Impact of Energy Imbalance on Financial Rewards in Peer-to-Peer Electricity Markets

Abstract

Peer-to-peer electricity markets allow small producers and consumers of energy to trade directly. Energy imbalances, the difference between predicted and actual supply or demand for energy, may be higher in peer-to-peer markets than in traditional markets. High energy imbalances could increase the total cost of the electricity system, both inside and outside the peer-to-peer market, because the system operator must take expensive corrective actions at short notice. This paper examines the effect of imbalance charges on peer-to-peer electricity markets. A new symmetric imbalance charge mechanism is proposed which penalises market participants irrespective of the direction of their energy imbalance. The symmetric imbalance charge mechanism provides a financial incentive for peer-to-peer market participants to reduce their energy imbalances. For illustrative purposes, this paper uses a simulation to show that the current imbalance charge mechanism in Great Britain does not provide a financial incentive for peer-to-peer market participants to reduce their energy imbalances. The imbalance charge is close to zero under the current British imbalance charge mechanism when averaged over hundreds of settlement periods or more. When subject to the symmetric imbalance charge mechanism, the simulation shows that peer-to-peer market participants are given a strong financial incentive to reduce their energy imbalances. Finally, this paper discussed how the symmetric imbalance charge mechanism could be implemented only within the bounds of a peer-to-peer market, or within the whole electricity system.