System Marginal Cost Research Articles

Cable cars: From optimal design to optimal pricing

Although cable car services have become an integral part of the transit system in many cities in the world, their specific technology has never been studied from the viewpoint of the links between optimal design and marginal cost pricing. Here we formulate, solve and apply a first model to represent the specific features of a cable car system considering operators' and users' costs. The links among cabins’ density, their speed and capacity, frequency, slope, and others, are formulated to obtain the optimal design variables as a function of demand volume, a system cost function, marginal and average costs, and first best money prices and possible subsidies. An application with sensitivity analysis illustrates the model.

Energy Price Decoupling and the Split Market Issue

Load scheduling and dispatch by merit order on electricity generation networks has used a wholesale market electricity system operator model focused on system marginal pricing, in which the spot price of electricity at any point in time is equal to the system marginal cost given by the higher value of the price, which rations demand to capacity or the operating cost of the most expensive plant on the system, which is usually a fossil fuel price. This idea has come under challenge because renewable technologies such as wind power farms or solar power farms are treated as having close to zero operating costs. The challenges, under the general heading of energy price decoupling, include suggestions for operating split markets possibly overseen by a regulator, and the prediction that marginal cost pricing should be abandoned. This review evaluates these in terms of their economic impact, relating them to the policy debates on electricity market reform.

Low energy demand scenario for feasible deep decarbonisation: Whole energy systems modelling for Ireland

Typically, energy system decarbonisation scenarios neglect the mitigation opportunities from reducing and restructuring energy service demands (ESDs), focusing instead on technology and fuel substitutions. Models tend to be designed to factor technologies explicitly while ESDs are exogenous. However, existing literature suggests that the scale and speed of decarbonisation required to limit global warming to 1.5∘ C by the end of the century requires a shift in energy demands to avoid the need for large-scale negative emission technologies. This can be brought about by major structural changes in drivers of demand such as transport modal shifting, substituting emission intensive materials like cement, and reducing building heat demand through behaviour change and efficiency. Ireland, the subject of this paper, has legislated one of the most ambitious decarbonisation targets in the world: the need to understand the role of demand shift is paramount. To fill this gap, the Irish Low Energy Demand (ILED) mitigation narrative is developed and applied to the TIMES-Ireland Model (TIM), an energy systems optimisation model. ILED represents a scenario where ESDs are decoupled from economic growth by shifting travel, increasing end-use efficiency, densifying urban settlement, focusing on low-energy intensive economic activities and changing social infrastructure. Compared to a scenario where ESDs follow ‘Business-as-usual’ growth, ILED enables the achievement of steep decarbonisation targets with a less rapid energy system transformation, lower capital and marginal abatement costs, and with lower reliance on the deployment of novel technologies.

Chile's electricity markets: Four decades on from their original design

It has been almost 40 years since Chile reformed its electricity sector. In 1982, the Electricity Act created an energy market for generators and large customers to negotiate supply contracts. It also established a centralized dispatch of power plants in ascending order of generation cost, independent of their owners' supply contracts. This setup results in power exchanges between generators, which are valued using the system's marginal costs. This paper: (i) describes the market design; (ii) shows its evolution to date; (iii) describes the triggers for change; (iv) draws policy lessons and (iv) provides a preliminary assessment of the reform.

Hydrothermal Unit-Commitment Problem of a Large-Scale System with Representation of Forbidden Zones

As we move towards electrical networks with a growing presence of renewable generation, the representation of the electrical components becomes more important. In hydro-dominated power systems, modelling the forbidden zones of hydro plants becomes increasingly challenging as the number of plants increases. Such zones are ranges of generation that either should be avoided or are altogether unreachable. However, because representing the forbidden zones introduces a substantial computational burden, hydrothermal unit-commitment problems (HTUC) for large systems are usually formulated ignoring the forbidden zones. Nonetheless, this simplification may demand adjustments to the solution of the HTUC, because the generation of the hydro stations may fall in forbidden zones. In practice, the adjustments are usually performed based on the experience of system operators and, then, can be far from an optimal correction. In this paper, we study the impact of explicitly representing the hydro-generation forbidden zones in a large-scale system with more than 7000 buses, 10,000 lines, and 700 hydro units. Our findings show that the simplified model that is current used can deviate significantly from the model with forbidden zones, both in terms of the generation of hydro plants, as well as the generation of thermal plants and the system marginal costs.

