Title: Welfare Benefits of Co-optimization of Energy and Reserves in Europe

 

 

Abstract: The joint scheduling of energy and reserves is an important step towards future-proof electricity market design dominated by the large-scale integration of renewable energy sources, where ancillary services are to gain increasing importance. The current European market design separates the procurement of reserve and energy in the day-ahead markets. This introduces inefficiencies, since both energy and reserve compete for finite generation capacity, and finite network capacity needs to be allocated for accommodating both energy trades as well as the potential activation of reserve. We develop a two-stage model that represents the status quo of European day-ahead market clearing followed by real-time market operation which is compared to a co-optimization benchmark. We further compare both setups to a regime of so-called market-based allocation of network capacity across European bidding zones, which is based on Article 41 of the European Commission Electricity Balancing Guideline. Market-based allocation maintains a separate clearing of energy and reserves in the day-ahead markets, and is the main contender to co-optimization in the European market design debate. These models are compared to each other on a realistic benchmark of the so-called Core region of Europe, which comprises the majority of Central Europe. Co-optimization is shown to yield substantial gains relative to the status quo, translating to € 955 million per year for the Core region, with market-based allocation reaping merely € 162 million of these potential efficiency gains. The results of the analysis provide a sound argument for advancing the implementation of co-optimization of energy and reserves in the European electricity market.

 

Anthony Papavasiliou is an assistant professor at the department of Electrical and Computer Engineering at the National Technical University of Athens. Formerly, he was an associate professor at the Center for Operations Research and Econometrics (CORE) at the Université catholique de Louvain, where he held the ENGIE Chair and a Francqui Research Professorship. He completed his PhD and post-doctoral research at the department of Industrial Engineering and Operations Research at UC Berkeley, working with Professor Shmuel Oren. He completed his undergraduate studies at the National Technical University of Athens, Greece, in the department of Electrical and Computer Engineering with a focus on electric power systems and power electronics.

In 2021 he received the Bodossaki Foundation Distinguished Young Scientist award in Applied Sciences. He is a recipient of an ERC Starting Grant under the 2019 funding cycle. He is currently serving as an associate editor for Operations Research and has served as an associate editor for the IEEE Transactions on Power Systems, Operations Research, as well as in the technical program committees of the Power Systems Computation Conference (2016, 2018, 2020), PowerTech (2019), the ACM Workshop on Energy Market Engineering (2018, 2019), and EnergyCon (2016). He has received the 2015 INFORMS best publication award in energy and the 2021 INFORMS best publication award in energy runner-up. He has served as a consultant for transmission system operators, regulatory authorities, power exchanges, and utilities on a number of topics related to electricity markets and power system operations.

 

 

 

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