Ecofys 2015 Flow Dynamic Grid wp2 2 Market Interaction PDF

FLOW Dynamic Power Management
WP2.2: Market Interaction
FLOW Dynamic Power Management
WP2.2: Market Interaction
By: A. Kakorin, L. Laurisch, G. Papaefthymiou

Date: 15 December 2014
Project number: WIENL14568
Reviewer:
C. Nabe
J. van Doorn
Ecofys 2014 by order of: TenneT TSO B.V. & Eneco N.V.
ECOFYS Netherlands B.V. | Kanaalweg 15G | 3526 KL Utrecht| T +31 (0)30 662-3300 | F +31 (0)30 662-3301 | E info@ecofys.com | I www.ecofys.com
Chamber of Commerce 30161191
Table of contents
1
Introduction
Mapping of Power Markets and the Role of Wind Energy
2.1
Energy markets
2.1.1
Wholesale Market
2.1.2
AS market
2.1.3
Market Coupling
2.1.4
Wind in energy markets
2.2
Renewables support schemes
2.2.1
Overview of support schemes
2.2.2
Support schemes in Germany and the Netherlands
2.2.3
Effect of support schemes on operation of wind farms
11
2.3
Summary
12
Mapping of AS and the potential provision by OWFs
13
3.1
Frequency control
13
3.1.1
Inertial control
14
3.1.2
Primary Control Reserve (PCR)
16
3.1.3
Secondary Control Reserve (SCR)
17
3.1.4
Tertiary Control Reserve
21
3.1.5
Provision of Control Reserve by OWFs
23
3.1.6
Imbalance Pricing System
28
3.2
Re-Dispatch
33
3.2.1
Technical requirements for the provision of re-dispatch
33
3.2.2
Market design of re-dispatch
33
3.2.3
Provision of re-dispatch by OWFs
34
3.3
Black Start Capability
34
3.3.1
Technical requirements for the provision of black start capability
34
3.3.2
Market design of black start capability
34
3.3.3
Provision of black start capability by OWFs
35
3.4
Reactive Power
35
3.4.1
Technical requirements for the provision of reactive power
35
3.4.2
Market design of reactive power
36
3.4.3
Provision of reactive power by OWFs
36
3.5
Summary
37
Market Hindcast Analysis
38
4.1
Objective of the hindcast model
38
4.1.1
Basic expected model results
38
4.2
Model description for the German control reserve market
39
4.2.1
Model of the German control reserve market
39
4.3
Data Sources
44
4.3.1
OWF data
44
4.3.2
Control reserve market data
47
4.3.3
Market premium
47
4.4
Overview of historic negative TCR market data (Market events)
48
4.5
Case studies and model results
51
4.5.1
Bid price strategies
51
4.5.2
Weekend Tender
55
4.5.3
Value of forecast error analysis/shortened lead-time of control reserve bids
57
4.5.4
Comparison of a product length of 1 hour compared to 4 hours
62
4.5.5
Secondary Control Reserve Market
64
4.6
Conclusions from the hindcast analysis
65
Market Forecast Analysis
67
5.1
Objective of the forecast analysis
67
5.2
Input Data
69
5.2.1
Data sources
69
5.2.2
Allocation of wind capacity
70
5.2.3
Calculation of power feed-in
71
5.3
Analysis of market dynamics
73
5.3.1
Capacity Market
73
5.3.2
Energy Market
77
5.3.3
Summary
86
5.4
Modelling of future markets
88
5.4.1
Model overview
88
5.4.2
Adjustment of bidding curves
89
5.4.3
Generation of calling events
91
5.4.4
Limitations of the model
94
5.5
Case studies and results
95
5.5.1
Reference scenarios - Impacts of different penetration levels of offshore wind
5.5.2
Examination of different framework conditions
104
5.6
Conclusions from the forecast analysis
108
95
Summary and Conclusions
110
Dutch Market Addendum
113
7.1
Dutch control reserve market
113
7.2
Modelling the Dutch control reserve market
114
Appendix
116
8.1
116
Documentation of forecast case study results
8.1.1
Minimum scenario bidding strategy
116
8.1.2
Height of the market premium
116
8.1.3
Comparison of a product length of 1 hour to 4 hours
119
8.1.4
Tendering on weekends
122
8.1.5
Higher volumes of procured capacity
124
8.2
Additional Figures and Tables
127
References
133
List of Figures
Figure 1: Structure of the Power market.
Figure 2: Qualitative depiction of the clearing order on energy markets.
Figure 3: Costs of AS per energy consumed.
Figure 4: Real-time feed-in and day-ahead feed-in forecast of an OWF during one week in January 2014.
Figure 5: Subsidy schemes in Europe.
Figure 6: Comparison of sources of income under the FIT and FIP scheme in Germany
Figure 7: Market Premium Auction in the Netherland under SDE+
11
Figure 8: Call sequence of inertia and control reserves.
14
Figure 9: Schematic depiction of the Dutch control reserve bidding ladder.
21
Figure 10: Reliability of Control Reserve Provision by Wind Power Plants.
26
Figure 11: Comparison of OWF FITs and Marginal Capacity Prices on the market for positive TCR in 2013.
28
Figure 12: System imbalance and imbalance prices in Germany for the years 2012 and 2013.
31
Figure 13: System imbalance and imbalance prices in the Netherlands for the years 2012 and 2013.
32
Figure 14: Overview of the model steps with the actions and input parameters for the respective step.
40
Figure 15: Capacity price bid merit order for negative control reserve. Note: capacity and price bids are herein defined
positively for reasons of clarity.
Figure 16: Energy price bid merit order for negative control reserve.
41
41
Figure 17: Reduced capacity offer on the control reserve market due to length of tender period. Only the minimum
forecasted capacity (dotted red line) within a tender period can be offered on the market of control reserve,
which can lead to significant income losses for the wind farm operator.
42
Figure 18: Insertion of the OWF bid into the bidding ladder (left: start of bidding ladder, right: end of ladder).
43
Figure 19: Distribution of wind speed forecast error of OWF 1.
45
Figure 20: Availability of OWF 2.
46
Figure 21: Marginal and weighted average capacity prices (procured bids) on the capacity market for negative TCR in
2013.
48
Figure 22: Marginal and weighted average called energy bid prices on the market for negative TCR in 2013.
48
Figure 23: Called control reserve and frequency of calls for specific marginal prices on the market for negative TCR
49
Figure 24: Weighted average and marginal capacity and energy prices on the negative TCR market per weekday.
50
Figure 25: Weighted average and marginal capacity and energy prices on the negative TCR market per tender period.
50
Figure 26: Cost savings for procurement and activation on the negative TCR market with the participation of OWF.
52
Figure 27: Maximum possible income normalized to nominal power for an OWF on the negative TCR market in 2013.
54
Figure 28: Minimum and maximum changes in cost for procurement and activation for high and low market premiums. 55
Figure 29: Maximum potential income under the weekday tender schedule (wd) vs. the possible submission of bids on
every day of the week (all).
56
Figure 30: Changes in costs for procurement and activation under the weekday tender schedule (wd) vs. the possible
submission of bids on all days of the week (all).
56
Figure 31: Amount of power forecast an OWF can offer to the market of negative control reserve for different standard
deviations of the wind speed forecast error.
57
Figure 32: Maximum possible income for an OWF under the low market premium on the negative TCR market for different
standard deviations of the wind speed forecast error.
Figure 33: Procurement of OWF control reserve capacity for different forecast qualities.
58
59
Figure 34: Maximum possible income for an OWF under the high market premium on the negative TCR market for
different standard deviations.
Figure 35: Maximum cost saving potential of OWFs for the low market premium on the negative TCR market in 2013.
59
60
Figure 36: Maximum cost saving potential of OWFs for the high market premium on the negative TCR market in 2013. 61
Figure 37: Minimum cost savings potential with a profit-maximizing bidding strategy by the OWF.
61
Figure 38: Procurement per year for a product length of 4 hrs vs. 1hr for different forecasting qualities.
62
Figure 39: Maximum potential income of an OWF on the negative TCR market for product lengths of 4hrs vs. 1hr.
63
Figure 40: Maximum cost savings potential for product lengths of 4hrs vs. 1hr.
63
Figure 41: Maximum possible income for an OWF in the capacity tender on the negative SCR vs. TCR market.
64
Figure 42: Maximum possible cost savings in the capacity tender on the negative SCR vs. TCR market.
65
Figure 43: Analyzed components of the tertiary control reserve market.
67
Figure 44: Assignment of OWF projects to FINO wind data sources, depicting OWFs of scenario 1 and scenario 2.
71
Figure 45: Power curves of the representative wind turbine models.
72
Figure 46: Day-ahead spot market prices against hourly average residual load levels.
74
Figure 47: Median capacity bids for negative TCR against hourly average day-ahead spot market prices.
75
Figure 48: Energy price bids show an increasing trend in 2012 and 2013.
77
Figure 49: Influence of the residual load level on negative TCR energy bids.
78
Figure 50: Excerpt of energy bids in September 2013 in time slices between 8:00 am and 2:00 pm.
79
Figure 51: Workdays Relative frequency of calling events in each 15min of the day in 2013.
80
Figure 52: Workdays - Average amplitude of calling events for each 15min interval of the day in 2013
81
Figure 53: Frequency of calling events in dependence of VRES feed-ins.
82
Figure 54: Mean amplitudes of calling events in dependence of VRES feed-in levels.
83
Figure 55: Relative frequency of calls depending on the absolute amplitude of VRES ramps in a period two hours.
85
Figure 56: Median amplitude of energy calls in dependence of VRES ramps within periods of two hours.
86
Figure 57: Overview of results on negative TCR market analysis.
87
Figure 58: Simplified flow diagram of the forecast model mechanisms.
89
Figure 59: Interpolation of capacity price bids.
90
Figure 60: Extrapolation of calling probabilities in dependence of VRES feed-in levels.
91
Figure 61: Interpolation of calling probabilities in dependence of VRES ramps.
92
Figure 62: Influence of the rating value on the relative frequency of calls.
93
Figure 63: Total revenue potentials at different penetration levels of wind.
97
Figure 64: Specific revenue potentials at different penetration levels of wind.
97
Figure 65: Total system costs for capacity procurement.
98
Figure 66: Total system costs of energy calling events.
98
99
100
100
101
Figure 71: Marginal capacity and energy prices together with accepted wind bids.
102
Figure 72: Specific revenues of OWF operators.
104
Figure 73: Total system costs optimistic bidding scenario.
106
Figure 74: Total cost saving potentials from the participation of OWFs in the negative TCR market.
107
Figure 75: Specific revenue potentials at a continuous feed-in tariff of 150 /MWh.
117
Figure 76: System costs at a continuous feed-in tariff of 150 /MWh.
118
Figure 77: Marginal prices on the control energy market.
118
Figure 78: Specific revenue potentials at an hourly tendering of negative TCR.
120
Figure 79: System costs at an hourly tendering of negative TCR.
120
Figure 80: Specific OWF operators' revenues with tenders on weekends.
122
Figure 81: System costs with tenders on weekends.
123
Figure 82: OWF operators specific revenues regarding an increase of the amplitude of calls relative to installed OWF
capacity proportionally increased bid volumes of all conventional participants.
125
Figure 83: System costs regarding an increase of the amplitude of calls relative to installed OWF capacity proportionally
increased bid volumes of all conventional participants.
126
Figure 84: Weekends Relative frequency of calling events in each 15min of the day in 2013
127
128
List of Tables
Table 1: Auction design of PCR procurement in Germany and the Netherlands.
17
Table 2: Products on the market for SCR in the Netherlands.
18
Table 3: Auction design for secondary control reserve in Germany and the Netherlands.
19
Table 4: Auction design for tertiary control reserve in Germany and the Netherlands.
22
Table 5: Cash flows on the balancing market.
29
Table 6: Average imbalance prices and spreads for different system states in Germany (years 2012-13).
31
32
Table 8: Imbalance management in Germany and the Netherlands.
33
Table 9: Overview of the potential provision of AS by OWFs.
37
Table 10: Results of the hindcast analysis for different market designs under the low market premium
66
Table 11: Results of the hindcast analysis for different market designs under the high market premium
66
Table 12: Capacity allocation by scenarios and wind sources.
71
Table 13: Classification of turbine models.
72
Table 14: Overview of case study features.
95
Table 15: Feature summary of the reference scenarios.
96
Table 16: Overview of hindcast case studies' results.
110
Table 17: Overview of forecast analysis case studies results.
111
Table 18: Additional capacity procurement of negative TCR at higher penetration levels of offshore wind.
124
Table 19: Categorization of OWF projects, as a foundation for the wind scenario creation.
132
List of Acronyms
AS
Ancillary Services
BRP
Balance responsible party
Exp1
Exponential function of the 1st degree
FIT
Feed-in tariff
LCC
Line Commutate Converter
Min.
Minimum
NRV
Netzregelverbund (Cooperation of the four German TSOs)
OTC
Over the counter
OWF
Offshore Wind Farm
PCR
Primary Control Reserve
Poly2
Polynomial function of the 2nd degree
Poly8
Polynomial function of the 8th degree
PTU
Programme Time Unit (= 15 minutes)
Ref.
Reference
Scn.
Scenario
SCR
Secondary Control Reserve
TCR
TSO
Transmission System Operator
(V)RES
(Variable) Renewable Energy Sources
VSC
Voltage Sourced Converters
1 Introduction
The rapidly growing share of renewable energy sources in the power market causes new challenges
for the maintenance of system security. With conventional power plants exiting the market, the
provision of ancillary services (AS) by renewable power plants is gaining in importance. For one of
the most important AS - the stabilization of the grid frequency through the provision of control
reserve - the participation of variable renewable energy sources (VRES) has only recently started to
be considered by Dutch and German transmission system operators (TSOs) while it is already taking
place in other European countries. Offshore wind farms (OWF), having a relatively stable feed-in, are
particularly suitable for the provision of control reserve.
The report aims to outline the role offshore wind can play for the provision of AS. Exemplarily, the
frameworks of the Dutch and German markets are examined in detail. After an introductory overview
of the power markets in both countries and the significance of wind energy in these markets in
Chapter 1, the focus is drawn to the AS in the following Chapters. Within Chapter 2, the technical
requirements for the provision of AS and the market design or remuneration for the service are
presented; these framework conditions are then analysed with regard to potential barriers that are
created for the provision of the respective service by OWFs. Considering current developments, a
more detailed analysis is done for the control reserve markets.
The qualitative examination of the provision of different AS by OWFs is followed by a quantifying
approach for the control reserve market, which is currently the only AS traded within a market.
Particularly, the analysis focuses on possible cost reductions for the procurement and calling of
control reserve when wind bids enter the market as well as benefits for wind farm operators when
participating in control reserve markets. While in Chapter 4, the assessment is done based on
historical control reserve market data of the year 2013, Chapter 5 presents results for a future
market with greater shares of wind energy and adjusted external market parameters. The
quantifications are done using a model that builds the detailed bid ladders from the control reserve
markets and adapts them to the inclusion of capacity bids from OWFs. Due to limited data availability
for the Dutch market, the model is based on German market data. For both the hindcast and forecast
analysis, different case studies are examined, which represent alternative control reserve market
designs and take into account aspects such as system security requirements and wind forecast
uncertainty. It is outlined how these market designs individually affect the potential benefits of wind
farm participation.
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2 Mapping of Power Markets and the Role of Wind

Energy
This chapter gives an overview of energy markets in Germany and the Netherlands and examines the
role of wind power in these markets. The characteristics and operational framework of different
energy markets are analysed. It is investigated how the markets are organised and what the key
differences between the countries are. Furthermore, different subsidy schemes for offshore wind
power are presented and the resulting main differences in operational principles of wind farms are
discussed.
The chapter aims to set the framework for the following analysis by showing the position of ancillary
services (AS) markets in the power market and outlining the impact of supporting schemes on
operational strategies.
2.1 Energy markets

First, an overview of the basic characteristics of the energy markets in both countries is given,
including the structure of the wholesale and AS market and the design of cross-border trading.
Overview of power markets
Figure 1 depicts the structure of the power market. It can generally be subdivided into two types of
markets the wholesale market for regular power trades and the market for AS, which are needed
for system security.
Trades on the wholesale market can be done via an exchange, which in Germany is the European
Energy Exchange (EEX) and in the Netherlands the Amsterdam Power Exchange (APX Power NL), or
via bilateral contracts in over the counter (OTC) transactions. Both exchange and OTC transactions
can take place on a derivatives or a spot market. On a derivatives market, financial instruments such
as futures or options are traded, with the financial settlement and physical delivery of energy being
at least one week apart. On the spot market, on the other hand, financial and physical transactions
nearly coincide in time [1].
Of the AS, only control reserve is traded within a market scheme. For inertia, there is no
remuneration in place at the moment. For AS such as reactive power, re-dispatching and black start
capability, the remuneration is settled in bilateral contracts.
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Figure 1: Structure of the Power market.

Source: Own depiction based on [1], [2], [3]
While trading of derivatives can take place up to 6 years in advance, the gate closure times on the
spot market are very close to delivery time. For the control reserve or balancing market, the market
design differs in Germany and the Netherlands but delivery of the AS takes place real time. Figure 2
qualitatively depicts the order of clearing.
The markets are described in detail in the following sections, with a more detailed description of the
AS markets in Chapter 3.
Intraday
Derivatives Market
Day-Ahead Market
- Cover supply needs and

optimize generation
- Balance production and

consumption
- Balance production and

consumption
- Hedge risks
- VRES: offset forecast

errors
- VRES: offset forecast

errors
Long & mid-term trades
Short term trades
Very short term trades
Real Time1
(years, months, weeks)
(Day+1)
(t-45min)
(minutes, seconds)
Market
Balancing Market
- Ensure system security
Figure 2: Qualitative depiction of the clearing order on energy markets.

Source: own depiction
2.1.1 Wholesale Market

As stated above, trades on the wholesale market can be done via an exchange or through OTC
transactions. For both transaction types, a derivatives and a spot market exists.
This is not the clearing time but time of delivery. The gate closure and clearing times for the control reserve markets in Germany and the
Netherlands differ and are outlined in detail in Chapter 3.
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2.1.1.1 Spot Market

The spot market is a trading platform for short-term supply of electricity. Conclusion of the contract
and its fulfilment in the form of physical delivery of electricity nearly coincide. Typical products are
hourly contracts for every hour of the day and block contracts such as the base load contract (24
hrs), peak load contract (8:00 a.m. 8:00 p.m.) or weekend base load contract (Sat 0:00 a.m.
Sun 0:00 p.m.).
Trading on the spot market is executed in day-ahead auctions or in the form of continuous trading,
on the intraday market. At both EEX and APX Power NL, volume and price bids for day-ahead
auctions can be placed until 12 a.m. on the day prior to delivery. Afterwards the market is cleared
through matching of the supply and demand curve; for every hour of the day of delivery a price is
determined. At 3 p.m. intraday trading starts, where purchase and sells offers are continuously
entered into an order book and cleared if prices and volume match. Gate closure time of the intraday
market at EPEX Spot SE is 45 minutes and at APX Power NL 5 minutes prior to delivery [1][5].
Currently, the Dutch intraday market is not very liquid2 [6].
2.1.1.2 Derivatives Market
The majority of power capacities are traded on the derivatives market for risk hedging reasons:
trades can take place up to six years before delivery time whereas the earliest time of trading on the
spot market is day-ahead. The greater the time span between the trading and delivery date of the
product, the greater the potential additional profit. As traders are willing to pay risk premiums, the
revenues generated within derivatives contracts can be much higher than the revenues generated on
the spot market. In the last years, trading volumes on the EEX Spot market constituted on average
around 1/3 of the volumes traded on the derivatives market. Consequently, for OTC transactions
traders use the prices for derivatives as orientation.
The power derivatives market offers various products such as forwards, futures, swaps, caps, floors
and options. Forwards, futures and swaps are conditional transactions, i.e. buyer and seller are
obliged to fulfil the contract. In contrast, for options, caps and floors, the buyer of the derivative has
the right, but no obligation, to exercise the transaction [1].
The exchange market for derivatives for the market area Germany/Austria is operated by the EEX
Power Derivatives GmbH. The products traded are futures and options on the futures for the
German/Austrian market area (Phelix futures). A future is a standardized contract between two
parties to buy or sell a specified asset of standardized quantity and quality at a specified future date
at a price agreed today [7]. A distinction is made between financial and physical futures. While for
financial futures (e.g. the Phelix future) fulfilment is done in the form of cash settlement, physical
delivery must take place for physical futures. In reality, future contracts are generally settled through
offsetting transactions.
A liquid market is characterised by a large number of market participants (sellers and buyers), where trades can be executed quickly and
changes in supply and demand have a comparably small impact on prices. The opposite is a tight or illiquid market.
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In November 2013, physical futures for the Netherlands were introduced at EEX [8]. The Dutch Power
Futures traded cover the period of one month, quarter or year and are differentiated into base and
peak load products. Maturities of Phelix futures are day, weekend, week, month, quarter and year,
maturities of the options month, quarter and year [9]. There are base products for a 24 hours
delivery period and peak products for deliveries between 8 a.m. and 8 p.m..
While futures are binding, an option is the contractual right to buy (...) or sell (...) a specified
volume of an underlying asset at a specified price at a predetermined future date [10].
Forwards have the same characteristics as futures and are their equivalent in OTC transactions. Other
types of OTC products are caps and floors. While a cap sets a maximum price in long-term contracts,
floors protect the seller against falling prices. Against payment of a premium, buyers of caps and
floors are reimbursed with the difference between the cap/floor price and the market price if the price
on the day of delivery exceeds the cap or falls below the floor [11].
2.1.2 AS market
The trading volumes of the wholesale market are significantly greater than the volumes traded on the
balancing market. In Germany, the balancing market size is only around 2% of the wholesale market
size for electricity [2]-[12]. The market size of the other AS is even smaller. See Figure 3 for a
depiction of the costs per energy consumed in Germany in 2012. It becomes apparent, that primary,
secondary and tertiary control reserve constitute a significant share of the AS market size. Primary
control reserve is most expensive, followed by secondary reserve with a still similar price level and
tertiary control reserve, which is the cheapest type of control reserve, possibly due to the lower
technical requirements for provision. Of secondary and tertiary control reserve, approximately twice
the capacity is procured compared to primary control reserve [2].
Costs AS per energy consumed [/MWh]
1.20
1.00
0.80
0.60
Redispatch
Black Start
Reactive
Power
TCR
0.40
0.20
SCR
PCR
0.00
Figure 3: Costs of AS per energy consumed.
Source: Own depiction based on [2],[13]-[14]
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The AS market size in the Netherlands is hard to assess as for most AS, costs are not publicly
available. For control reserve, the energy payments are very transparent, however until 2013
capacity payments have not been published. As of 2014, an average capacity price has to be made
available to bidders as orientation for their bids (also see Chapter 3).
As mentioned before, of the AS only control reserve is traded within a market structure in Germany
and the Netherlands. Other AS, such as reactive power, re-dispatching and black start capability, are
remunerated with fees agreed upon in bilateral contracts between the plant operator and the TSO.
For inertia, there is no remuneration scheme in place.
Within Chapter 2, the remuneration/market design for the above mentioned AS is outlined in more
detail. Furthermore, as imbalance prices are directly linked to control reserve prices, the imbalance
pricing systems in Germany and the Netherlands are also presented in Chapter 3, examining the
imbalances and price level of imbalance in both countries.
2.1.3 Market Coupling
European power markets are generally not operated isolated in Europe. The German and Dutch
market are interconnected to other markets via the so called market coupling, which optimizes the
power flows between countries and minimises costs. Market coupling optimises the usage of
interconnector transmission capacity between different power markets and serves as a congestion
management tool. If interconnectors are not congested, prices in the different market regions align.
Market coupling can be done in explicit auctions, where the physical transmission capacity of an
interconnector is traded independently from electricity trades and implicit auctions, where the
transmission capacity is already included (implicit) in electricity trades. Implicit auctions ensure the
optimal allocation of electricity flows, leading to price convergence in the different market regions due
to flows from high-price to low-price regions. There are two types of market coupling: volume
coupling where the trade volumes between different market regions are determined and price
coupling, where a centralised system evaluates both trade volumes and market prices of different
regions [15].
In 2006, price coupling of the Dutch, Belgian and French day-ahead markets took place. Three years
later, volume coupling of the German and Danish market followed. In November 2010, the CWE
region (Belgium, France, Germany, Luxembourg and the Netherlands) was coupled and connected to
the Nordic market via volume coupling. In February 2014, day-ahead price coupling in North Western
Europe (NWE) was introduced, connecting Great Britain and the CWE, Nordic and Baltic region [16].
The project NWE Enduring ID aims to introduce intraday market coupling for Great Britain and the
CWE and Nordic region. Up until now, the intraday markets of the Netherlands, Belgium and the
Nordic region are already coupled. Intraday trades between Germany and the Netherlands are still
settled in explicit auctions.
Market integration of balancing and AS markets is planned by TenneT following the integration of
intraday markets [15].
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2.1.4 Wind in energy markets

Trading of wind energy is greatly influenced by the forecast errors of the fluctuating energy source.
Figure 4 depicts the real-time power feed-in and 24 hours forecast of an OWF in an exemplary week
in January. Forecasts with a lead-time of 24 hours can deviate considerably from the real-time
production. In the night from 11 January to 12 January the feed-in was forecasted to go down
significantly a little before midnight; instead there was a decline of wind production a little after
midnight, leading to a deviation of observed feed-in and forecast of more than 80 MW.
120
Feed-in [MW]
100
80
60
40
20
0
Feed-in Forecast
Feed-in observed
Figure 4: Real-time feed-in and day-ahead feed-in forecast of an OWF during one week in January.
Source: own depiction with data of an OWF
There is a significant decline in of the wind power forecast errors when looking at shorter prediction
horizons. As an example, Fraunhofer show that while the Normalized Root Mean Square Error
(nRMSE)3 for a day-ahead forecast of a single OWF ranges between 17 and 23% (depending on the
quality of the forecast model), it is only 10 to 12% for a forecast with a 2 hour horizon [17]. Forecast
accuracy can increase significantly for larger wind farm portfolios, especially if they are
geographically dispersed. The portfolio effect for OWF is not as significant as for onshore wind farms,
as the turbines are concentrated on a smaller area.
Because of the uncertainty of wind production, the participation of wind power plants on derivatives
markets is very limited. Most of wind power is traded on day-ahead and intraday markets. However,
big power utilities that possess large and diversified portfolio, also trade wind energy in futures and
forwards for (price) risk hedging purposes. A mismatch in production due to forecast errors will be
offset with the remainder of the portfolio or traded back on the spot market. The day-ahead market
gate closure time, which is 12 am on the day prior to delivery, results in a forecasting lead-time for
wind farm production of 12 to 36 hours a time horizon for which forecasts are still quite inaccurate.
Thus, a significant amount of wind energy is traded again on the intraday market. In the Netherlands
however, intraday trading is very limited as the market is relatively illiquid. [6]
The nRMSE is a measure often used for analysing forecast errors of the feed-in of a wind farm. It is given by the following formula:
( )2
/ with n number of samples and Pnom nominal power of the turbine
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Looking at the future development of markets and the role of VRES in those markets, the following
can be stated:
With a rising share of VRES in the portfolio of a power utility, the volumes of wind energy
traded on the derivatives market will most likely go down, as forecast errors cannot be offset
with conventional capacities.
Intraday markets should be strengthened compared to day-ahead markets in order to

account for the significantly higher forecasting quality for shorter trading lead-times;
especially in the Netherlands, the market has to become more liquid.
With a growing share of VRES in the system, the importance of AS will increase due to the
fluctuating nature of energy production. With ever more VRES plants entering the market and
substituting conventional plants, the market design of AS has to be adjusted to the
characteristics of VRES (also see Chapter 2).
2.2 Renewables support schemes

In contrast to most conventional power plants, RES plants are only to a limited extent exposed to
market risks; they are generally supported in European countries.
2.2.1 Overview of support schemes
The most common support schemes in the EU are
feed-in tariffs such as the fixed feed-in tariff (FIT) and
feed-in premium (FIP). Only a few countries, such as
Sweden, Belgium or the United Kingdom promote
renewables through the quota system with certificates
[18]. See Figure 5 for an overview of the subsidy
schemes currently in place in Europe.
While with the FIT the revenues of RES power plant
producers do not depend on the market results at all,
the FIP scheme contains some exposure to market
risks and is thus a hybrid option between a full
subsidy and market-based approach.
The FIT is a fixed price per kWh of energy produced
paid to the plant operator over a certain period of
time.
The
tariffs
are
technology
specific
and
decreased over the years in order to account for the

different learning curves of the technologies.
In the FIP scheme power producers receive a market
premium in addition to the revenues they obtain on
Figure 5: Subsidy schemes in Europe.

