Imbalance Settlement Design with Demand Side Management and Combined Heat and Power

In this paper the effect of the imbalance settlement design is studied. The 3 considered imbalance settlement systems are single, dual and hybrid pricing systems. To evaluate the effects of system design, a statistical arbitrage model for two flexible asset holders - an aggregator with demand side flexibility and a combined heat and power plant is applied. System parameters such as absolute imbalance reduction, system costs and profits are analysed in the result section. This paper contributes to the discussion of imbalance settlement design in balancing markets and provides a numerical analysis of market players reacting to single, dual and the hybrid imbalance system design. The results suggest that the hybrid imbalance settlement system with a threshold of 10-15% of total control power reserves lead to best results in the Austrian market.