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Market power assessment in regional smart markets
... • The general potential for market manipulation due to market design inconsistency and market power tendencies needs to be observed. The potential of mitigation measures within LFM were discussed previously (see [59,60]). Nevertheless, a consistent evaluation of dynamic market behavior still demands further research. • ...
Local flexibility markets or smart markets are new tools used to harness regional flexibility for congestion management. In order to benefit from the available flexibility potential for grid-oriented or even grid-supportive applications, complex but efficient and transparent allocation is necessary. This paper proposes a constrained optimization method for matching the flexibility demand of grid operators to the flexibility supply using decentralized flexibility options located in the distribution grid. Starting with a definition of the operational and stakeholder environment of smart market design, various existing approaches are analyzed based on a literature review and a resulting meta-analysis. In the next step, a categorization of the allocation method is conducted followed by the definition of the optimization goal. The optimization problem, including all relevant input parameters, is identified and formulated by introducing the relevant boundary conditions and constraints of flexibility demand and offers. A proof of concept of the approach is presented using a case study and the Altdorfer Flexmarkt (ALF) field test within the project C/sells. In this paper, we analyze the background of the local flexibility market, provide the methodology (including publishing the code of the matching mechanism), and provide the results of the field test.
... [1] [2] As their main goal is to provide new approaches for marketbased congestion management there is a distinct need for reliability but also tamper-resistance, so transparency and monitoring of correct platform operation is needed. Historical incidences like [3] but also current discussions in this field of research (see [4] or [5]) prove this need. The status quo of market monitoring through authorities is mainly report-based (i.e. ...
The evolving granularity and structural decentralization of the energy system leads to a need for new tools for the efficient operation of electricity grids. Local Flexibility Markets (or "Smart Markets") provide platform concepts for market based congestion management. In this context there is a distinct need for a secure, reliable and tamper-resistant market design which requires transparent and independent monitoring of platform operation. Within the following paper different concepts for blockchain-based documentation of relevant processes on the proposed market platform are described. On this basis potential technical realizations are discussed. Finally, the implementation of one setup using Merkle tree operations is presented by using open source libraries.
After creating a new blockchain transaction, the next step usually is to make miners aware of it by having it propagated through the blockchain's peer-to-peer network. We study an unintended alternative to peer-to-peer propagation: exclusive mining. Exclusive mining is a type of collusion between a transaction initiator and a single miner (or mining pool). The initiator sends transactions through a private channel directly to the miner instead of propagating them through the peer-to-peer network. Other blockchain users only become aware of these transactions once they have been included in a block by the miner. We identify three possible motivations for engaging in exclusive mining: (i) reducing transaction cost volatility ("confirmation as a service"), (ii) hiding unconfirmed transactions from the network to prevent frontrunning and (iii) camouflaging wealth transfers as transaction costs to evade taxes or launder money. We further outline why exclusive mining is difficult to prevent and introduce metrics which can be used to identify mining pools engaging in exclusive mining activity.
Der Beitrag erläutert auf Grundlage von beschriebenen Marktmechanismen, welche im Rahmen des Projekts C/sells für ein zelluläres Energiesystem entwickelt werden, die Wertversprechen von Flex-Plattformen für den netzdienlichen Handel von Flexibilität. Diese stellen Netzbetreibern ein zukünftiges Werkzeug für marktbasiertes Engpassmanagement zur Verfügung. Hierzu werden die Funktionen des C/sells Flex-Plattform Konzepts sowie die Interaktionen der beteiligten Akteure vorgestellt. Anschließend werden Charakteristika des Altdorfer Flexmarkts (ALF) als eine Implementierung des Flex-Plattform Konzepts detailliert beschrieben. Auf Basis der Systemlandschaft werden spezifische Prozessschritte erläutert und auf die Schwerpunkte bei der Umsetzung von ALF eingegangen. Hierzu gehört neben dem einfachen Marktzugang von Kleinanlagen die Integration in die durch intelligente Messsysteme bereitgestellte Infrastruktur. In der Zusammenfassung werden die Inhalte im energiewirtschaftlichen Kontext verortet und ein Ausblick auf die weitere Umsetzung gegeben.
