Redispatch and balancing: Same but different. Links, conflicts and solutions

The authors provide a critical analysis of existing approaches to balancing and congestion management (specifically redispatch) and their effects on the incentives for service providers. This issue is particularly important in the view of the harmonization of ancillary service procurement in Europe, introduction of cross-border balancing markets and cooperation on congestion management. There is no universally established procurement mechanism for either of the two services. Based on case studies of Germany, France and the Netherlands and the introduction of an EU balancing energy platforms, we derive three stylized interaction models and discuss their comparative conflicts, risks and performance. We argue that market-based redispatch procurement can both increase allocative efficiency and resource availability as long as structural congestion is addressed first. Timeframe of procurement and remuneration mechanisms are other crucial factors affecting market efficiency. Combining redispatch with wholesale markets might yield a further improvement while minimizing conflicts between redispatch and balancing.