Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
The German Power Market 2.0 Session 2: Adapting liberalised power markets – Minor tweak or major overhaul? Dr. Marco Nicolosi IEA Workshop: Renewables in the Mainstream Paris, March 24th 2015 Take-aways • A flexible power market can guarantee security of supply and support renewable integration simultaneously • Some flexibility options can increase the market value of variable renewables • To achieve a level-playing-field for flexibility options, barriers and price distortions need to be removed • A capacity reserve can secure the transition period until the market is sufficiently flexible Connect Energy Economics GmbH 2 Two sides of the challenge 90 80 Low wind feed-in, cold winter evening: Low RES, high load 70 GW High residual load, high prices 60 50 40 30 20 residual load [GW] 10 0 10.12.2013 11.12.2013 biomass run-of-river 12.12.2013 wind 13.12.2013 solar 14.12.2013 conventional plants consumption Windy, sunny Sunday noon: High RES, low load 90 80 70 60 GW Low residual load, low prices 50 40 30 20 10 time [hours] Source: Data from Entso-e (2013) and EEX (2013) Connect Energy Economics GmbH 0 13.06.2013 14.06.2013 biomass run-of-river 15.06.2013 wind 16.06.2013 solar 17.06.2013 conventional plants 3 consumption Definition of flexibility • Finding a match between demand and supply requires ‘flexibility’ • Flexibility adds the time dimension to the static concept of the economic term ‘elasticity’ flexible demand inflexible supply flexible supply price inflexible demand price quantity quantity Sufficient flexibility in relevant areas of the supply and demand curve guarantees security of supply Connect Energy Economics GmbH 4 Flexibility supports security of supply and renewables integration I 3.000 supply demand inflexible 2.500 day-ahead price [EUR/MWh] 2.000 1.500 1.000 flexible 500 0 -500 -1.000 -1.500 -2.000 inflexible inflexible -2.500 -3.000 25.000 27.000 29.000 31.000 33.000 35.000 37.000 39.000 41.000 43.000 45.000 47.000 49.000 volume [MW] demand supply • Some areas of the supply and demand curve are inflexible • Inflexible areas could (theoretically) lead to a mismatch Source: Own illustration, Data from EEX (2013). Connect Energy Economics GmbH 5 Flexibility supports security of supply and renewables integration II 3.000 increase flexibility of demand import + peak plants replace base-load plants 2.500 day-ahead price [EUR/MWh] 2.000 1.500 1.000 supply 500 0 -500 -1.000 -1.500 -2.000 -2.500 reduction of must-run & renewables direct marketing coupling of sectors (power-to-heat/e-mobility) + export -3.000 25.000 27.000 29.000 31.000 33.000 35.000 37.000 39.000 41.000 43.000 45.000 47.000 49.000 volume [MW] demand supply • An increase in flexibility leads to security and more meaningful price signals • More flexibility options are available than the energy transition requires Source: Own illustration, Data from EEX (2013). Connect Energy Economics GmbH 6 Market effects of barriers Reasons for ‘must-run’ (technical and economic) • Reactive power • Heat-driven combined heat-and-power plants • Reserve power • Inflexible power plants • Must-run renewables • Must-run hydro ’must-run’ effects ’must-demand’ effects Reasons for ‘must-demand’ • Inflexible consumption • Grid-based incentives • Electric heating • Lack of information • Reserve power Connect Energy Economics GmbH 7 Reduce barriers to flexibility Market design Regulatory design • Open reserve power markets • Short-term auctions & products • prequalification • • • • • Improve balancing responsibility Avoid price caps Competitive wholesale markets Enable efficient cross-border trade Avoid explicit capacity remuneration, which weakens price signal • Adjust implicit incentives for privileged consumers (e.g. grid tariffs & RES support) to react on wholesale power price • Increase combined heat-andpower flexibility • Avoid price distortions in all policies • Enable renewable market access • Provide reactive power must-runfree Connect Energy Economics GmbH 8 In a nutshell • Security of supply and RES-integration require flexibility • Sufficient flexibility potential is available to allow for market-based competition • Competitive and well connected markets are a great and efficient source of flexibility • The EOM incentivises the optimal flexibility mix on the basis of reduced market and regulatory barriers • Capacity markets are likely to create path dependencies and regulatory uncertainty, while reserve mechanisms are reversible, once the market is sufficiently flexible Connect Energy Economics GmbH 9 Connect Energy Economics GmbH Tel. +49 30 8093312 30 [email protected] www.connect-ee.com