Assessment of alternative reserve procurement strategies for the Italian Power System

In most of the European countries reserve (e.g. balancing capacity) is procured in advance to the day-ahead market. At the opposite, in Italy, reserve is procured in the spot ancillary service market which held after the day-ahead market. This paper presents an assessment of the potential impacts of procuring reserve in advance to the day-ahead market, in the framework of the Italian electricity market. The aim of this approach is to anticipate potential scarcity conditions in order to ensure secure operation. This goal can be achieved by making price signals, raising from the day-ahead market, comparable with other countries. The paper describes the characteristics of the possible new reserve procurement model and its impact, in terms of outcomes and costs, of both the energy and ancillary services markets in Italy. Different scenarios are identified in order to find the optimal solutions to improve the reserve procurement process so as to ensure coherent price signals in case of scarcity conditions, without increasing system costs.