Effect of integrating regulating power markets of Northern Europe on total balancing costs

Integration of regulating power markets of different balancing regions has a potential to reduce the costs of balancing within multinational power markets by exchange of regulating power between these regions. Currently, most regulating power markets are operating on a national level so that exchange of regulating power between regions is minimal. This paper investigates the potentials for reduction of total balancing costs by creation of multinational regulating power markets studying the case study of Northern Europe; the Netherlands, the Nordic region and Germany. An optimization model is built to analyze the effects on total balancing costs - the costs paid by a multinational TSO to the providers of regulating power. Based on the numerical results, total balancing costs can decrease by 100 million Euros per year when enough interconnection capacity is allocated to balancing trade. Furthermore, total amount of activated regulating power is reduced due to supportive power exchange. Finally, the use of the uniform pricing mechanism leads to frequent congestion of interconnection lines due to balancing trade. On average, regulation power prices stay within the same range.