The paper concentrates on four aspects of mitigating market power in European electricity networks: capacity divestiture, entry, promoting interconnection, and the capacity to regulate competition in generation, drawing on lessons from Britain, California and the Continent. Each of these actions can improve the intensity of competition in electricity wholesale markets, but attractive strategies to promote any one of these may, unless carefully designed, be in conflict with other strategies, with possibly long-term disadvantages. Trading divestiture for the right to vertically integrate, or promoting contracts at the expense of a transparent spot and balancing market may increase short-run competition at the expense of entry. Gas liberalisation would greatly facilitate efficient electricity markets. Introduction The European electricity market is being liberalised primarily by pressure from the European Commission through the Electricity Directive 96/92/EC. The case for electricity liberalisation was based on the success of Britain and Norway in introducing competition into the wholesale electricity market, combined with the observation that electricity prices differed widely across the Continent. If customers were free to buy from cheaper suppliers, then wholesale and retail prices would fall in response to competition, and producers in different countries would have access to similarly priced electricity. This would fulfil the aims of the single market -"the free movement of goods, persons, services and capital," and hence increase European competitiveness. The analysis was sound, but for electricity liberalisation to deliver sustainable and competitive prices, a number of important pre-conditions must be met. The first is that there is adequate and secure capacity relative to peak demand. Electricity cannot readily be stored (except as storage hydro), so reserves must be sufficient to meet generation outages, unexpected surges in demand, and, in a liberalised market, strategic bidding or capacity withholding as demand increases relative to available capacity. Second, for the wholesale market to be competitive, potential suppliers must have access to the transmission system in order to reach customers. This certainly requires legal unbundling of transmission from generation at the least, though ownership separation is preferable. This also applies to import capacity, and requires that customers have access to foreign suppliers and that incumbent generators do not * Paper prepared for the conference Towards a European Market of Electricity: What have we Learnt from Recent Lessons? Spot Market Design, Derivatives and Regulation organized by the SSPA Italian Advanced School of Public Administration on June 24-5, 2002. Support from the ESRC under the project R000 238563 Efficient and sustainable regulation and competition in network industries, and the CMI project 045/P Promoting Innovation and Productivity in Electricity Markets is gratefully acknowledged. I am indebted to Richard Green for helpful comments.
The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence.
Within the framework of a so called smart market platform, the technical grid evaluation of flexible assets is crucial, and can be achieved without the use of continuous load flow calculations and grid data. The approach described in this paper contains a method to compute the impact of flexible assets and linearize this, which makes it possible to approximate the effect of flexible service provision without further information. For the classification of the results, a comparative case study with load flow simulations is used.
Flexibility of decentralized controllable loads face the challenge of a lack of prediction data and missing integration mechanisms in order to provide their flexibility to the grid. FfE developed a smart market platform with a special focus on integrating small flexible systems. Therefore, an aggregation mechanism was developed as described in this paper. Based on an introduction to the platform process and the requirements to an aggregated flexibility offer the derivation of available flexibility by determining statistical simultaneity factors is described. Further different pool formation and aggregation schemes are analyzed. Finally, a case study and critical review leads to the outlook.
The expansion of renewable energies along with a simultaneous increase in electrification of consumers in the lower voltage levels is increasingly leading to congestions in the electricity grid and to a rising complexity in the operational planning of grid operators. The Altdorfer Flexmarkt - a smart market platform - is a concept for the utilization of flexibility, their efficient use and the assurance of a coordinated call-off. The paper starts with a meta-study of comparable smart market concepts and their basic principles. Combined with today's operational planning processes for grid operators the smart market concept used for the Altdorfer Flexmarkt is derived. Its functionality is afterwards described by an explanation of the basic structure and key modules.
