Not pricing transmission in the price of EU power likely is more of a market design issue rather than a technical one given that the U.S markets have been doing this since they liberalized 30 years ago (though yes, everything will be priced according to linearized power flow in order to make things feasible to solve). Wonder if it’s more of a political question in the EU with how to handle cross border flows (even U.S markets have/have had issues with modeling this, see PJM/MISO seams modeling)
It's not about border, I'm talking about power flow through Germany.
And of course it's a market design issue, but as I said above, the problem is that you'll always face market design issues because the market designers face an impossible problem: you want to use a simple enough model and you're modeling an insanely complex problem for which any discrepancy between the model and reality will result in a catastrophic failure unless you have a central authority there to patch the holes.
At the end of the day, it's always going to be a centrally-managed system (because you cannot afford blackouts) but with the central planner merely swallowing the cost of the economic inefficiency rather than preventing it.
I mean, I guess I disagree that you need anything close to a perfect model. You will get many of the benefits of the correct solution by using linearized power flow with nodal pricing and explicitly modeling transmission constraints (and by extension, redispatch). Afaik, Germany doesn’t do this, but as you had described earlier, redispatch costs are physical in nature and obviously still exist, they just aren’t reflected in prices. This is very dumb.
Suppose a new generator wants to know which is the best node to interconnect to. This should be obvious from nodal pricing, as you would simply check the node that has the highest INC redispatch/lowest congestion costs (the nodes in the south of Germany in your example). Similarly, the worst node to connect to will be the one with the highest DEC redispatch/highest congestion costs (the North). Instead, in the current german system, I would think you would need to do some contrived thing of figuring out which generators are getting the highest uplift payments, but this would be very imperfect as you would not know how sensitive a different node would be to the system redispatch (not to mention, this is assuming this information is even readily published).
There’s really no excuse to not adopt nodal pricing over whatever exists for a centrally planned grid operator. I can only really imagine it’s a political issue.
> I mean, I guess I disagree that you need anything close to a perfect model.
It's an adversarial setting, economic actors are incentivized to find any loophole and exploit them, so even if it doesn't need to be perfect it needs to be indistinguishable from perfection from the PoV of the market actors, otherwise the defects will be weaponized.
On top of what others have mentioned, this paper also sidesteps forecasting electricity prices, which is already a very complicated problem (particularly in U.S markets where we have zonal pricing) needed to build profitable battery systems that actually operate on the grid.
I've had a few chats with some folks working on battery startups, and I think the more conventional approach is to forecast prices + run an optimization to find optimal storage decisions. You could measure the system's performance by looking at how well the algorithm does when it has perfect information about prices (obviously, when you have perfect information about prices it is trivial to optimize the battery).
Our two follow-up papers are addressing exactly this (for Europe)! We are extending our high-frequency continuous intraday approach (CID) with a forecast-based day-ahead bidding stage, and subsequent CID forecast updates.
I'd also be quite interested in strategies for grid-scale BESS trading in the US' real-time markets. Do you know more about it, or could forward me to someone who would be willing to talk about it? ;)
I'm afraid I'm not too familiar with BESS in particular, and the people I spoke to are probably not too keen on sharing much (which is generally true of those who work in U.S markets). Unfortunately it's all very opaque.
I'd be happy to provide you the names of the firms I spoke to over email, if that would be of use!
Yes thank you, that would be at least slightly more refined than me just randomly writing companies which might be relevant! My email is dschaurecker(at)gmail.com, thanks again :)
If you're going to be using an air fryer why bother with delivery then? Just put frozen food in there at that point for 10% of the cost of delivery+tip and you're eating sooner to boot.
Being in SCED just means that the resource bid into the real time energy market (which clears every 5 mins), it does not necessarily mean that the resource is cheap to dispatch. The confusion here might be caused by the differences of the ancillary market (PRC) and the energy market (SCED).
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