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WIREs Energy Environ.
Impact Factor: 3.297

Bidding strategies in Austrian and German balancing power auctions

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Balancing power markets involve complex procurement auction mechanisms that are challenging both to design for auctioneers and to take part in for suppliers. Recent empirical work indicates that auction results from Austria and Germany do not match game‐theoretic predictions. Instead, suppliers adjust their bids to previous auctions results and do not reveal their actual costs within their bids. Therefore, this work focuses on bidding strategies of suppliers in the Austrian and German automatically‐activated Frequency Restoration Reserve auctions. First, the operating principle of the auctions is analyzed and the cost and profit structures are illustrated. Then, a theoretic approach for the derivation of optimal bidding strategies is presented, that allows the integration of price expectations based on historical market data. We validate our approach by a numerical application of the bidder's calculus. Finally, our theoretic results are confronted with Austrian and German auction outcomes. We find evidence that the identified bidding strategies are applied by the suppliers. This article is categorized under: Energy Systems Analysis > Economics and Policy Energy Infrastructure > Economics and Policy Energy Policy and Planning > Economics and Policy Concentrating Solar Power > Economics and Policy
Step 1 of the operating principle in the Austrian and German automatically‐activated Frequency Restoration Reserve (aFRR) auctions: Winner determination (positive and negative aFRR)
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Merit‐order position 1,900 MW in the German merit order from 2016.1 to 2016.6 and in the common merit order from 2016.7 to 2017.8 for the positive Austrian‐German automatically‐activated Frequency Restoration Reserve market (main period and subperiod); source: regelleistung.net ()
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Empirical market data of the positive and negative Austrian automatically‐activated Frequency Restoration Reserve market in the time period from January 2014 to May 2016; main and subperiod combined; power bid converted to Euro/MWh; source: Austrian Power Grid ()
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Empirical market data of the positive and negative German automatically‐activated Frequency Restoration Reserve market in the time period from January 2014 to May 2016; main and subperiod combined; power bid converted to Euro/MWh; source: regelleistung.net ()
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Development of the highest awarded power bid bmax from January 2012 to December 2013 with a total of 105 auctions (regelleistung.net, )
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Step 2 of the operating principle in the Austrian and German automatically‐activated Frequency Restoration Reserve (aFRR) auctions: Demand probability (positive and negative aFRR)
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Step 2 of the operating principle in the Austrian and German automatically‐activated Frequency Restoration Reserve (aFRR) auctions: Position in the merit order of the energy bids (negative aFRR)
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Step 2 of the operating principle in the Austrian and German automatically‐activated Frequency Restoration Reserve (aFRR) auctions: Position in the merit order of the energy bids (positive aFRR)
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Concentrating Solar Power > Economics and Policy
Energy Policy and Planning > Economics and Policy
Energy Infrastructure > Economics and Policy
Energy Systems Analysis > Economics and Policy

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