On the effectiveness of the anti-gaming policy between the day-ahead and real-time electricity markets in The Netherlands

In this paper, we study the linkage between two related markets for electricity in The Netherlands: the day-ahead market and the real-time market. The Dutch regulator wants to prevent trading across these two markets and has set up a dual pricing system for this purpose. In this paper, we test the effectiveness of this policy by studying the ex post profitability of trading strategies spanning the two markets over various time segments. Our results show that profits generated by these strategies are rarely positive on average and always characterized by very large potential losses, which dwarf the mean profit when the latter is positive. (c) 2005 Elsevier B.V. All rights reserved.