Towards the use of pricing methods by Transmission System Operators on electricity balancing markets

This paper investigates the concept of pricing methods used by Transmission System Operators (TSOs) on electricity balancing markets. First, it uses an empirical analysis of the actual Replacement Reserve market to prove that TSOs are not price takers on this market, contrary to their usual representation, and to identify possible explanations for this fact. Amongst those, the existence of alternatives to balancing markets is highlighted, as it gives TSOs a basis to evaluate the prices of their balancing orders. A study is then conducted on the electricity market model ATLAS, illustrating TSOs’ benefits and impacts on market performances of a pricing method related with one specific alternative, the historical French local balancing mechanism.