The end of harsh electricity price spikes? – Now there was a new proposal

Tampere University researchers have presented a way to utilize energy storage capacity more efficiently in the electricity market.

At the moment, buyers and sellers of electricity can submit bids to the electricity auction either for individual hours or various combination bids, i.e. so-called block bids for a longer period of time, the University of Tampere press release describes. Flexible production and consumption are brought to the market by flexible combination offers, where the algorithm determines the best time to activate the offer. This lowers peak electricity prices.

According to Tampere University researchers, the problem with the current types of offers is that the energy storage operator would have to be able to predict when the storage should be loaded and when it should be unloaded, because the offers are left on the market before the price is determined.

PhD student at the University of Tampere Juha KoskelaPhD researcher Kimmo Lummi and professor Pertti Järventaus propose in a just published research report that a new type of offer be created for the wholesale electricity market: “storage order.”

“With this type of offer, the energy storages would be put directly to the use of the algorithm that determines the price, and the algorithm would determine when it is most favorable to load and unload them,” Koskela opens in the press release.

However, according to the researchers, a mere new type of offer would not be enough on its own, as it would eat into the profitability of electricity storage facilities that benefit from price fluctuations. That’s why the researchers propose a benefit compensation procedure, where the price leveling effect would be compensated for the warehouses.

The price of loading and unloading stocks would be determined based on the prices that would be realized without these stocks.

“By maintaining the incentive for warehouses to join the wholesale electricity market, significant benefits would be obtained from the point of view of the entire electricity market and also from a national economic point of view. The cost of the benefit compensation procedure would be vanishingly small in relation to the total benefits obtained from it,” says Koskela.