Making the most of short-term flexibility in the balancing market: Opportunities and challenges of voluntary bids in the new balancing market design

Electricity balancing is one of the main demanders short-term flexibility. To improve its integration, recent regulation European Union introduces a common standalone energy market. It allows actors that have not participated or been awarded in preceding capacity market to participate as voluntary bidders ‘second-chance’ bidders. We investigate effect these changes on efficiency and strategic behavior particular, using combination agent-based modelling reinforcement learning. This paper first model agents' interdependent bidding strategies markets with help two collaborative learning algorithms. Results reveal considerable gains from introduction bids even highly concentrated while offering new value stream providers ‘Second-chance’ further drive competition, reducing costs. However, we warn this design change likely shift some activation costs where agents are prompted bid more strategically view lower profits energy. As it unlikely can be removed altogether, recommend integrating par easing prequalification requirements ensure sufficient competition.