Possible effects of balancing market integration on performance of the individual markets

Abstract

Different cross-border arrangements for exchange of balancing services in electricity markets can potentially have different effects on the behavior of market parties and consequently market performance as a whole. This paper focuses on BSP-TSO trading (foreign bidding) as one of the main four arrangements proposed for exchange of balancing services across borders. We analyze the case of Norway and the Netherlands as a main balancing market integration case in Northern Europe and investigate the possible effect of enabling BSP-TSO trading (as one step towards full balancing market integration) between these countries on the performance of the two individual markets. An agent-based model is developed in MATLAB through which we study the possible change in behavior of market parties as a result of BSP-TSO trading implementation.