Download What kind of system and market integration for renewable energy

Design elements for a future electricity system:
What kind of system and market integration for renewable
energy sources?
Dr. David Jacobs
Transdisciplinary Panel on Energy Change
Institute for Advanced Sustainability Studies e.V. (IASS)
Friday, 15 March 2012
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
1
Reasons for market integration
 Competitiveness
 “renewables won‘t need support after 2020”
 System integration:
 More market integration = better system integration
 Theory/ideology:
 Text book market design and the EU target model
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
2
Wind and solar in the future (German) electricity
system
 80-100% of electricity from RES (2050)
 Wind and solar will become the backbone of the electricity system
(more than 50% of average supply)
 We need “overcapacity” of wind and solar
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
3
Features of wind and solar PV –
consequences for market integration?
 Cost structure:
 High capital cost, low O&M, no fuel costs
 The cost of wind and solar primarily depends on capital costs (which
depends on investment security)
 (Small actors need high degree of investment security)
 Marginal cost pricing:
 No marginal costs but integration into marginal cost markets
 Difficulty to re-finance wind and solar PV in marginal cost markets
 Limited reaction towards price signals from the market (On/Off;
limitation of market shares/overcapacity?)
 Variability and balancing power:
 Wind and solar are “weather dependent” (fluctuating)
 Providing balancing power at national/European level is cheaper than
providing it decentrally
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
4
Features of wind and solar PV –
consequences for market integration?
 Cost structure:
 High capital cost, low O&M, no fuel costs
 The cost of wind and solar primarily depends on capital costs (which
depends on investment security)
 (Small actors need high degree of investment security)
 Marginal cost pricing:
 No marginal costs but integration into marginal cost markets
 Difficulty to re-finance wind and solar PV in marginal cost markets
 Limited reaction towards price signals from the market (On/Off;
limitation of market shares/overcapacity?)
 Variability and balancing power:
 Wind and solar are “weather dependent” (fluctuating)
 Providing balancing power at national/European level is cheaper than a
decentralized solution
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
5
Long-term contracts for wind and solar PV
 Wind and solar PV should be financed via long-term contracts
(outside “the market”)
 Contracts with feed-in obligation
 Wind and solar can become a hedge against future fuel price
increases
 Very low tariffs after plant amortisation period
 Quantity of wind and solar needs to be regulated
 Flexibility needs to be provided by the supply and demand side
and the electricity grid
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
6
Components of a future electricity system
Flexibility:
Supply side
Reduction of
“must run” from
conventional
power plants
Long-term contracts for
wind and solar
CHP (electricity
focused)
Demand response
Storage
Heating and
transport sector
Flexibility of
biomass/biogas
Incentives for
low-carbon
technologies
(capacity
markets)
Flexibility:
Demand side
Energy efficiency
Flexibility:
Grid
infrastructure
Grid extension
Smart grids
EU grid
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
7
Compatibility with the EU level?
 Re-thinking the EU target model?
 Financing power plants outside of “energy-only” markets?
 Legal aspects:
 Long-term contracts and resulting legal conflicts (free movement of
goods)
 Economic aspects:
 EU market coupling – financing RES nationally and exporting cheap
electricity?
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
8
Thanks for your attention!
Institute for Advanced Sustainability Studies e.V.
Transdisciplinary Panel on Energy Change, 15 March 2013
9