Regional Electricity Market Research Articles

Implications of the EU Emissions Trading System for the South-East Europe Regional Electricity Market

As part of its climate policy, the European Union (EU) aims to reduce greenhouse gas (GHG) emissions levels by 20% by the year 2020 compared to 1990 levels. Although the EU is projected to reach this goal, its achievement of objectives under its Emissions Trading System (ETS) may be delayed by carbon leakage, which is defined as a situation in which the reduction in emissions in the ETS region is partially offset by an increase in carbon emissions in the non-ETS regions. We study the interaction between emissions and hydropower availability in order to estimate the magnitude of carbon leakage in the South-East Europe Regional Electricity Market (SEE-REM) via a bottom-up partial equilibrium framework. We find that 6.3% to 40.5% of the emissions reduction achieved in the ETS part of SEE-REM could be leaked to the non-ETS part depending on the price of allowances. Somewhat surprisingly, greater hydropower availability may increase emissions in the ETS part of SEE-REM. However, carbon leakage might be limited by demand response to higher electricity prices in the non-ETS area of SEE-REM. Such carbon leakage can affect both the competitiveness of producers in ETS member countries on the periphery of the ETS and the achievement of EU targets for CO2 emissions reduction. Meanwhile, higher non-ETS electricity prices imply that the current policy can have undesirable outcomes for consumers in non-ETS countries, while non-ETS producers would experience an increase in their profits due to higher power prices as well as exports. The presence of carbon leakage in SEE-REM suggests that current EU policy might become more effective when it is expanded to cover more countries in the future.

An Integrated Appraisal of the PPligre Electricity Transmission Line Rehabilitation Investment

The analytical challenges in evaluating the impacts of transmission line investments have vexed practitioners and electricity market regulators. The purpose of this study is to provide a guideline for improving the accuracy and predictability of the impacts of electricity rehabilitation projects. The subject is too broad to address completely here. The proposed guideline is suitable for evaluations of such project implemented in a broken electricity network. In such case, the demand for electricity is deterred, the supply of the electricity is unreliable, and the system is far away from its least-cost optimum production/consumption level. The guideline does not rebut the catalog of existing evaluation models or approaches. The guideline utilizes them for a reasonable ex-ante assessment to identify “good” projects that satisfy the economic and public objectives of the economy. An integrated cost-benefit analysis (CBA) framework is recommended to appraise such projects along with allocating the impacts to stakeholders in a manner that is commensurate with the net benefits they receive. Such an integrated analysis is much more than a set of procedures for estimating the expected net present values or rates of return of the project.

Agent-Based Simulations for Electricity Market Regulation Advice: Procedures and an Example

This paper discusses the use of agent-based simulation models for regulatory advice in electricity market regulation. It briefly introduces the necessary procedures and the state-of-the-art of the methodology, and outlines its possible range of application. In a second part, the paper presents an agent-based simulation model developed by the authors. The model can be applied for analyzing different market designs and market structures in order to derive evidence for regulatory advice. This is exemplified through the analysis of two settlement rules in the balancing power market and of several divestiture scenarios of the German electricity sector.

Electricity in Central America: Paradigms, reforms and the energy trilemma

A new global energy era is emerging, one driven by the confluence of energy security, climate politics and energy equity issues. This ‘energy trilemma’ is shaping the global political economy of energy, which in turn influences how decisions are made about how energy is provided—referred to as global energy governance. This article analyzes historical and contemporary developments in Central America’s power sectors. This is a region that has long been an implementation space for global policy priorities, but has been overlooked by those engaging with the challenges of the energy trilemma. During the 1990s and 2000s, the statist model of energy governance gave way to a market-led model in the Central American isthmus. This led to the privatization of state-owned utilities and the promotion of a regional electricity market. During this period, the dominance of largely hydro-based renewable electricity generation diminished to be replaced by imported fossil fuel-based generation. Oil price increases during the early 2000s highlighted the region’s dependence on imports, with some countries turning to energy rationing. Increasingly interventionist state policies, which now seek to reduce oil dependence, improve energy efficiency and expand access to electricity, are being pursued in the region. This interventionist turn reflects the pressures of the energy trilemma, although energy security, particularly the need to reduce dependence on imported oil, remains the most important driver.

