Decentralized, flexible capacities are increasingly becoming the backbone of supply security. Their digital networking requires data exchange and thus a redefinition of cooperation between transmission and distribution system operators. The establishment of electronic communication and trading platforms for cross-border spot trading, incorporating balancing services and capacity management, is a natural consequence of this and further increases the value-added potential in an integrated European electricity market.
To date, access to the markets for system services has been dominated by large electricity suppliers. With increasing decentralized feed-in and storage capacities at the distribution grid level, there is a growing need for stabilization mechanisms across all voltage levels and, as a result, for the integration of smaller suppliers and consumers. Decentralized, flexible generation and storage capacities, as well as conversion into other energy carriers such as hydrogen, synthetic gases, or thermal energy, require efficient and effective coordination. Accompanied by sector coupling, the energy system is becoming more decentralized and interconnected. Digitalization generates the necessary data and enables internal networking as well as external networking with the markets.
The DigIPlat project deals with the interoperability of flexibility platforms through which the allocation of flexible capacities can be better coordinated, thereby increasing their economic efficiency as well as the security of supply. To this end, solutions for the cross-platform utilization of flexibility for redispatch, balancing energy, and intraday markets are being conceptually developed from an information and procedural engineering perspective and analyzed from an economic viewpoint. The latter involves a thorough analysis of those short-term markets where a flexible capacity could be offered: The balancing energy market (BEM) and the intraday market (IDM). We estimate the value added by a flexible capacity that is offered in the BEM and IDM. To assess the earnings potential of intraday and balancing energy products from a supplier's perspective, intraday and balancing energy products are modeled as financial options.
Empirical analyses with 2023 data indicate that, despite different product characteristics, in general both markets are similarly attractive. Offering balancing energy would only be more profitable than trading in the intraday market in the last 30 minutes before delivery for providers in a control area with low liquidity (reflected by a low depth of the intraday order book, high bid-ask spreads and a small number of transactions). The evaluation methodology also allows forecasts of returns in upcoming delivery periods and, thereby, the development of rules as to whether a supplier should bid on the intraday or balancing energy market, since the capacity can only be marketed once. As a use case, we investigate a potential transfer of bids from the intraday to the BEM. This increases the liquidity of the latter and, due to a shift in the merit order curve by the additional bids, can lead to lower costs for balancing energy. Since the earnings opportunities in the intraday and the balancing energy market are similar, no additional incentives would be needed for participants in the intraday market to allow their bids to be transferred.
To assess the quality of the intraday market, we introduce a metric that quantifies frictions for limit order books of an individual trading product. We also describe a general model for the joint dynamics of prices and volume of an open position based on copulas.
Next, we show the impact of PICASSO on the demand for automatic and manual frequency restauration reserve, and we analyze the impact on the bidding behavior of market participants in the intraday market by comparing the years 2021 and 2023 (before and after go-live of PICASSO). A last section reflects on the potential system risks that may arise in connection with hedging strategies.