Source: own depiction based on [6]
the market through direct marketing. The premium is

usually technology-specific but is determined differently in each country.
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In quota systems generators, distributors or consumers are obliged to produce/consume a certain

amount
of
energy
from
RES.
Often
green
certificates
are
issued,
which
prove
the
production/consumption of RE. Generators can choose to produce the required amount of RE or fulfil
the quota through trading of certificates [19].
Many experts believe that RES subsidies should be phased out in the future. However for now, a fully
market based approach could only partly refinance investment and maintenance costs of the RES.
This effect is further enhanced for a rising share of VRES, as the merit order effect lowers market
prices during times of high wind and solar penetration, thus decreasing the market value of RES
plants and making it even harder for them to become competitive [20].
2.2.2 Support schemes in Germany and the Netherlands
The support schemes currently in place in Germany and the Netherlands are the FIT and FIP.
German support schemes
In Germany, a power producer can chose between two support schemes the FIT and the FIP with a
sliding market premium, which has been introduced to the German market in January 2012. If they
opt for the FIP, in accordance with 33g of the law on renewable energies (EEG), plant operators
receive a premium on top of the market revenues. The premium is the difference between the
technology-specific FIT and the monthly mean market price on the spot market (weighted per
technology) plus a management premium, which operators receive for the marketing costs [7]:
=
= with =
(1)
=1(() ())
(2)
=1 ()
RMP
Reference Market Price (technology specific)
MV
Monthly mean value of hourly contracts at EPEX Spot SE (technology specific)
MgmtP
Management Premium (technology specific; fixed per year)
Hours of the respective month
DA(h)
Mean value of hourly contracts at EPEX Spot SE at hour h
g(h)
Energy produced during specific hour h (technology specific)

Control Res.
While under the FIT scheme, marketing of energy on
Mgmt Fee
both the spot and control reserve market is forbidden,

operators choosing the market premium are allowed to
participate on the market for control reserve (see also
Premium
Chapter 3).
Figure 6 qualitatively compares the sources of income
FIT
under the FIT and the FIP. The market premium shall
reimburse the power plant operators for potential
losses compared to the FIT, when they market the
renewable energy directly on the spot market. Due to
the alignment of the market premium with a monthly
Wholesale
Market
reference market price, operators have an incentive to
Figure 6: Comparison of sources of income under the

FIT and FIP scheme in Germany
sell energy during hours of high prices. This way,
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revenues from the spot market and the market premium can exceed the FIT.
In addition to the income from the spot market and premium, operators receive a management fee
reimbursing them for trading efforts. Furthermore, they can generate revenues from the participation
on the control reserve market (see also Chapter 3). If remunerated by the FIT, RES plants in
Germany are not allowed to participate on the control reserve market. When remunerated with the
market premium a marketing of capacity on the control reserve market is allowed in line with 56 (1)
EEG.
In January 2013, renewable energy traded directly by operators on the German spot market
amounted to approximately 29 GW, of which almost 83% were from wind power plants [22].
The Offshore Wind FIT is a stepped tariff, which depends on the local conditions at the plant site. The
tariff rises with distance from the shore and water depth at the site (see 31 EEG). Each wind farm
operator is remunerated with the FIT for 20 years. According to EEG 2012, an initial rate of 15
ct/kWh is paid to the operator in the first 12 years of operation; in the last eight years operator
receive the basic remuneration of 3.5 ct/kWh. Another option is the participation in an acceleration
model with an elevated initial tariff of 19 ct/kWh, which is paid during the first eight years of
operation, followed by the basic remuneration for 12 years. The payment of the initial rate of 15
ct/kWh is prolonged by i) 0.5 month for each full nautical mile in excess of 12 nautical miles from the
coast line; ii) 1.7 month for each full metre in excess of 20m water depth.
According to the EEG reform published in summer 2014, the FIP scheme is obligatory for newly
installed plants with a nominal capacity greater than 500 kW and as of 2016 even for those with a
capacity greater than 100 kW (37 EEG 2014). Furthermore, costs for direct marketing will not be
reimbursed by a management premium, but rather be included in the premium. The tariffs have been
raised compared to EEG 2012: the initial tariff has been increased to 15.40 and the basic
remuneration to 3.90 ct/kWh. However in 2018, the initial tariff will be lowered to 14.9 ct/kWh and
as of 2019 will be decreased by 0.5 ct/kWh each year. The conditions for extension of the initial tariff
have not changed. The optional stepped tariff has been prolonged until 31 December 2019, however
with a decrease of tariffs by 1 ct/kWh in 2018 and 2019 due to expected technical progress and cost
reductions.
Dutch subsidy scheme

In the Netherlands generators are remunerated with the FIP scheme SDE+, which has replaced the
former FIP scheme Subsidies Duurzame Energie (SDE) in 2011. Under SDE+, operators receive a
fixed premium on top of the wholesale energy price but as opposed to the German system, the
premium paid to the power producers is based on auctions. Every party that has got a permit can
join the tender. Each year the Dutch government releases a certain budget (approx. 4 billon p.a.)
for the support of RES, which is allocated to the power producers in up to six tender rounds with
increasing prices. In each round an amount of support for a fixed number of full load hours is
auctioned and a maximum reference price is determined. There are also technology specific
maximum reference prices. Technologies that are not assigned a price in the respective tender round
can participate in the auction under the so-called free category. The reference price of the free
category rises in each round. When the maximum yearly budget is reached, the auction is finished,
i.e. later tender rounds might not take place [6][23]. Figure 7 qualitatively depicts the SDE+ tender.
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Figure 7: Market Premium Auction in the Netherland under SDE+

Source: [24]
As more expensive technologies such as offshore wind were not competitive in the conventional
SDE+ auction scheme, they enter separate tenders with a predefined budget. The yearly budget for
the offshore tender depends on various parameters and is adjusted over the years according to a
wind discount profile that reflects potential cost reductions and takes into account the average APX
prices and realisation rates of projects in prior years.
As the budget is very limited, it is crucial for OWF developers to secure a good location so that they
can bid a low premium within the tender. Up until now, the budget for offshore wind only sufficed for
support of a single wind farm per year.
The bid is placed for a FIT. The payment is however capped once a certain amount of full load hours
per year is reached. In the SDE+ 2014, 3200 h are supported, representing only around 75% of
typical full load hours of OWFs. After this amount is reached, the remuneration is purely market
based and operators are fully exposed to market risks.
The premium paid to the operator is the difference between the operators bid and average hourly
APX day ahead spot price of the whole year. This sets an incentive for operators to sell energy at
times of high prices. There is floor limit for the subsidy payments. If the market price falls below this
limit, the premium paid is still only the difference between the bid and the floor limit. [6], [24]
2.2.3 Effect of support schemes on operation of wind farms
Several aspects are criticised about the design of the RES support schemes. The FIT scheme does not
expose generators to price signals of the market. Instead of aligning the power plant output to the
demand on the market, thus producing a lot when market prices are high and less if market prices
are low, the plants are designed in an output-maximising manner. According to the incentive scheme,
wind farm investors design the plants following a quantity instead of value-based approach.
If the support scheme is more value based (such as in a FIP or quota scheme scheme), the plants
would be designed to produce in a more demand (and price) oriented manner. For wind power plants
for instance this would implicate production already at lower cut-in speeds. Obligatory participation in
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11
the FIP scheme is already the case in both the Netherlands and since publication of the EEG 2014in Germany too.
2.3 Summary
The section gave an overview of the energy markets in Germany and the Netherlands and the
participation of offshore wind in these markets. Furthermore, the offshore wind subsidy schemes in
the countries were outlined. The key messages of Chapter 2 are:
Wind power is foremost traded in short-term energy markets. Due to significant forecast
errors for 24 hours forecasts, the intraday market will gain importance in the future. The
intraday market in the Netherlands should be strengthened.
The AS market is very small compared to the wholesale markets. The largest AS market
regarding market size is that of control reserve. Its income potentials for wind farms will be
further discussed in Chapters 3, 4 and 5.
Typical subsidy schemes in Europe are the FIT, FIP and quota system, with the FIP becoming
increasingly widespread. As of 2014, the FIT scheme has been abolished in Germany for new
RES power plants. In order to incentivize plant operators to improve forecast qualities, a
trend to ever more market integration is necessary.
The incentive scheme and the resulting design of wind power plants should be changed to a
value-based instead of output-maximizing approach.
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12
3 Mapping of AS and the potential provision by

OWFs
In order to provide a secure and reliable power supply, TSOs constantly take measures to ensure that
frequency and voltage in the grid are kept within pre-defined limits. Furthermore they are responsible
for the restoration of power supply after disturbances or blackouts as well as for the coordination of
grid and system operations. These measures, the ancillary services, are nowadays to a large extent
provided by conventional power plants. The substantial increase of VRES generation in the system
and thus decreasing operating times of conventional power stations requires alternative ways of AS
provision [25]. Furthermore, the main characteristics of VRES, namely variability and uncertainty of
generation as well as asynchronous operation of most wind power generators, even create greater
challenges for system security [26].
In this chapter, we will provide an overview of AS provided by conventional power plants and outline
the technical requirements for the provision of the services. Furthermore, we will investigate the
market design or remuneration currently in place. The services examined are inertial control, control
reserve, reactive power, black start capability and re-dispatch. Finally, key aspects regarding OWF
participation in AS provision are analysed: which AS can be supplied by OWFs and what are the
technical barriers/barriers in market design that keep wind farms from providing them?
3.1 Frequency control

For a secure operation of the electricity grid, the frequency in the grid must remain constant at the
nominal value of 50Hz. As power cannot be stored generation must correspond to consumption at
any point in time in order to ensure a stable frequency. Generally, this should be ensured by the
balance responsible parties (BRPs), which are responsible for the balance of generation and
consumption in a certain area. The final responsibility for frequency control remains with the TSO in
their role as system operator.
In Germany and the Netherlands, BRPs are obliged to provide a schedule to the TSO defining the
production and consumption within their balancing area for the following day for each quarter of an
hour. The sum of generation and imports within the control area must equal the sum of internal
consumption and exports at every point in time. In order to be able to react to short-term changes in
generation and demand, BRPs can adjust those schedules intraday until one hour before the time of
delivery [13]. A deviation from the final schedules will lead to penalty payments in the form of an
imbalance price. The implementation of the imbalance pricing system within Germany and the
Netherlands is described in more detail below.
A deviation from schedules generally results from forecast errors of VRES, load or forced outages of
generators.
An oversupply of either feed-in into the system or consumption from the grid will lead to a frequency
deviation; while an exceeding feed-in will rise the frequency, an excess of load will lower it [27].
Frequency deviations are slowed down through system inertia as known as self-regulation of the
system or inertial control. This is followed by the activation of control reserves procured by the TSO,
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13
i.e. primary (PCR), secondary (SCR) and tertiary control reserve (TCR), which serve to bring back the
frequency to the nominal value. Figure 8 qualitatively depicts the call sequences of inertial control
Power
Frequency
and the control reserves.
Time
30 s
Inertia
15 min
PCR
> 15 min
SCR
TCR
Figure 8: Call sequence of inertia and control reserves.

As stated in the Operation Handbook by the European Network of Transmission System Operators for
Electricity (ENTSO-E) [28] the maximum dynamic frequency deviation after a sudden loss of
generation or load in the Central European Synchronized Area should not exceed 0.8 Hz. The quasi
steady state deviation may not exceed 0.2 Hz. A quasi steady state security margin of 20 mHz has
been stipulated, i.e. for a frequency deviation of 0.02 Hz no controls are activated. At a frequency
deviation of more than 1 Hz ENTSO-E requests the starting disconnection of generation units from
the system or load shedding respectively [29].
3.1.1 Inertial control

Motors as well as generators of conventional power plants are synchronized to the grid and rotate
with a frequency of 50Hz. After a frequency deviation, inertial control is automatically provided by
those generators: by injecting or extracting kinetic energy of their rotating masses to/from the grid
they slow down/speed up their rotation, thereby declining the rate of frequency deviation [26]. The
kinetic energy inherent in the rotating machinery connected to the grid thus acts as short-term
energy storage and bridges the period until control reserves can be activated.
3.1.1.1 Technical requirements for the provision of inertia
Due to a sufficient amount of inertia inherent in the grid, there is no requirement or explicit
scheduling of inertial control in the German or Dutch system. Technical characteristics for the
provision of inertial control have not been defined yet in either country [30].
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3.1.1.2 Market design of inertia

There is no market for inertial control in Germany or the Netherlands and providers of the AS do not
receive remuneration or other kinds of incentives by the TSO [30].
3.1.1.3 Potential provision of inertia by OWFs
With a rising share of VRES in the generation portfolio, the number of generators synchronized to the
grid is constantly declining. PV inverters are not capable to provide inertia to the grid at all and wind
power plants are usually equipped with generators that are decoupled from the grid and do not
automatically provide inertia to the system. With their rotating machinery wind turbines do, however,
provide a possible source of inertial control. While in Germany and the Netherlands, wind farm
operators are not obliged to contribute to inertial control, TSOs in Spain (REE), Canada (HydroQubec), Texas (ERCOT), Ireland and Denmark have started to implement requirements for the
provision of inertial control by wind power plants in their system operations [26]. The Hydro-Qubec
control zone, which is not synchronized to its neighbouring systems and has a substantial share of
wind power, is already nowadays facing a comparably low amount of inertia in the grid [31]. As a
prerequisite for the connection of wind power plants, they consequently implemented new grid code
requirements: plants with a capacity greater than 10MW have to be equipped with a frequency
control system which must be able to provide inertia to the system at the same rate as synchronous
generators [32].
However, in Europe the installation of inertia providing equipment in wind farms is also
recommended: in their proposal for a network code on requirements for grid connection ENTSO-E
state that each power park module which is not inherently capable of supplying additional active
power to the network by its inertia and which is greater than a MW size to be specified by the
relevant TSO should be equipped with a control that can provide additional active power to the
system after a sudden loss of feed-in at low frequency events [33].
The variable speed wind turbines are decoupled from the grid by system electronics to optimize
production with the effect that a change in frequency in the system does not affect the rotational
speed of the machine. As a result, system inertia is reduced in times of high VRES feed-in. In
general, the turbines are controlled to maximise power production and to operate at the maximum
power point tracking (MPP). Thus, in order to provide inertial control to the system, wind farms have
to be equipped with special controls that provide synthetic inertia [34]. The controls convert energy
from the rotor into incremental energy that can, following a drop in frequency, provide inertial control
to the system likewise to conventional generators.
However, while studies have shown that the provision of inertia by wind farms is technically possible,
the implications of the synthetic solution for the system are still subject to on-going research [35].
The increased power output following a drop of frequency could drive the turbine out of its optimum
point of operation; this will slow down the rotor, leading to a drop of active power production and
consequently energy losses.
It has not been established yet whether the quality and characteristics of synthetic inertia are the
same as those of conventional inertial control.
As sufficient inertial control is available in Europe today, a change in market design for inertial control
is regarded unlikely until the year 2050 [36]. However, due to the increasing scarcity of inertia
automatically inherent in the system, incentives for the provision of the AS can be expected in the
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future. In [25] a market design similar to that of control reserve is suggested. Another solution for
the provision of inertia would a more flexible Primary Control Reserve with a reaction time faster than
30s.
Provision of inertia by wind farms is far away from implementation in most European countries. Other
approaches of providing the AS in future systems, i.e. in electricity systems with few conventional
capacities, discuss the operation of synchronous generators that would not generate active power,
but solely serve as providers of reactive power (see below) and inertial control. Only after exploiting
such options, the synthetic inertia solution will possibly be considered.
3.1.2 Primary Control Reserve (PCR)
PCR serves to stabilise the system frequency at a new equilibrium point following imbalances during
normal system operation or after large loss-of-supply (-load) events. The new steady state however
deviates from the nominal value of frequency [26]. Parties in the entire Continental European
synchronous control area automatically activate PCR within seconds, if frequency deviates more than
0.02 Hz from the nominal value. When the frequency reaches a value below 49.8 Hz or above
50.2 Hz respectively all primary reserves must be fully activated [28]. PCR is typically supplied by
conventional power plant generators with turbine governor controls. The governors adjust generation
based on the frequency deviation and their droop characteristics [26].
Within the synchronous area, 3000 MW of PCR have to be jointly procured by all European TSOs in
order to meet the N-1 criterion. The amount to be reserved in each country depends on the size of
the control area(s) and on the capacity of the largest generating unit. In Germany, 576 MW of PCR
were procured in 2013, accounting for 19.2% of total primary reserve procurement of Europe [25];
the procured capacity in the Netherlands amounted to 114 MW corresponding to 3.8% [37].
3.1.2.1 Technical requirements for the provision of primary control reserve
ENTSO-E has defined the technical requirements for the provision of control reserve in the LoadFrequency Control and Performance Handbook. PCR must be able to offset a reference incident, which
is defined as an instantaneous power deviation between generation and demand of 3000 MW in the
synchronous area. Its activation serves to prevent load shedding or the disconnection of generation
units. PCR is activated within a few seconds following a frequency event, the ramping speed is 15 s to
a deployment of 50% of the reserves and after 30 s it must be fully activated. PCR must stay
activated until the power deviation is completely offset by the secondary/tertiary control reserve of
the control area/block in which the power deviation has occurred. The minimum possible activation
duration is 15 min. [28]
3.1.2.2 Market design of primary control reserve
In Germany every controllable production unit with a nominal capacity higher or equal to 100 MW has
to be capable to withhold 2% of their capacity for PCR [38]. Since 2007, the four German TSOs
(TenneT, 50Hertz, TransnetBW and Amprion) jointly procure PCR through a single-buyer auction on
the platform regelleistung.net. The tender is a single-part auction where bidders submit a capacity
price bid only. Primary reserve capacities are tendered weekly and the program time unit is one
week. The minimum bid size is 1 MW and the product is symmetric, i.e. both positive and negative
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control reserve capacities have to be provided for an entire week [39]. As the energy supplied by a
certain generator is difficult to quantify, there are only capacity payments for PCR [1].
The Dutch regulator Autoriteit Consument en Markt (ACM) has decided to implement a new
mechanism for the procurement of PCR as of January 2014. While in the past the provision of PCR
was a compulsory unpaid service in the Netherlands, it is now contracted by auction. TenneT NL has
joined the German auction platform with around one third of the required PCR, i.e. 35 MW. The
remaining capacity will be procured by Dutch suppliers only, but also in the form of an auction [40].
An overview of the auction design for the procurement of PCR in Germany and the Netherlands is
given in Table 1.
Table 1: Auction design of PCR procurement in Germany and the Netherlands.
Source: own depiction based on [39]-[40]
Netherlands (NL) and Germany (D)

Tender (NL: As of Jan 2014 approx. 1/3 of capacity procured in joined tender
Procurement
with German TSOs, remaining 2/3 procured in tender with Dutch suppliers
only)
Trading platform
Regelleistung.net
Pricing rule
Pay-as-bid
Auction Period
Week
Product
1 product: base; symmetric
Capacity payment
Yes
Energy payment
No
Minimum Bid
1 MW
Approx. Market Size
NL: 110 MW; D: 630 MW
3.1.3 Secondary Control Reserve (SCR)

After PCR has brought the frequency to a new equilibrium point, SCR serves to restore the frequency to the nominal
value of 50Hz. In contrast to PCR, SCR is not dimensioned for the whole European synchronous area,
but rather individually within each control zone, i.e. the Netzregelverbund in Germany and TenneT NL
in the Netherlands. It is generally supplied by power plants with short response time such as pumped
storage plants and gas turbines, but also biogas power plants and controllable loads.
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3.1.3.1 Technical requirements for the provision of secondary control reserve

The technical characteristics of SCR in Germany and the Netherlands differ in various aspects. In
Germany, units that provide SCR are activated within 30 s after a disturbance, full activation has to
be deployed within 5 min and the nominal frequency of 50Hz has to be reached within 15 min. The
providing units must be capable of keeping the frequency at the nominal value for one hour. In order
to participate in the market for SCR, prequalification requirements have to be met. For instance,
documentation of two predefined generation cycles has to be provided to the TSO. Within the cycles,
it must be clearly recognisable that plants can ramp up within 5 minutes after the reception of a
signal, supply control reserve for 10 minutes and ramp down again within 5 minutes. Following a 10minute pause, this cycle is undergone a second time. Another important prequalification aspect is the
reliability of the control reserve offer, which according to the transmission code has to be 100%.
More precisely, units must be able to provide the amount of control reserve they offered to the
market with 100% certainty. For power plants that cannot assure that level of reliability, the
participation is only possible within a portfolio [41]. Power plants that offer in a portfolio must belong
to the same control zone.
In the Netherlands, two different products represent SCR: regulating capacity (regelvermogen) and
reserve capacity (reservevermogen), with regulating capacity being most similar to the German SCR.
Regulating capacity has to be activated within 30 s. The activation ramp rate is defined as 7%/min
which results in a full activation of the reserve offer within 15 min. For reserve control activation time
ranges between 1-4 PTU (with 1 PTU being 15 min) and activation duration of 1 PTU for balancing
purposes or 4 PTU for other purposes (cf. Table 2 below for an overview of the Dutch products).
Table 2: Products on the market for SCR in the Netherlands.

Purpose
Product
Activation Time
Activation
Duration
Bid
Balancing
Regulating Power
contracted
within 15 min
1 PTU
Symmetric
Regulating Power
not contracted
within 15 min
1 PTU
pos. & neg. decoupled
Reserve Power
1, 2, 3, 4 PTU
1 PTU
Reserve Power
5 PTU
4 PTU
Other
Comparing technical characteristics, the definition of SCR in the Dutch market is considerably broader
than in Germany and includes attributes of the German SCR and TCR. Reserve power other
purposes with an activation time of 5 PTU is comparable to the balancing power that has to be
supplied by balance responsible parties (BRP) if the imbalance exceeds one hour in Germany.
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3.1.3.2 Market design of secondary control reserve

See Table 3 for an overview of the auction design of SCR in Germany and the Netherlands.
Table 3: Auction design for secondary control reserve in Germany and the Netherlands.
Source: own depiction based on [30], [42], [43]
Netherlands
Procurement
Trading platform
Pricing rule
Auction Period
Product
Germany
i. Auction obliging contractor to bid offered

amount as E bid into bidding ladder
ii. Sole placement of E bids in bidding
ladder (tender)
Energieinfo.tennet.org
C/E: Two-stage auction
Regelleistung.net
C: Pay-as-bid
C/E: Pay-as-bid
E: Marginal pricing
C: Year
Week
E: 1 PTU
C: symmetric base product (Year/Quarter)
E: 1 PTU (15 min), pos. & neg. decoupled
4 products: Peak & Off-Peak;

Capacity payment
i. Yes
ii. No
Yes
Energy payment
Yes
Yes
Minimum Bid
4 MW
5 MW
Approx. Market Size
300 MW
+2000 MW; -2000 MW
C: Capacity, E: Energy
In Germany, every generating unit that meets the requirements of prequalification defined in the grid
code, has the right to participate in the auction for SCR [38]. The reserve is tendered weekly in a
multi-part auction where bidders submit both energy and capacity price bids. Gate closure is
Wednesdays at 3 pm for the following week. The bids are placed separately for positive and negative
reserves for peak periods (workdays 8 am-8 pm) and off-peak periods (workdays 8pm-8am and
weekends) of a whole week. The minimum bid size is 5 MW [2].
The clearing is done in two stages: capacity price bids are ranked in order of merit until the required
amount of control reserve is procured. The procured capacity is determined by the TSOs. It is
dimensioned in such a way that an elimination of the imbalance in each control zone is guaranteed in
99.975% of the time [45]. In 2013, the procurement for both positive and negative control reserve
amounted to approximately 2000 MW respectively [44].
If control reserve is activated, the energy price bids of the units that were contracted in the capacity
auction are again ranked and the plants are called according to their position in the merit order. As
the pricing rule of the auction is pay-as-bid, parties receive the capacity and energy payments
according to the bids they submitted.
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The market design will however undergo changes in the next few years. As for PCR, German TSOs
possibly want to change the auction design to day-ahead tenders [46]. Within the framework of the
integration of European control reserve markets, it is considered to introduce the possibility to
participate exclusively on an energy-only market with a gate closure of energy bids 1 hour before
time of delivery [47]. This is already implemented in the Netherlands (see below). If parties chose to
participate this way, they will not receive capacity payments, but energy payments only. According to
[46] an energy-only market design is planned to be introduced mid-2015.
In the Netherlands, SCR is procured in a yearly tender for 300 MW symmetric base capacity, resulting
in a total procurement of 600 MW. Every generating unit with a capacity greater than 60 MW is
obliged to place a symmetric bid for SCR in the capacity auction, specifying the price for providing a
certain amount of SCR during a whole year (the auction design for the capacity tender is pay-as-bid)
[42]. As opposed to Germany, capacity prices are not published in the Netherlands as they are
settled in bilateral contracts with the TSO. TenneT NL claims that capacity prices are similar to the
ones in Germany [43]. As of 2014, the TSO is obliged to publish an average capacity price as an
indicator. The average price for the tender period 2014 was 130 000 /MWa. So far, around four
parties are participating; negotiations with around 1-2 additional parties are on-going [48].
As outlined in Table 3, there are two alternative options for participating in the Dutch control reserve
energy tender by placing bids in the so-called bidding ladder, which is the merit order of all energy
bids (see Figure 9 below). Bids can be placed into the ladder as of 2 pm day-ahead and volumes and
prices can be altered until one hour (4 PTUs) prior to delivery time.
i)
Parties that are contracted to offer control reserve capacity are obliged to bid the at least
the contracted, symmetric capacity into the bidding ladder for each PTU of the year they
committed to provide control reserve. The energy price bids can be adjusted in each PTU.
They can be placed into the ladder If the contracted parties miss placing the energy bids,
dummy prices are put into the bidding ladder by TenneT NL: for upward regulation the
price is 0 /MWh, for downward regulation the APX day-ahead price +35 /MWh is
applied. Both numbers represent comparably low prices [48].
ii)
Parties that are not participating in the yearly capacity tender can still offer control
reserve by placing energy-only bids into the bidding ladder. These bids can be
asymmetric, i.e. units can offer negative or positive control reserve only.
In the bidding ladder, information about the bids placed into the market of control reserve is
published real-time so that bidders can use the information as a reference for their price bids
[49]. This also constitutes a signal for market participants to regulate against the market
imbalance. See the Figure 9 for a schematic depiction of the control reserve bidding ladder.
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300
E
200
Price [/MWh]
100
M
0
-Vmax
-600
-500
-400
-300
-200
-100
100
200
300
Vmax
400
500
600
-100
-200
-E
-300
Power [MW]
Figure 9: Schematic depiction of the Dutch control reserve bidding ladder.
Source: own depiction based on [49]-[50]
The energy bids are ranked in order of increasing bid price for positive control reserve and decreasing
bid price for negative control reserve. Bids by individual parties with bid size and price are not
published in the Netherlands. The data made available includes the maximum bid price for up- (E)
and downward regulating capacity (-E) with the corresponding maximum volume (Vmax) of offered
control reserve. Furthermore, the prices for the capacities of 100 MW, 300 MW and -if that much
is offered collectively by all bidders- 600 MW control reserve are published [42]. M is the so-called
mid-price relevant for imbalance pricing (see section 3.1.6).
In the case of imbalance, the TSO calls the required energy in order of merit. Bids are settled at the
highest price bid (positive control reserve) and/or the lowest price bid (negative control reserve)
deployed in the respective PTU, i.e. all providers of control reserve are paid the price of the highest
bid called (marginal cost pricing) [51].
3.1.4 Tertiary Control Reserve
As for SCR, the definitions of TCR differ in Germany and the Netherlands. While in Germany, TCR is a
bidirectional product (both positive and negative reserves are traded), there is only positive TCR in
the Dutch market up until now. The so-called emergency capacity (noodvermogen) is mainly
provided by large electricity consumers or gas turbines that reduce electricity consumption or raise
feed-in if required. The providing units are especially reserved for regulation requirements of TenneT
NL. Units with a nominal capacity 60 MW are excluded from the delivery of emergency power
because of their obligation to provide all reserves on the market of SCR [52].
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In Germany, TCR serves to replace SCR and is generally supplied by synchronized or fast-starting
power plants and large consumers [2]. As forecast deviations by VRES are usually of long-term
nature, the increasing share of the fluctuating power plants has a great impact on the need for TCR
[25]; the provision of TCR will thus gain in importance in the future.
3.1.4.1 Technical requirements for the provision of tertiary control reserve
To meet German prequalification requirements, generators of TCR must provide generation cycles to
the TSO, which prove that the plants are able to ramp up within 15 minutes, supply the control
reserve for 15 minutes and ramp down again within 15 minutes. This cycle must be undergone a
second time, following a 15 minutes pause. During operation, TCR has to be available within 7
minutes and fully activated within 15 minutes [2]. If several disturbances occur, providers have to be
able to supply TCR for several hours.
in the Netherlands, TCR must be fully activated within 15 minutes and units should be able to provide
the service to the system for at least one hour [52]. While the activation time is the same as for SCR,
the ramp rate is not specified as %/min. In the technical requirements, emergency capacity is similar
to German quickly interruptible loads, however in Germany terms for the provision duration are
different (cf. [53]).
3.1.4.2 Market design of tertiary control reserve
Table 4 gives an overview of the market design for TCR in Germany and the Netherlands.
Table 4: Auction design for tertiary control reserve in Germany and the Netherlands.
Source: own depiction based on [30] , [42], [43]
Netherlands
Germany
Procurement
(Sealed-bid) auction
C/E: Two-stage auction
Trading platform
Energieinfo.tennet.org
Regelleistung.net
C: Pay-as-bid
Pricing rule
Auction Period
E: Marginal pricing (min. price dayahead market price + 200 /MWh)

C: Year/Quarter
E: 1 PTU (5 PTUs in advance)
C: base product; only pos. CR
Pay-as-bid
Day
E: 1 PTU (15 min); only pos. CR
12 products: blocks of 4 hrs; pos. &

neg. decoupled
Capacity payment
Yes
Yes
Energy payment
Yes
Yes
Minimum Bid
20 MW
5 MW
Approx. Market Size
+2400 MW; -2400 MW
+300 MW; -350 MW
Product
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In Germany, TCR is tendered daily in blocks of four hours and separate bids for positive and negative
reserve. Hence, there are twelve products for TCR per auction. As for SCR, it is a two-staged multipart auction with bids for capacity and energy. More than 2400 MW TCR were procured in 2013 for
positive and negative reserves respectively, rising to more than 2700 MW for negative control reserve
in the second half of the year [44].
As mentioned above, the market design of TCR will possibly change in the future with the
introduction of an additional energy-only market (cf. market design of SCR). This type of tender
design is already implemented in the Netherlands.
In the Netherlands, TCR is procured in a yearly tender for 300 MW positive base capacity. As of
September 2014, there will also be a procurement of negative emergency power of 350 MW [30].
Energy bids are placed daily into the bidding ladder (the same as for SCR) for the respective PTU and
as for SCR, volume and price of the bid can be changed up until one hour before delivery [42].
3.1.5 Provision of Control Reserve by OWFs
In the following, the potential provision of primary, secondary and tertiary control reserve by OWFs is
analysed.
3.1.5.1 Status Quo of control reserve provision by OWFs
Up until today, renewable power plants are not obliged to reserve control capacity in the German or
Dutch market. RES plants in Germany are only allowed to participate on the control reserve market
when remunerated with the market premium (see also Chapter 2). In the Netherlands, the legislative
framework does not impose any barriers.
At the moment, there is no participation of wind farms on the control reserve markets in either
country; however negotiations with TSOs are under way. The impact of the current technical
requirements on each market and possible barriers for the participation of OWFs created by the
auction design of PCR, SCR and TCR will be examined more closely below. Furthermore, requirements
for the participation of wind farms discussed by TSOs are outlined.
3.1.5.2 Potential Provision of control reserve by OWFs
Within the section the participation of OWFs on the control reserve market is analysed with regard to
1) market design aspects
2) technical requirements
Market Design PCR

While the minimum bid size of 1 MW is easily deliverable by an OWF, the auction period of one week
is too long. Forecasts exceeding 48 hours are too inaccurate for an offer on the control reserve
market that requires very high reliability levels. However, it has been discussed to change the auction
design to day-ahead tenders [46].
Still, the symmetric character of the PCR product constitutes a problem. Operating in a constantly
down-regulated state in order to be able to provide positive control reserve might not be efficient as
renewable energy is wasted. Furthermore, it will lead to reduction of income for the OWF operator.
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Even if the wind farm would not receive support payments, operatorss income is reduced and no fuel
savings occur (see also section on provision of positive control reserve by OWFs below).
In a recent study by Fraunhofer IWES [46] options for the provision of PCR by wind farms are
discussed. They include inter alia the provision of only negative control reserve for only large
frequency deviations or the short-term notification of operators by TSOs if positive PCR is needed.
The notification should, however, be provided at least one hour before the time of delivery in order to
give operators enough time to balance generation schedules through trades on the intraday market.
The obligation for wind farms to provide both positive and negative TCR is considered critically by the
authors due to the high energy as well as income losses. This should thus just be considered when
the share of conventional capacities in the system has undergone a severe decline.
Market Design SCR

