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Statistical Arbitrage and Information Flow in an Electricity Balancing Market

Derek W. Bunn and Stefan O.E. Kermer

Year: 2021
Volume: Volume 42
Number: Number 5
DOI: 10.5547/01956574.42.5.dbun
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Abstract:
Motivated by the events following a natural experiment in 2015, when the market rules for electricity spot trading were changed in Britain, we analyse the operational effects of market participants responding to price incentives for spillage and shortage positions in a single price, real-time market. We develop an analytical model for optimal real-time decisions by generators and speculators based upon forecasts of the conditional distribution of the total system imbalance between instantaneous supply and demand. From this, we examine the effects of time delays in information transparency for the consequent statistical arbitrage positions. We backtested this model empirically to the Austrian system imbalance settlements process within the German/Austrian integrated market. Results suggest that permitting additional intraday flexibility from a physical generator or a non-physical trader can be beneficial for the agents themselves, the system operator and market efficiency.



Do We Need to Implement Multi-Interval Real-Time Markets?

Darryl R. Biggar and Mohammad Reza Hesamzadeh

Year: 2022
Volume: Volume 43
Number: Number 2
DOI: 10.5547/01956574.43.2.dbig
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Abstract:
Many market-based power systems have implemented a form of 'look-ahead dispatch' which simultaneously solves for the optimal dispatch and prices over several intervals into the future. A few papers have pointed out that the dispatch outcomes which emerge from look-ahead dispatch may not be time consistent. We emphasise that this time inconsistency is not inherent in look-ahead dispatch but is a consequence of the assumption of linear cost and utility functions, which is arguably a special case. Various augmentations to the dispatch process to resolve the time inconsistency problem have been proposed, but these augmentations suffer from the drawback that they do not allow the power system to efficiently adjust to new information. We query whether it is necessary to implement multi-interval real-time markets. We show how under certain assumptions, a sequence of one-shot dispatch processes will achieve the efficient outcome.





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