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Transitioning from fossil fuel dominated power systems to high penetrations of intermittent renewable generation is affecting classical electricity market designs. Here, a method is proposed to model and assess the absence of co-optimization of energy and reserve that prevails in the European system. Co-optimization is formulated through an optimization problem (COM), and its absence as an equilibrium problem (EQM) built on Karush-Kuhn-Tucker conditions of agents’ optimization and market clearing equations. EQM cannot be reformulated as a single optimization problem. Market distortions are identified by comparing the complementarity conditions of both models. These are then discussed on system with Feed in Premium to wind generation. Parameters in the models allow to represent different market configurations regarding: available wind generation, Feed in Premium to wind, generators’ risk aversion, and required reserve from wind generation. [ABSTRACT FROM AUTHOR]

The cross-border trading among electricity markets in an interconnected multi-area system (e.g., in central Europe) and the integration of renewable resources (e.g., wind energy) have remarkably increased in recent years. To efficiently operate such system, a proper coordination among different areas is required. Within this context, a decentralized algorithm for market clearing is proposed in this paper to dispatch simultaneously energy and reserve under wind generation uncertainty and equipment failures. The proposed technique does not require a central operator but just a moderate interchange of information among neighboring areas. Additionally, the benefit of cross-border trading is studied. [ABSTRACT FROM PUBLISHER]