IEM: Electricity Market II.
Filip Černoch
cernoch@mail.muni.cz
Electricity market – current situation
• Tension between the aim of a) freely operating single market
and b) secure low-carbon energy system.
Renewables
• 14,1% in total final energy consumption. 24,1% of electricity
generation.
• Aim of having 27% of RES energy in the EU in 2030.
• Main drivers of development are a) goals of the EU b) that
lead to national subsidy schemes c) plus increasing
competitiveness of technology.
• RES significantly changes the way the electricity is produced
and traded.
Problem No. 1 – Oversurplus of generating
capacity
Net generating capacity, 2011-2015, GW
Yearly energy consumption, 2011 – 2015,
TWh
Merit-order effect
8
.
Production from non-dispatchable RES, May
2015, Germany
Decrease in revenue for CCGTs (€MW/month)
.
Solution 1: Energy-only market
• Generators paid solely on the basis of the volume of power
that they produce.
• No remuneration for being available during peak hours when
intermittent sources aren´t producing.
• Peak loading pricing theory = capacity adequacy is maintained
because prices will rise if market players anticipate an
impending shortage and invest accordingly.
• Political constraints.
• Boom and bust cycle.
• Limited ability of the system to store electricity, supply and
demand uncertainty, inelastic demand, steepness of the supply
curve = high price volatility when reserve margins are low.
Capacity mechanisms
= capacity remuneration.
• To solve problem of weaken investment incentives.
• But they replace market-driven investment with central planning
– considerable regulatory risk and cost for investors and
consumers.
Solution 2: Capacity mechanisms/payments
Problem No. 2 – impact of volatile sources on
electricity trade
Production from non-dispatchable RES, May
2015, Germany
Physical infrastructure
Cross-border electricity interconnection as ratio of total generating capacity, 2014
MS above the 10 % treshold MS below the 10 % treshold
Austria 29% Ireland 9%
Belgium 17% Italy 7%
Bulgaria 11% Romania 7%
Czech Republic 17% Portugal 7%
Germany 10% Estonia 4%
Denmark 44% Lithuania 4%
Finland 30% Latvia 4%
France 10% UK 6%
Greece 11% Spain 3%
Croatia 69% Poland 2%
Hungary 29% Cyprus 0%
Luxembourg 245% Malta 0%
Netherlands 17%
Slovenia 65%
Sweden 26%
Slovakia 61%
Thermal capacity of interconnectors
Trades and flow of electricity 2014/2015
Remedial measures
Unscheduled flows reduce the amount of tradable cross-zonal capacit
and affect the social welfare distribution.
Structural solutions:
• Improvement the capacity calculation methodology.
• Improving bidding zone configuration.
• Investments in the transmission network.
Short term emergency sollutions:
• Changing the grid topology.
• Re-dispatching.
• Counter-trading.
• Curtailment of allocated capacities.
• Phase-shifters.
Electricity market – current situation
= Electricity markets impacted by national energy and climate
policy decisions (RES, capacity mechanisms, retail market
regulation, carbon prices…). Necessary is:
• to improve functioning of national markets by limiting state
intervention (RES, capacity mechanisms, regulated tarrifs).
• to improve cross-border capacity (infrastructure investment,
balancing and intra-day markets).
• to optimise cross-border flows.
Sources
• IEA (2014): Energy Policies of IEA Countries – The European
Union.
• ENTSO-E (2016): Electricity in Europe 2015 .
• ACER/CEER (2016): Annual Report on the Results of
Monitoring the Internal Electricity Market in 2015.