Welfare benefits of co-optimizing energy and reserves

Our team is very proud to present our study on the co-optimization of energy and reserves, which we have conducted on behalf of the European Agency for the Cooperation of Energy Regulators (ACER). An ACER webinar was organized on June 10, 2024, where we had the opportunity to present our study to the community.

Key conclusions of our study:

  • Co-optimization could deliver ~1.3 billion € per year of welfare gains in the EU relative to the status quo
  • The market-based approach is estimated to deliver 159 million € per year of welfare gains in the EU relative to the status quo
  • Savings originate from complex interaction of fixed costs and technical minima, which allow for deeper integration of low-cost non-dispatchable technologies
  • Intraday corrections (due to, e.g., portfolio effects) can be highly beneficial for correcting some of the scheduling inefficiencies of the status quo and market-based
  • Price forecast errors, which can increase coordination inefficiencies due to misrepresentation of opportunity costs in the BC market, can be largely corrected by intraday adjustments
  • Explicit bidding of opportunity costs in co-optimization leads to a deterioration of the welfare gains
  • Many alternative attempts at representing fixed cost discounts in the day-ahead BC market model in sequential designs do not outperform full bidding of fixed costs in the sequential designs in our model