The impact of renewable energies on the power grid is continuously increasing. Besides the emission-free power generation, the renewable energies often are the cause for congested grids, component failure and costly interventions by the distribution system operators (DSO) and transmission system operators (TSO) in order to maintain grid stability. The scientific community discusses in recent years the usability of distributed energy resources (DER) as flexible devices. However, no approach can be found that actually quantifies the potential flexibility and sets a price to it. The model presented in this paper optimizes the charging operation of an electric vehicle (EV) according to a price signal with a state of the art exhaustive search algorithm. Furthermore, this model offers all possible deviations from the optimal operation as flexibility to a corresponding market platform and sets a price to each offer, which is dependent on the future price level of the energy. With this model, it is possible to offer positive and negative prices for flexibility. The proposed model shows that an exhaustive enumera-tion algorithm is feasible to calculate flexibility offers, prices and applicable on currently discussed platform models. The example of an EV charging schedule is successfully modelled and described in this paper.
This chapter discusses the interaction of market power and market efficiency, and particularly considers the implications of market power mitigation in improving the efficiency of operation of electricity markets. Competitive price levels are the prices that would prevail in a clearing-price market where no market participant can individually affect prices. The chapter discusses the market power and efficiency in detail. It describes price formation in electricity markets, price and offer caps, and the ability and incentive to exercise market power. Several market power mitigation approaches are also discussed. The chapter reiterates the backstop function of price and offer caps. It describes conduct and impact tests, structural tests and the "Texas two-step", respectively. Analysis of the incentives to exercise market power reveals how exercise of market power is also generally associated with inefficient production. Market power mitigation can be aimed at influencing the supply side, or increasing the discipline provided by the demand side.
This chapter provides an overview of how market power can be exercised and how effective market monitoring can prevent abusing practices. It elaborates what market power means in the particular context of wholesale electricity markets. It provides a review of the reasons why antitrust law is not always applicable to restructured electricity markets and why it cannot effectively address some of the market power problems encountered in those markets. The different types of market power and the different ways a monopolist can withhold production to affect market prices are described, and the tools available to market monitors to detect market power abuses and mitigate their impact are discussed. It provides a description of the role and function of market monitoring units (MMUs) that have been created in the United States and elsewhere. Market power is a fundamental problem that affects most electricity markets in transition from a regime of regulated monopolies to competition. Left unaddressed, restructuring will leave consumers at the mercy of unregulated monopolists. The problem is best addressed when legislators and regulators require structural changes and the large vertically integrated power companies inherited from the past divest their generation assets. Competitive electricity markets are prone to abuse of market power by dominant generators or firms with strategic assets under a number of circumstances. Experience suggests that when these conditions are present and a vigilant watchdog is absent, firms may be tempted to exercise their market power to manipulate prices in a number of ways, harming consumers and other market participants in the process.
Experience with deregulated electricity markets has shown that the assumption that markets will naturally produce competitive results is not justified. The existing independent system operators (ISOs) and emerging regional transmission organizations (RTOs) all have developed or are developing systems and procedures to accomplish the monitoring task in their markets. This paper provides an overview of the key elements necessary for effective design and implementation of market monitoring systems. Market monitoring must be concerned primarily with ensuring efficient market performance by identifying market inefficiencies, the potential for market abuses, and market power problems. In this paper, we define market power and identify factors that allow the exercise of market power in electricity markets. We also propose market efficiency objectives that should be used to design market rules that discourage gaming. We then identify the issues relevant to designing and implementing an effective market monitoring function.
The California Electricity Crisis: Causes and Policy Options
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Bottom-up-Szenarien am beispiel des altdorfer flexmarkts
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Non-Collusive market failures in the context of new markets for flexibility: An application of the residual supply index to the altdorfer flexmarkt and review of historical market manipulation cases
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Bottom-up-Szenarien am beispiel des altdorfer flexmarkts
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