Reconciling physics and economics in Italian electricity market

During last years, the Italian Electricity Market has seen important changes, aimed at reducing the cost for consumers as well as at improving efficiency and transparency. In this context, the Ancillary Services and Balancing Market (MSD) is operated by the Italian Transmission System Operator, Terna, to procure resources to relieve grid congestion, to build operational reserve and to balance the power system in real time. This paper describes the structure of the Italian Electricity Market, with a detailed presentation of the MSD that must be economically efficient while meeting the power system reliability standards. Reconciliation of economics and physics in MSD has been obtained by coupling the MSD clearing engine with a contingency analysis tool. The benefits of these decision support tools are shown through use cases. A special focus will be given on the combined action of the market clearing re-dispatch and the special protection schemes to reach a reliable operation plan.