Designing cross-zonal balancing capacity markets: potential benefits, challenges and ways forward

Topics

Balancing & Ancillary Services

Market Advisory

Market Design Advisory

TSO

Date

November 26, 2024

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The increasing complexity of balancing power systems is driven by the rising share of renewable energy and the electrification of mobility and industry, leading to greater uncertainty in real-time generation and demand. In Europe, the integration of power markets and the cross-zonal procurement of ancillary services are anticipated to enhance operational security and economic efficiency, which are critical for system operators. While platforms like MARI and PICASSO are operational, experience with cross-zonal balancing capacity services remains limited, primarily seen in initiatives like the “FCR Cooperation” and a few cross-border efforts in the Nordic region and between Germany and Austria.

This white paper examines the benefits and challenges of cross-zonal balancing capacity procurement, covering aspects such as market efficiency, price formation, algorithmic scalability, and IT governance. The discussion draws on N-SIDE’s extensive experience in ancillary service procurement, particularly through projects like the Enduring Auction Capability Market Design for NESO and the Co-optimization Roadmap Study for the SDAC and SIDC Market Coupling Steering Committee.

The paper explores the optimal allocation of cross-zonal balancing capacity, focusing on the need for effective allocation of transmission and generation assets for energy and balancing services. It also addresses the critical issue of pricing and provides concluding remarks on market design considerations.

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Author

Alberte Bouso

Senior Energy Markets Consultant, N-SIDE

Alberte holds a double master's degree in Energy Engineering from KTH (Sweden) and KU Leuven (Belgium) with a specialization in Smart Grids. He works on applications of mathematical programming and machine learning within electric power system operations, such as grid expansion planning or sizing of balancing capacity.

Author

Mehdi Madani

Senior Energy Markets Consultant, N-SIDE

Consultant Market Design Services | Mehdi holds an MSc in Mathematics, an MSc in Financial Risk Management from ULiège, and a Ph.D. in Economics and Management Sciences from UCLouvain, with a thesis on the clearing of the European day-ahead electricity markets. Mehdi was also a post-doctoral researcher in Mathematical Optimization at Johns Hopkins University, Baltimore (USA). He is now the expert contributor to the Euphemia Lab, our R&D program for Euphemia; the Single Day-ahead Coupling market clearing algorithm.

Author

Yves Langer

Senior Market Design Expert, N-SIDE

Yves Langer is a Senior Expert in Power Market Design with over 20 years of experience in European electricity markets. He specializes in the design and regulation of short- and long-term electricity trading mechanisms, with a particular focus on congestion management and market integration. Yves supports the evolution of market frameworks toward greater renewable participation and contributes as a freelancer to advanced market-clearing and ancillary-service projects across Europe.

Author

Giancarlo Marzano

Energy Senior Account Manager, N-SIDE

Giancarlo holds a double master's degree in Smart Electrical Networks and Systems from KTH (Sweden) and INP Grenoble (France) with a specialization in Electricity Markets and Smart Grids. He has 5 years of experience, starting in the Energy Storage Industry, on topics related to battery storage integration and their participation in grid balancing and wholesale energy markets. Since 2021 he works at N-SIDE where he tackled various topics such as Grid Flexibility, Local Electricity Markets and Power System operations. Giancarlo is responsible for leading the account management activities of N-SIDE's Energy for System Operators and Regional Coordination Centers.