The market design for SCR in the Netherlands is generally suitable for the participation of OWF. The
gate closure of only one hour (4 PTUs) before delivery time enables plant operators to base their bids
on very short-term forecasts. Due to the high accuracy of 1 h forecasts, the safety margin operators
have to apply to the control reserve bids is comparably low. Energy bids do not have to be symmetric
and with a product length of 15 min (1 PTU), the bids are already the smallest product size currently
traded on energy markets. With a trend to shorter product units on the day-ahead and intraday
market, this might facilitate a merger of the bidding infrastructures of the spot and control reserve
markets as it has been proposed in [42].
Still, when it comes to the basic provision of control reserve in contracts (see option i in Table 3), the
participation of wind farms is only possible within a flexible portfolio with conventional power plants:
the lead-time of one year, product size of one quarter or even year and the requirement of a
symmetric bid make it impossible for wind farms to participate in the auction alone. With an
increasing share of RES in the future, the market design would thus have to be adjusted with regard
to:
the lead-time of the auction (currently one year)
the product length (currently one quarter/one year) and
the bid characteristics (implementation of asymmetric capacity bids necessary).
TenneT NL is currently considering to introduce decoupled/non-symmetric bids for the SCR contracts
and to shorten the bids to weekly products [30].In Germany, the current market design makes it
impossible for wind farms to participate in the SCR tenders. While the minimum bid size of 5 MW especially due to the comparably high and steady feed-in of OWFs - and decoupled bids do not
impose restrictions, the following aspects hinder the participation of the wind farms on the market of
SCR:
the auction lead-time of five days (gate closure Wednesdays at 3 p.m.),
the product length of five days (HT products) or even seven days (NT products)
With the possible introduction of an energy-only control reserve market in the near future (cf. market
design SCR), these market design issues will be obsolete. Still, the price level on the energy-only
market might constitute an issue as long as OWFs have opportunity costs amounting to the market
premium (see Chapter 4).
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Market Design TCR

In Germany, the minimum bid size for TCR was decreased significantly in 2011 from 15 MW to 5 MW
[54]. This was an important step as the market was quite concentrated prior to the reformation and it
also facilitated the participation of VRES. For a wind farm, a minimum bid size of 15 MW reduces the
capacity that can be offered to the control reserve market significantly, especially due to a security
margin that has to be applied because of forecast errors.
The auction lead-time of one day is short enough for OWFs to make an offer on the control reserve
market. They will base the offer on a 24 hours forecast, which is sufficiently reliable, at least when
offering in a portfolio (see section technical requirements below). The possible introduction of an
energy-only market (see above) will favour their participation even more.
In the Netherlands, the already implemented possible participation in the energy-only tender greatly
benefits the participation of wind farms in the market. However, the participation in a contract is
made difficult due to the long auction period of one quarter or even year as well as the minimum bid
size of 20 MW.
Technical Requirements
OWFs are all equipped with a pitch mechanism and information infrastructure allowing the wind farm
to respond within seconds to a setpoint transmitted by the TSO. After the farm controller receives a
new setpoint, it takes less than a second for the information to be distributed to the individual
turbines and they start regulating. The technical requirements of a response time of 30s for PCR and
5 min or 15 min for SCR and TCR are thus met.
However, while in the Netherlands, there are no strict prequalification requirements for the provision
of control reserves, the requirements defined in the German grid code constitute considerable
barriers for OWF participation in the control reserve markets.
One important issue regarding prequalification requirements is the reliability level of the control
reserve capacity offered to the market of control reserve. In the grid code, a reliability of 100% is
demanded, i.e. in 100% of the time the plant has to be able to deliver the offered amount of control
reserve. For a wind farm, however, the reliability is subject to the forecasting reliability, as wind farm
operators have to base the amount they offer to the control reserve market on forecasts. For the
forecasts, a confidence interval is defined (cf. Figure 10 below). The lower limit of the confidence
interval is the amount of wind energy that will at least be generated with a high degree of probability
and can be offered to the control reserve market (for the provision of positive control reserve, this
limit must of course be reduced by the amount that is supposed to be offered to the market) [55].
The reliability level for control reserve provision of a wind farm thus represents the probability with
which the real time feed-in of the power plant is equal to or higher than the capacity offered to the
market of control reserve. In [46] it was found that control reserve capacity bids presented with a
reliability level of 99.994% in the past, i.e. with a probability of 99.994% the power feed-in of
conventional power plants was higher than or equal to the offer that operators placed in the market
of control reserve. This level of reliability is recommended by German TSOs as a minimum for control
reserve offers.
The compliance with the reliability level is reinforced by very high penalty payments in the case of a
failure of control reserve delivery, which are agreed upon in contracts drawn up between the TSO and
BRP [30]. Such penalty payments are in place in the Dutch market as well.
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30
Upper Limit Confidence Interval
25
Prognosis
Lower Limit Confidence Interval
Power [MW]
20
Positive Control Reserve

15
10
Schedule (Negative Control Reserve)
5
0
9:00
10:00
11:00
12:00
Time
Figure 10: Reliability of Control Reserve Provision by Wind Power Plants.
Another important issue regarding the participation on the control reserve market is the proof
methodology to demonstrate the actual delivery of control reserve. For conventional plants the
delivered control reserve is measured as the difference between the schedule that was provided to
the TSO at least 1 hour before delivery and the real-time feed-in. Under the conventional proof
method, the wind farm operator could only offer the lower limit of the confidence interval of the
forecast (see above) on the wholesale market in order to be definitely able to keep the schedule. This
would require the down-regulation of the wind farm below the actual possible feed-in, which in turn
leads to income losses on the wholesale market as well as energy losses. For OWFs, however, this
proof methodology would lead to both energy losses and income losses for the wind farm operators.
This issue has been analysed in [46]. The authors, together with TSOs, are trying to implement
another proof method, where the delivered control reserve would be measured as the difference
between the possible feed-in (that will be measured at a reference turbine of a wind farm) and the
real-time feed-in. While the possible feed-in method is not fully developed yet, the conventional
method does not provide strong incentives for wind farm operators to participate on the control
reserve market. The proof method is thus subject of on-going investigations.
It has however been shown that wind farms are able to follow predefined schedules, i.e. the
generation schedules that have to be provided to TSOs for prequalification for participating on the
control reserve market (see also technical requirements for SCR/TCR above) [56]. Due to the
comparably steady feed-in, this is even easier for OWF than for onshore wind farms.
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In a preliminary trial phase, German TSOs will test the participation of wind farms on the TCR
market. Due to economic and ecologic reasons, only the participation of wind farms on the negative
TCR market will be tested for now; provision of positive reserves has not yet been considered (see
section 3.1.5.3). In this trial phase operators must prove that they are able to 1) fully offset dayahead forecast errors on the intraday market and 2) assure that the 1 h forecast value does not
deviation more than 3% from real-time feed-in. Regarding the amount of capacity that is offered to
the market, they will only accept a third of the day-ahead forecasts as a maximum bid during the
trial phase [57].
When supplying PCR and SCR, power plants often ramp up or down in very small amounts, thus
allowed generation deviations are even smaller. For this reason, German TSOs only consider the
participation of OWFs on the TCR market at the moment.
3.1.5.3 Provision of positive control reserve by OWFs
Several authors have shown that the provision of positive control reserve is currently not economic
for wind farms in Germany (see e.g. [2], [58]-[59]).
In general, the price level for the provision of positive reserves has decreased significantly in the last
years - the price level on the negative control reserve markets is substantially higher. While in 2008,
the ratio of capacity costs for positive reserves compared to negative reserves was approximately
5:2, it was about 1:6 in 2012 [2]. Apart from that, opportunity costs for OWF when participating on
the market for positive control reserve are much higher than for the participation on negative control
reserve markets.
The opportunity costs for offering positive control reserve are the subsidy payments for an OWF, i.e.
the FIP and the income on the spot market (cf. Chapter 2). As wind farms would have to operate in a
down-regulated state in order to ramp up when needed, operators would lose the subsidy payments.
As outlined in Chapter 2, the market premium should as a minimum guarantee the reception of the
FIT to the plant operator, thus the FIT approximately represent the operators earnings from the spot
market and the market premium. The graph below depicts the marginal capacity prices for positive
control reserve (normalized to /MW-h) on the market for positive TCR in the year 2013 as well as
the initial FIT and the basic FIT for OWFs. At no point in time is the marginal capacity price higher
than the opportunity costs of the wind farm for operating in a down-regulated state.
Risk-affine operators might chose to bid a capacity price lower than the subsidy payments, hoping to
compensate for the losses in the capacity tender with revenues in the energy tender. However, while
energy prices for positive control reserve are comparably high, it is rarely activated. In only 4.5% of
the time an activation took place in 2013 [60]. During those hours, marginal energy prices exceeded
the basic remuneration (low FIT) at all times, and the high FIT in 62% of the time. The marginal
energy prices were in average 195 /MWh. Still, with the delimited number of market events and the
low probability of winning both the capacity and energy tender during those rare events, the
participation on the market for positive control reserve does not constitute a business case for OWF.
This might change in the future with new market designs.
Still, even if provision of positive control reserve were economic for OWFs, it would lead to overall
economic losses for the system. Wind farms can offer energy to the wholesale market at the marginal
cost of production of next to 0 /MWh. If they were down regulated in order to provide positive
reserves and less wind farm bids would enter the merit order, the prices on the wholesale market
would increase.
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Apart from the economical factors, it is not ecological to operate the wind farms in a down-regulated
state, as renewable energy is wasted. Down-regulation should only take place in emergency cases,
i.e. if it is needed for the provision of negative control reserve or due to impending grid congestions.
160
140
Price [/MW-h]
120
100
80
60
40
20
0
Marginal Capacity Price
FIT Low
FIT High
Figure 11: Comparison of OWF FITs and Marginal Capacity Prices on the market for positive TCR in 2013.
Source: own calculations with data from [60], [61]
3.1.6 Imbalance Pricing System

As announced in Chapter 2, the imbalance pricing systems in Germany and the Netherlands are
presented at this point, as they are directly linked to the control reserve market design.
The need for control reserve arises due to unforeseen production or consumption excess in the grid,
which is not in line with the schedules that BRPs provided to the TSO (see above). BRPs must ensure
that within their balancing area, consumption and exports equal generation and imports.
The need for balancing energy of over-supplied (presenting with an excess of production) and undersupplied (presenting with an excess of consumption) balancing areas can cancel each other out. If
there is still a need for balancing energy after the netting of all areas in the control area control
reserve is needed.
The costs for the control reserve energy, i.e. the actually activated amount of control reserve, have
to be borne by the BRPs that deviated from their schedule and are reallocated by the BRPs to the
market participants in their control zone, which that did not adhere to the provided schedules (this is
the case in both Germany and the Netherlands). Within the imbalance system, all costs for control
reserves energy payments are borne by the BRPs deviating from their delivered energy
programme/schedule [30]. Imbalance prices can be very high, which creates an incentive for the
market participants to avoid imbalance, e.g. by improving forecasting quality or balancing their
position through intraday trading. In the following, the formation of the imbalance prices in Germany
and the Netherlands is described in detail.
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Imbalance price formation Netherlands

In general, the imbalance prices in the Netherlands correspond to the marginal settlement prices on
the market for regulating and reserve power. The imbalance price system is a dual price system with
different prices for positive and negative control reserves if both are activated within a PTU.
Consequently, there is a different imbalance price for long (excess of generation) and short (excess
of consumption) BRPs. For regulation in only one direction, i.e. activation of either negative or
positive control reserve, there is one common price for long and short BRPs. If no regulating or
reserve power is activated in a certain PTU (quarter of an hour), the imbalance price is fixed at the
so-called mid-price, which is the midpoint between the lowest price bid for upward and the highest
price bid for downward regulation (see Figure 9 above) [62].
The imbalance price may also deviate from the marginal control reserve prices if the so-called
incentive component is activated, which serves to incentivise market participants to reduce imbalance
if a certain level of imbalance is exceeded. In this case, the imbalance price is the control reserve
settlement price raised by the incentive component [42].
TenneT NL publishes the bidding ladder (see Figure 9 and [49]) as well as the most recently deployed
regulating and reserve power on a minute by minute basis (so-called balance delta [63]), which
provides bidders with an indication of the settlement prices. Due to the real-time publication of
imbalance prices in the bidding ladder, BRPs can choose to regulate against the imbalance in the form
of passive contribution, i.e. they counteract the imbalance without being activated trough the
bidding ladder. Thus, they maintain an imbalance in their control area and deviate from the schedule,
but can receive remuneration.
Table 5 provides an overview of the cash flows on the Dutch balancing market. If for instance the
system is short, i.e. positive control reserve has to be provided, and the BRPs balancing area is long,
they will stay long if the imbalance price is positive. If the balancing area is short and the system is
long, with a need for negative control reserve, the BRP will not counteract the imbalance if the price
is negative. If, however, both up- and downward reserve power have to be activated, passive
contribution cannot be identified and thus not be remunerated. In 2013, this was the case in around
12.5% of the time.
The passive contribution lowers activation of control reserve offered in the bidding ladder, which will
keep the marginal price low. This in turn reduces the revenues of the contracted parties but also
lowers the imbalance payments of BRPs that deviate from their energy programme [50].
Table 5: Cash flows on the balancing market.

Source: own depiction based on [42], [64]
Imbalance Price >0
Imbalance Price <0
Positive CR (+) / long BRP
TSO pays BRP
BRP pays TSO
Negative CR (-) / short BRP
BRP pays TSO
TSO pays BRP
Imbalance price formation Germany

The imbalance pricing system is a single price system with one price for short and long BRPs [43].
The reBAP, which is the imbalance price for the whole German synchronous area (Netzregelverbund,
NRV), i.e. the cooperation of all German control zones, was introduced in 2010.
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It is determined by the following equation4 [64]:
[]
[]
(4)
For each quarter of an hour the ratio between the costs and revenues for the activation of SCR and
TCR in the NRV and the NRV balance, which is the net activation of positive and negative control
reserve, is determined. The balance is positive if the NRV is in average undersupplied in the
respective quarter of an hour, i.e. if more positive than negative control reserves was activated. Vice
versa, for an excess of negative control reserve activation, the NRV balance is negative.
The imbalance price represents an average of all control reserve energy price bids, in contrast to the
Netherlands, where the imbalance and control reserve have almost always the same (marginal) price.
The clearing of payments of the imbalance price is the same as in the Netherlands (see Table 5). The
imbalance price is not published real-time but only after several months, therefore parties trade
imbalances on the day after market in order to hedge risk: they are allowed to balance schedule
deviations by offsetting their imbalance position with counter positions of other market parties within
the same control zone until 4 p.m. on the following day [2].
Comparison of the systems

In Figure 12 and 13 the imbalances and imbalance prices in Germany and the Netherlands are
depicted for the years 2012-2013. The observed prices are shown in blue and the red line represents
the moving average of the imbalance prices. The yellow line is the imbalance spread, which is the
difference between the imbalance price and day-ahead price.
Negative system imbalance represents a long system with activation of negative control reserve,
positive system imbalance a short system with activation of positive control reserve. In Germany,
there is an apparent positive correlation between imbalance and the imbalance prices.
The price is further limited by certain rules, e.g. it may not exceed the maximum energy price of control reserve activated.
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Figure 12: System imbalance and imbalance prices in Germany for the years 2012 and 2013.
Table 6 depicts the average imbalance price and imbalance spread for different system states. In
2012 and 2013 the system was in average around 55% of the time long and 45% short. When the
system was long, long BRPs made a loss of more than 47 /MWh having spent 39 /MWh one the
day-ahead market and being penalized with 8.58 /MWh for their imbalance. When the system was
short, penalties for short parties were slightly higher, leaving them to pay more than double the dayahead price for imbalances.
In average (time-weighted), the imbalance and day-ahead price were almost the same, however
slightly negative, benefiting parties that were short.
Very Long
System state
Average
Long
Occurrence [%]
Short
(
MW)
-2000
Very Short
( 2000 MW)
54.69
45.31
2.21
1.70
Imbalance Price [/MWh]
40.04
-8.58
98.72
-72.35
180.94
Day-ahead Price [/MWh]
40.19
38.90
41.73
34.51
49.67
Imbalance Spread [/MWh]
-0.14
-47.48
56.98
-106.85
131.27
For the Netherlands, the data is significantly more scattered, which can be explained by the fact that
imbalance prices are in general marginal prices of the control reserve market and not an average of
all activated bids. This also explains the characteristic lines in the graph, possibly representing bids of
market parties that regularly offer control reserve at the same price.
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As in Germany, the graph reveals a positive correlation between imbalance and imbalance prices.
However, in average, the prices are higher than on the German market. While in the Netherlands
there is an imbalance price of around 150 /MWh for an imbalance of 300 MW, the same price
corresponds to an imbalance of 2000 MW in Germany. Positive prices in a long system and negative
prices in a short system occurred more often than in Germany.
Figure 13: System imbalance and imbalance prices in the Netherlands for the years 2012 and 2013.
In Table 7, the average imbalance prices and spreads for the Netherlands for the years 2012 and
2013 for different system states are shown. The average level of imbalance and day-ahead prices is
higher than in Germany. In 13.3% of the time, different imbalance prices for long and short parties
occurred. Surprisingly, the average imbalance price at a long system state is positive.
System state
Average
Long
Occurrence [%]
Short
Very Long
Very Short
(-2000 MW)
( 2000 MW)
52.58
47.41
2.30
1.92
Imbalance Price [/MWh]
53.32
26.23
83.37
-32.91
191.32
Day-ahead Price [/MWh]
50.23
48.50
52.15
47.56
60.81
3.09
-22.28
31.22
-80.48
130.51
Imbalance Spread [/MWh]
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Cf. Table 8 for an overview of the imbalance pricing mechanism and management in Germany and
the Netherlands. Note: While according to TenneT NL the Dutch imbalance management, especially
the passive contribution, leads to reduced control reserve needs [43], there is a danger of extensive
regulation in the wrong direction in the case of a failure within the information system under this
scheme.
Table 8: Imbalance management in Germany and the Netherlands.
Netherlands
Germany
Dual pricing: different price for

long and short BRPs
Single price for both long and short

BRPs
Price transparency
Real-time publication of balancing

actions,
final
publication
of
imbalance price on following day
Publication of imbalance price after

several months
Cost recovery CR capacity
100% grid users
100% grid users
Cost recovery CR energy
100% BRP
100% BRP
Imbalance
system
pricing
3.2 Re-Dispatch
Re-Dispatch is the adjustment of active power production in order to address the following:
(Impending) congestion in the grid
Overload of operational resources in the grid due to power flows
Approved voltage range might be or is already exceeded
Power plants at the respective end nodes of the line up- or down-regulate their production upon
instruction by the TSO in order to avoid or counteract and remove the above-mentioned incidents.
The measure must not affect the balanced position of demand and supply [67]-[68].
3.2.1
Technical requirements for the provision of re-dispatch
TenneT NL has not specified technical requirements for the provision of Re-Dispatch capacity. In
Germany, in accordance with 13 (1) EnWG, power plants with a nominal capacity greater than 10
MW are obliged to provide the Re-Dispatch capacity to the system.
3.2.2
Market design of re-dispatch
In the Netherlands, the grid capacity has been developed to such a point that congestion events are
rare. This is also due to the fact that the Dutch generation portfolio still mainly consists of
conventional energy sources, in particular gas power plants. Dutch plant operators are not obliged to
provide Re-Dispatch capacity. Contracts are only drawn up between the operators and TSO if a risk of
congestion has been identified. The remuneration for the AS can be a fixed fee aligned to the spot
price or is determined with a formula based on variables such as fuel prices. If there is not enough
time to draw up contracts, energy bids are taken from the bidding ladder [30].
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The deployment of Re-Dispatch measures in Germany has increased significantly in the last years.
While in 2011, during 5030 hours Re-Dispatch measures were taken, the deployment of the AS
occurred in over 7160 hours in 2012, representing a 42% increase [13]. Costs even rose by a factor
of four, with net costs of around 40 Mio in 2011 and more than 160 Mio in 2012.
For Re-dispatch bilateral contracts are drawn up between the plant operator and TSO [68]. Prices are
aligned to spot market prices following on ordinance by the Federal Energy Regulator. As trades are
not affected by Re-Dispatch measures, TSOs can pass on the costs for the AS to the grid fees [13].
3.2.3
Provision of re-dispatch by OWFs
According to 8 (1) EEG there is an unlimited precedence for electricity generated from renewable
sources of energy; their down-regulation can thus only be taken as a last measure. If RES plants are
down regulated due to congestion management measures, they are to be reimbursed for 95% of
their lost revenues plus additional expenses, less any expenses saved (12 (1) EEG).
In the Netherlands, there is no precedence for RES electricity and ramping down of power plants is
purely cost based [6]. As stated above, re-dispatch measures are rarely needed nowadays. However,
the expansion of both on- and offshore wind capacity is planned, which should reach 6000 MW
respectively in 2020 [57]. With only around 2700 MW of wind capacity being in operation today [71]
(of which 228 MW are offshore wind capacity), these expansion plans will impose significant
challenges to the grid infrastructure in the future, leading to a greater need for congestion
management. The provision of the redispatch capacity by OWFs will thus gain in importance.
3.3 Black Start Capability

While black outs in the power grid are rare, power system restoration is one of the most important
AS. Black start capability serves to bring the grid back into operation after an outage. It is the ability
of a generating unit to start up after a disconnection from the external transmission network with
grid-independent means, to ramp up at no load conditions and to finally pick up load. In each control
zone, TSOs have to procure a minimum number of black start capable power plants [38]. Nowadays,
black start capability is mainly provided by large hydro plants and gas turbines [25].
3.3.1
Technical requirements for the provision of black start capability
Power plants providing the AS must be capable to start and ramp up without support of external
energy sources at no load conditions. They are generally equipped with batteries or emergency power
units.
3.3.2
Market design of black start capability
In Germany, the provision of black start capability is no general requirement for the connection of a
plant to the grid, unless explicitly required by the network operator. The type and extent of provision
of the AS is settled in bilateral contracts between the plant operator and TSO upon connection of the
plant. The remuneration for the service, which is also settled in the contracts, covers the technical
installations necessary for the provision [38].
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In the Netherlands, there is a yearly tender for the procurement of black start capability. The AS can
be offered for one year or longer and is remunerated with a fixed fee settled bilaterally between plant
operators and the TSO. The market is small and very concentrated with only big parties participating
in the auction. Due to the characteristics of the service, units have to be geographically spread [30].
3.3.3
Provision of black start capability by OWFs
In general, plants providing black start capability should be connected to the transmission grid. This
is the case for OWFs, in contrast to most RES plants, which are generally connected on distribution
level (although there are also concepts with black start provision concepts on distribution level, e.g.
in Denmark). The suitability of OWFs for the provision of black start capability does however depend
on
the
interconnector
of
the
wind
farm.
Line
Commutate
Converter
(LCC)-based
HVDC
interconnectors do not have black-start capability. However, in general OWFs are equipped with the
Voltage Sourced Converters (VSC) technology that has to a great extent replaced the LCC technology
and is able to provide black-start capability [72]. As an emergency power unit, OWFs are generally
equipped with Diesel generators on the offshore substation. In case of a black out, they could supply
the energy for the technical system necessary for the starting of the wind farm. Still, the load that is
necessary for the starting process is not part of the technical system of an OWF nowadays.
Furthermore, starting up is evidently limited with regard to the availability of wind at the time of the
blackout.
From a technical point of view, black start capability could be provided by OWFs if equipped with load
supplying devices. However, wind farms cannot provide the service with certainty.
3.4 Reactive Power

Next to frequency control, voltage maintenance is one of the most important AS. As for frequency,
the voltage level in the grid must be kept stable and not exceed specified limits.
During transmission of active power in a power line, the reactive power rises along the line, resulting
in a voltage drop and limiting the capacity of the line to transmit active power. In order to mitigate
these effects, reactive power must be provided at the respective end nodes. Thus, in contrast to
frequency control, a local provision of the reactive power is required [73].
3.4.1
Technical requirements for the provision of reactive power
Reactive power is procured by telephone in the Netherlands and the response time may not exceed
15 min [74].
In Germany, the provision of reactive power is a prerequisite for the grid connection of a plant. The
technical requirements regarding the supply of reactive power are stipulated in the German grid code
[38]. Within bilateral contracts, the TSOs and plant operators agree on a specific form of provision
with a certain reactive power range. This range must be traversed within a few minutes and changes
in reactive power demand must be possible within the agreed range at any point in time. If required,
the TSO can furthermore change the reactive power range specified in the contract.
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3.4.2
Market design of reactive power
In the Netherlands, the provision of reactive power is an obligation for all controllable units connected
to the grid, i.e. all units with the exception of production units, which are solely dependent on one or
more non-adjustable energy sources [75]. The need for reactive power is specific for different
market areas and providers are generally monopolists in an area. Right now, there are six market
participants in the Dutch market. The remuneration for the AS is settled between TenneT NL and
plant operators in bilateral contracts with a fixed yearly fee or variable hourly fee, depending on the
need the TSO expects for the respective market area [30].
In Germany, according to [38] the delivery of reactive power is an obligation for every generating
unit. Just like in the Dutch market, the financial compensation for the provision of the service is
regulated on a bilateral basis. In 2012 costs for the procurement of reactive power amounted to
almost 70 Mio and thus were 2.5 as high as in 2011 (27 Mio ).
In general, only large power plants are at the moment remunerated for the provision of reactive
power. As the provision of the AS strongly depends on local needs, the development of a market is
unlikely.
3.4.3
Provision of reactive power by OWFs
The Dutch grid code (see [75]) does not specify the role of wind power in providing reactive power;
according to TenneT NL the requirements that will be defined in the European Network Codes will be
applied in the future [30].
With provision of reactive power being a prerequisite for grid connection in Germany, it is already an
obligation for OWFs today. The System Service Ordinance (SDLWindV) regulates the grid connection
requirements for wind farms (see also 6(5) EEG) and acts as a supplement to the German grid code.
Section 3.3.8.1 of Annex 1 of the SDLWindV in conjunction with Annex 2 defines the technical
requirements for the reactive power supply by wind farms. Reactive power is to be supplied at the
nominal operating point of the turbine and the agreed reactive power range must be traversed within
4 minutes. Changes in reactive power demand must be possible within the agreed range at any point
in time.
In general, modern converters integrated in wind turbines are capable of providing reactive power to
the grid. Just like the active power feed-in, the reactive power provision by the voltage-source
converters is dispatchable and can thus be used for voltage support [76].
However, OWFs are generally connected to the substation on land via HVDC cables and are thus not
able to provide reactive power directly to the system; the reactive power can only be supplied to the
offshore grid. Even if the wind farm is connected with an AC cable, which is usually the case for
shorter distances to the shore, the losses of reactive power within the cable are possibly too large to
provide a significant amount to the system. Evidently, the VSC at the onshore substation can
transform active into reactive power if needed, it is however operated by the TSO.
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3.5 Summary
The provision of AS by RES plants will gain importance in the future with ever more conventional
capacities exiting the market. However, not all AS can be provided by wind farms. Table 9
summarizes the suitability of OWFs for the provision of the above-examined services and lists
possible barriers from a market design perspective and regarding technical aspects.
Table 9: Overview of the potential provision of AS by OWFs.

