Abstract
This article presents a modeling framework to evaluate the impact of an economic penalty in the manual Frequency Restoration Reserve (mFRR) market. The framework is formulated as a deterministic optimization model for a hydropower plant participating in the Day-Ahead and mFRR Capacity markets, while participation in the mFRR Energy Activation Market is simulated through a receding horizon algorithm. The case study uses historical data on market prices, volumes, and inflow from June 1st, 2024 to February 11th, 2025, with detailed analysis of the period June 9th to 16th 2024. Incorporating the penalty in mFRR Energy Activation Market (EAM) bidding increases bid prices and reduces offered volumes. When the delivery probability decreases from full delivery to 98%, activated volumes decreases by 23%, highlighting the impact of penalty risk on market participation.