Electricity Market Auction Settings In a Future Danish Electricity System: A Comparison of Marginal Price Setting and Pay-As-Bid
Authors
Nielsen, Steffen ; Sorknæs, Peter
Term
10. term
Education
Publication year
2010
Submitted on
2010-06-10
Pages
100
Abstract
Danmarks langsigtede politiske mål er et energisystem uden fossile brændsler. Det kræver mere el fra svingende (fluktuerende) vedvarende kilder som vind. Den danske elhandel foregår på Nord Pool, hvor daglige auktioner anvender Marginal Price: markedsprisen er lig buddet fra den dyreste enhed, der accepteres. Svingende vedvarende kilder byder ofte 0 kr. eller tæt på, hvilket sænker prisen i timer med høj produktion. Det reducerer deres indtjening fra markedssalg og øger behovet for støtte, og effekten vokser med øget vedvarende kapacitet. En alternativ auktionsform er Pay-As-Bid, hvor vinderne betales deres eget bud; det kan få svingende kilder til at byde over nul. Specialet undersøger og sammenligner Marginal Price og Pay-As-Bid for at vurdere, om et skifte kan være mere egnet ved store mængder svingende vedvarende el. Analysen er udført med to tekniske opstillinger med forskellige mængder svingende produktion. Resultatet viser, at Marginal Price generelt er bedre for de svingende vedvarende kilder, men konklusionen afhænger stærkt af de anvendte grundantagelser. Ændres antagelserne, kan Pay-As-Bid blive bedre. Ingen af de undersøgte auktionsformer er dermed entydigt bedre for svingende vedvarende kilder.
Denmark’s long-term political goal is a fossil-fuel-free energy system. Achieving this requires more variable renewable electricity, such as wind power. Denmark trades power on Nord Pool, where the day-ahead market uses a Marginal Price auction: the market price equals the bid of the most expensive accepted unit. Variable renewables often bid at zero or near zero, which lowers prices in hours with high renewable output. This reduces their market revenues and increases reliance on subsidies, and the effect grows as renewables expand. An alternative is a Pay-As-Bid auction, where winning units are paid their own bid; this would lead variable renewables to bid above zero. This thesis investigates and compares Marginal Price and Pay-As-Bid to assess whether changing the auction format could better accommodate large amounts of variable renewable electricity. The analysis uses two technical setups with different levels of variable renewables. It finds that Marginal Price is generally better for variable renewable sources, but results are highly sensitive to the base assumptions. With different assumptions, Pay-As-Bid could perform better. Therefore, neither auction format is clearly superior for variable renewable sources.
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