Balancing market integration in the Northern European continent

This paper analyses the integration of the balancing power markets in Northern Europe including the Nordic system, Germany and the Netherlands. Two cases of balancing market integration are analysed: the current state with individual balancing markets, and the full integration of these markets, where the day-ahead market and the balancing market are settled separately. First, the day-ahead market is modelled as a common market for the whole European continent, while a simultaneous reserve procurement modelling is done for the Northern Europe. Available transmission capacity is considered to be allocated implicitly for the exchange of balancing services based on a trade-off between day-ahead energy and balancing capacity exchange. Next, the balancing energy market is modelled as a real-time power dispatch on the basis of the day-ahead market clearing results and the simulated imbalances.Detailed results for two different weeks in winter and summer are presented. They illustrate the consequences of market integration between two synchronous areas on procured and activated reserve, generation dispatch and power flows. It is demonstrated that cost savings can be achieved due to the use of cheaper balancing resources and less activation of reserves caused by imbalance netting. Such savings are estimated for a whole year of operation, and amount to approximately 400 M€ per year.