Ancillary
Service
Market Design Aspects
Technical Aspects
Market design for all types of CR

should be adjusted, preferably to
day-ahead capacity tenders and
1-hour lead-time energy auctions
Control Reserve
Energy-only
Provision
reserve
(suggested by ACER)
OWFs well controllable
control
reserve
market already implemented in
NL, but capacity auctions should
of
positive
questionable
control
due
to
ecologic and economic aspects

Prequalification
requirements
in
Germany constitute barriers
be changed
Special
rules
apply
for
Renewables, no additional income

Re-Dispatch
can be generated
No barriers from a technical point

of view; OWFs well controllable
Under FIP scheme provision of the

service by OWFs unlikely (downregulation comparably expensive)
Reactive Power
Inertial Control
Remuneration
in
bilateral
contracts for limited number of
by OWFs but DC connection
market participants
hinders provision to the system
No remuneration in place; market
Suitability of wind farm provision
design similar to control reserve
subject to on-going research
has been suggested

Black Start
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Technically possible to be supplied
Remuneration
in
bilateral
contracts
Issue for the future
Technically
dependency
possible,
on
provision uncertain
37
wind
but
makes
4 Market Hindcast Analysis

The market hindcast analysis constitutes the first element of the cost benefit analysis of the dynamic
power management of OWFs. Within this chapter we analyse historical operational data of OWFs and
prices as well as special events on the control reserve market in order to quantify benefits of the
participation of OWFs with focus on the market for negative TCR in Germany.
For quantification of the benefits we use a hindcast model which simulates bidding strategies of
OWFs. It is based on the results of the German control reserve market since in the Netherlands, bids
by individual market parties are not published and therefore the bidding ladder cannot be
reconstructed. The assessment is done for different scenarios that take into account various market
designs. In a study case, the participation on the negative SCR market is shortly analysed.
Key focus of the investigation is the assessment of the capacity that can be offered to the control
reserve market by OWFs and the quantification of the benefits from their participation in the market.
Modelling results help us to draw conclusions outlining how the control reserve market should evolve
in order to facilitate the integration of wind power and provide incentives for operators to participate
in the market.
4.1 Objective of the hindcast model

The hindcast model examines benefits of the participation of OWFs in the market for negative TCR in
Germany. It determines possible earnings of a wind farm operator for different bidding strategies.
Furthermore, it is examined to what extent the total costs for procurement and calling of control
reserve can be reduced when wind farms enter the market.
The effect that different market designs have on the earnings and costs are investigated in different
case studies. The German market is modelled, applying historic market data such as the procurement
and calling of reserves in 2013, as well as the capacity and energy bids by market participants.
4.1.1 Basic expected model results
OWF Operator
From the perspective of the OWF operator, the following questions are answered:
What are the additional revenue streams for an OWF operator when offering capacity on the
markets for negative control reserve?
How often is control reserve procured by the wind farm and how often is it activated?
The capacity that wind farms can offer depends greatly on the control reserve market design, e.g.
required reliability levels and gate closure time, while the wind farms opportunity costs for
participating on the market change depending on the remuneration system for renewables that is in
place. The different parameters influencing the income of the wind farm operator are examined in the
case studies presented below.
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System perspective
The main question from the system perspective is:
What are the costs of both procurement and calling of control reserve with and without the
participation of offshore wind in the market?
The additional supply of capacity to the negative TCR market will most likely lower capacity prices. 5
With respect to their energy cost the price bids of the wind farm depend on the market premium they
receive, which often exceeds the marginal price on the control reserve market. Thus, a significant
merit order effect can most likely only be observed for the procurement of control reserve, but for
energy costs, the effect is not expected to be as significant.
4.2 Model description for the German control reserve market

This section gives a detailed description of the model created to analyse the participation of OWFs on
the German control reserve market.
4.2.1 Model of the German control reserve market
In the following, the steps and input parameters of the basic model, which simulates the German
control reserve market, are outlined. The model allows a dynamic reconstruction of the different
bidding ladders for each bidding period, reflecting the changing market conditions, and estimates how
an OWF could participate under different operational strategies and market conditions, taking into
account the wind power output fluctuations and forecast uncertainty. An overview of the model steps
with the actions and input parameters for the respective step is given in Figure 14 below.
The hindcast analysis focuses on the analysis of the participation of one OWF in the control reserve market, answering to the question:
how could a OWF have participated in the market in that year?. The cost reductions that can be observed can thus only be seen as an
indicator of a possible merit order effect. Changes for different penetration levels of wind are further examined in the forecast analysis in
Chapter 5.
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Model historic
bidding ladders
Define the marginal

capacity and energy
prices
Price bids
Reserved capacity
Procured energy
Model Feed-in
forecasts for OWF
Model power curve,

analyse forecast error,
apply to available wind
speeds
Historic offshore
power feed-in
and wind speeds
Historic forecasts
Define offered
capacity by OWFs
- Takes into account

reliability level/risk
tolerance
Define energy and

capacity price bids
by OWF
Place OWF bids in

bidding ladder
Wind Farm Bids

Capacity price
1) 0/MW
2) Marginal price
Energy price
1) Market Premium
2) Marginal Price, but at least market
premium
Earnings of wind farm operator:

Capacity price bid [/MW-h]
+ energy price bid [/MWh]
- foregone market premium [/MWh]
Costs for end consumer:

Capacity price bids [/MW] * procured
capacity [MW]
Figure 14: Overview of the model steps with the actions and input parameters for the respective step.
1) Model historic bidding ladder

At first, the historic bidding ladders of the year 2013 are created using information on the
activated control reserve as well as capacity and energy price bids. Thus, the marginal capacity
and energy prices are determined:
-
Creation of the historic capacity price bid merit order

In Germany, every bid placed on the control reserve market is published anonymously,
specifying the bid size in MW, the capacity and energy price bid and information on whether the
bid won the capacity tender.
Using the information whether a bid was accepted by the TSO in the tender for control reserve
capacity, the procured capacity for each tender period (i.e. a 4 h block) can be determined. At
the same time, the marginal capacity prices are determined by placing the bids that won the
tender in order of merit; the last bid accepted defines the marginal capacity price. See Figure 15
for a depiction of the capacity price merit order and the deduction of the marginal capacity price.
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1400
Bidmax
Capacity Price [/MW]
1200
1000
800
600
MPCap
400
200
Capprocured
Captotal
0
0
500
1000
1500
2000
2500
3000
3500
4000
Capacity [MW]
Figure 15: Capacity price bid merit order for negative control reserve. Note: capacity and price bids are herein
defined positively for reasons of clarity.
Source: own depiction based on [77].
Creation of the historic energy price bid merit order

Parties that won the capacity tender participate in the tender for energy when control reserve is
actually activated. Thus, their energy price bids are placed in a new merit order. Applying the
activated control reserve, which is published by German TSOs for each 15 min interval, the
marginal energy price for each tender period can be determined (cf. Figure 16 below).
Energy Price [/MWh]
2500
Bidmax
2000
1500
1000
MPEnergy
500
Capprocured
Capactivated
0
0
500
1000
1500
Capacity [MW]
Figure 16: Energy price bid merit order for negative control reserve.
Source: own depiction based on [60], [77].
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2000
2500
2) Model feed-in forecasts for OWF

OWF operators base their capacity bids, i.e. the amount of capacity in MW they offer on the
control reserve market, on the wind farms feed-in forecasts. Due to data limitations, the
forecasts had to be synthetically generated for the investigated OWF. The forecast model is
presented in the data section below. The offers to the German TCR market currently have to be
based on day-ahead forecasts; the impact of a change of this market design is examined in the
case studies.
3) Define offered capacity by OWF
- Reliability level: Only a certain share of the feed-in forecasts of an OWF can be offered on the
control reserve market in order to ensure that the reliability level of the offer is sufficient, i.e. at
least 99.994% (cf. Chapter 3). Non- or only partial delivery of control reserve endangers system
security and can lead to very high penalty payments or even the exclusion from the control
reserve market.
- Reduce offer to minimum capacity of tender period: When placing a bid on the control reserve
market, the offering unit must be able to provide the capacity at all times during the full tender
period, i.e. for TCR a 4 h block. As a consequence, a wind farm can only offer the minimum of
the forecasted feed-in during the four hours. As can be seen in Figure 17 this may limit
significantly the capacity that can be offered - and thus the revenues of a wind farm operator.
The issue is analysed further in the case study discussing the length of the tender period.
70
Capacity [MW]
60
50
40
30
20
10
0
Wind feed-in forecast
Capacity offer
Figure 17: Reduced capacity offer on the control reserve market due to length of tender period. Only the minimum
forecasted capacity (dotted red line) within a tender period can be offered on the market of control reserve, which
can lead to significant income losses for the wind farm operator.
Source: own depiction with OWF data.
- Respect auction design: The auction design on the control reserve market can limit the
capacity offers even further. Due to the minimum bid size of 5 MW on the SCR and TCR market,
the OWF capacity offer will be set to zero within a tender period if it is lower than 5 MW.
Furthermore, all capacity bids on Sundays and Mondays are set to zero, as bids can only be
registered during workdays until 10 am for the following day. The lead-time of approximately 48
hours or even more is too long for sufficiently reliable forecasts. The auction design is, however,
changed in the case studies examined below in order to provide an idea about the impact of the
adjustments.
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4) Define energy and capacity price bids by OWF

The bids that an OWF operator places on the market of control reserve, directly correspond to
the earnings he can generate due to the pay-as-bid principle. Within the model, a minimum and
maximum scenario are examined:
Within the minimum bid price scenario the wind farm operator bids at opportunity costs;
this will lead to the greatest possible cost reductions on the market
Within the maximum bid price scenario, the wind farm operator bids the maximum possible
prices that guarantee the full procurement and calling of the OWF in order to maximise the
income
The different bidding price strategies are presented in more detail in the case study section in chapter
4.5.
5) Place OWF bids into bidding ladder

Having defined the wind farm offers, the OWF bids can be included in the capacity and energy
bidding ladders. This way, offers by conventional power plants in the bidding ladder are shifted
70
520
60
50
40
30
20
25 MW Wind
510
-13
530
/MW
80
to the right as depicted in the figure below.
500
490
480
470
460
10
450
2360
0
0
10
20
30
40
50
60
2370
2380
2390
2400
2410
2420
Procured Capacity [MW]
Procured Capacity [MW]
Figure 18: Insertion of the OWF bid into the bidding ladder (left: start of bidding ladder, right: end of ladder).
Exemplary depiction for the capacity tender on 1 January 4am-8am: an OWF capacity bid of 25 MW at opportunity
cost lowers the marginal capacity price by 13/MW. Source: own calculations
6) Define earnings of OWF operators and possible cost reductions

Due to the pay-as-bid principle on the German control reserve market, participants receive their
capacity and energy price bid when winning the respective tender. The income of an OWF
operator is thus the following:
= + ( )
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The changes in costs for procurement and calling are derived from the total costs incurred within
the capacity and energy tender. Costs with and without the participation of OWFs in the control
reserve market are compared. Capacity costs have to be borne by the end consumer and their
net position is always positive. Within the energy tender, negative prices occur as well. If net
costs for activation are negative, bidders in average offer to pay for providing control reserve
and TSOs receive money for the activation; if net costs are positive, TSOs have to pay the
bidders. Energy costs are finally allocated to the BRPs via the imbalance price (cf. Chapter 3).
The results of the calculations are generally presented for a whole year, i.e. the reference year
2013. The income of OWF operators is furthermore normalized to the installed capacity of the
wind farm.
Note: In order to participate on the control reserve market, units have to be equipped with
remote control stations that are implemented into an information and communication system, so
that TSOs can deliver signals to the plant, indicating the need for regulation. The model does not
take into account costs for the communication system, as with the introduction of the market
premium, remote control stations were installed in most wind farms and OWFs were generally
already equipped with such systems during installation.
Operational costs for trading are neither incurred in the model as most of the reserve capacity
trading can be automated [6].
4.3 Data Sources

Within this section, an overview of the input data used in the model is given. This includes data on
offshore wind feed-in and forecasts, the calculation of the market premium, the historic capacity and
energy price bids and the procured and called control reserve.
As wind feed-in forecasts, which define the capacity bids (in MW) that OWFs place on the market of
control reserve were not available for the year of interest 2013, a separate model for the creation of
the forecasts was built and is presented in the following section.
4.3.1 OWF data
In order to calculate the capacity bids that wind farm operators could place on the market for control
reserve, real-time wind speed and feed-in data as well as forecasts for OWFs and a farm power curve
were needed. The data was supplied for two wind farms in the North Sea as follows:
-
OWF 1: 15 min wind speed and power feed-in as well as forecasts for both wind speed and
feed-in.
OWF 2: 15 min wind speed and power feed-in data. The power curve was also available.
As due to market data availability the year under examination for the hindcast analysis was 2013, the
data of OWF 1 could not be used as input parameter for the model. Feed-in data was available for
OWF 2, but forecast data had to be generated synthetically. The forecasting method is presented in
the following section.
The generation of synthetic forecasts comprises three steps:
1. Analysis of the wind speed forecast errors of OWF 1 in order to obtain the statistical
properties of forecast errors
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2. Generation of synthetic wind speed forecasts for OWF 2 respecting the analysed forecast
error statistical properties
3. Generation of the respective wind power forecasts by applying a dynamic wind farm power
curve transformation based on an availability correction.
1)
Analysis of OWF 1 wind speed forecast error

After the cleaning of the data, the distribution of the 24 h wind speed forecast errors, i.e. the
difference between the real time wind speed and day-ahead wind speed forecast was analysed.
The mean and standard deviation of the forecast error were deducted, showing a wind speed
forecast error distribution of FE ~ N(-0.0263,2.5345). As shown in [78]-[79] it can be assumed
that the wind forecast error is normally (Gaussian) distributed. See the figure below for a
depiction of the distribution.
Figure 19: Distribution of wind speed forecast error of OWF 1.

Source: own depiction with OWF 1 data
2)
Wind speed forecast for OWF 2

Wind speed forecast errors for OWF 2 were generated synthetically using the obtained
information from the wind speed forecast error analysis performed on the data from OWF 1 and
applying a Gaussian distribution. The time series for the wind speed forecasts of OWF 2 was then
created by superimposing the forecast errors upon the real-time wind speed values. In order to
model different forecasting qualities or lead-times of the forecast, different forecasts were
generated by varying the standard deviation of the wind speed forecast error distribution.
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3)
Wind power forecasts for OWF 2

The wind power forecasts for OWF 2 are obtained by applying a time-varying wind park power
curve that allows correction of the power curve based on the availability of the wind turbines at
each quarter of an hour under investigation. The methodology is based on the following three
sub-steps:
i) Maximum power feed-in forecast for OWF 2

The maximum power feed-in is obtained by considering the aggregate power curve, from which
the available power generated at a certain wind speed under optimal conditions can be
deducted, assuming that all wind turbines are available. By applying the OWF 2 power curve
onto the wind speed forecasts created in step 2, the maximum feed-in of the wind farm into the
grid is calculated.
ii) Calculation of availability for OWF 2

Wind farms do not generate at each time step the optimal rated power given by the aggregate
power curve. External parameters including wake effects, maintenance as well as grid connection
losses lead to a reduced feed-in compared to the nominal feed-in at different points in time. The
ratio of the real-time feed-in and the rated feed-in given by the power curve is hereafter defined
as the availability of the turbine. For the feed-in time series, the availability of OWF 2 was
deducted for each quarter of an hour. See the figure below for the depiction of the OWF
availability.
Figure 20: Availability of OWF 2.

Source: own depiction with OWF 2 data
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iii) Power feed-in forecast OWF 2 with availability

The time-varying availability determined in the previous step is applied onto the optimal power
forecasts. Like this, power forecasts of OWF 2 are created, which are corrected with the
availability of the wind turbines.
4.3.2 Control reserve market data
Market data for the German control reserve market was taken from regelleistung.net, the jointly
operated platform of the four German TSOs. Under [60] the activated amounts of SCR and TCR can
be downloaded on a 15 min basis for each control zone individually and collectively for the NRV.
Under [77], the anonymous bids by all market parties participating in the tender for PCR, SCR and
TCR can be found. In particular, the published data are:
Date of delivery of control reserve
Product description, specifying whether positive or negative control reserve is provided and
the time for which the bid is placed (for TCR this is e.g. NEG_00_04, referring to a negative
control reserve bid valid from 0am-4am)
The offered capacity by the participating party in MW
The capacity (for PCR, SCR and TCR) and energy prices (for SCR and TCR) offered
Information whether the respective party won in the tender for control reserve capacity and
could thus participate in the tender for energy, which takes place when control reserve is
actually activated
4.3.3 Market premium

The market premium represents the opportunity costs of an OWF when offering energy on the market
for negative control reserve. It thus constitutes an input parameter for the model.
As outlined in chapter 2, the market premium of an OWF is the difference between the FIT it receives
and the offshore wind reference market price. In order to obtain the reference market price, the
monthly revenues of OWFs within the day-ahead market are divided by the technology-specific
monthly generation (cf. equations 1 and 2) and the technology-specific management premium is
subtracted.
Thus, four data sets are necessary in order to calculate the premium for the year 2013 for an OWF:
-
Day-ahead prices for each hour of the year 2013
The FIT an OWF would have received in 2013: The FIP remuneration scheme, which
constitutes a prerequisite for the participation of renewable energy plants on the market of
control reserve, was first introduced in the EEG 2012. Thus, the FITs presented in 31 EEG
2012 (both the high tariff of 150 /MWh and the basic remuneration of 35 /kWh) are used
as input parameters for the model.
The Management Premium for OWFs in 2013, which can be found in Annex 4 section 2.3.4
EEG 2012.
German offshore wind generation in 2013: In Germany, OWFs are connected to the control
zones of TenneT and 50Hz. Cumulated OWF generation data can be downloaded from the
transparency website of the German TSOs for both control zones [81].
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4.4 Overview of historic negative TCR market data (Market events)

For a better understanding of the results of the model some figures on the market of negative TCR in
2013 are presented in this section. An overview of the price levels within the capacity and energy
tender as well as the costs spent on the procurement and activation of control reserve is given. First,
the weighted average capacity and energy prices that were accepted in the respective tender as well
as the marginal prices of the respective tenders are examined (cf. the figure below).
Figure 21: Marginal and weighted average capacity prices (procured bids) on the capacity market for negative TCR in
2013.
Source: own calculations based on [77]
It becomes apparent that prices peaked significantly at the turn of the year. Christmas and New Year
2013/2014 were characterized by relatively high temperatures, low demand and considerable wind
feed-in. Furthermore, during summer, several peaks occur, which can possibly be explained by the
reduced availability of power plants; with less units participating in the energy tender, prices rise.
Figure 22: Marginal and weighted average called energy bid prices on the market for negative TCR in 2013.
Source: own calculations based on [60], [77]
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For the called energy price bids for negative TCR, peaks can also be observed around the turn of the
year. Other market events lead to peaks during the year, but no significant pattern can be detected.
In general, they result from forecast errors of either VRES production or load. On 24 March, while
wind and solar generation was underestimated day-ahead, the load was overestimated, leading to an
oversupply of electricity of almost 15 GW. Another extreme occurred around noon on 29 September
2013, when nearly all of the control reserve that was procured also had to be activated. That day, the
marginal energy price rose to 10,000 /MWh (not depicted in the figure). The reason for this was a
severe load projection error; the load was approximately 8 GW lower than forecasted day-ahead
[82].
For the analysis of the potential income of an OWF on the TCR market, it is interesting to examine,
which amounts of TCR were activated at a marginal price higher than the feed-in premium. Only in
these cases, the OWF could actually generate a profit when participating on the control reserve
market. Figure 22 provides an overview of the amounts of negative TCR that were activated at or
above a certain marginal TCR energy prices and outlines the frequency of activations at those prices.
In total, more than 1830 GW of negative TCR were activated in 2013. The minimum marginal energy
price was -17.5 /MWh. 35% of the activated control reserve was sold at a marginal price higher
than 250 /MWh, 14% at a price higher than 400 /MWh. However, the frequency of calls in relation
to the activated amount decreases for higher marginal prices, indicating extreme events.
Approximately 12% of activations were undertaken at a marginal price higher than 250 /MWh, only
5% at a marginal price higher than 400 /MWh.
3000
1800
2500
1600
1400
2000
1200
1000
1500
800
1000
600
400
Frequency of calls
Called Control Reserve [GW]
2000
500
200
1525
1475
1425
1375
1325
1275
1225
1175
1125
1075
975
1025
925
875
825
775
725
675
625
575
525
475
425
375
325
275
225
175
75
125
25
-25
Marginal Energy Price [/MWh]

Called Control Reserve
Frequency of calls
Figure 23: Called control reserve and frequency of calls for specific marginal prices on the market for negative TCR
When analysing each quarter of an hour individually, the marginal energy price exceeded the high
OWF market premium, which operators receive in the first years of operation, in 23% of the time.
The lower market premium paid in the last years of operation was exceeded in 77% of the time.
The average and marginal bid prices differ per day of the week. Figure 24 shows the weighted
average as well as marginal capacity and energy prices per weekday for the year 2013. The average
prices were 5.99 /MW-h for the weighted average capacity price, around 9 /MW-h for the weighted
average marginal capacity price, 86 /MWh for the weighted average energy price and 231 /MWh
for the weighted average marginal energy price.
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Prices on Sundays were significantly higher than prices during the rest of the week. However, when
analysing the energy price levels, it has to be taken into account that Wednesdays and Sundays were
the days with the greatest number of extreme events.
Bids can only be placed during weekdays on the TCR market, which significantly limits the income
potential for power plants that have to base their bids on forecasts, such as OWFs. This is analysed
20
18
16
14
12
10
8
6
4
2
0
500
450
Price [/MWh]
Price [/MW-h]
further in the case studies below.
400
350
300
250
200
150
100
50
0
Mon Tue Wed Thu Fri
Sat Sun Avrg
Mon Tue Wed Thu Fri Sat Sun Avrg
Weighted average capacity price
Weighted average energy price
Weighted marginal capacity price
Weighted marginal energy price
Figure 24: Weighted average and marginal capacity and energy prices on the negative TCR market per weekday.
Not only do the prices differ per day of the week, but also per tender period. Figure 25 shows the
weighted average capacity and energy prices per tender period for the year 2013. From midnight to 8
am, i.e. in off peak periods, capacity prices are markedly higher than during the rest of the day. This
was the same in the capacity tenders in recent years [59]. Energy prices are especially high during
the day. In approximately 5.8% of the time, market events with a marginal energy price greater than
14
400
12
350
Price [/MWh]
Price [/MW-h]
400/MWh occurred. Of those market events, over 93% took place in tender periods 2, 3 and 4.
10
8
6
4
2
300
250
200
150
100
50
0
1
Avrg
Weighted average capacity price
Weighted average energy price
Weighted marginal capacity price
Weighted marginal energy price
Avrg
Figure 25: Weighted average and marginal capacity and energy prices on the negative TCR market per tender period.
Source: own calculations based on [60] , [77]
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The costs for the procurement of negative TCR rose considerably in 2013 compared to 2012, after a
declination of prices in the years before [2]. While in 2012, capacity costs amounted to approximately
70 Mio [13], they almost doubled in 2013 and rose to over 157 Mio . Compared to the cost of
positive control reserve the share of costs for negative control reserve has increased significantly in
the last years. With more than 136 Mio , it represents about 87% of the total TCR capacity
payments in 2013. The costs for activation of negative TCR amounted to over 39 Mio representing
around 22% of total costs of positive and negative TCR.
4.5 Case studies and model results

In this section, the results of the hindcast model are presented for several case studies. Within the
case studies, different bid price strategies and new market designs are examined. Finally, their effect
on the potential income of the OWF operator and the costs for procurement and activation of
negative control reserve is outlined. The results are presented for the year 2013. The income of
operators is normalized to the installed capacity, which in the hindcast analysis is the nominal
capacity of the exemplary OWF (OWF 2).
4.5.1
Bid price strategies
Within this case study, the market design examined is that of the German TCR market with a 4 h
product length and 24 h lead-time for bid placement. Effects of a change of these external
parameters are examined in the case studies further down below.
The bids an OWF operator places on the market of control reserve, directly correspond to the
earnings he can generate due to the pay-as-bid principle. Different bidding strategies will lead to
different earnings for the wind farm operator and different cost reduction for procurement and
activation. For each scenario that is investigated, the bidding curve is affected in a different way by
the introduction of wind to the market. In this case study, we compare two scenarios: a) maximum
possible cost savings for the system and b) maximum potential earnings for the OWF operator:
Scenario maximum possible cost savings

The scenario serves to give an indication of the possible cost reductions on the control reserve
market, assuming OWF bidding at opportunity costs. In this case, the wind farm operator does not
benefit from participation on the control reserve market; he will be indifferent between a sole
marketing of energy on the wholesale market and placing a control reserve bid.
Providing the capacity for down-regulation does not create costs for the wind farm. Conventional
power plants might have to face losses when committing to the provision of negative control reserve,
i.e. if the spot price falls below their marginal cost of production. Wind, however, is not exposed to
such market risks, due to the reimbursement with the market premium. Thus, the minimum capacity
price bid of the wind farm is 0/MW6.
This is only true if the wind farm does not have to operate in a down-regulated state when participating on the market of control reserve.
TSOs and wind farm operators are still discussing the subject at the time of publication of this report. Cf. Chapter 3 for a more detailed
description of the issue.
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Furthermore, even if wind farms would have to operate fully market based in the future, providing
negative control reserve would only be disadvantageous if negative spot prices arise, due to the
marginal cost of production of 0 /MWh.
The energy price is defined by the opportunity costs when being activated by the TSO, i.e. the lost
market premium (ramping costs are not significant for wind farms). As mentioned above, the market
premium depends on the tariff the plant would receive under the FIT scheme, which changes over the
lifetime of the OWF. While the initial tariff for OWFs and consequently the market premium are very
high during the first 12 years of operation (or possibly longer, depending on the wind farm site), it is
significantly lower in the last 8 years. In the model, calculations are done for both cases.
Summarizing, the following cases are examined within the cost saving scenario:
1. Capacity price bid of 0 /MW, energy price bid high market premium (representing first years
of production)
2. Capacity price bid of 0 /MW, energy price bid low market premium (representing last years
of production)
Note: The maximum cost savings for procurement favour the end consumer as capacity payments
are allocated to the grid fees. Energy payments on the other hand are borne by the balancing
responsible parties as they are directly factored into the imbalance price by TSOs (see chapter 3).
The extent to which the price level of activation of negative TCR decreases due to the participation of
offshore wind in the market is outlined in the following case studies.
Figure 26 depicts the difference in costs for the procurement and activation of negative TCR with the
minimum offshore wind bids entering the market.
300,000
Cost delta []
250,000
90,003
200,000
150,000
100,000
170,753
170,753
50,000
-
-10,706
High MP
Low MP
-50,000
Cost delta procurement
Cost delta activation
Figure 26: Cost savings for procurement and activation on the negative TCR market with the participation of OWF.
Source: own calculations
Under the current market design of a 4 h tender period, the OWF can bid successfully 112 times in
the capacity tender if bidding at its opportunity costs, which corresponds to 5% of all tender periods.
The replacement of conventional power plants in the capacity tender leads to cost reductions of
approximately 170,750 (1423 /MW installed), which compared to total costs of procurement is a
little over 0.1%. These are the cost savings favouring the end consumer, as the costs of the capacity
tender are part of the grid fee.
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Within the energy tender, the OWF is activated 29 times when bidding the high market premium.
With the total number of activations being approximately 2700 in the year 2013, this corresponds to
only about 1% of all activations of negative control reserve. In this scenario, the costs of the energy
tender increase slightly with the participation of OWF in the market. Evidently, conventional
capacities that were replaced in the capacity tender could have offered energy at lower prices than
the OWF bidding the high market premium as energy price. In almost 80% of the time the OWF
capacity was called, the wind farm bid raised the marginal price of the energy tender. In total
however, when netting capacity and energy payments, the participation of offshore wind leads to cost
reductions of more than 160,000 .
For the low market premium, cost savings are reached in both the capacity and energy tender. With
200 activations the OWF wins the energy tender 7.4% of the time and is activated almost seven
times more often than under the high market premium. This way, more than 90,000 can be saved
in the energy tender. Together with the savings from the capacity tender total costs for procurement
and activation could be reduced by more than 260,700 . Note that this is true for a conservative
day-ahead forecast. The influence of the bidding strategies under the minimum cost scenario will be
further analysed in the case studies below.
Scenario maximum earnings by wind farm operator

The scenario is modelled in order to give an indication of the maximum possible revenues that an
OWF operator could have earned on the control reserve market in 2013. It also outlines the
corresponding changes for costs in procurement and calling.
The profit-maximizing operation corresponds with bidding the maximum capacity and energy price
that guarantee the full procurement and calling of the wind farm. For the energy price, the operator
will always bid at least the market premium as those are the opportunity costs for participation on
the control reserve market. The bids are determined as follows:
Marginal capacity price (/MW) that guarantees full procurement of offered capacity
Marginal energy price (/MWh) that guarantees full activation of offered capacity within the
tender period (at least high/low market premium)
At this point, the assumption of complete information is made. This idealization is used to indicate
maximum possible values.
Making the same external assumptions as for the minimum cost scenario, i.e. analysing the current
market design with a product length of 4 hours and a day-ahead gate closure, the maximum possible
income of an OWF operator, normalized to the installed capacity of the investigated wind farm, is as
depicted below:
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2000
1800
Income [/MW]
1600
312
1400
1200
1000
800
600
1409
1409
High MP
Low MP
400
200
0
Max Income Capacity Tender
Max Income Energy Tender
Figure 27: Maximum possible income normalized to nominal power for an OWF on the negative TCR market in 2013.
Within the capacity tender, the OWF operator could have earned a little over 1,400 /MW on the
negative TCR market in 2013. For the energy tender, the income of the OWF depends on its
opportunity costs. As mentioned above, the wind farm is activated only 29 times when having high
opportunity costs, i.e. when receiving the high market premium. Of those 29 times, the operator
must bid the market premium in order to avoid losses from the participation on the control reserve
market compared to the sole participation on the spot market. Thus, no extra earnings within the
energy tender can be made. Under the basic remuneration, with the opportunity costs being the low
market premium, the OWF is activated almost seven times more often. During the times of
activation, the operator is able to bid at prices higher than the market premium in 75% of the time,
leaving the wind farm operator with a profit of more than 300 /MW in that year.
Resulting from a profit-maximising bidding strategy, the net changes in cost for procurement and
activation are evidently smaller than for the maximum cost savings scenario examined above. See
Figure 28 for a comparison of the cost changes for the respective bidding strategies.
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300,000
260,756
250,000
Cost delta []
200,000
160,046
150,000
100,000
54,216
50,000
0
-9,030
-50,000
High MP
Minimum net cost savings
Low MP
Maximum net cost savings
Figure 28: Minimum and maximum changes in cost for procurement and activation for high and low market
premiums.
For the low market premium, 54,216 of total cost savings can still be realized for the profitmaximizing bidding strategy. This number is considerably lower than the savings in the costminimizing bidding scenario (260,756 ). For the high market premium the savings decrease in both
cases. This is mainly due to the fact that the OWFs replace conventional plants in the capacity tender
and then place higher price bids in the energy tender in order to offset the opportunity costs of the
high market premium (or even higher price bids).
4.5.2 Weekend Tender
The TCR tender takes place during weekdays so that bids for control reserve provision on Sundays
and Mondays have to be placed on Friday. For OWFs, such a lead-time is too long with respect to the
forecast accuracy, thus no bids can be placed for those days. This case study serves to give an
indication of the possible additional earnings/cost savings on the TCR market if bid submission was
extended to weekends. Figure 29 indicates the differences in specific income for the wind farm
operator when being able to make offers to the control reserve market each day of the week vs. the
income under the conventional weekday tender design.
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Income [/MW]
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
818
28
3776
3776
312
1409
1409
High MP wd
High MP all
Low MP wd
Low MP all
Figure 29: Maximum potential income under the weekday tender schedule (wd) vs. the possible submission of bids
on every day of the week (all).
The analysis of the control reserve market data of 2013 showed, that capacity prices are especially
high on Sundays. Consequently, the possible maximum income of the OWF within the capacity tender
increases significantly - by a factor of almost 2.7 - when being able to place bids for Sundays and
Mondays too. When remunerated with the high market premium, the wind farm operator can bid
energy into the market at a price higher than the market premium 15% of the time, leading to an
additional income of 28 /MW. For the low market premium, the income from activations rises by a
factor of 2.6 for an everyday compared to a weekday tender design.
664,470
700,000
Cost delta []
600,000
500,000
436,168
400,000
260,756
300,000
160,046
200,000
113,079
100,000
0
-100,000
54,216
-9,030
-20,339
High MP wd
High MP all
Cost delta Min
Low MP wd
Low MP all
Cost delta Max
Figure 30: Changes in costs for procurement and activation under the weekday tender schedule (wd) vs. the possible
submission of bids on all days of the week (all).
Figure 30 depicts the range of cost savings under the profit-maximizing bidding strategy or the
bidding at opportunity costs respectively. If bid submission is possible every day of the week instead
of only on weekdays, cost for procurement and activation rise by approximately 20,000 with the
participation of OWFs. With procurement rising from 112 times to almost 200 times, offshore wind is
activated almost 4 times as often as under the weekday tender design. As more wind farm bids are
successful in the capacity tender, conventional power plants with lower energy prices are excluded
from the energy tender and costs rise.
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However, when bidding at opportunity costs, i.e. for the maximum cost savings scenario, cost
decrease with the participation of offshore wind in the market and savings almost triple for the high
market premium for an everyday compared to weekday tender. For the low market premium, cost
savings are achieved for both bidding strategies and savings more than double if bids can be placed
by OWFs every day of the week.
4.5.3
Value of forecast error analysis/shortened lead-time of control reserve bids
This analysis shows the impact of improved forecast quality on the costs and benefits of the market
participants. In particular, we examine the effects of forecast quality on the OWF income and the
costs for procurement and calling. Due to a rising share of wind bids in the control reserve market,
higher income and lower costs are expected for better forecast accuracies.
A key approach for improving forecast accuracy is reducing gate closure times. If the bids for control
reserve do not have to be submitted day-ahead, but can rather be placed closer to real-time, the
quality of wind forecasts and therefore the offered capacity by the wind farm rises. Our analysis will
help quantify the benefits of changing these market arrangements. The OWF data analysis showed
standard deviation of 2.5 and 1.7 for day-ahead forecasts and 0.35 for 1-hour forecast (cf. data
section and data analysis in WP3). Thus, these standard deviations were chosen for the case study
and complemented by reasonable interim values. A shortened lead-time of the auction will possibly
be applied soon in the German market, with the introduction of an energy-only control reserve
market with a gate closure time of 1 hour before delivery (also see Chapter 3). In the Netherlands,
Percentage of forecast offerable to

the control reserve market
bids can already now be placed up until 60 min before time of delivery.
70%
60%
50%
40%
30%
20%
10%
0%
0
0.5
1.5
2.5
Standard deviation wind speed forecast error

Figure 31: Amount of power forecast an OWF can offer to the market of negative control reserve for different
standard deviations of the wind speed forecast error.
Source: own calculations based on OWF 1 and OWF 2 data
Figure 31 shows the average amount of capacity that could have been offered to the market of
control reserve for different standard deviations of the wind speed forecast error, when respecting a
reliability of the offer of at least 99.994% (cf. Chapter 3 for a detailed explanation of the reliability
level).
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For standard deviations typical for day-ahead forecasts, the share that can be offered is in average
approximately 20%. For forecasts closer to real-time, this share rises significantly. For a typical 1hour forecast for instance, the average amount of capacity that can be marketed reaches
approximately 65%7.
The results are in line with values found in related literature. In [59] the share of capacities that can
be marketed on the control reserve market are estimated for an onshore wind farm portfolio of 2.5
GW. For a market design where bids are based on day-ahead forecasts, a share of around 31% is
estimated. For the examination of only one OWF implemented in the hindcast analysis, a share of
around 20% for the same forecast horizon is thus reasonable. For an offshore portfolio of the same
size, the share will most likely be higher than for the onshore portfolio due to the steadier as well as
Income [/MW]
in average higher feed-in.
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
6,233
5,179
2,793
688
838
10,420
1,347
312
1,409
2,820
3,604
4,509
2.5
1.7
1.5
11,576
6,764
0.5
0.35
Standard deviation
Figure 32: Maximum possible income for an OWF under the low market premium on the negative TCR market for
different standard deviations of the wind speed forecast error.
Figure 32 shows the maximum potential income that an OWF operator receiving the low market
premium could have earned on the market for negative TCR in the year 2013. The income is
normalized to the installed capacity. It rises significantly with smaller standard deviations, i.e. shorter
lead-times of the tender or improved forecast quality. For a 1-hour forecast the maximum potential
income is around 5 times higher than for a day-ahead forecast.
Furthermore, the share of income from the energy tender rises. For better forecasting qualities, a
significantly greater share of capacity can be offered to the control reserve market. Thus, the
minimum bid size of 5 MW can be reached more often, raising the participation of the OWF in the
capacity tender and the probability of activation.
Note that the offers have been analysed for a single OWF. The numbers will increase for several wind farms in a portfolio.
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For a standard deviation of the wind speed forecast error of 2.5, the OWF won the capacity tender
112 times, which corresponds to a success rate of only 5%. For a standard deviation of 0.35 the OWF
capacity was, with 944 times, procured more than eight times as much, in approximately 43% of the
% Procurement
time (cf. figure 33).