The Role of BECCS in Achieving Climate Neutrality in the European Union

The achievement of climate neutrality in the European Union by 2050 will not be possible solely through a reduction in fossil fuels and the development of energy generation from renewable sources. Large-scale implementation of various technologies is necessary, including bioenergy with carbon capture and storage (BECCS), carbon capture and storage (CCS), and carbon capture and utilisation (CCU), as well as industrial electrification, the use of hydrogen, the expansion of electromobility, low-emission agricultural practices, and afforestation. This research is devoted to an analysis of BECCS as a negative emissions technology (NET) and the assessment of its implementation impact upon the possibility of achieving climate neutrality in the EU. The modelling approach utilises tools developed within the LIFE Climate CAKE PL project and includes the MEESA energy model and the d-PLACE CGE economic model. This article identifies the scope of the required investment in generation capacity and the amount of electricity production from BECCS necessary to meet the greenhouse gas (GHG) emission reduction targets in the EU, examining the technology’s impact on the overall system costs and marginal abatement costs (MACs). The modelling results confirm the key role of BECCS technology in achieving EU climate goals by 2050.

A Minimal System Cost Minimization Model for Variable Renewable Energy Integration: Application to France and Comparison to Mean-Variance Analysis

The viability of Variable Renewable Energy (VRE)-investment strategies depends on the response of dispatchable producers to satisfy the net load. We lack a simple research tool with sufficient complexity to represent major phenomena associated with the response of dispatchable producers to the integration of high shares of VRE and their impact on system costs. We develop a minimization of the system cost allowing one to quantify and decompose the system value of VRE depending on an aggregate dispatchable production. Defining the variable cost of the dispatchable generation as quadratic with a coefficient depending on macroeconomic factors such as the cost of greenhouse gas emissions leads to the simplest version of the model. In the absence of curtailment, and for particular parameter values, this version is equivalent to a mean-variance problem. We apply this model to France with solar and wind capacities distributed over the administrative regions of metropolitan France. In this case, ignoring the wholesale price effect and variability has a relatively small impact on optimal investments, but leads to largely underestimating the system total cost and overestimating the system marginal cost.

Agent-Based Spectrum Management Scheme in Satellite Communication Systems

Efficient spectrum management has always been an important issue due to the scarcity of satellite spectral resource, especially with the ever-increasing broadband demand. This paper proposes a market-driven technique to improve spectrum efficiency. In practice, spectrum resources are typically allocated in bulk to terrestrial agents which in turn will resell the bandwidth to end users of satellite communications. This paper explores the important role of terrestrial agents which serve as spectrum sales agents in satellite communications systems. The proposed approach aims to provide an incentive scheme for the agents to participate in the spectrum optimization process so as to result in maximizing the benefit of the agents as well as the satellite systems. We propose a dynamically optimal cooperation scheme between terrestrial agents and satellite systems, which is based on a stochastic process and optimal contract principle. By taking into consideration the satellite system's marginal cost related to transmission capacity in the given bandwidth, terrestrial agent's effort and the impact of market volatility, we designed an optimal incentive model which allows the satellite systems to determine a threshold value for paying sales commission to terrestrial agents or triggering contract termination if spectrum utilization is inefficient. Numerical results are presented to evaluate the performances of satellite systems’ profits in changing spectrum market and agency cost undertaken by satellite systems.

Analysis of power market simulation methods under the background of re-electrification

The world is experiencing a new round energy transition from fossil energy to clean energy. To many countries, continuously upgrading electrification level and accommodate more wind power and solar power to achieve re-electrification roadmap, will be a trend and the only way of these countries’ energy transition. In this paper, challenges brought by large-scale wind power and solar power to power system operation are analyzed from the aspects of accommodation, fluctuation characteristics, prediction error, power electronics characteristics and pulling down system marginal cost. Also, key issues of power market simulation methods, such as co-considered day-ahead market and real-time market by use of Security Constrained Unit Commitment (SCUC) model and Security Constrained Economic Dispatch (SCED) model respectively, co-optimized energy and ancillary service market and added rotational inertia verification in SCUC model, are studied.

Hydrogen from offshore wind: Investor perspective on the profitability of a hybrid system including for curtailment

Accommodating renewables on the electricity grid may hinder development opportunities for offshore wind farms (OWFs) as they begin to experience significant curtailment or constraint. However, there is potential to combine investment in OWFs with Power-to-Gas (PtG), converting electricity to hydrogen via electrolysis for an alternative/complementary revenue. Using historic wind speed and simulated system marginal costs data this work models the electricity generated and potential revenues of a 504 MW OWF. Three configurations are analysed; (1) all electricity is sold to the grid, (2) all electricity is converted to hydrogen and sold, and (3) a hybrid system where power is converted to hydrogen when curtailment occurs and/or when the system marginal cost is low, with the effect of curtailment analysed in each scenario. These represent the status quo, a potential future configuration, and an innovative business model respectively. The willingness of an investor to build PtG are determined by changes to the net present value (NPV) of a project. Results suggest that configuration (1) is most profitable and that curtailment mitigation alone is not sufficient to secure investment in PtG. By acting as an artificial floor in the electricity price, a hybrid configuration (3) is promising and increases NPV for all hydrogen values greater than €4.2/kgH2. Hybrid system attractiveness increases with curtailment only if the hydrogen value is significantly above the levelised cost of €3.77/kgH2. In order for an investor to choose to pursue configuration (2), the offshore wind farm would have to anticipate 8.5% curtailment and be able to receive €4.5/kgH2, or 25% curtailment and receive €4/kgH2. The capital costs and discount rates are the most sensitive parameters and ambitious combinations of technology improvements could produce a levelised cost of €3/kgH2.

