Journal of Regulatory Economics

, Volume 48, Issue 2, pp 218–243 | Cite as

Strategic behavior in the German balancing energy mechanism: incentives, evidence, costs and solutions

  • Sebastian Just
  • Christoph Weber
Original Article


This paper investigates the incentives market participants have in the German electricity balancing mechanism. Strategic over and undersupply positions are the result of existing stochastic arbitrage opportunities between the spot market and the balancing mechanism. Clear indications for strategic behavior can be observed in aggregate market data. These structural imbalances increase the need for reserve capacity, raise system security concerns, and therefore place significant costs on consumers. The underlying problem is the disconnect between spot market, reserve capacity market and balancing mechanism. Alternative market design options discussed in this paper suggest better alignment between these markets/mechanisms.


Electricity market design Balancing mechanism Reserve capacity Strategic behavior 

JEL Classification

L94 Q41 Q47 



The authors would like to thank the editor and the anonymous referees for helpful comments on earlier drafts of the paper.


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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Chair of Management Sciences and Energy EconomicsUniversity of Duisburg-EssenEssenGermany

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