• Steffen Nielsen
  • Peter Sorknæs
The long-term political goal for the Danish energy system is to be free of fossil fuels. In order to achieve this, an increased amount of fluctuating renewable electricity such as wind power is expected to be implemented. The Danish electricity market is part of the Nordic power exchange Nord Pool, which uses an auction setting known as Marginal Price for the day-ahead auctions. This is characterized by the market price being equal to the bidding price of the most expensive auction winning unit. In this setting the fluctuating renewable electricity sources bid with prices of zero or close to zero, resulting in a market price for the hours of fluctuating renewable production to be lower than what they otherwise would be. In turn, this reduces the fluctuating renewable sources’ income from market sales, and makes them more dependent on subsidies. As more fluctuating renewable electricity is implemented, this effect will only become greater. Other auction settings could potentially help to reduce this problem. One of these is the Pay-As-Bid auction setting, where the winning units are paid their own bid, which would result in bids greater than zero from fluctuating renewable energy sources. The aim of this thesis is hereby to investigate and compare the two auction settings; Marginal Price Setting
and Pay-As-Bid, to find whether a change of electricity market auction setting might provide a more suitable auction setting for large amounts of fluctuating renewable electricity. This has been done with two technical setups with different amounts of fluctuating renewable electricity. From the analysis it is found that the Marginal Price Setting generally is better for the fluctuating renewable electricity sources. The result is, however, very dependent on the base assumptions used for the calculations, and any change in the base assumptions could result in the Pay-As-Bid setting becoming better. None of the investigated auction settings are hereby significantly better for fluctuating renewable electricity sources.
Publication date10 Jun 2010
Number of pages100
Publishing institutionAalborg Univercity
ID: 32688243