Welfare optimal reliability and reserve provision in electricity markets with increasing shares of renewable energy sources

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: HEMF Working Paper ; No. 03/2017

Classification and Topics

• Classification: Wirtschaft ; Criteria for Decision-Making under Risk and Uncertainty ; Industrial Policy; Sectoral Planning Methods ; Energy: Demand and Supply; Prices ; Alternative Energy Sources
• Subject: Renewable Energy Sources ; Electricity Reserves ; Reliability ; Electricity Market ; TSO

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Friðrik Már Baldursson ; Bellenbaum, Julia ; Lazarczyk, Ewa ; Niesen, Lenja ; Weber, Christoph
• Event: Veröffentlichung
• (who): University of Duisburg-Essen, House of Energy Markets & Finance
• (where): Essen
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/162996
• Last update: 10.03.2025, 11:42 AM CET