Statkraft – Strategic bidding in a primary reserve auction #SWI2011

In any electric system, the generation has to match the consumption at all times. In the European interconnected (UCTE) grid, this balance is
maintained by Primary Reserve. The four German grid operators procure their demand of Primary Reserve by means of a monthly auction, which results are publicly accessible.

Generation units that can participate in this auction have to be located in Germany and have to be able to provide active power extremely quickly within seconds. Therefore the number of players in this auction is very limited and the available Primary Reserve is in the same order of magnitude as the demanded Primary Reserve. As providing Primary Reserve is technically very challenging, its price is higher than that of any other comparable product and it is hardly impacted by any macroeconomics.

The above mentioned factors suggest that Game Theory could be applied in order to improve the understanding of the auction results. The ultimate goal is to set up an estimator for the auction results. Based on the historic results, this estimator would assess the individual players’ behavior and predict their bid for the upcoming auction.

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