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2.5
1.7
1.5
0.5
0.35
Standard deviation
Figure 33: Procurement of OWF control reserve capacity for different forecast qualities.
Activation rises from 200 times for offers based on day-ahead forecasts to over 1000 times for offers
based on 1-hour forecasts, which as percentage of all activations is around 7% or 37% respectively.
The share of income from the energy tender compared to total income rises from 18% to
approximately 35%.
Figure 34 depicts the maximum income for the OWF on the negative TCR market for different
standard deviations for the high market premium. It becomes apparent that the income from
activation is significantly lower than with the low market premium. In relative terms, however, the
income grows more strongly than under the low market premium. While for the day-ahead forecast
with standard deviation of the wind speed forecast error of 2.5 no earnings can be made on the
control reserve market, the income on the energy market is approximately 2500 /MW when basing
the amount of control reserve that is offered to the market on 1 hour forecasts. Activation rises from
29 times to 376 times.
16,000
Income [/MW]
14,000
2,482
12,000
2,030
10,000
8,000
864
6,000
4,000
2,000
1,409
2.5
83
10,420
257
71
2,820
3,604
4,509
1.7
1.5
11,576
6,764
0.5
0.35
Standard deviation
Figure 34: Maximum possible income for an OWF under the high market premium on the negative TCR market for
different standard deviations.
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When looking at the maximum cost saving potential of procurement and activation of control reserve
under the low market premium (cf. figure 35), significant cost reductions can be observed for smaller
standard deviations. For procurement, savings for a day-ahead forecast are only approximately
170,750, while for a one-hour forecast they amount to more than 1.4 Mio . The total cost saving
potential in the reference year 2013 rises from approximately 260,000 to 2.5 Mio . Note that this is
only true if the wind farm operator bids at opportunity costs in the tenders. Of total costs, this would
mean a maximum decrease of approximately 0.2-0.5% under the current market design, i.e. dayahead gate closure, and a little over 1.8% if the auction gate closure time was 1 hour before delivery.
Cost delta [Mio ]
3.0
2.5
2.0
1.12
0.94
1.5
0.59
1.0
0.5
0.0
0.17
0.20
0.34
2.5
0.09
0.24
0.32
0.44
0.55
1.7
1.5
0.82
1.27
1.41
0.5
0.35
Standard deviation
Figure 35: Maximum cost saving potential of OWFs for the low market premium on the negative TCR market in 2013.
The maximum cost saving potential under the high market premium is again considerably lower than
for the low market premium (cf. figure 33). While the total savings potential is positive at all times,
the prices in the energy tender rise compared to a system without participation of offshore wind if
bids are based on day-ahead forecasts. There is however a turning point with a growing market share
of OWF capacity: at a standard deviation of 1, the activation of wind rises significantly. For this
standard deviation, around one third of all offers are close to the minimum bid size of 5 MW. For
worse forecasting qualities the wind farm could not have participated during those tender periods, as
the minimum bid size could not have been reached with sufficient reliability. With a rising share of
wind winning the capacity tender, it is ever more activated during quarters of an hour with high
energy price bids that can be undercut when bidding the high market premium. While for a standard
deviation of wind forecast error of 1.7, the marginal energy price is lowered in 0.7% of the time, it is
lowered in 2.2% of the time for a standard deviation of 1; hence the positive trend for cost savings.
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2.0
0.29
Cost delta [Mio ]
1.5
0.21
1.0
0.07
1.41
1.27
0.5
0.0
0.17
-0.01
0.34
-0.02
0.44
0.55
-0.04
-0.02
2.5
1.7
1.5
-0.5
0.82
0.5
0.35
Standard deviation
Figure 36: Maximum cost saving potential of OWFs for the high market premium on the negative TCR market in 2013.
When analysing the net minimum cost saving potentials, i.e. if the wind farm operator bids in a
profit-maximising manner, the potential cost savings for the low market premium is only around 16%
of the maximum cost savings for an economically optimal bidding strategy (cf. figure 37).
For the high market premium, costs first increase slightly, and then decrease again for shorter
auction lead-times. This can be explained by the fact that the cost savings in the capacity tender are
in relative terms bigger compared to the losses created by the high OWF energy price bids, when the
wind farm is procured more often. It becomes apparent that a profit-maximizing bidding strategy by
wind farms remunerated with the high market premium have in average a negative impact on system
costs.
450,000
396,285
400,000
336,724
350,000
Cost delta []
300,000
265,099
250,000
200,000
145,583
150,000
100,000
167,037
119,039
54,216
50,000
14,493
0
-50,000
-100,000
-9,030
2.5
-28,081
-44,997
-43,158
1.7
1.5
Min cost delta high MP
-20,336
-17,152
0.5
0.35
Min cost delta low MP
Figure 37: Minimum cost savings potential with a profit-maximizing bidding strategy by the OWF.
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4.5.4
Comparison of a product length of 1 hour compared to 4 hours
What can the wind farm owner earn on the market of control reserve if he can place offers for a
tender period of 1 hour instead of 4 hours? Can costs for procurement be lowered significantly if the
product length is shortened? Earnings are expected to rise as the operator can now offer the
minimum forecasted capacity of a 1 hour block instead of a 4 hours block. Costs in turn are likely
decreasing because the wind farm can participate more often. The analysis is exemplary done for the
low market premium.
Figure 38 shows the percentage of procurement of the wind farm of the tender periods of the whole
year. For a 4 h product length there are 2190 tender periods, for a 1hr period 8760. When basing
capacity bids on day-ahead forecasts the OWF can participate considerably more often in the capacity
tender if a product length of one hour is applied. While for the conventional 4hrs block, the wind farm
capacity is procured during 5% of all tender periods, the share rises to approximately 12.5% for a
1 h product length. For all standard deviations of the wind speed forecast error, the procurement per
year as percentage of all tender periods rises by approximately 6.5-8.5% when bidding the minimum
capacity of a 1hr instead of 4hr block. For shorter auction lead-times, the percentage growth
% of procurements per year
decreases slightly.
60%
50%
40%
30%
20%
10%
0%
2.50
2.00
1.70
1.50
Procurement 4hrs
1.00
0.50
0.35
Procurement 1hr
Figure 38: Procurement per year for a product length of 4 hrs vs. 1hr for different forecasting qualities.
In line with the numbers of procurement of the wind farm capacity, the maximum potential income
rises, in particular for lower forecasting quality (see figure 39). For day-ahead forecasts the smaller
tender period of only 1hr leads to an increase of potential income by a factor of 2.5 to 3.5. For
intraday auctions it rises by approximately 60%, i.e. by a factor of 1.6.
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30,000
Income [/MW]
25,000
12,426
20,000
11,026
15,000
7,243
10,000
4,846
4,054
5,000
2,793
2,990
2,529
688
312 4,070
1,409
2,820
2.50
2.00
838
5,085
3,604
6,233
5,179
1,347
6,684
4,509
1.70
7,557
6,764
1.50
10,124
1.00
13,899
10,420
15,100
11,576
0.50
0.35
Standard deviation
Max Income Capacity Tender 4hrs/1hr
Max Income Energy Tender 4hrs/1hr
Figure 39: Maximum potential income of an OWF on the negative TCR market for product lengths of 4hrs vs. 1hr.
Under the current market design with day-ahead gate closure, the maximum cost saving potential is
more than three times higher when shortening the product length from four hours to one hour. For
shorter forecasting periods the difference in cost saving potential is less significant, as even for a
4hour product length, the share of offshore wind winning the capacity tender is considerably bigger
than for longer lead-times. For a 1-hour forecast, the maximum cost savings potential reaches values
of up 3.5 Mio for a product length of 1 hour, compared to 2.5 Mio for a product length of 4 hrs.
3.5
Cost delta [Mio ]
3.0
1.47
2.5
1.30
2.0
1.12
1.5
0.38
0.34
0.5
0.0
0.64
0.54
1.0
0.09
0.17
0.20
0.49
0.34
2.5
0.24
0.62
0.44
0.55
1.7
0.94
1.23
1.27
1.41
0.5
0.35
0.59
1.70
0.32
0.82
0.91
0.92
1.5
0.82
Standard deviations
Cost savings procurement 4hrs/1hr
Cost savings activation 4hrs/1hr
Figure 40: Maximum cost savings potential for product lengths of 4hrs vs. 1hr.
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1.84
4.5.5 Secondary Control Reserve Market

The current market design of the German SCR market does not allow for a participation of VRES as
bids have to be placed 5-11 days before the time of delivery for a tender period of a whole week
(gate closure is Wednesdays, see Chapter 3), which is not possible for wind farms due to poor
forecasting accuracy for such a long lead-time. In order to still give an indication of the earnings and
possible cost savings on the SCR market, the market design was adjusted to the design of the TCR
market with day-ahead gate closure and 4-hour product length. For this purpose, input data had to
be altered, in particular the bids placed by market parties.
Activated amounts of control reserve are only published by TSOs for quarters of an hour. On the SCR
market, however, parties are not remunerated for the whole quarter of an hour if activated, but only
for the time they are actually delivering control reserve [56]. As these activation times are not
published by TSOs, income and potential cost savings could not be analysed for the energy tender.
Still, an overview is given for the capacity tender in order to convey an impression of the price levels
and participation of wind farms on the SCR market. Energy prices are then qualitatively discussed.
The analysis is exemplarily done for standard deviations of the wind speed forecast error of 0.35, 1,
1.7 and 2.5. Just like for TCR, the minimum bid size on the SCR market is 5 MW, thus participation in
the capacity tender remains the same if the OWF operator applies a bidding strategy that secures full
procurement. As can be seen in the following figures, however, the price level in the SCR market is
much higher.
40,000
33,641
Income [/MW]
35,000
30,000
25,000
18,748
20,000
15,000
5,000
11,576
9,805
10,000
1,409
4,226
6,764
3,604
0
2.5
1.7
0.35
Standard deviation
Maximum potential income TCR Cap
Maximum potential income SCR Cap
Figure 41: Maximum possible income for an OWF in the capacity tender on the negative SCR vs. TCR market.
The price level is such that the income approximately triples. This is depicted for different standard
deviations in Figure 41. The maximum potential income for an OWF on the market of negative SCR
would have amounted to more than 4200 /MW based when basing capacity bids on day-ahead
forecasts and 33600 /MW for gate closure around 1 hour before delivery time. Note that the amount
of capacity procured is very similar on the TCR and SCR market (around 2000 MW per tender period).
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The maximum cost savings potential shows a similar trend (cf. Figure 42). In 2013, costs for the
procurement of SCR amounted to approximately Mio 216.32. The entering of wind capacity into the
market and thus displacement of more expensive conventional technologies will lower prices in the
capacity tender approximately three times as much as on the TCR market, when operators bid at
opportunity costs. This would result in savings of more than 567,000 in the capacity tender for a
Cost savings [Mio ]
day-ahead bidding and almost 4.27 Mio for a gate-closure time one hour before delivery.
4.27
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.40
1.41
1.27
0.57
0.17
2.5
0.82
0.44
1.7
0.35
Standard deviation
Maximum cost savings TCR Cap
Maximum cost savings SCR Cap
Figure 42: Maximum possible cost savings in the capacity tender on the negative SCR vs. TCR market.
It should be noted, however, that an analysis of the energy prices on the SCR market reveals rather
low prices compared to the TCR market, with an increased occurrence of negative price bids. This
might impose problems regarding the high opportunity costs of offshore wind for the energy tender.
Furthermore, activation often only occurs for a few minutes in very small amounts. The average
activated amount of negative control reserve was approximately 678 MW/15 min on the TCR market
and 275 MW/15 min on the SCR market in 2013, with only three activations smaller than 100 MW on
the TCR market and over 6150 smaller than 100 MW on the SCR market. OWFs with comparably high
opportunity costs for control reserve activation will be rather located at the rear end of the merit
order and will thus possibly not be able to win the energy tender very often.
4.6 Conclusions from the hindcast analysis

For the integration of VRES the adjustment of the current control power market design is crucial.
Even if the provision of control reserve by VRES has been made possible with the introduction of the
feed-in premium in early 2012, the participation of solar and wind power on the control power
markets has so far been marginal due to the market design of the reserve power market. The
hindcast analysis reaffirms that several aspects of market design have to be adjusted in order to
increase incentives for wind farm operators to participate in the market of control reserve and lower
costs for procurement and activation. Table 10 and Table 11 give an overview of the effects that
different market design adjustments have on the earnings for OWF operators and on the costs for
procurement and activation.
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0.35 Standard
Deviation
1.0 Standard
Deviation
1.7 Standard
Deviation
2.5 Standard
Deviation
Sp.Rev. in
/MW
Cost
reduction8
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Basic
Scenario
17,809
0.23%
9,557
0.15%
4,442
0.08%
1,721
0.03%
1 Hour
product
27,526
0.01%
17,367
0.03%
10,738
0.04%
6,599
0.02%
4,594
0.06%
33,641
1.97%
18,748
1.1%
9,805
0.59%
4,226
0.46%
Weekend
tenders
SCR
market9
Cost
reduction
Cost
reduction
Table 10: Results of the hindcast analysis for different market designs under the low market premium
0.35 Standard
Deviation
Sp.Rev. in
/MW
Cost
reduction
10
1.0 Standard
Deviation
1.7 Standard
Deviation
2.5 Standard
Deviation
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Cost
reduction
Cost
reduction
Basic
Scenario
14,057
0.01%
7,627
-0.01%
3,687
-0.03%
1,409
-0.01%
1 Hour
product
21,122
-0.14%
13,169
-0.08%
8,017
-0.05%
4,914
-0.03%
3,804
0.25%
Weekend
tenders
Table 11: Results of the hindcast analysis for different market designs under the high market premium
The colours indicate the potential increase in income/cost savings potential (from green for very
significant to red for marginal). In general, the following can be concluded:
-
For shorter lead-times the maximum potential income and cost savings are
significantly higher. At the same time the capacity that can be offered to the market
rises (from 20% for a day-ahead forecast to 65% for a 1-hr forecast).
Great cost saving potentials and a considerable increase of income can be achieved when
shortening the product length of the auction, a slightly smaller effect can be observed
when wind farms can participate in tenders on the weekend.
The greater the auction lead-time, the greater the effect of shortening the product length, as
forecasts vary more widely.
Cost saving potentials under the support mechanism with the high market premium are
significantly lower (often even negative); this effect increases for lower standard
deviations of the wind speed forecast error/gate closure times closer to delivery time. Thus, a
participation of OWFs in the first years of operation is not as beneficial as under the basic
remuneration scheme.
Percentage of cost reductions through the participation of OWFs in the control reserve market (revenue maximizing bidding).
Only the capacity market is quantitatively assessed.
10
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Price level on the SCR market is much higher for the capacity tender; both the specific
income and maximum potential cost savings are three times higher than on the TCR market.
However, current market design makes the participation of wind farms impossible (cf.
Chapter 3).
5 Market Forecast Analysis

Till 2050, a large number of up to 40 GW additional OWF capacity is planned to be connected to the
grid [1], [2]. Although a tertiary control reserve provision may be profitable for OWF operators in the
current market, the market situation can change dramatically, if the control reserve market is
exposed to higher penetration levels of offshore wind.
5.1 Objective of the forecast analysis

The forecast analysis will give answers to the following questions:
1. How do higher installed capacities of OWFs affect the control market externally?
2. Does a participation of OWFs make sense even at higher penetration levels or does a market
saturation radically diminish revenues?
3. How does the participation of OWFs affect costs for capacity and energy provision at higher
penetration levels?
4. What is the effect of market design changes considering higher available OWF capacities?
Which are the most suitable market designs for high penetration levels of offshore wind?
In order to provide insights to the listed issues, a forecasting and assessment of future market
conditions will be conducted comprising the following four steps:
A. The components of the negative tertiary control reserve market are depicted in Figure 43.
The dependence of each individual component on parameters related to the penetration
levels of OWFs is investigated as a first step of the analysis (section 5.2). Such parameters
are e.g. VRES power feed-in levels, residual load levels or spot market prices.
Market for negative

Capacity Market
Capacity Price
Bids
Procured
Amount of
Capacity
Energy Market
Energy Price
Bids
Frequency of
calling Events
Figure 43: Analyzed components of the tertiary control reserve market.
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Amplitude of
Calls
B. Three wind scenarios are created (section 5.2) referring to German OWF capacity which is:
1. Installed today (0.6 GW)11
2. Already approved (11 GW)
3. Still in the authorization process (30 GW) [1]
The available power in each scenario is modelled using realistic wind data sets, measured by
the FINO research platforms, corresponding to a granularity of 15 min from multiple
measuring points in the North Sea area [3]. Within the model, these capacities respectively
increase the VRES feed-in level, which is used to model market changes for each OWF
capacity scenario.
C. Each market component is modelled according to the interdependencies found in the first
step (section 5.4). As the installed OWF capacity of 385 MW in 2013, in Germany, [4] is not
sufficient to already show significant market impacts, representative VRES feed-in levels are
used for modelling external market effects caused by higher amounts of installed OWF
capacity. Such external effects are e.g. increasing frequencies of calls and changing bid prices
of conventional TCR market participants.
D. The market model from the hindcast analysis, presented in chapter 4, will be adapted to the
changed market conditions, which were remodelled in the third step. For each of the three
OWF capacity scenarios, wind bids are respectively included to the bidding ladders within the
market model.
Finally, key case studies are investigated for different penetration levels OWFs and assessed
focusing on the estimation of the potential revenues for OWF operators and potential cost
savings on the energy or capacity market. As a result, potential impacts of different
framework conditions are quantified (section 0).
11
June 2014
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5.2 Input Data

This chapter gives an overview of the data sources used as model inputs and as basis for the analysis
of market dynamics in chapter 5.2. Problematic aspects and details of data processing are
documented. Subsequently, it will be explained how future scenarios depicting different penetration
levels of offshore wind were derived from the available data set.
5.2.1 Data sources
Wind data sets
In order to simulate realistic wind conditions, three wind data sets of the year 2013 are used. The
data is provided by the three FINO (Forschungsplattformen in Nord- und Ostsee) offshore research
platforms. FINO 1 and FINO 3 are located in the North Sea, whereas FINO 2 is located in the Baltic
Sea. The location of the research platforms is suitable for representing real wind conditions for
established and future wind farms, as they are near to the center of planned wind farm areas. The
platforms measuring took place in heights between 32 m and 106 m with the use of cup- and sonic
anemometers.12 As the average hub height of offshore wind turbines is estimated near to 90 m, data
sets measured at this height are taken if available. Data gaps are closed preferably by scaling down
data from higher measurement positions and if not possible, from lower measurement positions. This
is done by the application of the logarithmic wind profile relationship assuming a roughness length of
z0 = 0.0002 m [5]. This way, the total share of data gaps can be reduced to about 4 %. Remaining
data gaps are filled the mean of the next and previous existing value. [3]
Power curves
Power curve data of the represetative wind turbine models were reconstructed from fact-sheets
provided by the producers. The following turbines were modelled:
-
Siemens S120 3.6 MW [6]
REPower RE5M 5.0 MW [7]
REPower RE6M 6.15 MW [8]
Control reserve market/ Day-Ahead spot market

-
12
See chapter 4.3 of the hindcast analysis
Details regarding technical aspects of the measuring process can be found at:
http://www.bsh.de/de/Meeresdaten/Beobachtungen/MARNET-Messnetz/FINO_1/index.jsp
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Power system
Solar, onshore and offshore wind feed-in data of the year 2013, in Germany, has been received from
the EEX Transparency Site. Feed-in values are determined by transmission system operators
respectively for their control area by an extrapolation based on measured online reference sites. It is
available in a granularity of 15 min intervals. [9]
German system load data for the year 2013 has been received from the ENTSO-E website. It consists
of hourly averaged values. [10] The problematic of the data was inter alia addressed in an Agora
study on negative energy prices. The attention is called to the fact, that the data set does not
represent 100 % of the actual electricity consumption. This is why a base load band of 8.3 GW is
added to data set within that study.[88] As ENTSO-E mentions in a documentation, it is primarily the
data values of industry's own production for own consumption and some parts of German railways
that are not included in the data set. [11]
Data on power import- and export flows could be obtained from the Fraunhofer ISE website. Similar
to system load data, they are available in an hourly granularity. Import and export data is used to
determine the residual load level from available load and VRES feed-in data. [12]
5.2.2 Allocation of wind capacity
Three wind scenarios are created referring to 1) German OWF capacity installed today, 2) OWF
capacity approved and 3) OWF capacity still in the authorization process. Related information is
obtained from offshore-windenergie.net, a website hosted by the International Economic Forum for
Renewable Energies (IWR). The website does a categorization of OWF project as mentioned above
and provides information about the project characteristics like total capacity, capacity of individual
wind farms and their geographic position.
OWFs are assigned to wind data sources based on their geographic coordinates, as shown exemplary
in Figure 60 for OWFs installed and OWFs approved. For simplicitys sake the distinction between
OWFs assigned to FINO 1 and OWFs assigned to FINO 3 is made in compliance with the following
principle. A line is drawn perpendicularly to the dominant wind direction and shifted to the east until
the most north-east OWFs belonging to the cluster around FINO 1. That line distinguishes wind farms
contained in each of the three scenarios. A detailed listing of the OWF project details and assignment
to wind sources is attached to the appendix.
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Figure 44: Assignment of OWF projects to FINO wind data sources, depicting OWFs of scenario 1 and scenario 2.
Source: own depiction based on map material from Google Maps
Table 12: Capacity allocation by scenarios and wind sources.

Source: own calculations based on [1]
Scenario 1
Scenario 2
Scenario 3
FINO 1
577.5 MW
7,754.8 MW
17,957.8 MW
FINO 2
50.8 MW
1,163.8 MW
1,586.8 MW
FINO 3
2,175.5 MW
10,727.5 MW
628.3 MW
11,094.1 MW
30,272.1 MW
Total
5.2.3 Calculation of power feed-in

Information on the wind turbine model types used in each OWF project is obtained from offshorewindenergie.net as well. The variety of model types are clustered by turbine capacity into three
classes, which are summarized in Table 12. This approach still allows a consideration of different
power curves with distinct wind usage profiles, while keeping the model as simple as possible.
However, especially for projects still in the authorization process, details of turbine models are often
not determined, yet. That wind farms are assumed to belong to the medium class, as it is most
widespread among projects with the turbine model documented.
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Table 13: Classification of turbine models.

Sources: own depiction based on [6], [7], [8]
Turbine class
Low
Medium
High
Original wind turbine capacity
Class representing model
Rated power
< 4.5 MW
Siemens S120
3.6 MW
4.5 to 5 MW
REPower RE5M
5 MW
> 5 MW
REPower RE6M
6.15 MW
The conversion of wind speed data to power feed-in values is achieved with the help of power curve
functions, which were provided by the producers of the class representing models. However, as
function values were provided in intervals of 1 m/s wind speeds, values in between are linearly
extrapolated.
Figure 45: Power curves of the representative wind turbine models.

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5.3 Analysis of market dynamics

In this section, market mechanisms and impacts of offshore wind related parameters, as VRES feedins, are examined. This shall provide an understanding of the functioning and organisation of
negative TCR market and allow the assessment of indirect impacts from increasing capacities of
OWFs. Therewith, a more detailed modelling of future markets at higher penetration levels of offshore
wind is enabled in the next step.
5.3.1 Capacity Market
Similar to the market principle of price formation by supply and demand, revenues and costs in the
capacity market are formed by placed capacity bids (supply) and by the total amount of capacity
procured (demand). In the following, the external factors influence capacity bids. These could be
spot-market prices and residual load levels. As the total amount of procured capacity is set by the
TSO and thus does not follow market dynamics, future procurement volumes will be assumed on the
basis of a brief literature review.
5.3.1.1 Capacity bids
This chapter examines the influence higher shares of VRES have on the configuration of capacity bids.
First, the relationship between day-ahead spot market prices and the amount of VRES in the system
is shown. Secondly, the influence of day-ahead prices on capacity bids prices is analysed.
Impact of higher shares of VRES on spot-market prices

Higher amounts of supported VRES entering the day-ahead market at effectively zero bid levels,
cause a shift of the merit order towards lower marginal prices [13], [14]. This is known as the merit
order effect. In order to show the effect with historical data, the relationship between the day-ahead
market prices and the residual load is examined. [88]
To verify the merit order effect, residual load levels are plotted against day-ahead prices as depicted
in Figure 46. The used data set represents the German market in 2013 [80], [7]. As the day-ahead
prices are only available in hourly intervals, the residual load is averaged to hourly values as well.
Median and quantile values were calculated in three consecutive steps:
1. Mean residual load values were calculated for each time slice of four hours, for which energy
bids were placed.
2. The data set was clustered by residual load level intervals of 1 GW. Consequently, e.g. all
day-ahead prices for hours with actual residual load values between 39.5 GW and 40.5 GW
would form one cluster.
3. Median as well as lower and upper quantile values were determined for each cluster.
Figure 46 indicates a linear relationship between day-ahead prices and the residual load level. This
can be explained by merit-order shifts caused by higher shares of VRES. The spread marked by the
5% and 95% quantiles stays remarkably stable for residual load levels above 20 GW, which
substantiates the quality of the relationship.
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Residual load levels below 20 GW result into negative day-ahead prices and increasing spreads. In
2013, the occurrence of negative day-ahead prices is rare and can be explained with short term
events marked by low load levels and an oversupply of energy. As conventional power plant
operators face ramping costs for turning on and off and ramping their power plants, they are willing
to accept negative prices in order to keep the plants running until the market situation improves. This
operational strategy can be reasonable if the period stays short, but can as well result in losses in
case of longer periods. A crucial factor for the occurrence of negative prices is also the current mustrun level of about 20 to 25 GW, which consists of power plants that have to stay online to provide
other services as e.g. heat or reserves. [88]
Concluding, the data analysis confirms the assumption of a linear correlation between day-ahead
spot-market prices and the residual load level.
Figure 46: Day-ahead spot market prices against hourly average residual load levels.
Impact of spot-market price levels on negative TCR capacity bid prices

As discussed in chapter 4, capacity bids are influenced by opportunity costs from potential spot
market revenues.
To verify this hypothesis, the median of capacity bids is plotted against the average day-ahead
prices, as shown in Figure 47. As capacity bids are placed for a time period of four hours, the dayahead prices relating to the same time period are averaged to this period. The median of capacity
bids is chosen in order to reduce the effect of outliers, which is significant due to extreme maximum
values. The data is segmented into 1 /MWh intervals of day-ahead market prices, which contain all
bids placed in a time slice with an average day-ahead price in the specified interval.
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Figure 47: Median capacity bids for negative TCR against hourly average day-ahead spot market prices.
Figure 47 shows a tendency of increasing capacity bids with decreasing day-ahead prices, which is
especially visible at day-ahead prices below 37 /MWh. Furthermore, it is visible that the effect on
prices at the 5% quantile is lower than the effect on the 95% quantile, which leads to a wider spread
of capacity bids.
The wide spread and the different sensitivities of high and low price level bidding periods indicate the
influence of additional factors. A comparison of the four seasons revealed that the interrelation is
more pronounced during winter time and rather undefined during summer time. Three explanation
seem reasonable. First, the availability of certain power plant types can be systematically lower
during summer times due to an accumulation of planned outages. Summer times are marked by load
residual load values and consequently lower profitability levels, which can incentivize planned
outages. This could result divergent bid structures. Second, higher must-run levels caused by a
higher demand in heat during winter times can influence the opportunity costs of negative TCR
market participants. Third, technical aspects, as depleted water storages, could additionally influence
the bid structures.
Concluding, capacity price bids are indeed affected by the day-ahead spot market prices and,
consequently, also by the residual load level, which is strongly correlated to the day-ahead spotmarket price. However, data values show an increasing spread at low residual load values and not all
bid ranges seem to be equally affected. This indicates the significant influence of additional factors,
which could be a subject for further analysis.
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5.3.1.2 Procured negative TCR volume

