**7. Trading Behavior of Wind Power Producers**

As noted earlier, most existing energy markets, including the Iberian electricity market [37], were not designed to deal with large levels of non-dispatchable generation. MIBEL includes a day-ahead market and an intra-day market, managed by the Spanish electricity market operator (OMIE [38]), as well as a derivatives market, managed by the Portuguese electricity market operator (OMIP [39]). Market participants submit hourly bids to trade energy in the day-ahead market. The IDM involves six auction sessions, with gate-closures between 1 and 5 h ahead of real-time operation. The derivatives market allows private parties to trade standardized bilateral contracts.

Figure 4 shows the typical trading behavior of WPPs in the DAM and the IDM, which takes into consideration the most reliable meteorological data, in order to minimize deviations. WPPs submit wind power forecasts in the day-ahead market during day *D*−1, and make commitments to produce specific quantities of energy for day *D*. The bids to submit to the intra-day market are essentially deviations—that is, they are computed by taking into consideration the actual commitments and the current updates of the wind power forecasts.

In this work, the forecasts are obtained by considering the Neural Network Toolbox and the artificial neuronal networks (ANN) approach [40]. ANN is typically organized in layers, namely the input, hidden, and output layers. Each layer covers one or more nodes that represent the basic unit of information process (also known as the neuron). The main advantage of the ANN is the capability to deal with nonlinear relationships by learning the association between the predictors and predictions.

**Figure 4.** Trading behavior of wind power producers in the day-ahead and intra-day markets.

Numerical weather prediction (NWP) models present systematic errors, which are mainly associated with the following: (i) initial and boundary meteorological conditions (ICs), (ii) a poor representation of the physics of the models, and (iii) a failure to solve sub-grid scale phenomena, such as the sea-land interaction. The data to feed the NWP model to enable wind power producers to participate in the day-ahead market are based on ICs from 06:00 UTC, representing a time horizon for the meteorological forecast ranging between 18 to 42 h ahead. For the case of the intra-day market, the time horizon for the forecast ranges from 2 to 7 h (depending on the auction session).

The meteorological data (ICs) are updated every six hours, namely at 6:00, 12:00, 18:00 and 24:00 (see the small light-blue arrows of Figure 4). This data needs to be processed to get the wind power forecasts, involving a computation time of nearly 2 h (see the dotted green lines of Figure 4). The updated forecasts are represented by the vertical orange arrows, meaning that the bids of WPPs to intra-day sessions 1, 3, 5 and 6 are based on updated data, and the bids to the other sessions take into account the available data only. Also, the bids of WPPs for a particular intra-day session involve the first hours of that session only—that is, the hours until the beginning of the next session (see the horizontal dark yellow arrows of Figure 4). Such bids include a quantity and a price. The quantity refers to the excess of energy. The price is 0 e/MWh.

Overall, WPPs submit bids to the day-ahead market, make commitments to produce energy during day *D*, and submit their deviations to the various sessions of the intra-day market. After that, in case WPPs still expect deviations, they can make use of the new bilateral energy contract to eventually reduce the imbalances. Following this, WPPs can participate in the aforementioned marketplaces. At the end, in case WPPs still expect deviations, they need to assume their balance responsibility and (eventually) pay penalties for their imbalances.

## **8. Simulation-Based Study**

This section presents a simulation-based study carried out by using the MATREM system. It involves the simulation of the day-ahead and intra-day markets, as well as the use of the new contract and the simulation of the new marketplaces.
