Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/162996 
Year of Publication: 
2017
Series/Report no.: 
HEMF Working Paper No. 03/2017
Publisher: 
University of Duisburg-Essen, House of Energy Markets & Finance, Essen
Abstract: 
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.
Subjects: 
Renewable Energy Sources
Electricity Reserves
Reliability
Electricity Market
TSO
JEL: 
D81
L52
Q41
Q42
Document Type: 
Working Paper

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