ACER consultation on co-optimisation implementation in SDAC algorithm

Eurelectric welcomes ACER study for providing valuable insights but considers it too theoretical, lacking detailed feasibility and sensitivity analyses on crucial co-optimization challenges. The study’s identified welfare gains are difficult to interpret without clear benchmarks, and the simplistic price forecast methodology may overestimate co-optimisation performance. Additionally, Eurelectric questions some assumptions, such as the generation mix and dispatch decision irrevocability, and emphasizes the need for further development of responsive and flexible short-term markets.
The main advantage of this co-optimisation design, if realized, could be that it externalizes the complexities of bidding from market participants to the market coupling algorithm, potentially leading to greater system economic efficiency. However it could come along with numerous drawbacks such as:
- deriving from the current portfolio-based bidding model which has numerous advantages;
- translating day-ahead energy bids into balancing capacity bids requires accounting for various technical capabilities and limitations, which may not be fully captured by the clearing algorithm, leading to inefficiencies.
- the added complexity could hinder the algorithm’s performance, increasing calculation time, decoupling risk, etc.
Eurelectric notes that several questions must be clarified before considering a bid design without explicit price for balancing capacity within the co-optimisation design. In the meantime, Eurelectric urges a focus on bid designs with explicit price other than opportunity costs and on means to deliver the same economic efficiency.
Additionally, Eurelectric emphasizes the need to carefully scope the R&D work and include market participants, particularly regarding the bid design. As previously stated, Eurelectric strongly rejects any negative impact of new evolutions on products and services within the SDAC.

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