| Abstract: |
Following several regional initiatives on the day-ahead and intra-day stage,
integrating real-time balancing markets constitutes a logical next step in the
process towards an Internal Electricity Market (IEM) in Europe. So far,
realtime balancing market designs significantly differ between European
countries and a coordinated approach for cross-border exchange of balancing
services is non-existent. This paper aims to illustrate that the current lack
of balancing market harmonisation – in combination with an increasingly
integrated day-ahead and intra-day trade – can be profitably exploited by
traders. More specifically, trading strategies taking advantage of structural
design differences in the imbalance settlement of two countries are identified
and assessed. The paper analyses detailed data of the Belgian and French power
system using statistics in order to verify the profitability of different
trading strategies between both countries. Some of the identified trading
strategies are found to be significantly profitable; others turn out to be
loss-making. On average, France was the most attractive country for traders to
be long in 2008; Belgium to be short. Profitable trading strategies can usally
be carried out without any expense as cross-border capacities available at the
intra-day stage are currently far from being used and no value is attributed
to them. However, some profitable trading activities resulting from market
design imperfections may induce economic inefficiencies |