Análisis de aplicabilidad de derivados financieros en el otorgamiento de financiamiento para el desarrollo de pequeños proyectos hidroeléctricos en Honduras

A lo largo de los últimos años el país ha fomentado la inversión en energías renovables, sin embargo; a raíz del nuevo marco regulatorio han surgido cuestionamientos en todo lo relacionado a este tipo de energía. La nueva ley modifica el esquema de operación del país, desregulando el subsector y separando operaciones, así como dictando que las ofertas de energía se realizan mediante procesos licitatorios. En este trabajo se efectúa una simulación, presentando como base la venta de energía por parte del productor al mercado eléctrico regional por un periodo determinado de años, aspecto que cuenta con bastante riesgo por no tener un Contrato de Compra y Venta de energía. El precio de la energía eléctrica se ha caracterizado por presentar grandes fluctuaciones ya sea en periodos de tiempo cortos o largos, lo que incrementa el riesgo de los generadores y por tanto la utilidad esperada. En seguimiento a lo anterior, el objetivo principal del presente trabajo es demostrar que el uso de derivados financieros disminuye el riesgo de proyectos hidroeléctricos.

Electricity Sector Reforms in Bosnia and Herzegovina: Results and Policy Implications

Analysis shows that electricity sector reforms in Bosnia and Herzegovina have not been implemented as they should according to the Third Energy Package and obligations deriving from the Energy Community membership. Despite the sanctions and infringement procedures for non-transposition of the Third Energy Package that has been adopted against Bosnia and Herzegovina, its legal and regulatory framework for the electricity market is still non-compliant with the Energy Community acquis. Legal framework harmonization with the Acquis communaitaire is completely missing on the state level in Bosnia and Herzegovina while the legal compliance with the Acquis is somewhat better on entity levels. Still, they do not comply with the Third Energy Package as well and this situation strongly hinders the required structural reforms and liberalization of the electricity market. Development of electricity market in Bosnia and Herzegovina has been also influenced by regional electricity market that started by European Union’s incentive. Extending the European Union internal energy market to its neighboring countries, the Energy Community aims to create a regulatory and market framework capable of securing reliable energy supply and attracting investments in the energy sector. All Contracting Parties from Southeast Europe started to implement reforms in the energy sector at a different pace, but Bosnia and Herzegovina has been marked as the worst performer. It is not wondering because Bosnia and Herzegovina is a victim of its own constitutional framework and political complexity. However, during 2016 some new developments have occurred that give some hope for this country to solve some of the obstacles for functioning national and regional electricity market.

Water-Energy Prototype Model for the NEMS Modeling Platform: Thermoelectric Water Demand and Its Implications on Regional Electricity Market

A simplified energy-water prototype model has been developed at the National Energy Technology Laboratory (NETL) as a part of a larger effort to comprehensively model energy-water interactions. The NETL Water-Energy Model (NWEM) prototype passively couples a variety of data on water supply, water availability, and power plant water use with the National Energy Modeling System (NEMS) power generation forecasts. NWEM operates at a watershed level and its efficacy in resolving local water supply and water-use trade-offs was demonstrated using data from Sandia National Laboratory along with a water supply scenario projected by the World Resources Institute (WRI). The prototype model only passively utilized a forecast of power generation from an existing forecast; the model’s choices were limited to purchases or retrofitting to meet future water supply constraints. NETL is continuing to integrate the water sub-module into the NEMS framework, which will allow active interaction between the water market and power markets, extending the industry’s ability to re-dispatch its generating units with the price of water as one of the variable costs.

Brazil and the International Electrical Integration: Background, Current Status and Perspectives

Electrical integration is a topic discussed and promoted worldwide. European countries have created regional electricity markets, while in South American countries the creation of a regional electricity market is still a distant option due to economic and social asymmetries and, especially, because of incompatibilities in the regulatory framework and energy trading mechanisms. This paper aims to analyze the electrical integration process in South America, being Brazil the central focus of the analysis. The main constraints of Brazil's regulatory model are analyzed, highlighting that the last restructuring process of the electrical sector (2003-2004) has defined a commercial model where financial contracts of “physical guarantee” are traded instead of electricity itself, and where the power plants do not have autonomy over their own production. The already existing integration projects are also analyzed highlighting that these projects were developed under special conditions for taking advantage of specific opportunities without the support of a strategic integration policy. Additionally, the paper addresses two other electrical integration projects that are being discussed.

