalances leading to the need to reserve balancing capacity and activate balancing energy. We consider different levels of integration, as outlined in the NC EB. Our results show that coordinated procurement and activation of balancing services lead to cost decreases, but at the same time distributional effects, which might need to be compensated are incurred.

Suggested Citation

  • Casimir Lorenz & Clemens Gerbaulet, 2014. "New Cross-Border Electricity Balancing Arrangements in Europe," Discussion Papers of DIW Berlin 1400, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp1400
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.470807.de/dp1400.pdf
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    References listed on IDEAS

    as
    1. Farahmand, H. & Doorman, G.L., 2012. "Balancing market integration in the Northern European continent," Applied Energy, Elsevier, vol. 96(C), pages 316-326.
    2. Lion Hirth & Inka Ziegenhagen, 2013. "Control Power and Variable Renewables A Glimpse at German Data," Working Papers 2013.46, Fondazione Eni Enrico Mattei.
    3. 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.
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    Cited by:

    1. Clemens Gerbaulet, Casimir Lorenz, Julia Rechlitz, and Tim Hainbach, 2014. "Regional Cooperation Potentials in the European Context: Survey and Case Study Evidence from the Alpine Region," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    2. Casimir Lorenz & Clemens Gerbaulet, 2017. "Wind Providing Balancing Reserves: An Application to the German Electricity System of 2025," Discussion Papers of DIW Berlin 1655, DIW Berlin, German Institute for Economic Research.
    3. Jonas Egerer, 2016. "Open Source Electricity Model for Germany (ELMOD-DE)," Data Documentation 83, DIW Berlin, German Institute for Economic Research.
    4. Shin, Hunyoung & Baldick, Ross, 2018. "Mitigating market risk for wind power providers via financial risk exchange," Energy Economics, Elsevier, vol. 71(C), pages 344-358.

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    More about this item

    Keywords

    balancing energy markets; regional cooperation; network code electricity balancing;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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