متعادل کننده استراتژی های انرژی در مدیریت پرتفولیو برق

Traditional management of electricity portfolios is focused on the day-ahead market and futures of longer maturity. Within limits, market participants can however also resort to the balancing energy market to close their positions. In this paper, we determine strategic positions in the balancing energy market and identify corresponding economic incentives in an analysis of the German balancing energy demand. We find that those strategies allow an economically optimal starting point for real-time balancing and create a marketplace for flexible capacity that is more open than alternative marketplaces. The strategies we proffer in this paper we believe will contribute to an effective functioning of the electricity market.

In the late 20th century, electricity markets were liberalized across the world. Since this restructuring, integrated companies have separated into specialized individual market participants. In addition, institutional investors such as banks and hedge funds have entered the market not solely to exploit its opportunities but also for risk diversification. All these players face not only the risk of a highly volatile energy market, but also the inner-market risk of the electricity market. Naturally, market participants want to actively trade and hedge this risk. Alongside with traditional bilateral over-the-counter (OTC) contracts, electricity exchange-traded contracts have emerged as instruments for these inner-market trades. Among these contracts, the day-ahead futures contract is the principal instrument. This futures contract offers the shortest delivery period — often 1 h — and serves as the reference price for longer-dated futures contracts. For this reason, the day-ahead futures contract is sometimes referred to as the spot contract. The properties of the day-ahead market and the market for futures written on day-ahead contracts have been analyzed using various modeling approaches (see, for example, Geman and Roncoroni, 2006, Trück et al., 2007 and Römisch and Wegner-Specht, 2005). In addition, the interdependence of the day-ahead market and the futures market has been investigated (see, for example, Bessembinder and Lemmon, 2002 and de Jong and Huisman, 2002). The aggregate positions in the futures and day-ahead markets serve as a preliminary schedule for operating an electricity network. However, because electricity is practically non-storable, the market for electricity consumption and delivery also requires a marketplace for ancillary services so that blackouts may be avoided. The capacity reserve market is one such marketplace. Capacity reserve is provided by installations such as the fraction of power stations or factories that are readily adjustable to counter deviations from the preliminary schedule. The capacity of these installations can be traded on the electricity exchange as well as on the capacity reserve market. Thus, the day-ahead market and the capacity reserve market are interchangeable marketplaces for trading this capacity. It should be noted that ancillary services value the flexibility of electricity interchange, whereas the focus of the futures market is energy content. Nonetheless, it is recognized that the competition between these two marketplaces should be taken into account in formulating optimal bidding strategies in both trading forums (see Weigt and Riedel, 2007 and Simoglou and Bakirtzis, 2008). In this paper, we extend this notion of interchangeable marketplaces to another ancillary services market, the balancing energy market where electricity transactions relative to the preliminary schedule are settled. The market design of the balancing energy market is a crucial component of electricity markets as it mediates between the liberalized futures and day-ahead markets, and the natural monopoly of the grid and its operation (see ETSO, 2007). In view of the stated objective of increasing renewable generation in the future (see EU, 2008 and U.S.Congress, 2009), this importance is likely to become even more pronounced. Clearly the value of flexible electricity interchange increases with a higher market share of renewables such as wind energy (see EU, 2005). Therefore, a harmonization of the balancing energy markets is being pursued in Europe. Several studies compare and analyze the current European market designs to identify potential approaches to achieve harmonization (see ETSO, 2007 and Belmans et al., 2009). However, all these studies are focused on the point of view of system security and disregard the implications of strategic positions in the balancing energy market. In fact, such positions are controversial. It has been argued that any use of the balancing energy market, apart from the settlement of imbalances caused by unpredictable events, might endanger the system operation by adding the uncertainty associated with market participants' strategic positions. As a consequence, the balancing energy market is reduced to a marketplace with a single focus on secure system operation and blackout prevention (see Belmans et al., 2009 and ERGEG, 2006). In analyzing these positions, we add the perspective of market equilibria with interchangeable marketplaces in our discussion of European market designs. Outside European markets, this notion is recognized in the PJM electricity market, for example, that even allows purely financial positions to enhance market price convergence (see Zhou et al., 2003 and Longstaff and Wang, 2004). In the context of interchangeable marketplaces, we focus on two aspects of the balancing energy market. We first look at the balancing energy market as an alternative marketplace for reserve capacity. By comparison, it offers market access to a wider and technically less demanding range of installations such as power stations or factories. Second, we investigate the balancing energy market's interplay with the marketplace for electricity consumption and delivery. Because the price formation of the balancing energy market and the day-ahead market differ, this alternative marketplace potentially dampens the effects of electricity price spikes on the electricity portfolio of market participants. In this paper, we provide evidence of the balancing energy market being utilized as an alternative market for both the electricity exchange and reserve capacity in Germany. The German market is chosen for this analysis due to the combination of its market design and generation stock. More specifically, among European markets, the German market is the only major market that does not impose implicit transaction costs or even penalties on electricity transactions in the balancing energy market. In fact, Boogert and Dupont, 2005 show that the level of penalties effectively prohibits strategic positions in the Netherlands. Therefore, it is only in the German market that strategic positions can be observed undistorted. Moreover, the German market features a thermal-based generation stock, allowing transferring results to similar markets. In this respect, a renewable power market share of 15% also reflects the importance of the balancing energy market for the integration of renewables (see BMU, 2009). The share of inflexible thermal and renewable generation translates into a high value of load flexibility as reflected in a high spread between balancing energy prices during periods of positive and negative net deviation. This spread enhances the economic incentive for strategic positions. Finally, different fundamental periods of the balancing energy market and the day-ahead market allow analyzing the interaction with the capacity reserve market and the day-ahead market separately. Therefore, Germany provides a suitable setting to observe the interaction with interchangeable marketplaces described earlier. The paper is organized as follows. Section 2 provides a brief review of balancing energy settlement schemes, followed by a description of the German market design and the motivation for the chosen setting in Section 3. Section 4 describes the data and introduces the proposed modeling approach. A quarter–hourly pattern is analyzed in Section 5. Section 6 focuses on an hourly pattern, and the interdependence with the day-ahead market. At the same time, we look at the incentive structure leading to the observed patterns at these two timeframes. Additionally, we look at incentives for positions in the balancing energy market persistent over longer periods of time in Section 7. Section 8 summarizes our results and their implications.

