A novel cost-revenue allocation computation for the competitiveness of balancing responsible parties, including RES. Insights from the electricity market

Abstract

The difference between the scheduled and actual generation of electricity leads to disruption on the balancing markets that must be paid at the deficit or surplus price. To smooth and simplify the market interactions, each license holder (producer, large consumer, supplier, grid operator) must be a member of a Balancing Responsible Party (BRP). We propose an improvement of the method for transparently and equidistantly setting the imbalance, cost - revenue allocation at the level of BRPs to increase the competitiveness among them. The proposed allocation method is compared with two existing methods implemented by two representative BRPs in Romania. The novelty of our approach consists in fairly rewarding the BRP members that reduce the cost or penalizing those members that diminish the revenue using indirect cost and revenue and implementing the penalty/reward principle. In this paper, we prove that BRP members benefit from cooperating and BRP minimizes the costs of imbalances between the schedule and real-time electricity delivery. The gain of BRP members (BRPi) may vary from 19 to 226%. Furthermore, we simulate that by adjusting the initial imbalance with only 2 or 3 units (equivalent with a smaller imbalance), the costs considerably decrease by 23.7%, 35.6% respectively.