The Effect of Multi-Market Participation on Day-Ahead Trading of an Electricity Producer

Abstract

The operating landscape for electricity producers has changed profoundly as new reserve markets have emerged and intraday trading volumes have increased substantially. Thus, the day-ahead market is no longer the sole focus of generation companies. As multi-market participation becomes widespread and discussions around market design intensify, it is pertinent to understand optimal strategies in this environment, especially how they contrast with traditional day-ahead market-focused strategies. Therefore, we analyse multi-market and day-aheadfocused offer strategies of a hybrid producer. Specifically, offers are optimised for the day-ahead market, the up-regulating frequency containment for the disturbances market, and intraday trading using stochastic programming. We find that up-regulating reserve-market participation reduces day-ahead market participation as expected. However, as this effect only manifests at higher bid prices, this behaviour could be misconstrued as market manipulation. Furthermore, we observe undesirable effects resulting from the model structure that lead to strategies optimising price arbitrage and generating intentional imbalances.