Design of European Balancing Power Markets

This paper presents an empirical study for 24 European countries that procure balancing power with auctions. We find that there is no predominant market design in Europe but qualitatively identify three key drivers for the variety in market designs: the share of volatile renewable energy sources, short-term flexibility and market coupling. The inconsistency of auction designs, however, cannot be traced back to the power market framework conditions. We argue that this is a consequence of the applied multi-part auction mechanism and offer a brief review of auction-theoretic literature.