Friðrik Már Baldursson Bellenbaum, Julia Lazarczyk, Ewa Niesen, Lenja Weber, Christoph
Year of Publication:
HEMF Working Paper 03/2017
We develop an analytical model to derive the competitive market equilibrium for electricity spot and reserve markets under stochastic demand and uncertain renewable electricity generation. We then derive the welfare-optimal provision of reserves. At rst-best, cost of reserve capacity is balanced against expected cost of outages. The rst-best market equilibrium of the model implies an increase of reserve provision with a growing share of renewable generation. Furthermore, a growing share of renewable generation decreases the level of reliability as measured in energy not served. Additionally, required reserves to balance higher expected deviations will be more expensive, resulting in a trade-o between higher reserve costs and costs of energy not served.
Renewable Energy Sources Electricity Reserves Reliability Electricity Market TSO