Evaluating the benefits of using short-term direct normal irradiance forecasts to operate a concentrated solar thermal plant

Past studies about using direct normal irradiance (DNI) forecasts to operate a concentrated solar thermal (CST) plant have not considered intra-day forecasts. This is a critical research gap because short-term forecasts are recommended for managing variable output from renewable energy generators, including CST plants. This study evaluates the benefits of using 1-h forecasts to decide updated bids for a CST plant after making initial bids from 48-h forecasts. The benefits are represented by the financial value calculated from revenue and reserve generation (RG) payments, and the reliability calculated from the equivalent forced outage rate (EFOR).Simulating a CST plant operating in the Australian National Electricity Market for one year showed that using 1-h forecasts increases financial value by $1.04–1.13million and reduces EFOR by 20–21% points for a 50 Megawatt (MW) CST plant with 7.5h of storage, and increases financial value by $0.7–$0.9million and reduces EFOR by 20–23% points for a 50MW CST plant without storage. Reduced RG costs contributed towards 76–98% of the financial value increase for both CST plants. A CST plant without storage that uses 1-h forecasts achieves an EFOR of 10–11%, whereas a CST plant with storage that does not use 1-h forecasts achieves an EFOR of 21–22%, so using 1-h forecasts may improve reliability more than adding storage to a CST plant without storage. Using 1-h forecasts does not achieve the same total net value as a perfect 48-h forecast, but it achieves close to maximum value per unit electricity generated. Overall, CST plants should use short-term forecasts if permitted under local electricity market regulations because they can achieve higher financial value and reliability. Future studies should use short-term forecasts when allowed by the local electricity market to more accurately demonstrate the value of CST plants.

Mandating Low‐Carbon Fuels to Reshape a Regional Electricity Market

The national policy debate over how to reduce carbon emissions while preserving the integrity of wholesale electricity markets heard a jarring message from the Northeast this summer. In a region known for first creating and then defending competition in its wholesale electricity market, the largest consuming state, Massachusetts, passed legislation that requires distribution utilities to purchase carbon‐free electricity under long‐term contracts for up to 30 percent of the state's electricity supply.

The evolution model of electricity market on the stable development in China and its dynamic analysis

According to the causal relationships between electricity consumption, electricity supply and electricity price, the complex interrelationships among all the factors in electricity market are clarified, and a net structure that every element can conduct mutually are founded. Furthermore, a novel dynamic system model of the electricity supply-consumption-price is proposed. By means of Lyapunov exponents and bifurcation diagrams, the dynamic behaviors of the system are analyzed, and an electricity market attractor is achieved. Then the model is applied to China's electricity market. With the statistical data of China between 1997 and 2012, the parameters for establishing a China-specific dynamic system of electricity market are identified by artificial neural network of machine learning. Owing to the actual system in China's electricity market is unstable, four efficient single regulatory strategies have been found by means of bifurcation diagrams. And comparative scenario analysis is employed based on the influences to electricity market and electricity balance index under all kinds of regulatory strength and regulatory strategies. The results show that the current actual situation in China's electricity market should be considered, and excessive regulation should be avoided. At the same time, it is found that the integrated regulatory strategies are better than the single regulatory strategies, and the optimal regulatory strategy of the integrated regulatory strategies is strategy-2,3,4. That is, to reform the regulation of China's current electricity market, the best way is to deepen market-oriented reforms in the electricity generation side, implementing peak-valley TOU price and adopting appropriate administrative measures.

Optimal management and planning of storage systems based on particle swarm optimization technique

In restructured electric power systems under electricity market regulations, Distribution Companies (DISCOs) mainly aim at maximizing their profit subject to safe operation of the network. In this regard, optimal planning of Energy Storage Systems (ESSs) can be a very effective method to maximize DISCOs profit. This paper addresses an optimal methodology to signify the location and capacity of ESSs in distribution network under electricity market environment. The proposed optimal ESSs planning aims at maximizing DISCO profit subject to safe and secure operation constraints (e.g., voltage and flow limits). The maximization problem is mathematically expressed as a mixed integer non-linear programming and solved using particle swarm optimization algorithm. Simulations are carried out on a typical distribution network. Simulation results demonstrate significant impact of ESSs on the network operation, security constraint, and costs. The proposed planning not only increases the DISCO profit but also guarantees the safe operation of the network. As well, several stativity analyses are carried out to indicate the impact of parameters on the planning.

