**The Uncertain Bidder Pays Principle and Its Implementation in a Simple Integrated Portfolio-Bidding Energy-Reserve Market Model**

#### **Dávid Csercsik 1,\*, Ádám Sleisz 2 and Péter Márk S ˝orés 2**


Received: 21 June 2019; Accepted: 26 July 2019; Published: 1 August 2019

**Abstract:** One reason for the allocation of reserves in electricity markets is the uncertainty of demand and supply. If the bias of the generation portfolio shifts from controllable generators to renewable sources with significantly higher uncertainty, it is natural to assume that more reserve has to be allocated. The price of reserve allocation in European models is dominantly paid by the independent system operator in the form of long-term paid reserve capacities and reserve demand bids submitted to various reserve markets. However, if we consider a scenario where the significant part of generation is allocated in day-ahead auctions, the power mix is not known in advance, so the required reserves can not be efficiently curtailed for the ratio of renewables. In the current paper we analyze an integrated European-type, portfolio-bidding energy-reserve market model, which aims to (at least partially) put the burden of reserve allocation costs to the uncertain energy bidders who are partially responsible for the amount of reserves needed. The proposed method in addition proposes a more dynamic and adaptive reserve curtailment method compared to the current practice, while it is formulated in a computationally efficient way.

**Keywords:** integration of renewable sources; integrated markets; co-optimization; reserve allocation
