Analysis of bidding strategies and their influence on the electricity price in the EU internal market
Background
On the electricity exchange, the marginal costs of all electricity producers are ranked in order, starting with the power plant with the lowest marginal costs (merit order). Due to the expansion of renewable energies, the power plant portfolio in a market area will be much more heterogeneous in future. In addition to renewable generation technologies, storage and demand flexibility will become increasingly important on the market and significantly change the characteristics of the merit order. As the marginal costs of renewable energy plants are almost zero, their increasing trading on the markets can lead to large differences between the marginal costs of the bidding power plants. At the same time, the expected volatility in renewable energy generation in particular can lead to very low electricity prices and thus make refinancing more difficult. Unforeseen sharp increases in commodity prices can also change the usual trading picture. In addition, the European market coupling connects different generation parks with each other and thus also changes the existing markets and their trading characteristics.
Aim of project
These impending changes in the market may lead to strategic behavior on the part of market participants that differs from bidding according to marginal costs. As part of the project, the bidding data of individual market areas available on the EPEX SPOT power exchange will be analyzed for strategic patterns. Strategies found are to be analyzed and are then tested within a future scenario. Their influence on the electricity price and on investments in flexible generation technologies in Germany will be examined, taking into account the different national electricity generation systems in Europe in the future.
Project flow
WP1 identifies key bidding strategies based on a literature review and classifies the strategies.
WP2 analyzes aggregated price curves of individual market areas with regard to the patterns of strategic bidding behavior identified in WP1.
WP3 deals with the development of a strategically acting market participant within an electricity market model.
WP4 evaluates the influence of bidding strategies of electricity market players in the European internal market on electricity prices in market structures with a high share of renewable energies.
WP5 covers project management.
Project duration
01.11.2023 – 31.10.2026
Contact
Prof. Marc Deissenroth-Uhrig
Department
Energiemärkte