Tender Frequency and Market Concentration in the Balancing Power Market

The case of Germany

Andreas Knaut, Frank Obermüller, Florian Weiser

Balancing power markets ensure the short-term balance of supply and demand in electricity markets and their importance is expected to increase with a higher share of fluctuating renewable electricity production. While it is clear that shorter tender frequencies, e.g. daily or hourly, are able to increase the efficiency compared to a weekly procurement, it remains unclear in which respect market concentration will be affected. Against this background, we develop a numerical electricity market model to quantify the possible effects of shorter tender frequencies on costs and market concentration. We find that shorter spans of procurement are able to lower the costs by up to 15\%. While market concentration decreases in many markets, we – surprisingly – identify cases in which shorter time spans lead to higher concentration.

Figure: Comparison of the technologies (left) and operators (right) providing positive secondary balancing power for the weekly, daily and hourly provision duration in the winter week.

For further information, please find the working paper here. http://www.ewi.uni-koeln.de/fileadmin/user_upload/Publikationen/Working_Paper/EWI_WP_17_04_Tender_Frequency_and_Market_Concentration.pdf