Flow-based Capacity Allocation in the CEE Electricity Market: Sensitivity Analysis, Multiple Optima, Total Revenue

Abstract

The paper introduces the mechanism of the Flow-based Capacity Allocation (FBA) method on the electricity market of the Central-Eastern Europe (CEE) Region, proposed by the Central Allocation Office (CAO). The method is a coordinated heterogeneous multi-unit uniform price auction where the allocation is determined by the solution of a linear programming problem. On one hand, the properties of the underlying linear programming problem are discussed: the possibilities of multiple solutions are analysed, then a non-standard sensitivity analysis method of the market spread auction is developed. On the other hand, a global optimization problem is presented that yields uniform auction prices corresponding to higher total income than at the original allocation method. Several numerical examples and results of practical test problems are presented.