Economics of Ancillary Services for Electricity

This thesis examines approaches and solutions how challenges of balancing power markets and congestion management can be addressed. The ancillary services are of immanent importance for secure and reliable network operation. As a result of the energy turnaround in Germany, conventional power plant capacities that have so far provided these ancillary services will significantly be reduced. Particularly with regard to frequency control and grid operation, it has already become apparent today that high costs can be expected if current practice and market conditions are maintained. The aim of this thesis is to investigate options for a cost-efficient transformation of the electricity system with a focus on the ancillary services frequency control and grid operation. In a first step, the ancillary services and their development in the recent past is addressed. In a second step, the effects of different cooperation between network operators on network operation are investigated. Here it is shown that in the medium term an intensified cooperation on transmission grid operator level has a positive impact on the operation of the grid. In the long term, it is necessary for distribution system operators to cooperate more closely in order to ensure cost-efficient and secure network operation. In a third step, options for the market design of balancing power markets are examined. The results show that it is necessary to make tendering times more flexible so that renewable energies can participate in the markets and, at the same time, more players can participate in these markets. With these adjustments it is possible to significantly reduce the cost of balancing power to levels below those of 2014. Finally, it is examined which market inefficiencies may occur in more flexible balancing markets due to strategic bidding behavior. Especially in the upward markets it can be seen that increasing market inefficiencies are to be expected, which, however, can be limited by increased international cooperation and the participation of renewable energies.