Renewable Energy Integration: Quantifying the Value of Market Design
Karsten Neuhoff, David Newbery, Christian von Hirschhausen, Benjamin Hobbs, Christoph Weber,
Janusz Bialek, Frieder Borggrefe, Julian Barquin, Christian Nabe, Chris Dent, Francisco M. Echavarren, Rodney Boyd, Thilo Grau, Friedrich Kunz, George
Papaefthymiou, Hannes Weigt
34th IAEE International Conference, Stockholm, June 20 2011
2Karsten Neuhoff
Projected installation of new generation capacity
0
100
200
300
400
500
600
700
2010 2015 2020 2025 2030
Geothermal electricitySolar thermal electricityPhotovoltaicsTide & waveWind offshoreWind onshoreBiowasteBiogasSolid biomassHydro large-scaleHydro small-scale
GW
inst
alle
d ca
paci
ty
Source: EMPLOY-RES Studie
Current Landscape
3
Cross-border Physical Flows – 28 March 2011, 09:00-10:00 (source: www.etso-vista.org)
• Naturally evolved into 29 separated, individual regions with 38 TSOs - 300,000km transmission lines
• Mosaic means TSOs charged with security in their region only…
4Karsten Neuhoff
Based on: Borggrefe and Neuhoff 2010: Balancing and Intraday Market Design – Options for wind integration
CHP (Heat Driven)3%
Coal Power Plant19%
Combined Cycle Gas Turbine (CCGT)
12%
Gas-fired Steam Turbine6%
Hydro Power Plant (Reservoir)4%
Lignite Power Plant15%
Nuclear Power Plant27%
Oil-fired Power Plant7%
Open Cycle Gas Turbine (OCGT)2%
Pumped Hydro Power Plant5%
Generation technologies mix used in the models.
0 0.5 1 1.5 2 2.5 3 3.5 4
x 104
0
50
100
150
200
250
Wind power (MW)
Sam
ples
MAX
MEAN
MIN
Distribution of the aggregate wind in-feed for the 2008 (H) TradeWind scenario and the respective snapshots.
Comparison of selected actual market prices for power products for Wednesday 16 January 2008 (bars) and simulated prices
Nodal Prices: Voltage Levels >= 220kV - No wind
10 E
10 28 46 64 82 100
No wind
Source: Model results from the Intelligent Energy Europe project Re-shaping
Zones for zonal pricing do not match national borders
Nodal Prices: Voltage Levels >= 220kV - Max wind
10 E
10 28 46 64 82 100
Max windSuitable zones incongested network can change hour by hour
And zones with similar price change with wind output
Source: Model results from the Intelligent Energy Europe project Re-shaping
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 10
50
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400
Branch Loadings
Voltage Levels >= 220kV - Max windN
umbe
r of b
ranc
hes
Distribution of branch loads (as a fraction of capacity) for the analysed high wind scenario
Congested Lines are within and between EU CountriesLine Loadings: Voltage Levels >= 220kV - Max wind
10 E 20
E
• Transmission not allocated within market – TSO have to buy back capacity-> inefficient, costly and creates opportunities for gaming.
• TSO not informed about state of the European power system– make very conservative use of transmission lines– lack of information exchange main cause for black-outs
Respecting loop flows ...
Karsten Neuhoff 11
Flows through the Belgian Grid on July 14, 1999
0
1000
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3000
4000
1 3 5 7 9 11 13 15 17 19 21 23
Hour
Pow
er (M
W)
Unidentified flowsExpected flows
Source: P. Bonnard, 2003 IEEE Trans. Distr. Conf
Calculating Transfer capacity
Definition+ Net transfer capacity (NTC)+ Transmission Reliability Margin (TRM)= Total Transfer capacity (TTC)Calculation of TTCHow much G increase in A can meet D increase in B, while keeping G,D fixed for other countries(i) scaling G (ii) scaling G<= G (iii) merit order
EU-wide volume weighted prices from DRESDEN model.
Results: Nodal Pricing Study• We compared a nodal design to two zonal pricing approaches – with
Madrid Comillas and Dresden Technical Universities.
no WIND min WIND mean WIND max WIND0
10,000
20,000
30,000
40,000
50,000
Model: Comillias University, Madrid NodalMW
of i
nter
natio
nal
tran
smiss
ion
no WIND min WIND mean WIND max WIND0
10,000
20,000
30,000
40,000
50,000
Model: Technical University of Dresden NodalMW
of i
nter
natio
nal
tran
smiss
ion
www.pjm.com
AEP / Dayton / ComEd Integration into the PJM Market
Change in Transmission Interconnector flows
Source: Erin T. Mansur and Matthew W. White, “Market Organization and Efficiency in Electricity Markets,” March 31, 2009, Figure 2,pg 50, discussion draft, (available at http://bpp.wharton.upenn.edu/mawhite/ ). (based on presentation by Andy Ott, PJM)
Key Study Conclusions:
• Bilateral Trading could only achieve 40% of the efficiency gains of LMP-based market
• Incremental benefit of LMP Market Integration = $180 Million annually, Net Present Value over 20 yrs is $1.5 Billion
Savings - €0.8 - 2 billion per annum
(i) Integration with domestic
congestion management
(ii) Joint allocation of international transmission
rights
(iii) Integration with day ahead energy market
(iv) Integration with intraday/
balancing market
(v) Transparency of congestion management
Bilateral transmission rights auction
No No No No No
Joint multi-country auction of NTC rights
No Yes No No No
Multi-region day-ahead market coupling (zonal pricing)
No (only at zonal level) Possible Yes No No
Nodal pricing Yes Yes Yes Possible Yes
Source: Congestion Management in European Power Networks: Criteria to Assess the Available Options, Neuhoff, Hobbs, Newbery
Multiple dimensions of congestion management