Multi-TSO system reliability: Cross-border balancing

This paper develops a stylized analytical model that analyses reliability management of multiple TSOs. First we analyse the possibilities for TSO cooperation on reserves dispatch and procurement, with a focus on European network codes. Then we propose a model that theoretically analyses cross-border reserve cooperation. We distinguish two degrees of cooperation: reserves exchange and reserves sharing. Our model first determines the non-cooperative TSO equilibrium i.e. the autarkic provision of reserves. Next we compare this with the socially optimal (cooperative) policy of generation reserves procurement. The paper shows why reserves sharing is economically superior to reserves exchange. Sharing allows cost arbitrage and pooling of reserve needs while reserves exchange only takes care of cost arbitrage. The benefits of reserves exchange and reserves sharing depends on cost asymmetry and correlation of reserve needs between the TSO zones.