Co-Optimized Allocation of Cross-Zonal Capacity for the Exchange of Energy and Reserves

The integration of renewable energy sources in the electricity system leads to growing balancing reserve requirements whereas common providers of balancing reserves are gradually being decommissioned. To increase cost efficiency of electricity balancing despite these developments, the European Commission aims for more international cooperation in the provision of balancing reserves. The need for cross-zonal capacities for international reserve trading leads to a concurrence situation between energy and reserve markets with respect to trading capacities. A market simulation model is used to simulate a joint energy and balancing capacity market clearing and investigate a co-optimized allocation of cross-zonal capacity for a 2030 scenario for Europe. The results show that even though less cross-zonal capacity is available for energy trading, the case with reserve exchange leads to a reduction in both the cost of electricity generation and the costs for reserves compared to the case without reserve exchange.