Assessing inefficiencies on the German balancing market

In this paper, we present a model of the German spot and balancing markets. We focus on the secondary and tertiary balancing market, analyzing the effect of two factors on procurement costs. First, the length of the time period a single supplier has to provide balancing power for. Second, balancing auctions are held well before the bidding period starts, at a time when electricity demand, as well as renewable feed-in is uncertain. Our results suggest that changing the market design, considering early commitment and the length of time period, could decrease inefficiencies.