Evolving Bidding Formats and Pricing Schemes in US and Europe Day-Ahead Electricity Markets

Carlos Batlle, Ignacio Herrero, and Pablo Rodilla,

July 2020

The ability of power system participants to trade in short-term power markets is not only limited by grid constraints, but also by their own operational characteristics, which must be considered in power auctions (or even when entering into supply contracts). Organized electricity markets, both in the US and Europe, feature different bidding formats to allow representing these constraints, and different pricing schemes to help market agents recover their short-term costs.

The increasing penetration of renewable energy as well as storage resources requires adapting bidding formats and pricing schemes. Learning from best practices from both sides of the Atlantic, we review current trends and future challenges to properly evolve these market design elements.

Keywords: Wholesale electricity markets, market design, bidding formats, pricing rules, renewable energy sources