Distributed energy resources (DERs) are selected based on their merit order (lowest total price) until the required flexibility volume is met.
For example, the market operator made makes a request for flexibility services with the following parameters:
Start date & time: 26/03/2021 10:00
End date & time: 26/03/2021 11:30
Flexibility Volume (MW) = 1 MW
Availability Ceiling Price (£/MW/h) = 25
Utilisation Ceiling Price (£/MWh) = 25
Utilisation-weighting Factor (%) = 100
If there are three DERs (Asset123, Asset234, Asset 345) participating in this flexibility market, the resulting merit order stack would be:
Asset ID | Order in the Merit Order Stack | Offered Availability Price (£/MW/h) | Offered Utilisation Price (£/MWh) | Total Price (£/MW/h) | Volume (MW) |
Asset123 | 1 | 15.00 | 12.00 | 27.00 | 0.525 |
Asset234 | 2 | 8.00 | 23.67 | 31.67 | 0.050 |
Asset345 | 3 | 16.67 | 20.34 | 37.01 | 0.094 |
In this example, all three DERs would be awarded the contracts because:
All of their availability prices are lower than the specified Availability Price Ceiling (<25 £/MW/h)
All of their utilisation prices are lower than the specified Utilisation Price Ceiling (<25 £/MW/h)
Their cumulative volume (0.669 MW) is less than the requested volume of 1 MW.
Price clearing
Price clearing then happens in two ways.
Pay-as-bid price clearing
In pay-as-bid clearing, DERs get paid the exact prices offered in their bids, if they’re awarded the contract. This is different to uniform pricing, where all selected DERs receive the same clearing price.
Asset ID | Offered Availability Price (£/MW/h) | Cleared Availability Price (£/MW/h) (pay-as-bid) | Offered Utilisation Price (£/MWh) | Cleared Utilisation Price (£/MWh) (pay-as-bid) | Total Cleared Price (£/MW/h) |
Asset123 | 15.00 | 15.00 | 12.00 | 12.00 | 27.00 |
Asset234 | 8.00 | 8.00 | 23.67 | 23.67 | 31.67 |
Asset345 | 16.67 | 16.67 | 20.34 | 20.34 | 37.01 |
Pay-as-clear price clearing
In pay-as-clear price clearing, the price paid to every DER in the stack is determined by the bid price of the “marginal” - most expensive - DER in the stack. In markets that pay for both availability and utilisation, the clearing prices can be set by different DERs for each price component.
Asset ID | Offered Availability Price (Volume-weighted Average) (£/MW/h) | Cleared Availability Price (£/MW/h) (pay-as-bid) | Offered Utilisation Price (Volume Weighted-Average) (£/MWh) | Cleared Utilisation Price (£/MWh) (pay-as-bid) | Total Cleared Price (£/MW/h) |
Asset123 | 15.00 | 16.67 | 12.00 | 23.67 | 40.33 |
Asset234 | 8.00 | 16.67 | 23.67 | 23.67 | 40.33 |
Asset345 | 16.67 | 16.67 | 20.34 | 23.67 | 40.33 |