Austrian Electricity Market Transformation: Analysing effects of aFRR/mFRR LMOL Limits regarding Efficiency in Balancing Energy Markets and the Local Intraday Market

Julia Brandstetter

Research output: ThesisMaster's Thesis

Abstract

European goals aiming for climate-neutrality demand an increase of renewable energy sources within the electricity system. The Austrian goal of achieving carbon-neutrality in its electricity generation by 2030 poses additional challenges to the country. An increase of renewable volatile energy sources goes along with an increase in forecast errors, resulting in a higher system imbalance. Real-time price signals, short-term market opportunities, and well-functioning balancing mechanisms are needed to accomplish energy transition. European interconnected balancing energy markets play a key role when it comes to increased market efficiency, thriving for welfare gains for all cooperation members. Nevertheless, balancing cross-border and national market elements is no easy task. By setting a limit to the local merit order list in balancing energy markets in Austria, both short-term markets, the balancing energy market, and the local intraday market, shall benefit. Whereas enough balancing energy shall be forwarded and shared with cooperation members, not-needed balancing energy shall be set free to be traded at the local intraday market, enabling to decrease open positions. This way, imbalances can be handled within the local intraday market by market participants themselves before the transmission system operator has to activate balancing energy, causing high costs which are in the end carried by consumers and producers likewise. Additional intraday trading does not only promise to reduce imbalance costs but also creates an option for balance service providers to increase their incomes. This thesis aims to evaluate the potential impact of short-term market participation of balancing service providers under the current energy market design on overall welfare. The main focus lies on the limit of the local merit order list within the balancing energy market. A simulation model is derived based on evaluations of the current market situation and applied to accomplish a scenario comparison. Different market behaviors of balancing service providers and their chances within the given balancing energy market framework are put into focus. Sensitivities of varied parameters and assumptions are tested, finding the lever to increase producer and consumer surplus. It is shown that short-term market participation is increasing significantly in the balancing energy market as in the intraday market. However, not all market participants apply short-term strategies, causing time periods with illiquid market situations. Nonetheless, intraday incomes could significantly be increased if more close-to-delivery trading is done. The impact is expected to increase even further if regular activities at the local intraday market are established. Yet, the impact onto consumer surplus is still marginal. Further developments and an increase in short-term market activity trends are needed to generate noticeable benefits. This work states the need and potential for short-term market participation within the balancing energy and intraday markets while providing a solid foundation for observing the recently started trend of almost real-time trading to deal with higher volatilities. Only by taking the chance and courage of short-term market actions will energy transition be accomplished technically and economically equally.
Translated title of the contributionÖsterreichische Strommarkttransformation: Analyse der Auswirkungen der aFRR/mFRR LMOL-Limitsauf die Effizienz der Regelenergiemärkte und des lokalen Intraday-Marktes
Original languageEnglish
QualificationDipl.-Ing.
Awarding Institution
  • Montanuniversität
Supervisors/Advisors
  • Schlar, Daniel, Co-Supervisor (internal)
  • Posch, Wolfgang, Supervisor (internal)
  • Spindler, Christian, Co-Supervisor (external), External person
Award date28 Jun 2024
Publication statusPublished - 2024

Bibliographical note

no embargo

Keywords

  • Electricity Market
  • Balancing Energy Market
  • Local Intraday Continuous Market
  • Short-Term Trading

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