Abstract
The objective of this paper is to analyse the trade-off between the cost of operation and system reliability resulting from different shapes of Operating Reserve Demand Curves under scarcity pricing. We implement a model of the short-term operation of Belgium and we validate it against historical realisations of operation. The model of short-term operation is implemented using 4 embedded optimization problems. The model simulates the trade-off between the lag and cost of mobilizing flexible resources versus the increased reliability that these resources ensure for system operation and allows us to quantity the resulting effect on the level of scarcity pricing adders. We compare eight variants of operating reserve demand curves, and use them as the basis for supporting a recommendation to the Belgian regulatory authority for the implementation of scarcity pricing in Belgium.
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