Another balancing market option

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A small electricity trading market in use in Sweden and Finland could improve the situation for Danish wind power producers who are otherwise forced to schedule their production on the Nordic power exchange a day ahead of delivery -- a time span that makes accurate predictions of wind generation difficult to achieve. Called Elbas, it is a market where trade closes one hour before delivery. As Hannele Holttinen, of the Technical Research Centre of Finland, points out, if Denmark's transmission system operator (TSO) Eltra used this market it would reduce its expenditure in the big regulating market.

Just one hour before delivery, Elbas allows market players to check the likely deviation of their production/consumption from the spot bid made the day before. "As there are a lot of actors, you may well find someone wanting to buy your extra production at a price near the spot price, or sell production to cover your underproduction near spot price. This is the idea, to avoid the high (or too low) prices on the regulating market," says Holttinen.

increasing income

Elbas enables wind producers to forecast production one to two hours ahead of delivery. Using 2001 data, Holttinen says Elbas could reduce Eltra's regulation costs by 70% and increase its net income by 7%, assuming that wind power does not influence the Elbas price and the Swedish price level applies in Denmark. "A well working after [spot] sales market would help both wind power producers and the system operator in reducing the amount and cost of wind power production at the regulating market," she states.

Eltra's Henning Parbo says the TSO is not immediately interested in pursuing trade on Elbas, partially for the same reasons it is against working under a shorter gate closure (main story). "But the crucial question will be the price level in such a market," he says. "Will the prices be close to the spot prices or close to the regulating prices? And, indeed, if the regulating market prices without an intra-day-market in place are already close to the spot prices, there seems to be no economic room for an intra-day-market. To me, this is the case in Sweden and Finland, and the moderate turnover in Elbas seems to support my view."

Parbo concedes, however, that regulating prices in Denmark are quite "expensive" compared with the other Nordic countries. "This may speak in favour of experimenting with an intra-day-market," he states. Parbo stresses that Eltra is not against a concept when many more players enter the electricity market -- particularly if German market players could be included.

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