Imbalance Settlement and Multi-Product Balancing Energy Markets

This paper provides a framework for analyzing the interaction of imbalance settlement and the strategy of system operators for activating reserves on the clearing of multiproduct real-time energy markets. We characterize the optimal strategies of price-taking flexibility providers that can participate in sequential auctions conducted by the system operator to activate automatic and manual frequency restoration reserves. Combinations of imbalance settlement schemes and activation strategies are assessed based on their influence on bidding incentives and cost efficiency.