The Benefits and Risks of Virtual Bidding in Multi-Settlement Markets

While it is possible that multi-settlement markets can exist without virtual trading, it is equally clear that virtual trading can provide many market benefits. The main one: In the absence of explicit virtual bidding (EVB), the price arbitrage trades that are benign in other commodity markets affect the reliability of the underlying electricity markets, resulting in a situation where EVB is most useful when it neutralizes the deleterious reliability effects of implicit virtual bidding and physical arbitrage.