Benefits of cross-border reserve procurement based on pre-allocation of transmission capacity

Integration of national balancing markets is one of the tools needed to integrate large amounts of intermittent generation. Such integration affects both balancing and day-ahead markets in the involved countries and analyses to study the effects of such integration are required. This paper describes an approach where the bidding prices for reserve capacity of generation units are determined on the basis of their opportunity costs in the day-ahead for the period considered for the reserve procurement. The approach is described both for a single balancing area, and for a system with several balancing areas, in which case also the availability of transmission capacity is important. The approach is illustrated with a small example.