Combined bidding at power and ancillary service markets

Power and ancillary service markets are strongly coupled. However, at the moment auctions are organized in such a manner that the coupling is not taken into account. Every market participant submits bids at power and/or AS markets without possibility to adjust with respect to the outcome of the other market. Inexact approximations of the actual market price induce deviations from the optimal social welfare value. In this paper, we firstly describe and analyze the consequences of power and ancillary service market coupling. Secondly, we present two different market design strategies, both of which are based on the idea of iterative auction and have the goal to optimally account for power and AS coupling, enabling the overall system to maximize its social welfare. An illustrative example is used to present potential benefits and downsides that might arise as a result of introducing proposed market arrangements.