In Germany the dimensioning of the procured TCR capacity is done quarterly by the TSO [15]. In
2013, the average procured capacity for negative TCR was 2600 MW. The decision concerning the
amount of the volume procured is based on the so called Graf-Haubrich-Methodology. Using a
probabilistic approach, this model quantitatively assesses:
1. power plant outages
2. load fluctuations
3.
scheduled ramps
4.
forecast errors
Data of the past four quarters are used for the dimensioning of the following quarter. [16]
A modelling of the impact of higher penetration levels of offshore wind would require a reproduction
of the Graf-Haubrich-Methodology, which lies outside the scope of this work. Alternatively, a review
of literature on that topic will be used to determine the expected range of values of procured capacity
amounts examined within the model
The now outdated first part of the dena grid study from 2005 assumes that the demand in control
reserve capacity will rise over-proportionally to the installed wind capacity. It is stated that about
32 % of underestimations in wind forecasts are to be balanced by negative TCR. This would lead to
capacity provision requirements amounting to 6500 MW for negative control reserve in 2015. This
would constitute an increase of about 8.3 % p.a. starting with a level of about 2900 MW in 2003.
[17].
However, the latest part of the dena grid study predicts a constant demand in control reserve
capacity till 2020. It argues that the quality of wind forecasting will improve by 45% through higher
resolved weather models as well as through the further development of new and existing weather
models. [18] The current dena study on ancillary services in 2030 comes to the conclusion that an
increasing effect of forecast errors, caused by renewable energies, will have a significant influence on
reserve capacity requirements. An increase in capacity requirement for negative TCR of 70 % is
expected amounting to a procured capacity of about 4100 MW in 2033. [19]
Holttinen et al. (2010) are summarizing and comparing studies on reserve requirements caused by
wind integration from several European countries. They show an increase of reserve requirements
between 0.1% and 18.2% of installed wind capacity, depending on country and wind penetration
levels, as share [20]
Summarizing, literature does not indicate a clear relationship between wind capacity and reserve
requirements. For Germany, the most recent and reliable source is the dena grid study II, which
shows a moderate increase of reserve requirements.
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5.3.2 Energy Market

The revenues a market participant is able achieve on the energy market or, vice versa, the costs that
arise from control energy provision are substantially dependent on the following three factors:
1. Price level of the energy bids
2. Frequency of calling events
3. Amplitude of calling events
In this chapter, the influences of higher penetration levels of OWFs on that three mentioned factors is
investigated.
5.3.2.1 Energy bids
The influence of residual load levels on spot-market prices and ultimately capacity price bids was
already described in section 5.3.1. Higher capacity price bids at low spot-market prices, respectively
at low residual load levels, were explained with the need of conventional market participants to
include a premium into their bid in order to compensate the risk of being forced to run their power
plants at unprofitable power feed-in prices. This explanation could also expand on the energy price
component of TCR bids and thus shall be verified within this section.
As illustrated in Figure 48, mean energy price bids show indeed an increasing price trend throughout
the years 2012 and 2013. This leads to the assumption that price bids are not placed at a continuous
level or arbitrarily, but are influenced by external factors. In the same time, the feed-in from RES
Monthly averaage
energy price bids
[/MWh]
gradually increased by about 9 TWh or 6 %, consequently resulting in lower residual load levels. [21]
500
400
300
200
100
0
Figure 48: Energy price bids show an increasing trend in 2012 and 2013.
Source: own depiction based on [60],[77]
Thus, a similar interdependence as the one related to capacity bids is observed regarding energy
bids. Likewise, the data is segmented into 1 /MWh intervals of day-ahead market prices, which
contain all bids placed in a time slice with an average day-ahead price in the specified interval.
Figure 49 depicts this relationship between energy price bids and residual load levels.
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Figure 49: Influence of the residual load level on negative TCR energy bids.
Source: own depiction based on [10], [11], [60], [77]
The data points are widely spread and seem not to be systematically affected by residual load levels.
In the centre of the data, a nearly straight edge is recognisable that is seemingly dividing high bid
level time slices from low bid level time slices. While upper bids seem to be nearly equally distributed
at all residual load levels, lower bids show a wedge-shaped form, indicating a continuous increase of
energy bid price levels at lower residual load values.
Exemplary energy bids from September 2013, shown in Figure 50, can partially explain that
phenomenon. Some bids, especially in upper price levels, are placed continuously and often at round
values as 1500 /MWh or 2500 /MWh. However, there are also bids, which are changing day by
day. Slight shifts of the mass centres of low price level bids are visible regarding the upper and lower
quantiles. Nevertheless, a clear distinction between constant and adaptive bidders could not be
reached in further analysis, as it showed that even lower price level bids are marked by both type of
bidding behaviours.
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Constant bids
Adaptive bids?
Figure 50: Excerpt of energy bids in September 2013 in time slices between 8:00 am and 2:00 pm.
Singular values at 10,000 /MWh and 5,000 /MWh are not depicted for a better visibility.
Source: own depiction based on [60],[77]
Concluding, no clear interrelation of energy bid price levels and residual load levels is determinable. A
high share of bids is placed at continuous prices, whereas some bidders seem indeed to adjust their
bids on daily basis. Nevertheless, it can be stated that at decreasing residual load levels, low energy
bid levels become increasingly unlikely.
5.3.2.2 Energy calling events
Negative TCR energy is called if energy demand and supply are not balanced for a period of time
longer than 15 min, as these shorter periods are handled by SCR. That imbalance can either be a
result of an unexpected decrease of energy demand or an unexpected increase of energy supply,
which is in many cases caused by VRES prediction errors. [22], [23]. This chapter aims at revealing
influences of both VRES related and load level related factors on the frequency and amplitude of
energy calling events.
Influence of load related imbalances on the frequency and amplitude of calls
Electricity consumption depends significantly on the time of day. While the demand in electricity is
low in during late night hours and the early morning, it ramps up abruptly when people wake up and
prepare for work altogether. Although the load patterns have been studied in detail and can be
predicted to a far extend, it is expectable that fast changing load levels are nevertheless challenging,
if it comes to detailed predictions. [23]
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In order to verify that effect, the relative frequency of calling events is plotted for each 15 min
interval of the day, as presented in Figure 51. The relative frequency is calculated by dividing the
number of all calling events during a specified time interval of the day, throughout the year, by the
total number of data values in that interval. As load ramping patterns are different on workdays and
weekends, they are examined separately. However, for the sake of a better readability, only the
results for workdays are presented in this chapter.
Workdays
75
0.35
70
65
0.3
60
0.25
55
0.2
50
0.15
0.1
45
0.05
40
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average day in 15min intervals
Mean load [GW]
Relative frequency of calling events
0.4
Relative frequency of calling events (first quater of an hour)

Average hourly load [GW]
35
Figure 51: Workdays Relative frequency of calling events in each 15min of the day in 2013.
Source: own depiction and calculation based on [60], [77], [10]
Three aspects can be observed from Figure 51. First, energy is called more frequently during daytimes between 8 a.m. and 7 p.m., which are marked by high load levels, in comparison to morning
hours. Following the explanation presented in a recent study of the Wuppertal Institute, this is
reasonable, as relative load forecast errors amount to higher absolute errors in case of higher load
levels. [24]
Second, the relative frequency of calls has a global peak at 6 a.m. and a local peak at 7 a.m. Both
hours are marked by the highest average load gradient. In order to avoid imbalance charges,
suppliers oversupply their balancing areas during load ramps. This is a consequence of missing 15min products in the examined year. The oversupply required the TSO to activate negative reserves.
Third, during hours with negative load gradients, as between 7 p.m. and 2 a.m., calling frequencies
gradually increase in each quarter of the hour, but fall back to a lower level at the beginning of an
hour. That recently occurring phenomenon is also described by Consentec (2010) adressing it as
scheduled ramp (Stundensprung). The reason is seen in the hourly control of the accounting grid,
which is practiced instead of a quarter-hourly control, as it is prescribed in the StromNZV13 [25]. That
13
Stromnetzzugangsverordnung (StromNZV) - regulation on electricity feed-in to and consumption from electricity supply grids
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practice can be explained with an increasing share of load, which is covered by hourly products
procured at the exchange markets.
During decreasing load gradients this would imply an underspupply in the first half-an-hour and an
oversupply in the last half-an-hour. Consequently, calling events should be more frequent and have a
higher amplitude during the last half of each hour. Given the opposite case of an increasing load, that
effect should be reversed leading to more calls of negative control reserve during the first half of an
hour. [26]
A similar approch is followed in order to depict the distribution of amplitudes of calls. Figure 52 shows
the mean amplitudes of calls during a specified 15 min interval on an average workday in 2013.
Comparing the data formation to the values of calling frequencies from Figure 51 it can be stated that
accumulations of maximum values do not overlap, but seem to be rather shifted in time. Especially
the peak values at 6 a.m. are not as distinctive for mean calling amplitudes, as they were for relative
frequency calls. Instead, two peaks at around 8 a.m. and 12 a.m. can be determined.
Workdays
75
Average aplitude of calling events (first quater of an hour)
Average aplitude of calling events
1500
1400
70
65
1300
60
1200
1100
55
1000
50
900
800
45
700
40
Mean load [GW]
Average amplitude of calling events [MW]
1600
600
35
500
400
30
300
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
25
All in all, the data indicates that the frequency and amplitude of calling events is strongly determined
by load ramps.
Influence of VRES feed-in levels on the frequency and amplitude of calls

Higher feed-in amounts of VRES make the energy supply less predictable, as the actual feed-in
capacity from VRES underlies a forecast error. Thus, the risk of system imbalances increases,
resulting in higher probabilities for energy calling events. Indeed, this assumption is supported by a
study from Consentec, which was mentioning increasing amounts of forecast errors within accounting
grids in 2010. [26]
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In order to verify that assumption, rounded amounts of VRES feed-ins are plotted against the relative
number of calling events, as illustrated in Figure 53. The relative frequency of calls is calculated in
three steps:
1. Each 15-min interval of the year 2013 gets the respective VRES feed-in level assigned.
2. The data is segmented into 1 GW intervals of VRES feed-in levels. For example, 15-min
intervals with VRES feed-in values between 9.5 GW and 10.5 GW would constitute one
cluster.
3. The frequency of calling events within each cluster is calculated as the number of 15-min
intervals, where a call occurred, divided by the overall number of 15 min data samples in that
cluster.
As expected, a positive interrelation is visible. Considering that the mean overall relative frequency of
calling events is about 7.7 %, the frequency of calling events at VRES feed-in levels of 6 GW or less
can be certainly seen as below average. This changes at feed-in levels of above 6 GW, when the
curve adapts a steeper, seemingly linearly increasing, trend. The trend adapts an even quadratic
polynomial course at values above 20 GW. This is when the calling frequency is already more than
twice as high as the overall average.
Figure 53: Frequency of calling events in dependence of VRES feed-ins.

The same approach is followed in order to verify, whether the depicted interrelation is also true for
the amplitudes of energy calls. Median as well as lower and upper quantile amplitudes of calling
events are calculated for each 1 GW VRES feed-in interval, as depicted in Figure 54.
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No certain trend is determinable from the data. Both median and lower quantile values are staying at
nearly constant levels. Upper quantile values show an undefined course with a global maximum at
values above 27 GW. In general, data values show line shaped formations at round numbers as at
500 MW or 1000 MW. This leads to the assumption that TSOs are, in many cases, determining the
needed amplitudes of calls only roughly. A reason for this could be proactive calls, which are done on
the basis of assumptions regarding the future energy supply and demand situation. This can be
necessary and reasonable at points of time due to the relatively long reaction time of TCR calls. [26]
Figure 54: Mean amplitudes of calling events in dependence of VRES feed-in levels14.
Concluding, the interrelation, visible between VRES feed-in levels and frequencies of calls, is not
applicable to the amplitudes of calls. The amplitudes of calls show no impact of high VRES feed-ins,
but rather seem to be roughly calculated, and respectively called proactively.
Influence of VRES ramps on the frequency and amplitude of calls

As it was shown in in chapter 5.3.2.2, load ramps are a cause for TCR calling events. The same
should be true for supply ramps and especially ramps of VRES, which underlie a forecast error and
are fed-in independently from demand [14].
14
The smoothing was done with the Matlab smooth(data,35,rloess) function. For more details see:
http://www.mathworks.de/de/help/curvefit/smooth.html.
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In order to assess that hypothesis, the relative frequency of calling events is examined in relation to
the
amplitude
of
VRES
ramps,
as
depicted
in
Figure
55
.
VRES ramps are determined as the difference of a VRES value at a given point in time to the mean of
VRES values in an interval of 1.75 to 2.25 hours before. The mean is applied in order to reduce the
effect of short term fluctuations on the resulting ramp value. An interval of roughly 2 hours is chosen,
as short term prediction errors can usually be managed with the use of PCR and SCR. TCR would be
called if a VRES forecast error persisted during a longer period of time. [23] Concretely, an interval of
roughly 2 hours was chosen empirically as it resulted the least noise within the curve, in comparison
to slightly smaller and larger intervals. The relative frequency of calls is determined by clustering the
data in VRES ramp intervals with the size of 0.1 GW. For each interval, the occurred number of called
15-minute intervals is divided by the total amount of 15-minute intervals with VRES values lying in
the observed interval. The noisy curve shape has been smoothed for a better visibility of the
underlying trend.
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Figure 55: Relative frequency of calls depending on the absolute amplitude of VRES ramps in a period two hours 15.
The plot depicts both positive as well as negative ramp values. Relative frequencies at negative VRES
ramps stay at roughly constant levels around less than 7.7%, which is the overall mean frequency.
Thus, negative ramps do not seem to have an effect on the calling frequencies of negative TCR,
which is reasonable, as they would usually lead to an undersupply requiring positive control reserves.
Frequencies at positive ramps rise to a value of 10% at ramps of 1 GW and remain constant until
ramp values of above 5 GW. At ramp values above 5 GW, the relative frequencies increase
dramatically. Concluding, VRES ramps have an influence on the relative frequency of calling events.
The frequencies are above average at positive ramp values above 1 GW and increase drastically at
ramp values above 5 GW.
A similar relation could be also applicable to the amplitude of energy calls. As VRES ramps are not
only difficult to predict in time, but also in amplitude, the amplitude of energy calls should increase
with the amplitude of the VRES ramps in case of actual forecast errors. In order to verify that
hypothesis, VRES ramp values have been determined likewise as described above and plotted against
the median amplitudes of energy calls, which is shown in Figure 56. The noisy curve shape upper and
lower quantiles has been smoothed for a better overview.
15
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Figure 56: Median amplitude of energy calls in dependence of VRES ramps within periods of two hours 16.
Though median values indicate a slight increase of amplitude of calls at ramp values above 2 GW, the
values are strongly deviating and remaining at an approximately constant level. Thus, similar to the
former section on the influence of VRES levels, no clear impact of VRES ramps on the amplitude of
calling events is ascertainable.
5.3.3 Summary
This section analysed the market mechanisms on the market for negative TCR. The influence of
OWFVRES feed-ins and residual load levels, on the energy- and capacity market was examined.
Figure 57 provides an overview of relationships found. Grey components show no direct impact of
higher installed capacities of OWFs, while green components are directly influenced towards the
direction that is indicated by the red arrows. Components depicted in blue seem rather dependent on
load forecast errors, than on VRES forecast errors. Thus blue components are assumed to remain
unaffected by higher installed capacities of OWFs. However, the information on the distribution of
load forecast errors throughout the day will be used for a more realistic remodelling of calling event
frequencies and amplitudes. The modelling methodology is described in more detail in chapter 0,
while the key conclusions are presented below.
16
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Higher installed OWF capcities
Load forecast
errors
Effects on the
power system
Frequency of
calling events
Calling events
Amplitude of
calling events
Energy bids
VRES ramps
VRES feed-in
Energy
Market
Indirect price
effects
Residual load/
Spot prices
Capacity bids
Procured
capacity
Capacity
Market
Figure 57: Overview of results on negative TCR market analysis.

Energy Market
No clear influence of day-ahead prices on energy price bids was found,
Both frequencies and amplitudes of calls showed a considerable dependence on the time of
the day. The effect of morning ramps as well as schedule ramps was determinable.
Higher power feed-in levels from VRES seem to foster the occurrence of calling events, but do
not have an identifiable influence on amplitudes of calls.
Ramp values above 1-2 GW lead to increasing frequencies of calls. The amplitude of calling
events, however, seems not affected by VRES ramps.
Capacity Market
Day-ahead spot-market prices are strongly correlated to the residual load level and decrease
at higher levels of installed OWF capacity.
Day-ahead prices show a significant influence on capacity price bids, which are increasing at
lower spot-market prices.
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5.4 Modelling of future markets

The constructed model contains all market dynamics and interrelations described in chapter 5.2.
Individual interdependencies will be interpolated and afterwards combined to a comprehensive
market forecasting model. This section gives an overview of the model components and leads
through the modelling steps explaining assumptions and simplifications made. Finally, limitations of
the model are addressed.
5.4.1 Model overview
This section provides an overview over the basic functionalities of the model, which is illustrated in
Figure 58. It briefly describes its three major components, namely the
a.
available OWF bidding capacity
b.
adjusted capacity bids
c.
remodelled schedule of calling events
The model uses the installed OWF capacity for each scenario as a major input for the definition of two
further parameters: first, the available OWF capacity to be offered as a control reserve, and second,
the amount of VRES feed-in power at each bidding period.
The VRES feed-in power is used to determine the residual load level, which builds as the difference of
load and VRES feed-in, reduced by import-export residuals (see Figure 58). Furthermore, the VRES
data set is reduced by the historical OWF feed-in from 2013, as it shall be represented by the feed-in
of the OWF scenarios from section 5.2. As concluded in section 5.2, day-ahead spot market prices are
strongly correlated to the residual load level. Thus, the residual load is used as representative
modelling parameter for the spot-market dependent capacity bids. Future bidding ladders are
generated by adjusting historical bidding ladders with a factor determined according to the
interrelations found in chapter 5.2.
Historical load data from 2013 is used together with the adjusted VRES feed-in in order to set up a
Monte-Carlo process to artificially generate calling events, specifying the time of their occurrence and
their amplitude. This is done with the help of a simplified scoring system following two steps. In a
first step, the occurrence of special events is determined. This is done by rating every 15 min interval
of the year 2013 according the individual situation regarding time of day, VRES in the system and
eventual VRES ramps. Each rating is related to a certain probability for the occurrence of calling
events and is used as a basis for a random generation of calls. In a second step, the amplitude of the
calls is determined randomly depending on the time of the day.
Finally, these three components are used as input parameters for the German negative TCR market
model, which assesses revenue potentials and costs for the end consumer. Distinct additional
variations are applied for specific study cases.
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Available OWF bidding

capacity
Residual Load
Offshore Wind Capacity Scenarios

(FINO 1,2,3)
Load Data
VRES Feed-in Data
Frequency of Calls
Volume of Calls
Capacity Bids
Remodeling bidding curves
Artificial generation of calling events in

dependece of load and VRES input parameters
Assessing revenue potentials for OWF operators with a model of the german control reserve
market (see hindcast analysis in chapter 4)
Figure 58: Simplified flow diagram of the forecast model mechanisms.
5.4.2 Adjustment of bidding curves

This section explains how historical capacity bids from 2013 are adjusted according to the
relationships described in section 5.2.
5.4.2.1 Capacity bids
The modelling of future capacity bids is done in two steps. First, a regression and extrapolation of the
interrelation found in section 5.3.1.1 is made. Second, capacity bids are adjusted according to the
resulting function. Figure 59 depicts the impact of residual load levels on capacity bid price levels. As
suggested by the overall trend, the increase of capacity price levels is interpolated by an exponential
function. Though residual load values could theoretically decline to 0 GW at higher levels of installed
OWF capacity, in this model, the assumption is made that excess feed-in capacity can be exported to
other countries. Thus a minimum residual load limit is set at 9.4 GW, which is the minimum value
that actually occurred in 2013.
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Figure 59: Interpolation of capacity price bids.

Source: own depiction based on [60], [77], [11], [12]
The determined function is used in order to adjust capacity bids at decreasing residual load levels
caused by higher penetration levels of wind. The adjustment is made in the following four steps:
1. The average historical residual load level is calculated for each 4 hour time slice of 2013,
representing the period of time for which bids are placed.
2. The average forecasted residual load level is calculated for each time slice according to the
respective installed OWF capacity scenario.
3. The assumed capacity price level is calculated for both historical as well as forecasted residual
load values by the application of the function from Figure 59. The difference factor between
the assumed historical and forecasted capacity price level is determined.
4. All capacity bids within each time slice are multiplied by the determined difference factor.
This approach allows to leave the bidding structure unchanged, meaning that the bidding ladders will
retain their shape, but will be adjusted in their absolute level. Furthermore, the spread between low
level and high level time slices will increase with declining residual load values, similar to the
formation in Figure 59.
5.4.2.2 Energy bids
As section 5.2 revealed no significant interdependencies between the penetration level of offshore
wind and energy bid prices, energy bids will remain unchanged. Bid values from 2013 are taken for
all future scenarios.
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5.4.3 Generation of calling events

A new schedule of calling events is generated on the basis of calling probabilities derived from the
findings described in section 5.2. The determination of the point of time of the call as well as its
amplitude, as part of the modelling process, is documented.
5.4.3.1 Point of time
The occurrence of calling events is randomly generated on the basis of probabilities depending on the
time of day, the amount of VRES in the system and the amplitude of VRES ramps. This section will
first describe the extrapolation of probabilities depending on VRES feed-in levels and ramps. Below,
the approach is presented of how all three mentioned influence parameters are taken into account in
a simplified scoring system for a more realistic chronological placement of energy calls.
Influence of load forecast errors
The probabilities for calling events are directly derived from the distribution calculated in
section 5.3.2.2. Each 15 min interval of the day gets assigned a probability value relating to the
historical relative frequency of calls determined for that time interval. Days are furthermore grouped
into workdays and weekends, as they show very different distributions.
Influence of VRES feed-in levels
The influence of VRES feed-in levels on the frequency of energy calling events was shown in
section 5.3.2.2. As depicted in Figure 60, the interpolation is divided into two parts. The first part,
including VRES feed-in values between 0 and 20 GW, is interpolated with a linear function. The
second part, including values above 20 GW is described with a quadratic polynomial function.
Figure 60: Extrapolation of calling probabilities in dependence of VRES feed-in levels.

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Influence of VRES-ramps
The influence of VRES-ramps on the frequency of calling events is discussed in section 5.3.2.2. As the
shape of the frequency curve is rather undefined, it is refrained from dividing it up into multiple
segments. Like it is depicted in Figure 61, the interrelation is interpolated with a single polynomial
function of the 8th degree, which showed the best fit.
Figure 61: Interpolation of calling probabilities in dependence of VRES ramps.

Scoring approach
Finally, each 15-min interval of the year 2013 gets assigned three probability values derived from the
interpolation and extrapolation functions constructed above. Naturally, the values should differ
depending on the chosen wind capacity scenario, as it influences VRES feed-in amounts and ramps.
Probability values depending on the load pattern will, however, stay constant, because they are
assumed not to be supply dependent. A rating score of each 15-min interval is formed by adding the
three probability values together. Next, the frequencies are plotted in dependence of the rating score
based on historical VRES data, as depicted in Figure 62. Ideally, the rating should have a strong
linear correlation with the actual frequencies of calls, as it consists of equally scaled probability values
just regarding the probability of calls from different perspectives.
Although marked by increasing oscillations at higher values, a linear trend is indeed determinable.
The resulting curve is interpolated with a linear function in order to build a link between the ranking
and actual calling frequencies. This curve is used in order to assign one single probability value to
each 15-min interval. Based on that probability, the decision, whether or not a call takes place in that
interval, is done randomly, using a Monte-Carlo process.
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Figure 62: Influence of the rating value on the relative frequency of calls.
5.4.3.2 Amplitude
As pointed out in section 5.2, there is no identified interrelation of the amplitudes of calls with neither
the VRES feed-in level, nor the VRES ramping behaviour. Thus, time intervals that were marked as
calling events during the process described in the former section, get assigned their amplitude in
dependence of the time of the day. The amplitude value is generated randomly from the distribution
of the occurred values during a specified 15 min interval of a day. Additionally, a distinction between
workdays and weekends is made. Because the amplitude of calls are modelled independently from
VRES values, they are remaining a constant level throughout all three OWF capacity scenarios.
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5.4.4 Limitations of the model

The market forecast model bases on interrelations determined from a data set of 2013. Though a
spot check of data from 2012 showed same qualitative relations, the interrelations were distinctly
pronounced. Stochastic interrelations and model results could be refined if data sets of longer periods
of time were available. However, data from the years before 2013 is not very suitable, as it is market
by changing framework conditions going with the implementation of the Grid Control Co-operation17
in 2008 and the inclusion of further countries until 2012. [13]
Problematic could be also the representative use of VRES for the assessment of the impact of higher
capacities of OWFs. As in 2013 the installed feed-in capacity of OWFs was too low to significantly
affect the power system or to result indirect price effects, VRES feed-ins were used representative to
determine such interrelations (cf. section 5.3). Consequently, the impact of higher capacities of OWFs
on indirect price effects and effects on the power system were modelled indirectly by increasing the
VRES feed-ins by the amount of forecasted OWF feed-ins. However, though offshore wind can
certainly be rated among VRES, its individual characteristics, as prediction errors and ramping
behaviours can vary from that of solar or onshore power feed-ins. Thus, the interrelations could vary
from the described, if OWF capacity should increase non-proportionally to the other VRES.
As the model generates TCR calling events on the basis of a partially random distribution functions,
results of distinct model runs can diverge. In order to investigate the convergence properties of the
Monte-Carlo process, we performed an exemplary comparison of the results of 20 modelling cycles,
which showed a deviation below 10% on yearly values.
The first and the last week of the year 2013 has been left out from remodelling, as they are marked
by extreme circumstances due to New Years Eve and Christmas holidays. This means, these periods
are included to OWFs revenues and system cost calculations, but excluded from the modelling of
external market effects. This way, the forecast model results are closer to reality and better
comparable among each other and to related results from the hindcast analysis.
17
Netzregelverbund (NRV)
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5.5 Case studies and results

In this section, the analysed case studies are presented. First, reference scenarios are created to
allow a comparability of case study results and provide a better understanding of the impact that the
implemented remodelling had on the historical data set. Subsequently, key aspects of the hindcast
analysis are assessed regarding different penetration levels of wind and caused market reactions. The
impact of market design changes on OWF operators revenues and system costs is quantified.
Table 14 gives an overview of the features of the case studies conducted in this section.
Table 14: Overview of case study features.
Weekend
tenders
Higher
procured
capacity
volumes
Reference
Scenario A
Reference
Scenario B
High
market
premium
Product
length
of
one Hour
Feed-in
tariff
35 /MWh
35 /MWh
150 /MWh
35 /MWh
35 /MWh
35 /MWh
Product
length
4 hours
4 hours
4 hours
1 hour
4 hours
4 hours
Weekend
tenders
No
No
No
No
Yes
No
Procured
2597 MW
2597 MW
2597 MW
2597 MW
2597 MW
Variable18
As
in
reference
scenario B
As
in
reference
scenario B
As
in
reference
scenario B
volume
Other
No
modelling
of
market
reactions
As
reference
scenario B
in
5.5.1 Reference scenarios - Impacts of different penetration levels of offshore wind

This section demonstrates the impact of different capacity levels of offshore wind participating the
control reserve market. This is done with two reference scenarios of which the first, scenario A, will
solely depict the historical market set with included bid capacities of OWFs, while the second,
scenario B, will also take into account market dynamics e.g. changing bid prices, like they were
discussed in section 5.2. The scenarios shall provide a basic understanding of the mode of operation
of the model and allow a better comparison and interpretation of the following case study results.
18
See appendix for a detailed documentation
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For the reference scenarios, a set of conservative market design features and optimistic bidding
scenarios is chosen. A summary of market design features is listed in
Table 15.
Table 15: Feature summary of the reference scenarios.
Market design features

1.
Bidding scenario
A decrease of the feed in tariff from 150 /MWh
1.
initial remuneration to a basic remuneration of

19
35 /MWh is anticipated.
high as possible, but allow them to be
Thus, the market
premium is calculated on the basis of a feed-in

tariff of 35 /MWh. This results in a lower
procured completely.
2.
OWFs
do
not
participate
on
Sundays
completely. However, the energy bid is never

and
Mondays. As there is no tendering on weekends,

the forecasting period would be too long for
accurate wind predictions.
3.
OWFs are placing energy bids, which are as

high as possible, but allow them to be called
assessment of OWFs opportunity costs.

2.
OWFs are placing capacity bids, which are as
lower than the market premium.

3.
OWFs are bidding 30 %20 of their available

capacity in order to provide a sufficient
reliability level.
Amplitudes of energy calling events stay at a

constant
level,
as
well
as
the
amount
of
procured capacity.
5.5.1.1 Reference Scenario A: No consideration of market effects

In this scenario wind bids are placed in a market, mirroring the market situation in 2013. No reaction
of the market to higher capacities of offshore wind is modelled. Hence the isolated effect of higher
penetration capacities of OWFs is observed.
Effects on OWF operators revenues

Figure 63 and Figure 64, shows that negative TCR markets become saturated quickly.. Though total
revenues increase from scenario 1 to scenario 2, specific revenues show that the yield per MW
installed capacity shrinks dramatically to less than a half. From scenario 2 to scenario 3, even total
revenues have barely increased. The reason for the diminishing of specific revenues is an increased
total bidding volume of OWFs at an unchanged bidding of other market participants. In this model
OWFs are trying to adapt their bids so that they are procured and called at their maximum available
capacity. Thus, they have to gradually lower their bids in order to sell all of their available capacity to
the market. Especially in scenarios 2 and 3 this leads to more frequent zero capacity bids with
respect to energy bids in the height of the market premium, which constitute a profitless operation
for OWFs. This explains why at a certain point OWFs are not able to significantly increase profits,
though a higher bidding capacity is available.
19
See: 31 EEG 2012
20
This reference value has been proposed by a representative of 50Hertz Transmission GmbH
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Total revenues [m ]
35
2.99
30
3.14
25
20
15
10
25
26
Scenario 2 (11 GW)
Scenario 3 (30 GW)
2.46
Scenario 1 (0.6 GW)
Revenues from capacity provison
Net revenues from energy provision
Specific revenues
[/MW]
12,000
10,000
8,000
3,913.72
6,000
4,000
2,000
269.79
5,928
2,295
0
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
103.85
871
Scenario 3 (30 GW)
Effects on Costs
Though unfavourable regarding the achieved revenues of OWF operators, that saturating mechanism
has a positive effect on the overall system costs for capacity and energy provision. High conventional
capacity bids are increasingly replaced by lower bids of OWFs, lowering the mean marginal price level
of capacity provision by 26% in scenario 2 and 34% in scenario 3. The result is a significant decrease
of costs for capacity provision in scenario 2 and scenario 3, which is depicted in Figure 65.
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Total capacity costs

[m ]
160
136
140
136
136
136
115
120
102
100
80
60
40
20
0
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Capacity costs incl. OWFs
Scenario 3 (30 GW)
Capacity costs excl. OWFs
A slightly different picture unfolds regarding the costs from energy calling events, which are shown in
Figure 66. A radical reduction of energy costs by 21 m (54%) takes place from scenario 1 to
scenario 2. However, nearly no further costs are saved in scenario 3. Obviously the control energy
market is already saturated at a participating OWF capacity of 11 GW, represented by scenario 2.
Indeed OWFs have increased their sold volume in the energy market only by 5% in scenario 3 in
relative to scenario 2, though the available capacity has nearly tripled.
The reason for the market saturation stepping in earlier on the energy market than on the capacity
market, is the downside capacity bid limit of OWFs, which orientates on the market premium. The
market premium values calculated on the basis of a feed-in tariff of 35 /MWh range between about
3 to 19 /MWh. That downside limit is a noticeable restriction to OWFs, as conventional players are
often able to bid energy prices near to or below zero. For the reason of eventual fuel cost savings
coming with turning down the energy production at negative TCR calls, even such prices can be
attractive to conventional participants. Consequently, this constitutes a barrier for a further market
penetration of OWFs and explains the lack of further cost reductions in scenario 3. Indeed, the OWFs
had increased their volume market share in the energy market from 54 % in scenario 2 only by 5 %
Total energy costs [m ]
in scenario 3.
45
40
35
30
25
20
15
10
5
0
38
39
39
17
Scenario 1 (0.6 GW)
Scenario 3 (30 GW)
Energy costs excl. OWFs
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Scenario 2 (11 GW)
Energy costs incl. OWFs
39
98
This section illustrates that under the assumption of no market reactions to higher penetration levels
of offshore wind, a market saturation steps in already in scenario 2 representing an installed OWF
capacity of 11 GW. The market saturation effect is especially pronounced in the energy market,
where that effect is undermining further significant revenues or cost savings at increasing OWF
capacities.
5.5.1.2 Reference Scenario B: Including a consideration of market effects

The following scenario will take into account market interrelations discussed in section 5.2. It was
shown, that higher shares of VRES in the system lead to more frequent calling events as well as
higher capacity bids. In case of the amplitudes of calling events and energy price bids, no
interdependence with the feed-in of VRES, respectively the residual load level was observed.
Regarding this effects, the market saturation effect, visible in reference scenario A, is expected to be
reduced by higher prices on the capacity market, ultimately enabling higher revenues and cost saving
potentials.