Calculating the financial value of a concentrated solar thermal plant operated using direct normal irradiance forecasts

This study examines the effect of direct normal irradiance (DNI) forecast accuracy on the financial value of a concentrated solar thermal (CST) plant. Other factors such as electricity market regulations, plant site local climate, and operating strategy are not considered. A CST model varied over 11 combinations of solar field sizes and storage sizes is used to simulate plant operation for three forecast methods and a perfect forecast. The financial value is calculated using revenue and reserve generation payments resultant from plant operation.Results show when the root mean square error (RMSE) of a 48-h DNI forecast is between 325 and 400W/m2, a 1W/m2 improvement increases the financial value by $400–1300 per 6months operation for a CST plant with solar multiple between 1.25 and 2, and storage size between 0 and 20h. Similarly, when the mean absolute error (MAE) is between 250 and 300W/m2, a 1W/m2 improvement shows an increase of $1000–3600 per 6months operation. If two forecast methods have similar MAE or RMSE, then the method that tends to over-predict DNI achieves higher value. For all forecast methods, increasing solar multiple or storage size increases financial value. Financial value expressed using only revenue is overstated by 14–64% compared to using both revenue and reserve generation payments, depending on the CST plant configuration and the forecast method. CST plants with small solar fields or small storage sizes gain proportionally more from investing to obtain better DNI forecasts because more accurate forecasts help these CST plants generate more electricity from the limited solar field thermal output, and use more of the limited stored thermal energy to increase revenue instead of reduce reserve generation payments caused by forecast errors.

Novel Power Smoothing and Generation Scheduling Strategies for a Hybrid Wind and Marine Current Turbine System

Grid integration of wind energy is a major challenge as grid codes require electricity generation units to schedule their generation ahead of the trading period and to limit the power fluctuations. This paper proposes novel strategies for mitigating the effects of wind intermittency by developing hybrid off-shore wind and marine current turbines. Unlike the random nature of wind, marine currents have slow cyclic variations and are highly predictable. The proposed methods involve optimal sizing strategy for the hybrid system and rely on the resource predictions. Prediction Intervals for wind speed forecasts using Bootstrapped Artificial Neural Networks have been developed and validated. Marine current speeds have been mathematically modeled using the Harmonic Analysis Method. Subsequently, novel power fluctuation mitigation and generation scheduling strategies using minimum energy storage have been designed based on the UK electricity market regulations and the predicted wind and current speeds. The results demonstrate the effectiveness of the proposed methods which ensure successful mitigation of power fluctuations, reliable dispatch scheduling of renewable generation, and significant cost saving potential.

Convergent Double Auction Mechanism for a Prosumers’ Decentralized Smart Grid

In this paper, we propose a novel automated double auction mechanism called convergent linear function submission-based double-auction (CLFS-DA) for a prosumers’ decentralized smart grid. The target decentralized smart grid is a regional electricity network that consists of many prosumers that have a battery and a renewable energy-based generator, such as photovoltaic cells. In the proposed double-auction mechanism, each intelligent software agent representing each prosumer submits linear demand and supply functions to an automated regional electricity market where they are registered. It is proven that the CLFS-DA mechanism is guaranteed to obtain one of the global optimal price profiles in addition to it achieving an exact balance between demand and supply, even through the learning period. The proof of convergence is provided on the basis of the theory of LFS-DA, which gives a clear bridge between a function submission-based double auction and a dual decomposition (DD)-based real-time pricing procedure. The performance of the proposed mechanism is demonstrated numerically through a simulation experiment.

