IDEAS home Printed from https://ideas.repec.org/p/dui/wpaper/1002.html
   My bibliography  Save this paper

Appropriate Contract Durations in the German Markets for On-line Reserve Capacity

Author

Listed:
  • Sebastian Just

    (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)

Abstract

This paper explores the economic implications of different contract durations in markets for on-line (primary and secondary) reserve capacity in Germany with the crucial feature of separate markets for spot energy and reserve capacity provision. The analysis is based on an equilibrium model developed by Just and Weber (2008) for reserve markets. It reveals the implicit trade-off for the bidders and interdependencies between the reserve and the spot markets. The results clearly show that shorter periods (with resulting lower variations in overall electricity demand) lead to more efficient dispatch and market results. Not only prices in the reserve capacity markets are expected to be lower, but also spot market prices. As these benefits can be partially reaped by owners of large generation portfolios also under longer contract durations, it discriminates smaller generation companies and can potentially deter market participation. Further, the paper discusses security concerns against shorter contract durations. It is shown that the opportunity costs character of the reserve market implies sufficient incentives for supplying online reserve capacity. The concerns do not appear to be predominant and it should be possible to manage them appropriately.

Suggested Citation

  • Sebastian Just, 2010. "Appropriate Contract Durations in the German Markets for On-line Reserve Capacity," EWL Working Papers 1002, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Aug 2010.
    • Handle: RePEc:dui:wpaper:1002
    as

    Download full text from publisher

    File URL: http://www.wiwi.uni-due.de/fileadmin/fileupload/BWL-ENERGIE/Arbeitspapiere/RePEc/pdf/wp1002_Just_ContractDurations_2010_08_16.pdf
    File Function: First version, 2010
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Feuerriegel, Stefan & Neumann, Dirk, 2016. "Integration scenarios of Demand Response into electricity markets: Load shifting, financial savings and policy implications," Energy Policy, Elsevier, vol. 96(C), pages 231-240.
    2. Hirth, Lion & Ziegenhagen, Inka, 2015. "Balancing power and variable renewables: Three links," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1035-1051.
    3. 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.
    4. Lion Hirth & Inka Ziegenhagen, 2013. "Control Power and Variable Renewables A Glimpse at German Data," Working Papers 2013.46, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    electricity markets; contract duration; power systems reserve; ancillary service; primary reserve; secondary reserve; spinning reserve; opportunity costs; equilibrium model;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    Statistics

    Access and download statistics

    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:dui:wpaper:1002. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Andreas Fritz (email available below). General contact details of provider: https://edirc.repec.org/data/fwessde.html .

    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.