Comparing to the results of scenario A, it is obvious that the saturation effect is far less pronounced.
Total revenues from capacity provision, depicted in Figure 67, rise by the factor 14 from scenario 1 to
scenario 2, which is substantially more than in reference scenario A. Nevertheless, a slight market
saturation can be identified, if considering that the total installed capacity increased by more than 18
times in scenario 2. The revenues from capacity provision in scenario 3 show still an increase by
nearly factor 3, in comparison to scenario 2, which is roughly proportional to the expansion of
installed OWF capacity. Revenues from energy provision, on the other hand, show an unchanged
effect of market saturation. While they show minor increases of roughly 10 % in scenario 2 and 2 %
in scenario 3, the increases are in no relation to the actual increases of available OWF capacity.
This effect becomes clearer regarding specific revenues that are illustrated in Figure 68. It is
observable that specific capacity revenues decrease in scenario 2 and rise again in scenario 3, but are
not able to reach the level of scenario 1. Specific revenues from energy provision are drastically
diminished by 93 % in scenario 2 and decline even further by 55 % in scenario 3.
Total revenues [m ]
200
3.87
150
100
3.18
164
50
2.57
0
57
Scenario 1 (0.6 GW)

Scenario 2 (11 GW)
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99
Specific revenues [/MW]
12,000
10,000
8,000
4,085
6,000
4,000
287
128
5,110
5,420
Scenario 2 (11 GW)
Scenario 3 (30 GW)
5,814
2,000
0
Scenario 1 (0.6 GW)

Effects on Costs
Figure 69 and Figure 70 depict total costs for capacity and energy provision that occurred in
reference scenario B. System costs diverge from the former reference scenario, which was not
considering market effects, in mainly two aspects. First, system costs increase with or without the
participation of OWFs in the control reserve market. Second, the extent to which OWFs are able to
reduce capacity costs for negative TCR provision as well as energy costs is relatively lower, than in
reference Scenario A.
Ultimately, without the participation of OWFs, the system costs for control capacity provision would
increase by 46 % in scenario 2, and by 147 % in scenario 3, in comparison to capacity costs
amounting to 149 m in scenario 1. With the participation of OWFs cost savings in the amount of 9 %
can be realized in scenario 2 and 3. Wind scenario 1 has nearly no cost reduction effect due to the
low available capacity.
Total capacity costs

[m ]
400
335
350
368
300
250
200
150
199
149
218
149
100
50
0
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Capacity costs incl. OWFs
Scenario 3 (30 GW)
Capacity costs excl. OWFs
Costs for energy provision are even more affected, increasing by 20 % in scenario 2 and 73 % in
scenario 3. While the available capacity in wind scenario 1 is again too low to achieve a significant
cost saving effect, costs in scenario 2 could be potentially reduced with the participation of OWFs by
53 %, respectively 51 % in scenario 3.
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Total energy costs [m ]
69
75
60
45
48
40
39
34
30
23
15
0
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Energy costs incl. OWFs
Scenario 3 (30 GW)
Energy costs excl. OWFs
Explanation of outcomes
The outcomes are determined by the superposition of the following three mechanisms: a) the impacts
on the power system b) indirect price effects and c) direct price effects. Impacts on the power system
refer to increasing requirements in negative TCR, which come with higher levels of installed OWF
capacity, as e.g. an increasing frequency of calls. Indirect price effects refer to the influence that an
OWF-caused reduction of residual load levels has on the bid price levels on the negative TCR market.
Direct price effects are addressing the influence, which additional OWF capacity, entering the TCR
market, has on marginal prices in the TCR market.
Impacts on the power system: Higher OWF feed-in capacities increase the amount of VRES in the
system. As shown in section 5.2, this leads to an increasing frequency of calls. In fact the number of
calls rises by 43 % in scenario 2 and even 208 % in scenario 3, if relating to a number of 2776 calls
in scenario 1. At the same time the mean amplitude of calls stays roughly constant at a value of
700 MW. This leads to an expansion of the overall market for energy provision and, with that, to
increased revenue potentials.
Indirect price effects: Feed-ins from OWFs are influencing the price levels on the market for negative
TCR indirectly by reducing residual load levels and, with that, lowering prices on the spot market. The
interdependence of day-ahead spot market prices, respectively residual load levels, with the height of
capacity price bids was shown in section 5.2. As depicted in Figure 71 mean capacity price bids
increased by 13 % in scenario 2 and 76 % in scenario 3, in comparison to an average price level of
37 /MW in scenario 1.
Direct price effects: With higher available amounts of OWF capacity, also the OWF bidding capacity
on the TCR market increases. Within the model, OWFs try to bid the highest capacity and energy
price, which, at the same time, allows them to be procured and called at their full bid capacity. In
order to ensure this, OWFs are able to lower capacity prices until 0 /MW and control energy prices
until the height of the market premium. By doing so, they reduce marginal prices, which can lead to
system cost savings, but also to losses of OWF revenues.
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Figure 71 illustrates the marginal prices on the capacity- and energy market and compares them with
mean accepted bid prices. It indicates that mean marginal prices for capacity provision gradually
increase, while wind bids initially stagnate and only increase in scenario 3. This is caused by an
overlay of two effects. First, overall capacity bids increase due to indirect price effects described
above. Second, this effects are partially compensated by market saturation, which is a result of
increased OWF bid volumes. Basically, OWF bid volumes expanded over-proportionally to the increase
of the overall capacity bid level, meaning that OWFs had to reduce capacity bids in order to be
procured completely.
In case of marginal energy prices, the picture is even more drastic. The accepted price of OWF bids
declines by 75 % in scenario 2 and by 82 % in scenario 3, if comparing the level in scenario 1. As the
price levels of energy bids did not go up, like it was the case with capacity bids, the market
saturation effect is much more pronounced on the energy market. OWFs have to radically reduce
their energy bids in order ensure to be called at full capacity. Effectively, this diminishes their specific
revenues, but also leads to substantial savings of system costs. Potential additional revenues from an
increased number of calls are negatively overcompensated by the reduced bids of OWFs, which
65
70
60
50
40
30
51
37
41
31
30
20
10
0
Scenario 1 Scenario 2 Scenario 3
(0.6 GW)
(11 GW)
(30 GW)
Energy prices [/MWh]
Capacity price [/MW]
ultimately lead to lower control energy cost at higher installed capacity of offshore wind.
Mean marginal capacity prices

Mean capacity prices of accepted wind bids
120
100
80
106
79
53
60
40
19
20
33
14
0
Scenario 1 Scenario 2 Scenario 3
(0.6 GW)
(11 GW)
(30 GW)
Mean marginal energy prices
Mean energy prices of accepted wind bids
Figure 71: Marginal capacity and energy prices together with accepted wind bids.
Conclusion
This section showed that a consideration of market effects coming with higher penetration levels of
offshore wind can radically change the cost and revenue situation. The influence of three modelled
mechanisms, namely, the impact on the power system as well as indirect- and direct price effects
was described. The following conclusions are drawn from the model results.
Total system costs will increase with higher penetration levels of wind due to increasing capacity bid
levels. The increase in costs can be partially, but not completely counteracted by the participation of
OWFs in the TCR market. The largest absolute and relative cost saving potentials occur in the energy
market. Absolute cost saving potentials in the capacity market have a similar extent, but are
relatively much smaller to total capacity costs.
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The energy market will lose attractiveness for OWFs at higher penetration levels of offshore wind, as
the bid prices have to be drastically reduced in order to be called at full capacity. A downside price
limit, set by the market premium, is furthermore reducing the utilization of OWFs. The capacity
market, however, retains its profitability for OWFs allowing roughly constant specific revenues, even
at higher penetration levels of OWFs. The market is effectively expanding due to increasing capacity
price bids.
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5.5.2 Examination of different framework conditions

All key aspects of the hindcast analysis were assessed regarding higher penetration levels on OWFs.
This section presents the case study results in a condensed form. Revenue- as well as cost saving
potentials for the examined framework conditions will be compared to each other and the reference
scenarios, which were explained in the former section (cf.
Table 14). For a detailed description of case study settings and result interpretations, see the
documentation in the appendix.
5.5.2.1 Revenues of OWF operators
Achievable specific revenues of OWF operator at distinct framework settings are summarized in
Figure 72. The comparison of different framework settings at distinct penetration levels of offshore
wind leads to the following conclusions.
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Scenario 3 (30 GW)
All values in /MW
Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
3,914
5,928
270
2,295
104
871
Ref. Scn. B
4,085
5,814
287
5,110
128
5,420
Higher FIT
1,588
5,814
13
5,110
5,420
1 Hour product
6,788
6,828
1,897
5,544
292
5,634
Weekend tenders
4,796
10,124
402
8,813
175
8,314
Incr. cap. procur.21
4,167
5,813
477
6,523
267
10,059
Figure 72: Specific revenues of OWF operators.
First, though revenues from energy provision are a major revenue potential source for OWFs at
scenarios with low installed OWFs capacity, at higher penetration levels of offshore wind, this market
21
Increasing capacity procurements
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104
will become of minor relevance to OWF operators. As visible from Figure 72, revenues from energy
provision strongly decline at scenarios with high levels of installed OWF capacity. While revenues
from energy provision reach a share of up to 50% in scenario 1, they diminish to a negligible level in
scenario 2 and 3. This effect can only be marginally compensated in scenario 2 by an implementation
of a one hour product length.
Second, a high FIT tariff reduced OWF revenue potentials from energy provision by roughly 75% at
low levels of installed OWF capacity, but does not play a significant role at higher penetration levels
of offshore wind due to energy market saturation, which steps in anyway.
Third, at low penetration levels of offshore wind, measures, as the change of the product length to
one hour periods and the enabling of weekend tenders have the most positive impact on OWF
revenues. Each measure can increase specific revenues by roughly 40%.
Fourth, at high penetration levels of offshore wind, weekend tenders are most effective, whereas the
positive effect of one hour product lengths is diminished. Weekend tenders increase the overall
available market size for OWFs and, with that, the available capacity market for OWFs. A shift to one
hour product lengths, on the other hand, primarily impacts revenues on the energy market. As
revenues from capacity provision remain on a high level due to increasing capacity bid prices, while
revenues from energy provision reduce due to a market saturation, weekend tenders are a the most
suitable measure for market settings at high levels of installed OWF capacity.
Fifth, increasing capacity procurements can sustain the profitability of OWFs at high penetration
levels of wind. Rising amounts of procured capacity increase the specific revenues from capacity
provision. This effect is especially pronounced in scenario 3, where specific revenue potentials regain
a value of roughly 10,000 /MW.
5.5.2.2 System costs
Total system costs occurring at distinct framework settings are summarized in Figure 73. A
comparison of costs leads to the following conclusions.
First, the costs for capacity provision gradually expand with increasing levels of installed OWF
capacity due to rising capacity bid prices. This effect is multiplied under assumption of expanding
capacity procurements volumes and raises costs by up to factor 5, as in case of scenario 3.
Second, costs from energy provision increase only marginally for most framework settings.
Exceptions constitute the costs under the assumption of higher capacity procurements and under the
assumption of a high FIT. In the former case, energy costs are heightened because of increasing
amplitudes of calls, which were assumed to be resulting the expanded amounts of capacity
procurements, in the first place. In case of the high FIT assumption, the increasing control energy
costs are caused by higher OWF bids. The effect is especially distinctive in scenario 3, when OWFs are
able to gain a significant share in the energy market and thereby replace cheaper participants.
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Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Scenario 3 (30 GW)
All values in m
Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
136
38
115
17
102
16
Ref. Scn. B
149
39
199
23
335
34
Higher FIT
149
39
199
52
335
126
1 Hour product
149
42
196
40
333
38
Weekend tenders
149
38
184
17
307
21
151
39
296
36
746
75
Figure 73: Total system costs optimistic bidding scenario.
22
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Figure 74 depicts cost saving potential, which can be achieved through the participation of OWFs in
the negative TCR market. They are calculated as the difference of cost with and without the inclusion
of OWF bids to the market. Obviously the installed OWF capacity in scenario 1 is not big enough to
significantly influence system costs. However, the cost reduction potential increases with higher
penetration levels of offshore wind. System costs can be reduced by up to approximately 50 m in
scenario 2 and up to 125 m in scenario 3. In nearly all cases, OWFs are able to reduce system costs
in total. One exception is the case study scenario assuming a high FIT. A high FIT increases energy
costs due to a heightening of the downside bid limit for OWFs, which is even overcompensating cost
reduction potentials on the capacity market in case of scenarios with high penetration levels of
offshore wind, as in scenario 3.
Total system costs [m ]
150
100
50
0
-50
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Capacity cost savings
Scenario 1 (0.6 GW)
Scenario 3 (30 GW)
Energy costs savings
Scenario 2 (11 GW)
Scenario 3 (30 GW)
All values in m
Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
21
22
35
23
Ref. Scn. B
19
25
33
35
Higher FIT
19
-4
33
-57
1 Hour product
-2
22
35
31
Weekend tenders
34
31
61
48
13
32
52
74
Figure 74: Total cost saving potentials from the participation of OWFs in the negative TCR market.
23
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Incr. cap. procur.
Weekend tenders
1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
Incr. cap. procur.
Weekend tenders
1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
Incr. cap. procur.
Weekend tenders
1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
-100
107
5.6 Conclusions from the forecast analysis

This part of the report assessed key aspects of the hindcast analysis under the conditions of a future
TCR market marked by higher penetration levels of offshore wind.
In a first step, an investigation of market dynamics revealed following potential interrelations:

Capacity Market
a.
Day-ahead spot market prices are linearly correlated to the residual load level.
b.
Capacity price bids show a noticeable increase at decreasing spot-market prices. The effect is
especially strong, if the day-ahead spot market price falls beyond 37 /MWh.
c.
The amounts of capacity procurements is set by TSOs following the Graf-HaubrichMethodology. Opinions of the future development of capacity procurements diverge heavily.
An increase of 0 70 % of the current volume seems possible until 2033.
Energy Market
a.
Energy price bids are not significantly affected by residual load levels. A high share of bids
seems to be placed at constant prices over a period of a month or longer.
b.
Both frequencies and amplitudes of calls show a considerable dependence on the time of the
day, representative for typical load pattern and load forecast errors. The effect of morning
ramps as well as schedule ramps is determinable.
c.
Higher VRES feed-in levels lead to higher frequencies of calls.
d.
Positive VRES ramps above 2 GW increase the frequency of calling events
e.
The amplitude of calls seems independent from VRES and VRES-ramps. Calls are often placed
in the height of round numbers as 500 MW or 1000 MW.
In a final step, the consideration of distinct framework conditions led to following conclusions:
1. Assuming continuous market conditions at increasing penetration levels of OWFs, the TCR
market is rapidly saturated. Specific revenues are strongly diminished. Costs can be reduced
substantially from scenario 1 to scenario 2. However, only minor savings can be realized by
further increasing OWF capacity levels.
2. If market reactions are modelled, specific revenues decline at medium and high levels of
installed OWF capacity. This decline is mainly caused by vanishing revenues from energy
provision, which are declining due to a saturation on the energy market. Nevertheless,
specific revenues of capacity provision rise again at high levels of installed OWF capacity. A
minimum profit of 5,000 - 6,000 /MW is sustained in all cases.
3. The paid feed-in tariff has a tremendous influence on net revenues from energy provision. A
high FIT makes a participation less attractive for OWFs, as it increases opportunity costs. Also
costs for energy provision increase with the participation of offshore wind farms, if the FIT is
high.
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4. A reduction of the product length from four hours to one hour increases both revenues from
capacity as well as energy provision in each OWF capacity scenario. However, the effect
diminishes at scenarios with higher installed OWF capacity. Costs for energy provision are
higher than in reference scenario B. This is due to increased marginal energy prices resulting
from a better adjustment of OWF bid prices to individual calling events. This effect is probably
overrated by the model.
5. Tenders on weekends can increase specific revenues of OWF operators by up to 40 %.
Furthermore, the by far largest cost saving potentials are enabled. This is especially true at
scenarios with higher installed capacities of OWFs. Thus, responsible authorities should
consider rearranging the tendering habits in order to make the whole TCR market accessible
to OWFs.
6. Higher capacity procurement volumes gradually increase specific capacity revenues due to an
expansion of the overall market volume. Though disadvantageous for the system costs
situation, a development towards this direction would assure high revenues for OWF
operators.
All-in-all, a profitable participation of OWFs seems possible under each examined framework
condition. If market reactions follow the forecasted scheme, specific annual revenues can be retained
at a roughly constant level of 5,000 - 6,000 /MW, even at high maximum expectable penetration
levels of offshore wind. Revenues will further increase at higher penetration levels of OWFs, if they
initiate an increase of procured capacity volumes. The maximum welfare is added, if OWFs were
enabled to place bids on weekends, which roughly increases their specific revenues by 30-50%, while
further reducing system costs at the same time.
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6 Summary and Conclusions

This report assessed the potential role of OFWs in the provision of AS and eventual opportunities and
barriers for a participation.
Power markets in Germany and the Netherlands were compared regarding framework conditions and
subsidies for OWFs. AS were mapped and scrutinized for opportunities as well as barriers for a
provision by OWFs consecuting in a focus on the market for control reserve. A quantification of
achievable OWF operators revenues and savings of system cost followed in a detailed hindcast and
forecast analysis for the German control reserve market. The impact of distinct framework conditions
on OWF operators revenues and system costs was assessed in several case studies.
Results from the market mapping of ancillary services

A mapping of AS and their assessment cosidering potentials for OWFs showed that though the AS
market is comparativley small to the wholesale market, it still holds substantial revenue potentials for
OWFs. But not all AS can be reasonably provided by wind farms. The market for control reserve has
the largest market size and is an especially good fit for OWFs, although prequalification requirements
in Germany still constitute barriers. Also the Re-Dispatch market can constitute an additional revenue
source for OWFs, which, however, seems pointless under the FIP scheme, as it makes downregulation comparably expensive. The provision of reactive power, inertial control or black start
capabilities is technical possible, but is assesed as unattractive in the near future.
Results from hindcast analysis

The quantification of OWF revenue and system cost saving potentials, under distinct framework
conditions, for an exemplary wind park in the German control reserve market led to the results
summarized in Table 16.
0.35 Standard Deviation
Spec.Rev.
in /MW
Cost
reductions24
Basic Scenario
17,809
0.23%
Higher FIT
14,058
1 Hour product
27,526
Weekend tenders
SCR market
25

Spec.Rev. in
/MW
Cost
reductions
Spec.Rev. in
/MW
Cost
reductions
4,442
0.08%
1,721
0.03%
0.01%
3,687
-0.03%
1,409
-0.01%
0.01%
10,738
0.04%
6,599
0.02%
4,594
0.06%
33,641
1.97%
9,805
0.59%
4,226
0.46%
Table 16: Overview of hindcast case studies' results.
Improving forecast quality can increase specific revenues of OWFs by up to factor 10. Cost
savings from the participation of OWFs increase likewise with better forecast quality. Thus, the
gate closure time of the auction should be moved closer to time of delivery.
24
25
Only the capacity market is quantitatively assessed.
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110
A higher FIT leads to a market distortion and losses of welfare on the negative TCR market.
Revenues of OWFs are diminished by about 20%, while system costs even slightly increase
through the participation of OWFs.
The reduction of contract duration to hourly products instead of blocks of four hours leads to an
increase of income by factor 1.5 to 3.8. The greater the auction lead-time, the greater the effect
of shortening the product length, as forecasts deviate stronger during different hours.
Tenders on weekends allow the participation of OWFs during times of elevated prices (especially
Sundays), which leads to higher specific revenue potentials by more than factor 2.5. System
costs decrease slightly.
Specific revenue potentials on the SCR market could be more than twice as high as on the TCR
market. However, a participation of OWFs is not possible under current market conditions.
From systems perspective, a high market premium paid to OWF operators combined with the twostaged tender in the German control reserve market leads to higher system costs. OWF can provide
negative TCR capacity at zero cost and are successful in the procurement auction which is entirely
based on capacity bids. Their activation costs are defined by the support scheme, i.e. the market
premium, and often exceed historic average or marginal energy prices for negative TCR. If OWF
follow a profit maximising strategy this will lead to higher total costs as the capacity cost savings
cannot compensate higher activation costs. This situation changes when the market premium in the
support scheme is reduced. In this case, the OWF participation leads to overall costs reductions.
Results from forecast analysis

The modelling of future market conditions at different penetration scenarios of offshore wind showed
that a profitable TCR provision, with earnings amounting to 5,000 - 6,000 /MW, can be achieved by
OWFs even at higher installed capacities of OWFs, if offering in a portfolio. At higher penetration
levels, revenues from capacity provision become the major revenue source, while revenues from
energy provision are increasingly negligible due to market saturation effects. The influence of
different framework conditions is summarized in Table 17.
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Scenario 3 (30 GW)
Spec.Rev.
in /MW
Spec.Rev.
in /MW
Spec.Rev.
in /MW
Cost
reductions26
Cost
reductions
Cost
reductions
Ref. Scn. A27
10k
0.9%
3k
33%
1k
49%
Ref. Scn. B28
10k
0.7%
5k
20%
6k
18%
7k
0.4%
5k
6%
5k
-5%
1 Hour product
14k
-0.8%
7k
13%
6k
18%
Weekend tenders
15k
0.9%
9k
32%
8k
33%
10k
0.7%
7k
12%
10k
13%
Higher FIT
Table 17: Overview of forecast analysis case studies results.
26
Percentage of cost reductions through the participation of OWFs in the control reserve market.
27
Excluding market reactions to higher installed OWF capacities.
28
Including market reactions to higher installed OWF capacities.
29
Increasing capacity procurement volumes.
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Not considering market reactions to higher installed capacities of OWFs, a market saturation
steps in very quickly. Specific revenues decline by factor 4 to 10, but cost reduction
potentials gradually increase to nearly 50%.
Considering market reactions, specific revenues drop by 55%, but then remain at nearly the
same level at higher penetration levels of OWFs. The market saturation effect is reduced due
to increasing capacity bids of conventional participants and higher frequencies of energy calls.
Cost reduction potentials amount to 20% at higher penetration levels of wind.
A high FIT especially diminishes specific revenues of OWFs at low penetration levels of
offshore wind. The revenue diminishing effect is less pronounced at higher penetration levels
of offshore wind, as it is superimposed by market saturation effects. Nevertheless, cost
reduction potentials are strongly reduced, which can lead to absolutely rising system costs.
The implementation of hourly products increases specific revenue potentials by roughly 40%.
Additional revenue potentials decline to 7% at maximum penetration levels of OWFs due to
market saturation effects. Cost reduction potential are slightly diminished.
Tenders on weekends increase specific revenues by 50-70%, even at maximum penetration

levels of OWFs. The same is true for cost reduction potentials, which amount to up to 33%.
This option is identified, as the most effective at higher penetration levels of OWFs.
Increasing capacity procurements provide OWFs with higher revenue potentials due to an
increasing demand in control reserve. Consequently, absolute system costs increase, but can
be reduced through the participation of OWFs by 12-18% at higher penetration levels.
Recommendations
OWF operators should consider the participation in the negative TCR market, as it holds
additional revenue potentials.
If the market design of the negative SCR market was adjusted, a participation could even
provide greater income potentials. The participation on the positive control reserve market is
not economic under current market conditions.
OWF should attempt to improve forecasting quality, as this can substantially increase revenue
potentials. Shorter lead times of the control reserve auction has the same effect.
A different bid evaluation system needs to be established in order to avoid the adverse
incentives resulting from the two-staged auction. This bid evaluation system would need to
incorporate the impact of the energy bids and the support scheme.
A reduction of the product length from four hours to one hour or even 15 minutes should be
considered to increase the effectively available OWF capacity for control reserve provision.
This is especially effective at low penetration levels of OWFs.
The implementation of tenders on weekends should be considered especially at high

penetration levels of offshore wind, as price levels on the weekend are significantly higher.
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7 Dutch Market Addendum

This addendum Dutch Market is an addition to the report FLOW Dynamic Power Management
WP2.2 Market Interaction and will explain our expectation for Offshore wind farms when
participating on the Dutch Control reserve market. As a whole, the literature review shows that
similar level of earnings can be expected (ballpark figure). However, more detailed assessment can
be done using a detailed market model for the Netherlands. We therefore here present how such a
model can be developed and discuss key bottlenecks, such as the availability of data.
7.1 Dutch control reserve market

At the moment, there is no participation of wind farms on the control reserve markets in the
Netherlands, however, negotiations between market parties and TenneT on this topic are under way.
The market design characteristics are summarized in Table 1. On the one hand, the capacity market
design in the Netherlands is impeding the participation of OWFs due to long term contracts. On the
other hand, the option to participate in an Energy-Only market is very suitable for OWFs. The
legislative framework does not impose any barriers.
Option 1
Long term contracts
Option 2
Energy-Only
Primary Control
Reserve
Auction period of one week

Symmetric bids
Minimum bid size: 1 MW
No energy payment/
No energy-only market
Negative
Secondary
Control Reserve
Symmetric bids
Lead time of one year
Product length from 1/4 to 1 year
Min bid size: 4 MW
Bids do not have to be symmetric

One hour lead time
Product length of 15min
Min bid size: 4 MW
Negative
Tertiary Control
Reserve
Symmetric bids
Lead time of one year
Product length from 1/4 to 1 year
Min bid size: 20 MW
Bids do not have to be symmetric

One hour lead time
Product length of 15min
Min bid size: 20 MW
Table 18: Overview of market design characteristics
Primary control reserve (PCR)

The market design of the Dutch PCR market is similar to the German one. Both do not allow the
participation of OWFs due to long auction periods. Tenders take place only once a week resulting in
forecast horizons, which are not feasible for OWFs. Also the symmetric character of control reserve
provision makes the participation of OWFs not reasonable, as it requires OWFs to operate in a
constantly ramped down state for being able to provide positive control reserve.
Negative secondary control reserve (SCR)

The Dutch SCR market holds two options for participation.
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First, a participation within a long term contract. The auction for this type of participation takes place
with a lead time of one year and obliges the contractor to place corresponding symmetric energy bids
in a time frame from a quarter year to up to a whole year. This commitment for capacity provision is
remunerated. However, this option is not suitable for OWFs due to extremely long forecast horizons
and the obligation to symmetric bids. At the moment, market parties are investigating pooling of
assets to enable this option.
Second, a participation in the Energy-Only market. Market participants, who are not willing to
engage in long term contracts are able to place energy bids spontaneously. However, they do not
receive a remuneration for capacity provision, as in the first option. Bids can be placed with a lead
time of one hour, a product length of 15 min and a minimum bid size of 4 MW. These characteristics
substantially improve the flexibility of the market participants and thus constitute an especially good
fit for OWFs.
Negative tertiary control reserve (TCR)

The Dutch TCR market holds the same two options for participation, as the SCR market. The market
design of the long term contract and the Energy-Only option is identical to the SCR market, with
the exemption of the minimum bid size being 20 MW instead of 4 MW. The higher minimum bid size
impedes the participation of OWFs, but would constitute a minor barrier for OWFs in larger portfolios.
All-in-all, the participation of OWFs in the Energy-Only market for negative SCR and TCR is
expected to be reasonable for OWFs. Specific revenues from energy provision in the Dutch market
are expected to be higher than in the German market because of a better forecasting due to shorter
lead times and product lengths. However, total specific revenues on the control reserve market are
expected to be lower, as revenue potentials from capacity provision are not available for OWFs in the
current Dutch market. The adaptation of the market design of the long term contracting option
towards shorter lead times and product lengths could substantially increase the attractiveness of the
control reserve market for OWFs and also reduce system costs from capacity provision.
7.2 Modelling the Dutch control reserve market

By creating a model of the Dutch market in accordance to our existing model for the German market,
the impacts of a participation of OWFs in the Dutch SCR and TCR (Energy-Only) market could be
quantified regarding OWF revenue potentials and savings of system costs. Similar to the existing
German model, this could be done within a hindcast analysis and a forecast analysis considering
different penetration levels of offshore wind. Revenues and system costs savings could be
benchmarked against the German market.
In a next step, also the effect of the following market design changes on OWF revenue and system
cost saving potentials would be quantitatively assessable.
1. The adaption of the capacity market design to shorter lead times and reduced product
lengths could be modelled. As, according to the product length, capacity market data is
granulated in periods of to 1 year, assumptions have to be made in order to model shorter
periods. Here, the knowledge from the analysis of market dynamics in the German market
could help to extrapolate price effects in the Dutch market, taking into account the key
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differences between the markets, e.g. contracting levels, reason for contracting, impact to
socialised costs, etc.
2. The effects of a reduction of the minimum bid size could be quantified. Realistic wind speed
and forecast error data would be used to determine the marginal effects of minimum bid size
reductions and the expansion of OWF portfolio size.
3. Impacts of a consolidation of the German and Dutch market for SCR and TCR could be
examined. The implementation of this case study is facilitated through the existence of the
German market model. With a cross-border reserve provision, system costs are expected
to decrease due to a prevention of opposed energy calls. However, OWF revenue potentials
are expected to decrease due to an increasing market saturation.
Off course, the market model should be adjusted according to the specific details of the market
design in the Netherlands and some effort is needed on this direction. However, the key bottleneck
identified is the availability of respective market data. Below we present an overview of the data
needed for such analysis.
Missing Data
Data for the Dutch market is not as openly accessible as in case of Germany. Thus, the possibility of
a market modelling is depending on the provision of the following data sets:
1. Bids by individual parties in MW with prices (at least marginal bid)
2. Called balancing energy with corresponding energy price
3. Contracted balancing power with corresponding capacity price
4. [If positive control reserve should be examined as well, Dutch spot market data would be
necessary]
5. Forecast and realisation data for OWF
The long term capacity bids for secondary and tertiary reserves are placed in a sealed auction and
can only be provided by the TSO. However, following the statement of TenneT NL, capacity bids in
the Netherlands are assumed to have similar price levels as in the German control reserve market.
Thus, in case no data sets can be provided, they could be approximated built on the knowledge
gained from the analysis of the German market. The other needed data sets are less restricted and
could be researched as part of a follow-up project.
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8 Appendix
8.1 Documentation of forecast case study results
This chapter provides detailed results of the individual case studies and explanations concerning their
formation. For this, first specific revenue potentials and occurring system costs are quantified.
Afterwards, outcomes are explained by means of quantified changes on the negative TCR market.
8.1.1 Minimum scenario bidding strategy
The minimum scenario shall allow the assessment of maximum cost saving potentials. Independent
of the framework scenario, most cost reductions can be realized, if OWFs follow a bidding strategy,
which provides them with exactly zero net revenues. This assures the lowest possible bid prices and
an implicit passing over of OWFs gains to the market in the form of cost savings.
Distinct to conventional power plants, OWFs do not have to anticipate any cost from providing
negative TCR. As they are, to a far extent, compensated by subsidies and do not face significant
variable cost, they do not face the risk of being forced to produce energy at unprofitable prices. Thus,
zero capacity price bids would imply a non-profit operation and could, hypothetically, be enforced by
regulatory authorities.
The situation is slightly different in case of energy price bids. If OWFs reduce their power feed-in for
the provision of negative control reserve, they face opportunity costs amounting to the market
premium. The market premium is lost, as it is a subsidy connected to the actual feed-in and does not
expand to ancillary services. Thus, the minimum energy bid, which is not involving an unprofitable
operation, cannot be lower than the market premium.
Summarizing, it was argued that an OWF bidding strategy consisting of the placement of zero
capacity bids and the market premium as energy bid will lead to zero OWF revenues on the TCR
market and enable the highest cost saving potentials. This bidding scenario will be included in the
following study cases as indicator for maximum possible cost savings.
8.1.2 Height of the market premium
As described in section 0, the market premium constitutes a downside price limit for OWF energy
bids. In case of a call, the subsidy amounting to the market premium is lost and cannot be
compensated by the revenues from energy provision, if the energy bid was set below the market
premium price. The market premium within the reference scenarios and the other scenarios in this
section is calculated on the basis of a feed-in tariff of 35 /MWh constituting the basic remuneration,
which is paid after a decrease of the feed-in tariff after 12 years of operation, according to 31 EEG
2012. [27] This section aims at assessing potential OFW operators revenues and system costs under
the condition of the feed-in remaining at a high initial remuneration level 150 /MWh. A high market
premium could provide solid revenues from OWFs power feed-in, but would also increase the
downside limit for OWF energy bids and ultimately diminish net gains from energy provision as well
as cost saving effects. The actual effect shall be quantified in the following.
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The results depicted in Figure 75 indicate an immense effect of the higher market premium on the
achievable specific net revenues from energy provision. Revenues per installed capacity are
diminishing to a negligible level in scenario 2 and 3. Revenues in scenario 1 are still significant, but
are reduced by 61 % in comparison to reference scenario B, which was calculating with a low market
premium.
OWF operators' specific

renvenues [/MW]
12,000
Specific Capacity Revenues
Specific Net Energy Revenues
10,000
8,000
6,000
4,085
1,588
13
4
287
128
4,000
5,814
5,814
2,000
5,110
5,110
5,420
5,420
0
incl. ref. Scn.
OWFs
B
Scenario 1 (0.6 GW)
incl. ref. Scn.

