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Assessing options to model market design and investment in flexible technologies

April 2016

ENERDAY 2016 TU Dresden

Co-author: Tim Schittekatte (Florence School of Regulation).

To study investment incentives sent by energy prices in European power exchanges in the context of high renewable injections, it is necessary to model precisely the functioning of the short-term market. In particular, the possible impacts of non-convex technical constraints on prices should be considered as they may deeply impact investment decisions.

In this article, four different models are compared based on two criteria, the complexity and the relevance to represent the functioning of a power exchange when technical constraints are considered. A trade-off between these two criteria is needed and no model seems to meet successfully both. As a result, an intermediate model like a convex Unit Commitment model or a decentralized model with simple bids appears to be a wise solution to study the investment decisions.

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