We consider an electricity market organized with sequential market clearings: one market clearing in the day-ahead market and one market clearing in a regulation market where uncertainty regarding production from non-dispatchable energy sources as well as variable load is resolved. We formulate two main models to study the efficiency of this market design. The first is a myopic model where the day-ahead market is cleared independently of the regulation market, and the second model is a stochastic dispatch model where the possible outcomes of the regulation market clearing is considered when the day-ahead market is cleared. The focus of our paper is on how changes in the design for the electricity market influence the efficiency of the stochastic dispatch. In particular, we examine how a relaxation of both the network flow constraints and the balancing constraints in the day-ahead market clearing affects the overall efficiency of the system. This allows the stochastic dispatch to be infeasible in terms of flow patterns and dispatch in the day-ahead market. These infeasibilities will however be handled in the regulation market. We find that relaxing the balancing constraints when clearing the day ahead market provides additional flexibility that can be valuable to the system. In our case studies we found a value in `overbooking' that lead to lower total costs for the system. (joint with Endre Bjørndal, Kjetil Midthun and Golbon Zakeri)
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