We supported a European electricity TSO in the design and implementation of the algorithms for the capacity market, that allocate about 1.2 mld € yearly. The algorithms include:
- Marginal-price auctions for the selection of generation capacity from different technologies, including DSR, storage systems, foreign capacity and conventional technologies. Different bid caps and price caps are implemented for existing and new capacity, that compete in the same auction. The auctions are organized as multi-round descending clock auctions with an activity rule that requires participants to decrease their price between one round and the next. The market is organized in multiple market zones, so that bids are selected to maximise the total welfare while fulfilling transmission constraints.
- Continuous-trading market sessions for the adjustment of the positions taken through the auctions. The continuous-trading market is organized with the same zonal structure as the auctions, so that every time a bid is inserted in the market, its impact is recalculated in all market zones (with an approach similar in spirit to XBID). Further, bid caps and price caps are also applied to bids in the continuous-trading market, and existing and new technologies compete in the same market sessions.
We supported the TSO in the design of the algorithm, drafting functional and technical specifications for the software developers responsible for the implementation. Further, we designed and run the tests necessary to validate the software implementation, also developing a fully working prototype of the auction algorithm.Assessing the financial implications and regulatory risk of alternative roll-out plans
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