OWFs
B
Scenario 2 (11 GW)
incl. ref. Scn.

OWFs
B
Scenario 3 (30 GW)
Figure 75: Specific revenue potentials at a continuous feed-in tariff of 150 /MWh.
Effects on costs
Looking at costs presented in Figure 76, it is apparent that a higher market premium diminishes most
energy cost saving effects. Moverover, it even leads to an increase of the energy costs for negative
TCR calls. While in scenario 1 energy cost can be slighlty redcued by 1 m, the cost go up by 4 m in
scenario 2 and by 57 m in scenario 3. As in scenario 3 energy costs increases are compensating
cost reductions on the capacity market, this even leads to an inrease of overall cost through the
participation of OWFs.
Nevertheless, system costs can still be reduced, if OWFs renounce their
revenues. Hereby, cost reductions are nearly exclusivley achieved on the capacity market.
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Energy Costs
69
126
34
149
149
149
142
excl. OWFs
min. Scenario
Scenario 1 (0.6 GW)
199
199
218
Scenario 2 (11 GW)
335
368
excl. OWFs
145
335
171
incl. OWFs
52
126
min. Scenario
40
excl. OWFs
39
ref. Scn. B
39
incl. OWFs
38
48
23
ref. Scn. B
52
ref. Scn. B
System costs [m ]
Capacity Costs
incl. OWFs
min. Scenario
500
450
400
350
300
250
200
150
100
50
0
Scenario 3 (30 GW)
Figure 76: System costs at a continuous feed-in tariff of 150 /MWh.
Shrinking specific revenues of OWF operators and cost saving potentials on the energy market can be
explained with two factors.
First, the higher market premium increases opportunity costs, decreasing therewith the profit margin
of energy provision. Moreover, a higher market premium effectively increases the downside bid limit
of OWFs, as already decribed above. In the modelled cases that market premium is ranging between
118 /MWh and 135 /MWh, depending on the month and the respective price level on the spot
market. As evident from Figure 77, paid marginal prices for energy provision are usually ranging
below that minimum possible bid prices of OWFs. This constitutes a foreclosing of the OWFs from the
participation in the energy market, during many calls. While the mean prices of accepted wind bids
are at a high level in scenario 1, they fall to almost minimum values in scenario 2 and 3. Obviously,
higher available capacities of OWFs forced OWFs to reduce their energy bids to a baraly profitable
level, which explaines their diminishing profitability on the control energy market. Moreover, also cost
saving potentials are negatively effected, as wind control energy is getting more expensive and the
Energy prices
[/MWh]
total volume provided by OWFs reduces.

300
202
200
109
101
100
126
100
125
0
Scenario 1 (0.6 GW)
Scenario 2 (11 GW)
Mean marginal energy prices
Mean accepced wind bids
Figure 77: Marginal prices on the control energy market.
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118
Second, when OWFs penetrate the capacity market with possible zero capacity bids, they partially
oust participants, which could potentially provide a cheaper control energy price. Consequently, in
case of calls with higher amplitudes, more expensive OWF bids are requested. Additionally, to a
reduction of cost saving potentials that were described above, this effect leads to even increasing
costs. The effect becomes more pronounced in scenario 3, where OWFs are able to reach a 57 %
volume market share in the energy market, although by bidding mostly non-profitable energy prices
to be called completely.
Conclusion
The effect of a high feed-in tariff of 150 /MWh on OWFs revenues and system cost was examined. It
was shown that the specific revenues on the energy market are diminished to a negligible level at
higher penetration levels of offshore wind. At low penetration levels, as in scenario 1, net revenues
are also strongly reduced by a high feed-in tariff. Nevertheless, specific net revenues of roughly
1600 /MWh are possible in scenario 1. Control energy cost reductions through the participation of
OWFs seem impossible at higher penetration levels of OWFs. Energy costs are rather increasing and
even overcompensating the reductions on the capacity market, which is leading to higher overall
cost, caused by the participation of wind. Thus, a reduction of the feed-in tariff or a change of the
subsidy conditions for OWFs seems reasonable in long term.
8.1.3 Comparison of a product length of 1 hour to 4 hours
In the current market for TCR, bids are placed for each of the altogether six time slices of four hours
in each day. Accepted bidders are responsible for providing the bid control reserve volume
throughout the complete time slice at a reliability level of about 99.994 % [28]. This means that the
bid volume can be only as high as it were possible for an OWF portfolio to provide the volume even
during the point of time in the time slice with the minimum wind capacity. Consequently, OWFs shall
refer the bids to minimum forecasted wind conditions during that time frame. Thus, a finer clustering
of the time frame of four hours could enable OWFs to bid higher volumes and with that reduce
system cost and increase revenue potentials. This section aims at quantifying the effect of a finer
clustering of the bidding intervals into one hour time slices.
As visible from Figure 78, reducing the product length of TCR capacity provision has a positive effect
on both specific revenues from capacity as well as control energy provision. Surprisingly, the effect is
even stronger pronounced in case of revenues from control energy provision. While specific capacity
revenues show an increase of between 4 % and 17 %, specific revenues from energy provision are
nearly 6-times higher in scenario 2. However, revenues from energy provision are almost aligned
again in scenario 3.
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OWF operators' specific renvenues

[/MW]
16,000
14,000
12,000
6,788
10,000
8,000
4,085
1,897
6,000
287
4,000
6,828
2,000
5,814
5,544
5,110
292
128
5,634
5,420
0
incl. ref. Scn.
OWFs
B
incl. ref. Scn.

OWFs
B
Scenario 1 (0.6 GW)
incl. ref. Scn.

OWFs
B
Scenario 2 (11 GW)
Scenario 3 (30 GW)
Figure 78: Specific revenue potentials at an hourly tendering of negative TCR.
Effects on costs
Despite increased revenues of OWFs, cost reduction potentials still exist, as visible from Figure 79.
Except of the energy costs in scenario 1, all other costs have reduced through the participation of
OWFs. While the OWF capacity seems to be too low to reduce capacity costs significantly, cost can be
reduced by 10 % in scenario 2 and 3. Cost reduction potentials on the energy market are even more
pronounced in scenario 2 and 3, where control energy costs can be reduced by 15 %, respectively 44
%. In scenario 1, high specific OWF revenues show their impact on energy cost, even leading to an
increase of energy costs by 4 %. Generally speaking, cost reduction potentials for called control
Capacity Costs
Energy Costs
69
40
145
149
149
149
134
excl. OWFs
min. Scenario
196
199
218
ref. Scn. B
excl. OWFs
Scenario 2 (11 GW)
Figure 79: System costs at an hourly tendering of negative TCR.
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incl. OWFs
Scenario 1 (0.6 GW)
18
120
333
335
368
excl. OWFs
39
ref. Scn. B
42
34
48
162
min. Scenario
35
23
38
incl. OWFs
40
ref. Scn. B
incl. OWFs
500
450
400
350
300
250
200
150
100
50
0
min. Scenario
System costs [m ]
energy are systematically smaller than in reference scenario B.
Scenario 3 (30 GW)
The positive effect on revenues from capacity provision can be explained with a higher share of
capacity, which OWFs are able to bid on the negative TCR market. Effectively, this leads to a higher
overall capacity, which is able to generate revenues for OWFs. This is because only speed variations
and forecast errors for a time frame of one hour, instead of four hours, have to be taken into
account. Consequently, while OWFs were orientating on the available minimum power capacity in a
time frame of four hours, this period has reduced to a one hour time frame.
The especially pronounced increase of revenues from energy provision is explainable with the
modeled OWF bidding behavior. In order to provide a measurement for the maximum achievable
OWF revenues, it was assumed that OWFs were able to anticipate the maximum energy bid price for
each time slice, so that they were able to provide all of their available capacity for calls. As in some
cases the amplitudes of calls are quite small, OWFs have to decrease their bids immensely in order to
oust cheaper participants to ensure a demand in their own capacity. Because bids are placed for the
duration of a whole time slice, the lowered bid reduces also the profitability of all other calling events
in that time frame, which had possibly allowed also higher bids. Thus, a clustering of time slices into
one hour intervals allows OWFs a better adjustment of their bids to low and high amplitude calls
explaining the strongly increased specific revenues from control energy provision. Here, it should be
kept in mind that these revenues are most likely overrated, because of the simplified bidding model
that was primarily designed to show maximum revenue potentials. The model assumes OWFs
anticipation of calling amplitudes, which is not to that extent realizable in reality.
Costs are in this case directly interrelated with the additional revenues of OWFs. Declined cost
reduction potentials can be mainly led back to two former mentioned mechanisms, which allowed
OWFs to increase their revenues.
Conclusion
All-in-all, an hourly tendering of negative TCR seems especially attractive for OWF operators, which
can are able increase revenues. This can be explained by higher possible capacity bid volumes of
OWFs and a better adjustment of energy bids to individual call situations. The effect is especially
pronounced at low penetration levels of offshore wind, but is diminished with increasing installed
capacity. Cost reduction potentials are still achievable through the participation of OWFs. However,
they range at a lower level than in reference scenario B.
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8.1.4 Tendering on weekends

In the current market for TCR, tendering takes place only on workdays. That means that bids for
Sundays and Mondays have to be places on Fridays as well. What is a minor issue for conventional
power plant operators, can be a barrier for OWF operators, as the forecast quality immensely drops
at time intervals, which are longer than 24 hours. For this reason a participation of OWFs does not
seem realistic at these days at the current market setting. Thus, it was not included into the
reference scenario and the other study cases within this section. Nevertheless, a future change of the
market design could constitute a great increase of revenue and cost saving potentials, especially as
price levels are usually nearly twice as high on Sundays as during the rest of the week. This section
aims at quantifying the effect of daily tenders on both revenue potentials as well as cost saving
potentials. (cf. chapter 4)

Figure 80 depicts specific revenues from capacity provision as well as from negative TCR provision in
comparison to reference scenario B, which was not including OWFs to the control reserve markets on
Sundays and Mondays. A tremendous effect on specific revenues from capacity provision is visible.
Revenues from capacity provision in each wind penetration scenario are increasing by roughly 50 %
to 75 %. Specific revenues from control energy provision are similarly affected. In scenario 1, an
increase of specific net energy revenues by 17 % seem possible, whereas revenue potentials in

[/MW]
scenario 2 and 3, which are at an initially lower level, show an increase of even 40 %.
16,000
14,000
12,000
4,796
402
10,000
8,000
6,000
4,000
2,000
175
4,085
10,124
8,813
5,814
8,314
5,110
5,420
0
incl. ref. Scn.
OWFs
B
Scenario 1 (0.6 GW)
incl. ref. Scn.

OWFs
B
Scenario 2 (11 GW)
Figure 80: Specific OWF operators' revenues with tenders on weekends.
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287
122
incl. ref. Scn.

OWFs
B
Scenario 3 (30 GW)
Effects on costs
As illustrated in Figure 81 tenders on weekends can reduce cost in all wind penetration scenarios
even below the level of reference scenario B. Absolute and relative cost saving potentials increase
with higher penetration levels of offshore wind, for both energy- as well as capacity costs. While cost
savings are negligible in scenario 1, in scenario 2 and 3, about 20 % of capacity costs and about
65 % of energy costs can be saved. An interesting additional aspect is that if OWFs place bids with
zero profitability, as done in the minimum scenario, they are able reduce costs in scenario 2 and 3 to
levels, which are even below the level of scenario 1. This indicates that higher capacities of installed
OFWs, can reduce current system costs, even despite increasing bid levels and increasing frequencies
Capacity Costs
Energy Costs
69
21
excl. OWFs
Scenario 1 (0.6 GW)
13
87
184
199
218
368
excl. OWFs
149
335
ref. Scn. B
149
307
incl. OWFs
149
16
55
Scenario 2 (11 GW)
min. Scenario
142
17
excl. OWFs
40
ref. Scn. B
39
34
48
23
incl. OWFs
38
min. Scenario
35
ref. Scn. B
incl. OWFs
500
450
400
350
300
250
200
150
100
50
0
min. Scenario
System costs [m ]
of calls, if the control reserve provision by OFWs is done at zero profits.
Scenario 3 (30 GW)
Figure 81: System costs with tenders on weekends.
Explanation of Outcomes
The effect on specific capacity revenues is primarily explainable with an extraordinary high overall
bidding level on the capacity market on Sundays and a high amplitude of calls on this day. As already
depicted in chapter 4, marginal capacity price bids are nearly twice as high on Sundays comparing to
the rest of the week. Though weighted average energy prices are not above average on Sundays,
marginal prices are. This indicates abnormally high amplitudes of calls on Sundays that could be
caused by generally low and harder predictable load levels.
The reason for the cost saving effect is the omitted restriction of OWFs to bid for Sundays and
Mondays, which constitutes a significant increase of the available overall market volume for OWFs.
Potential cost reductions are especially high on Sundays, as they are usually marked by an
abnormally high level of marginal capacity and energy prices. With access to the whole negative TCR
market, OWFs are able increase the volume of their provided control reserve on the capacity and
energy market by 40-50%. This is a tremendous amount considering that only two of seven days of
the week were added for OWFs.
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Conclusion
Enabling OWFs to participate each day on the control reserve market by setting up tenders on
weekends, would enormously increase system cost saving potentials and make the participation in
the negative TCR market more attractive to OWFs. This is true for each installed OWF capacity
scenario. The opening of the market for Sundays has an especially high effect due to usually very
high marginal price levels. In the minimum scenario at higher penetration levels of offshore wind,
costs can be even reduced under the current level. All-in-all, weekend tenders seem to be highly
reasonable regarding incentives for OWF operators and system cost, especially at higher penetration
levels of wind.
8.1.5 Higher volumes of procured capacity
As portrayed in section 5.2, opinions on future requirements of reserve capacity are quite divergent.
Furthermore, the analysed data did not show a clear influence of higher VRES feed-in levels on the
amplitude of calls, which are a decisive for the extent of capacity procurement requirements.
Nevertheless, it is thinkable that influence becomes more pronounced, when a certain capacity of
OWFs is exceeded. This section will examine the influence, which higher amplitudes of calls and, with
that, higher amounts of procured capacity have on OWFs operators revenues and system costs.
Three factors are taken into account for modelling higher procured capacities.
First, obviously, the procured capacity volume has to be scaled up. The amount of how much
additional capacity procurements are needed is set to a value of 10 % of the installed OWF capacity.
The resulting values from that assumption, listed in Table 19, are in line with the ranges supported in
the literature, which has been reviewed in section 5.2.
Table 19: Additional capacity procurement of negative TCR at higher penetration levels of offshore wind.
Mean 2013
Scenario 1
Scenario 2
Scenario 3
Additional procurement
62 MW
1.109 MW
3.027 MW
Relative
+2%
+ 43 %
+ 117 %
2659 MW
3706 MW
5624 MW
Total
2597 MW
Second, the amplitudes of calls have to be scaled up, as in praxis they should be a main reason for
higher capacity procurements, in the first place. This is done by scaling up the calling amplitudes
from the reference scenario with the relative factor by which the capacity procurement amount has
increased.
Third, higher capacity procurement volumes will require additional bidding volumes in order to be
covered. The up scaling of bidding volumes is done by increasing the volumes of all bids
proportionally to the increase of the procurement volumes. This way the effect of bid volume
shortages is detached.
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Figure 82 shows the specific revenues of OWF operators under the assumtion that the procured
capcity amount and, with that, the amplitude of calling events increase at 10 % of additionally

[/MW]
installed OWF capacity.

25,000
20,000
15,000
10,000
5,000
270
4,130
4,085
5,819
5,814
476
6,562
287
5,110
10,089
128
5,420
0
incl.
ref.
OWFs Scenario
B
Scenario 1 (0.6 GW)
incl.
ref.
OWFs Scenario
B
Scenario 2 (11 GW)
incl.
ref.
OWFs Scenario
B
Scenario 3 (30 GW)
Figure 82: OWF operators specific revenues regarding an increase of the amplitude of calls relative to installed OWF
capacity proportionally increased bid volumes of all conventional participants.
It is visible that both specific revenues for capacity provision as well as control energy provision have
increased in comparison to reference scenario B in each of the OWF capacity scenarios. While specific
capacity revenues in scenario 1 are nearly equal to the reference scenario B, capacity revenues in
scenario 2 and 3 are gadually increasing by 28 %, respectivley 86 %. Being at initially very low
levels, specific net energy revenues show an even higher relative increase of 66 % in scenario 2 and
109 % in scenario 3. Secific net revenues in scenario 1 are only minorly affected.
Effects on costs
Costs arising with additional capacity procurements and higher amplitudes of calls are depicted in
Figure 83. A huge increase of the cost levels is recognizable in scenarios with high penetration levels
of offshore wind. In fact total costs have increased by 33 % in scenario 2 and by 55 % in scenario 3,
if comparing to the respective reference scenario B. Even costs in the minimum scenario, depicting
cost at OWF bids with zero profitability, are 15 %, respectively 38 %, higher than in reference
scenario B. Costs in scenario 1 are only marginally affected.
WIENL14568
125
Energy Costs
150
76
68
226
299
23
199
312
441
799
excl. OWFs
ref. Scenario B
Scenario 2 (11 GW)
34
335
incl. OWFs
min. Scenario
excl. OWFs
Scenario 1 (0.6 GW)
31
excl. OWFs
41
152
ref. Scenario B
39
149
746
68
36
incl. OWFs
39
152
min. Scenario
37
148
ref. Scenario B
System costs [m ]
Capacity Costs
incl. OWFs
min. Scenario
1,000
900
800
700
600
500
400
300
200
100
0
Scenario 3 (30 GW)
Figure 83: System costs regarding an increase of the amplitude of calls relative to installed OWF capacity
proportionally increased bid volumes of all conventional participants.
The increase of specific revenues from capacity provision is directly explainable with additional
revenues from an expanded capacity procurement. Obviously that additional procured volumes allow
the OWFs to place higher capacity price bids, but still be procured completely. In the same time, the
overall size of the capacity market increases through the higer demand in reserve capacity.
Higher specific net revenues from energy provision are resulting from higher amplitudes of calls,
which allow OWFs to place bids at higher levels. As assumed in the case study construction, they are
causing higher demands in reserve capacity or at least going with higher capacity procurements. Also
the size of the energy market increases, as higher amplitudes of calls require higher capacities of
provided control energy.
The reason for additional costs from capacity and energy provision is directly linked to the increasing
demand in negative TCR due to higher capacity procurements and higher amplitudes of calls.
Consequently, as totally more capacity is procured and more energy called, the costs of both energy
and capacity provision is equally increasing. Also the participation of OWFs cannot fully compensate
the heightened cost through a cheaper provision of control reserves.
Conclusion
An increase of the amplitude of calls and, with that, the height of capacity procurements will lead to
significantly higher system costs. This effect is only marginally compensated through the participation
of OWFs in the control reserve market, as the increasing demand in capacity and energy allows
higher bid prices. However, OWF operators revenues are substantially increased by effectively
expanding sizes of the capacity and energy market. Nevertheless, rising specific revenues from
capacity provision cannot compensate the decline of specific net energy revenues, caused by market
saturation effects at scenarios with high penetration levels of offshore wind.
WIENL14568
126
8.2 Additional Figures and Tables

Some figures were not presented within the report for the sake of a better readability. They shall be
attached in the following to allow a more comprehensive picture of the findings.
Influence on load forecast errors on frequencies and amplitudes of calls on weekends

The influence of load forecast errors on the occurrence rate and amplitudes of calling events was
described for workdays in section 5.3.2. Figure 84 and Figure 85 on the contrary depict the situation
on weekends.
Weekends
65
0.35
60
55
0.3
50
0.25
45
0.2
40
0.15
0.1
35
0.05
30
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Figure 84: Weekends Relative frequency of calling events in each 15min of the day in 2013
WIENL14568
127
25
Mean load [GW]
0.4
Relative frequency of calling events (first quater of an hour)

Weekends
1500
1400
75
Average amplitude of calling events (first quater of an hour)
Average amplitude of calling events
70
65
1300
60
1200
1100
55
1000
50
900
800
45
700
40
600
35
500
400
30
300
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
WIENL14568
128
25
Mean load [GW]
Average amplitude of calling events [MW]
1600
Allocation of wind capacity

The following data was used for creating the wind penetration scenario 1,2 and 3. The formation
process is described in section 5.2.
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Rostock
2.5
2.5
3.6
FINO 2
ENOVA Offshore Ems-Emden
4.5
4.5
FINO 1
Hooksiel
FINO 1
Wikinger-Nord
3.6
FINO 2
Wikinger-Sd
18
6.15
FINO 2
Adlergrund 500
20
FINO 2
GEOFReE
25
FINO 2
Adlergrund Nordkap
31
FINO 2
Ostseeperle
35
FINO 2
Adlergrund GAP
39
FINO 2
Strom-Nord
39
FINO 2
Ostseeschatz
45
FINO 2
48.3
13
2.3
3.6
FINO 2
Beta Baltic
50
10
FINO 2
Arcadis Ost 1
58
348
6.15
FINO 2
Alpha Ventus (Borkum West)
60
12
FINO 1
BalticEagle
80
16
FINO 2
Riffgat
108
30
3.6
3.6
FINO 1
Nordergrnde
110
18
6.15
FINO 3
SeaWind I
Kaskasi II (Hochsee Testfeld
Helgoland)
125
25
FINO 1
170
34
FINO 1
GAIA II
195
39
FINO 3
Sandbank Ext.
200
40
FINO 3
Deutsche Bucht
210
42
FINO 1
Borkum Riffgrund West II
215
43
FINO 1
Baltic 1
30
Turbine models were categorized into three distinct turbine types (cf. section 5.2)
31
A: in operation; B: already authorized; C: in authorization process
WIENL14568
129
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Horizont IV
222
36
6.15
FINO 3
Gode Wind II
252
41
6.15
FINO 1
Borkum Riffgrund I
277
77
3.6
3.6
FINO 1
SeaWind III
285
57
FINO 1
OWP West
EnBW Windpark Baltic 2 (Kriegers
Flak)
288
58
FINO 1
288
80
3.6
3.6
FINO 2
Amrumbank West
288
80
3.6
3.6
FINO 3
Butendiek
288
80
3.6
3.6
FINO 3
DanTysk
288
80
3.6
3.6
FINO 3
Meerwind Sd / Ost
288
80
3.6
3.6
FINO 3
Sandbank 24
288
80
3.6
FINO 3
Innogy Nordsee 2 (ENOVA 3)
295.2
48
6.15
6.15
FINO 1
Nordsee Ost
295.5
48
6.15
6.15
FINO 3
SeaStorm II
300
60
FINO 1
Horizont I
306
50
6.15
FINO 3
Notos
318
52
6.15
FINO 1
Borkum Riffgrund II
330
66
FINO 1
Borkum Riffgrund West I
330
66
FINO 1
Gode Wind I
330
54
6.15
FINO 1
Nrdlicher Grund
330
54
6.15
FINO 3
GAIA IV
330
66
FINO 3
GAIA V
330
66
FINO 3
332.1
54
6.15
6.15
FINO 1
SeaWind IV
350
70
FINO 1
Innogy Nordsee 3 ( ENOVA 3)
369
60
6.15
6.15
FINO 1
Global Tech I
400
80
FINO 1
MEG Offshore I
Trianel Windpark Borkum
(Borkum West II)
400
80
FINO 1
400
80
FINO 1
Veja Mate
400
80
FINO 1
BARD Offshore 1
400
80
FINO 1
SeaStorm I
400
80
FINO 1
Innogy Nordsee 1 ( ENOVA 3)
WIENL14568
130
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Aquamarin
400
80
FINO 1
Austerngrund
400
80
FINO 1
Bernstein
400
80
FINO 1
Citrin
400
80
FINO 1
Gannet
400
80
FINO 1
GlobalTech II
400
80
FINO 1
Nautilus II
400
80
FINO 1
Skua
400
80
FINO 1
Arkona Becken Sdost
400
80
FINO 2
Wikinger ( Ventotec Ost 2)
400
80
FINO 2
GAIA I Nord
400
80
FINO 3
GAIA III
400
80
FINO 3
H2-20
400
80
FINO 3
Nordpassage
400
80
FINO 3
Delta Nordsee I & II
402
65
6.15
FINO 1
Horizont III
444
72
6.15
FINO 3
Horizont II
450
73
6.15
FINO 3
Albatros
475
95
FINO 1
ENOVA Offshore NSWP 4

EnBW Hohe See ( Hochsee
Windpark Nordsee)
486
79
6.15
FINO 3
492
80
6.15
6.15
FINO 1
504
82
6.15
FINO 3
510
83
6.15
FINO 3
570
93
6.15
FINO 3
EnBW He Dreiht
595
119
FINO 1
Kaikas
600
98
6.15
FINO 1
Aiolos
600
98
6.15
FINO 3
Nautilus
675
135
FINO 3
Diamant
800
160
FINO 1
Euklas
800
160
FINO 1
Jules Verne
800
160
FINO 3
Seagull
330
66
FINO 1
WIENL14568
131
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Atlantis I
330
66
FINO 1
Atlantis II
330
66
FINO 1
Atlantis III
330
66
FINO 1
Gode Wind III
330
66
FINO 1
Heron
330
66
FINO 1
Petrel
330
66
FINO 1
Witte Bank
330
66
FINO 1
Nemo
330
66
FINO 3
Apollon
600
98
6.15
FINO 1
Table 20: Categorization of OWF projects, as a foundation for the wind scenario creation.
WIENL14568
132
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FLOW Dynamic Power Management

WP2.2: Market Interaction

FLOW Dynamic Power Management

WP2.2: Market Interaction

By: A. Kakorin, L. Laurisch, G. Papaefthymiou

Mapping of Power Markets and the Role of Wind Energy

Wind in energy markets

Renewables support schemes

Overview of support schemes

Support schemes in Germany and the Netherlands

Effect of support schemes on operation of wind farms

Mapping of AS and the potential provision by OWFs

Primary Control Reserve (PCR)

Secondary Control Reserve (SCR)

Tertiary Control Reserve

Provision of Control Reserve by OWFs

Imbalance Pricing System

Technical requirements for the provision of re-dispatch

Market design of re-dispatch

Provision of re-dispatch by OWFs

Black Start Capability

Technical requirements for the provision of black start capability

Market design of black start capability

Provision of black start capability by OWFs

Technical requirements for the provision of reactive power

Market design of reactive power

Provision of reactive power by OWFs

Market Hindcast Analysis

Objective of the hindcast model

Basic expected model results

Model description for the German control reserve market

Model of the German control reserve market

Control reserve market data

Overview of historic negative TCR market data (Market events)

Case studies and model results

Bid price strategies

Value of forecast error analysis/shortened lead-time of control reserve bids

Comparison of a product length of 1 hour compared to 4 hours

Secondary Control Reserve Market

Conclusions from the hindcast analysis

Market Forecast Analysis

Objective of the forecast analysis

Allocation of wind capacity

Calculation of power feed-in

Analysis of market dynamics

Modelling of future markets

Adjustment of bidding curves

Generation of calling events

Limitations of the model

Case studies and results

Reference scenarios - Impacts of different penetration levels of offshore wind

Examination of different framework conditions

Conclusions from the forecast analysis

Summary and Conclusions

Dutch Market Addendum

Dutch control reserve market

Modelling the Dutch control reserve market

Documentation of forecast case study results

Minimum scenario bidding strategy

Height of the market premium

Comparison of a product length of 1 hour to 4 hours

Higher volumes of procured capacity

Additional Figures and Tables