A Risk-Based Equilibrium Analysis of Energy Imbalance Reserve in Day-Ahead Electricity Markets
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arXiv
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| Hauptverfasser: | , , , |
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| Format: | Preprint |
| Veröffentlicht: |
2025
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| _version_ | 1866915916993789952 |
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| author | Ent, Ryan Zakeri, Golbon Zheng, Tongxin Zhao, Jinye |
| author_facet | Ent, Ryan Zakeri, Golbon Zheng, Tongxin Zhao, Jinye |
| contents | Energy imbalance reserve (EIR) product is introduced into the Independent System Operator (ISO) of New England's day-ahead wholesale electricity market to provide a better fuel procurement incentive for generating resources. Different from existing forward reserve products, EIR is a novel real option product, which is settled against real-time energy price rather than reserve prices. This novel product has not been analyzed in the research literature in terms of its effects. In this paper, we develop a stochastic long-run equilibrium model that incorporates the risk preference of generator and demand agents participating in the energy and reserve market in both day-ahead and real-time time frame. In a risk neutral environment, we find that the presence of the EIR product makes little difference on market outcomes. We also conduct a series of numerical simulations with risk-averse generators and demand, and observed increased advanced fuel procurement when the EIR product is present. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2511_08736 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | A Risk-Based Equilibrium Analysis of Energy Imbalance Reserve in Day-Ahead Electricity Markets Ent, Ryan Zakeri, Golbon Zheng, Tongxin Zhao, Jinye General Economics Economics Energy imbalance reserve (EIR) product is introduced into the Independent System Operator (ISO) of New England's day-ahead wholesale electricity market to provide a better fuel procurement incentive for generating resources. Different from existing forward reserve products, EIR is a novel real option product, which is settled against real-time energy price rather than reserve prices. This novel product has not been analyzed in the research literature in terms of its effects. In this paper, we develop a stochastic long-run equilibrium model that incorporates the risk preference of generator and demand agents participating in the energy and reserve market in both day-ahead and real-time time frame. In a risk neutral environment, we find that the presence of the EIR product makes little difference on market outcomes. We also conduct a series of numerical simulations with risk-averse generators and demand, and observed increased advanced fuel procurement when the EIR product is present. |
| title | A Risk-Based Equilibrium Analysis of Energy Imbalance Reserve in Day-Ahead Electricity Markets |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2511.08736 |