Benefits of cross-border reserve procurement based on pre-allocation of transmission capacity

Integration of national balancing markets is one
of the tools needed to integrate large amounts of intermittent
generation. Such integration affects both balancing and dayahead
markets in the involved countries and analyses to study
the effects of such integration are required. This paper describes
an approach where the bidding prices for reserve capacity of
generation units are determined on the basis of their opportunity
costs in the day-ahead for the period considered for the reserve
procurement. The approach is described both for a single
balancing area, and for a system with several balancing areas,
in which case also the availability of transmission capacity is
important. The approach is illustrated with a small example.