Redesigning the balancing power market in Germany — a critical assessment

Since electrical energy cannot be stored the maintenance of balance between supply and demand in the grid is one major task of the system operator. His duty is to estimate beforehand how much energy will be injected in or withdrawn from the network. Therefore, an efficient and appropriate designed market is a necessary component in order to assist the balancing management. In awareness of this, the following study examines the effects of the auction redesign on observable demand charges. We analyze the consequences caused by the launch of the common IT platform on power balance charges, particularly with regard to expected values and volatility. This allows further conclusions about possible difficulties resulting from the new market design and which may contradict the assistance for managing the grid balance. Furthermore, we compare the efficiency of the German power reserve market before and after the change of the market design by using a number of econometric approaches for analyzing structural changes. With the view to assist the establishment of a secure German energy network, we finally draw economic conclusions.