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Cost reduction potentials in the German market for balancing power

Author

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  • Flinkerbusch, Kai
  • Heuterkes, Michael

Abstract

This article examines potential cost reductions in the market for balancing power by pooling all four German control areas. In a united control area both the procurement and the production of balancing power may be more efficient than in four separated control areas. Our data contain published bids on energy procurement as well as balancing power flows in the period from December 2007 to November 2008. A reference scenario simulates the market results for primary and secondary balancing power, as well as minutes reserve. Subsequently, we simulate a united control area by pooling the historical bids of each control area and by netting the area imbalances. We show that in the period under review the total costs of procured and produced balancing power are reduced by 17 %. The production costs for secondary balancing power are reduced by even 45 %.

Suggested Citation

  • Flinkerbusch, Kai & Heuterkes, Michael, 2009. "Cost reduction potentials in the German market for balancing power," CAWM Discussion Papers 25, University of Münster, Münster Center for Economic Policy (MEP).
    • Handle: RePEc:zbw:cawmdp:25
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    More about this item

    Keywords

    Electricity; Balancing Power; Regulation;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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