Study of Interaction between Spot Market and Market for Balancing Services

Around the world, there are a number of policies encouraging penetration of wind generation in the electricity industry. The proposed large increase in the penetration of wind generation has raised concerns about the continued security and reliability of the operation of the network. The Market participants who are willing to provide the balancing services offer their services to the Transmission System Operator, TSO. In case of any system imbalances, the offers are listed in a merit order list and the cheapest offer will be selected. This selection is regardless of balancing service provider’s nationality. If congestion happens, some other offers will be used to relieve congested line. This results in different prices for balancing services in different areas. This methodology is based on the corrective actions in the market for balancing services given the dispatch information from the spot market. With the increased penetration of wind generation into the electricity industry, the demand for balancing services is increasing. Under these windy scenarios, it might be more efficient to use preventive actions in the spot market rather than doing corrective actions in the Market for balancing services. This master thesis aims at showing the advantages of this new paradigm of the organization of the electricity market based on preventive actions. With this purpose, an integrated model of the electricity market was built in GAMS software and run for different scenarios and configurations of the grid. Comparisons are made at the end of this document in order to point out the superiority of this new approach over the traditional corrective model