System optimum dynamic traffic assignment with departure time choice on two-terminal networks

ABSTRACTThis paper addresses the system optimum dynamic traffic assignment (SO-DTA) problem with departure time choice on a two-terminal network, where the travel cost consists of travel time and an early schedule delay cost. Under a certain condition, we show that SO-DTA reduces to the latest departure earliest arrival flow (LDEAF), and hence methodologies of LDEAF can be used to study SO-DTA. A successive shortest path (SSP) algorithm is used to solve the LDEAF problem. The benefit is that the SSP algorithm involves only the shortest path computations on a static network. System marginal costs, externalities and dynamic user equilibrium tolls are analyzed in the LDEAF context, and used to provide a better understanding of the SO-DTA problem characteristics. Further, the study findings can be used for the morning commute problem as it is a special case of the SO-DTA problem on a two-terminal network.

A Pricing Strategy Reflecting the Cost of Power Volatility to Facilitate Decentralized Demand Response

Previous pricing strategies including time-of-use price and dynamic price reflect system marginal cost and calculate consumers' bills according to the quantity of their electricity usage. Little effort is made to understand the impact of power volatility on total production costs. This paper thus proposes a novel pricing strategy reflecting the cost arising from power volatility. Firstly, the impact of volatility on the production cost is investigated to quantify volatility cost. Secondly, a novel pricing model is proposed to allocate the volatility cost to consumers and renewable energy generations (REGs). It can reveal the coupling relationship between an individual load/REG curve and the system load curve. Thirdly, under the proposed pricing strategy, customers/REGs help to flatten the system load curve and reduce the production cost in a decentralized manner, which is certificated theoretically based on the Haar wavelet transforms. Validation on residential level loads shows that the volatility and peak-to-valley difference of aggregated load curve is reduced by 34.07% and 19.81%, respectively. The problem of synchronous response among customers faced by hourly price strategies is addressed by the proposed strategy. A test on megawatt-level loads shows a 61.95% reduction in system load volatility and a 2.21% reduction in production cost. It also reduces the peak-to-valley difference by 6.52%.

A Probabilistic Economic/CO2eq Emissions Dispatch Model: Real Applications

The worldwide evolution of the electric systems requires, i. a.: a) fossil-fuel generators with carbon capture and b) clean technologies based on renewable energies. For this reason, dispatch centers are in constant search for solutions in order to improve decision-making that involve the generation matrix. Consequently, in this paper a probabilistic economic dispatch model is proposed. The proposed methodology considers uncertainties, affecting the short–term control, the emission factors and the load dispatching. Wind speed, solar radiation and power demand are treated as random variables. Unavailability factors are also taken into account. The solution strategy is based on the Monte Carlo method and a bi-objective linear optimization constrained procedure. The approach involves multidimensional probabilities, descriptive statistics, clusters studies and bimodal analysis. The optimal solution yields the probability distributions of system marginal prices, dual costs, load-shedding, thermal and renewable power generation and emission factors. The proposed model and methodology are applied to the electric power system of northern Chile.

English

Small water systems have water technology that has a higher cost structure than those of large cities. Consequently they cannot enjoy “comparable” consumption patterns. It is shown that full cost pricing is not compatible with achieving equity for small system residents and marginal cost pricing would not cover the capital costs. Therefore, provinces could seek legal recourse for higher federal transfers, based on section 36(2) of the Canadian Constitution Act, which mandates “comparable” public services irrespective of residence. It is argued that such a case is justiciable. This legal remedy would interest the global water policy community. Key words: Alberta, water pricing, small water systems, affordability, income.

Small systems, big targets: Power sector reforms and renewable energy in small systems

There is some consensus that the traditional energy-only electricity markets, where prices are based on system marginal cost, cannot function efficiently with both fossil fuels and renewables, resulting in market disruptions and price volatility. Consequently, much effort has been focused on how to integrate these different resources in larger and mature electricity systems such as the use of capacity markets in addition to energy-only markets. This paper argues that the effectiveness of competition is limited by the size of an electricity system and there is a threshold size (and associated characteristics such as tropical locations, lack of access, and the prevalence of remote communities of consumers) below which competition will not produce the expected outcomes. This paper contributes to the policy discourse by discussing the reform of small electricity systems to integrate renewable energy via the means of three case studies: Nicaragua, El Salvador, and Australia's Northern Territory. The paper concludes that electricity reforms and renewables can be complementary in small systems when supported by appropriate instruments and incentives. We draw policy lessons for other small systems that are pursuing a triad of objectives including electricity reform, large-scale renewables development and improving energy access.