In this paper we discuss the deployment of balancing energy in the management of electricity portfolios for the particular setting of the German market design. The German market was selected because (1) strategic positions benefit from the high spread between up- and down-regulation periods and the absence of penalties and transaction cost, (2) the different settlement periods of the day-ahead and balancing energy market allow a separate analysis of the interaction with the capacity reserve market, and (3) the generation mix of thermal and renewables allows transferring results to other European markets. We identify and model three strategies that reflect the interaction of the balancing energy market with other electricity marketplaces and corresponding economic incentives. These strategies are well characterized by the timeframe of their deployment. Within the hour, different settlement periods in the day-ahead and balancing energy market lead to a pronounced quarter–hourly pattern. A high spread between up- and down-regulation balancing energy prices in different periods translates into an economic incentive to obtain less correlation to this quarter–hourly pattern. This strategy reduces load fluctuation in the network, which is equivalent to the deployment of reserve capacity. For the given timeframe, the strategy sets free capacity reserve otherwise deployed to compensate for fluctuations. On an hourly timeframe, a pattern resembling the load curve is identified. This hourly pattern shows that market participants exploit statistical-arbitrage opportunities between the balancing energy market and the day-ahead market. In other words, the hourly pattern can be understood as the exercise of grid-access as a real option, in many ways comparable to a swing option. Only through the hourly pattern may the electricity price in the day-ahead market and the balancing energy market reach equilibrium. Additionally, we identify positions taken in the balancing energy market over extended periods of time. Changes in these positions coincide with changes in the asymmetric cost function of balancing energy. This observed asymmetry provides an economic incentive to present a trimmed forecast in order to reduce deviation cost. Historically, the asymmetry displays a tendency to drive the market towards oversupply. The existence of the three predictable patterns is clearly incompatible with a minimum-variance forecasting objective of all market participants, as sizeable efficiency reserves remain on all timeframes. Instead, the market appears to follow a best economic forecast objective and actively allocates part of the electricity portfolio in the balancing energy market whenever its expected price is competitive. These positions in the German market represent an important difference to the dual-price settlement scheme adopted by other European countries. In the case of the quarter–hourly pattern, the balancing energy market adds a liquid and transparent marketplace to trade electricity on a sub-hourly timeframe. An adaption of portfolios to this pattern results in a reduction of fluctuations, which is a valuable addition to capacity reserve market because market access to the balancing energy market is less restricted. This is especially advantageous to the demand side management capacity that cannot meet the technical requirements set by the TSO for capacity reserve. As a result, additional flexible capacity enters the market as indicated by the quarter–hourly pattern diminishing over the years. In contrast, the hourly and long-term strategies increase load fluctuations. However, these positions are in line with the price signals set by the market. This mechanism effectively reduces the ability to exploit market power in scarcity situations of electricity supply or demand and reduces the total cost of electricity supply under demand uncertainty. Moreover, the long-term positions tending towards negative balancing energy demand help to reduce the cost of inevitable fluctuations, as the more expensive regime of positive balancing energy demand is avoided. The resulting biased preliminary schedule takes into account that upward regulation is more demanding than downward regulation and is economically superior to an unbiased schedule. This information is distorted by the dual-price settlement scheme driving BRPs to omit strategic positions. In fact, the dual-price system will even undermine system security with respect to the quarter–hourly pattern by also driving BRPs negatively correlated to the net deviation to reduce their fluctuations. These effects have to be valued against the additional variability that might be imposed on the system by misguided (i.e., unprofitable) strategic positions. Also, there is no indication that the German system security was inferior to that of neighboring markets with a dual-price settlement scheme. Overall, the experience of the German balancing energy market demonstrates that the market responds to the incentives set by the market design, and indicates balancing energy to be an integral component of electricity portfolio management. Consequently, the balancing energy market helps to direct investment into the most economical capacity extensions and forecasting procedures to secure system security. These are key issues in adapting the electricity market for the challenges of integrating a higher share of renewables.