Regulatory Aspects and Public International Law Issues of the Construction of Cross-Border Electricity Networks

The role of government and regulation in the construction of regional interconnections and enabling cross-border trade in electricity over long distances is crucial. Only integrated electricity markets and well-designed regulatory frameworks can deliver and maintain cost-effective electricity systems. Interconnected electricity systems, in their turn, can contribute to the objectives of low carbon economy, as cross-border electricity networks can integrate large-scale renewable energy sources. This paper explores the challenges related to the regulatory environment for the construction of cross-border electricity transmission links. It looks at regulatory aspects and public international law issues of cross-border energy trade and investment and international and regional cooperation related to the construction of cross-border electricity networks. First, it examines the right to construct transmission under the law of the World Trade Organization (WTO), focusing on the transit provisions of Article V of the General Agreement on Tariffs and Trade (GATT) and related obligations under the Agreement on Subsidies and Countervailing Measures (ASCM). Second, it discusses rights and obligations arising from the participation at energy-specific international treaties, such as the non-impediment obligation under Article 7 of the Energy Charter Treaty. Third, it looks at the potential of creating legal guarantees for investors under regional trade and energy-specific agreements. The paper draws on existing case law and the experience with electricity market regulations and energy investment regimes in the European Union.

New European Electricity Market Regulations and their Impact on the Domestic Market

New European Electricity Market Regulations and their Impact on the Domestic Market

The Impact of Bidding Rules on Electricity Markets With Intermittent Renewables

The cycling regime of thermal power plants significantly increases in the presence of intermittent renewables, increasing fuel and operation and maintenance costs from startups. Some regional electricity market operators adopt complex bidding mechanisms to account for nonconvex cost components that are not reflected in the marginal cost of energy, while other markets rely solely on simple bids with revenue sufficiency conditions. This paper compares the impacts of different bidding rules on wholesale prices and on the remuneration of units in power systems with a significant share of renewable generation. We distinguish the effects of bidding rules from the effects of regulatory uncertainty that can unexpectedly increase renewable generation by considering two distinct situations: 1) an “adapted” capacity mix, which is optimized for any given amount of renewable penetration, and 2) a “nonadapted” capacity mix, which is optimized for zero renewable penetration, but operated with different nonzero levels of renewables. We show that, although in the transitory state the impact on remuneration of having a nonadapted system dominates over the effect of the startup remuneration mechanisms explored, in equilibrium, bidding rules play an important role in making power plants whole while impacting on the cost borne by consumers.

Regional energy trading—a new avenue for resolving a regional water dispute?

The Coruh/Chorokhi river system is of great economic importance to both Turkey and Georgia because of its largely undeveloped but economically exploitable potential for hydropower. On both sides of the border a large number of hydropower projects are being implemented unilaterally in which private investors play the key role, following liberalisation of the energy sectors in Turkey and Georgia. This has been promoted in both countries, despite the resulting social and environmental costs, particularly in Turkey. Negative effects – i.e., the changes in sedimentation and the river flow regimes – moving from upstream interventions in Turkey to downstream Georgia – have still not been resolved, and they will put electricity generation in Georgia at risk when the hydroelectricity plants start operating. This article explores regional disputes and the degree of cooperation that exists, and analyses the effect that the efforts of relevant actors to establish regional electricity trading are having on the current problems. The creation of a regional electricity market seems to be opening up a new avenue for cooperation also on water. Key words: Coruh/Chorokhi river system, unilateralism, hydropower, international disputes, regional electricity trade, potential for dispute resolution

Modeling Demand Response Capability by Internet Data Centers Processing Batch Computing Jobs

Electricity cost has become a big concern of commercial cloud service providers with the rapid expansion of network-based cloud computing. Locationally, dispersed large-scale Internet data centers (IDCs) that underpin the cloud have increasing impact on the regional electricity market with their skyrocketing energy consumption. In this paper, the electricity market participation and accordingly the demand response capability of an IDC is defined as its temporally and spatially shiftable electricity demand quantities for processing delay-tolerant central processing unit-intense batch computing jobs. The demand response capability of the IDC is obtained by the proposed electric demand management solution. Price-sensitive and cooling efficiency-enabled batch computing workload dispatch with the objective of minimizing electricity cost is realized by dynamic IDC server consolidation and scheduling with virtual machine live migration technology. Numerical simulations show the effectiveness of the proposed demand management solution in IDC energy consumption and electricity cost reduction.