Impact of Renewable Integration on Day-Ahead and Real-Time Market Prices under One- and Two-Price Imbalance Settlements

This paper investigates the influence of renewable energy integration on the pricing dynamics of day-ahead and real-time markets under one- and two-price imbalance settlement methods. As the penetration of renewable energy sources increases, the accurate allocation of revenue and payments becomes critical to ensure market efficiency and participant equity. One-price settlements ensure that all imbalances are settled at a single price, typically the system marginal price, leading to revenue and payment neutrality. In contrast, two-price settlements differentiate prices based on whether the imbalance decreases or increases the overall system balance, often resulting in different financial outcomes for participants, as well as profit for the market operator. This study, powered by PLEXOS, provides a comprehensive methodology to accurately model one- and two-price imbalance settlements. The methodology combines in-software adjustments with Python-based automation to enhance data handling and reporting accuracy, enabling precise reflection of the financial impacts of renewable energy on market prices and settlements. Through a detailed test network model, the study analyses the discrepancies in market prices and allocations caused by the variability of renewable energy. The findings highlight the significant impact of renewable energy on both the day-ahead and real-time market prices, providing actionable insights for market operators and participants to optimise financial outcomes and maintain market stability. This work contributes to the broader goal of integrating renewable energy sources into electricity markets, offering practical solutions to manage price volatility and ensuring transparent and equitable market operations.