Svk publishes scarcity pricing report

The Swedish TSO Svenska kraftnät recently published our report about the implementation of scarcity pricing in the context of a joint project between N-SIDE and Svk.

The report addresses a variety of topics, including:

  • Principles of scarcity pricing
  • Specialized topics on the calibration of operating reserve demand curves
  • Adaptation of scarcity pricing to the Swedish / Nordic system
  • Design of European balancing markets with scarcity pricing
  • Legal and institutional compliance and interaction with capacity remuneration mechanisms
  • Cross-border effects and pan-European balancing platforms

The report includes a number of interesting aspects, including:

  • A market model proposal for implementing scarcity pricing which ensures deliverability of reserve on a radial network (such as the one of Sweden). The analytical model arrives to an intuitive result, whereby scarcity adders within a congested region apply to flexible resources within the region, and also out of the region provided that the network can support delivery of balancing energy from external zones. If resources in external zones cannot deliver balancing energy due to network congestion, these resources do not receive scarcity adders.
  • A proof of concept on a stylized model of the Swedish system. The model reveals two types of scarcity. System-wide scarcity, which is severe, occurs during winter months, is due to system-wide shortage, and results in the most pronounced adders. Local scarcity in southern Sweden, which occurs in summer months, is due to local shortage of balancing capacity, even if there is no system-wide scarcity. This results in less pronounced adders, that are only payable to balancing resources within the zone that experiences scarcity.