Small Systems, Big Targets: Power Sector Reforms and Renewable Energy Development in Small Electricity Systems

The dominant focus of much policy attention of late has been on the suitability of electricity market reform carried out under the ‘standard’ or prescriptive approach – the end point of which is market liberalization – for the integration of intermittent renewables. There is now a growing consensus around the argument that traditional energy-only electricity markets where prices are based on system marginal cost cannot function efficiently with both fossil fuels and renewables, potentially resulting in market disruptions and price volatility. Consequently, most policy discussion has focused on finding ways to successfully integrate the two through adopting advanced competitive solutions (such as the use of capacity markets in addition to energy-only markets) in larger systems. We however argue that the effectiveness of competition is limited by the size of the system – i.e., there is a minimum threshold size (and other characteristics such as tropical locations, lack of access, and the prevalence of remote consumers) under which competition will not produce expected outcomes, and require distinctive policy solutions. This paper contributes to the policy discourse by discussing the reform of small electricity systems to integrate renewable energy via the means of three case studies: Nicaragua, El Salvador, and their application to Australia’s Northern Territory. The paper draws some policy lessons that can be considered for other small electricity systems in island economies and territories across Africa, the Caribbean, and the Asia-Pacific, that are pursuing a triad of objectives including electricity sector reform, large-scale renewables development and improving energy access.

Design and operation optimization of an internal reforming solid oxide fuel cell integrated system based on multi objective approach

The interaction between design parameters and operation variables is a complex problem that affects system techno-economic performance. The aim of this paper is to optimize the design and operation of an SOFC/MGT integrated system. The problem consists of design and operation optimization of an integrated SOFC/MGT system. Decision variables including design parameters (number of SOFC cells) as well as the operation parameters (air pressure ratio, methane and air flow rates). The multi objective approach using genetic algorithm is applied considering two pairs of proposed objectives: (1) maximization of output power and minimization of the electricity cost and (2) maximization of system electrical efficiency and minimization of the electricity cost. The results demonstrate minimum cost of electricity is 0.047$/kWh at 306.49kW output power and 59.93% efficiency. The Pareto frontiers show that 11.23% growth of output power leads to only 5.3% increase in electricity cost and a growth of 12.18% increase of efficiency leads to only 4.05% increase in electricity cost, which is more favorable. Multi objective optimization provides valuable information about flexibility of trade-offs between design and operation variables for decision making and determination of system marginal cost.

Simplified method for the assessment of ship electric power systems operation cost reduction from energy storage and renewable energy sources integration

The extensive electrification of ship power systems has become a very appealing option for the development of more efficient and environmentally friendly ships. Renewable energy sources and energy storage systems will have a key role in such systems as they can lead to fuel consumption reduction and increase of ship efficiency. In this study, analytic formulas are obtained for the estimation of system marginal cost of a ship power system equipped with photovoltaics and energy storage system and its operation is analysed from the economical point of view. The major advantage of the proposed method is that the obtained formulas require almost zero computational capacity although they provide a qualitative view of the problem not easily attainable by other conventional methods. Hence, it could be a convenient tool for the technical–economical study of such systems. In this context, it could be exploited for the assessment of a large number of ship power system operation scenarios during ship design phase.

An Illustrative Note on the System Price Effect of Wind and Solar Power: The German Case

Exposing wind and solar power to the market price signal allows for cost-efficient investment decisions, as it incentivizes investors to account for the marginal value ( $$MV^{el}$$ ) of renewable energy technologies. As shown by Lamont (2008), the $$MV^{el}$$ of wind and solar power units depends on their penetration level. More specifically, the $$MV^{el}$$ of wind and solar power units is a function of the respective unit’s capacity factor and the covariance between its generation profile and the system marginal costs. The latter component of the $$MV^{el}$$ (i.e., the covariance) is found to decline as the wind and solar power penetration increases, displacing dispatchable power plants with higher short-run marginal costs of power production and thus reducing the system marginal costs in all generation hours. This so called ‘system price effect’ is analyzed in more detail in this paper. The analysis complements the work of Lamont (2008) in two regards. First of all, an alternative expression for the $$MV^{el}$$ of wind and solar power units is derived, which shows that the $$MV^{el}$$ of fluctuating renewable energy technologies depends not only on their own penetration level but also on a variety of other parameters that are specific to the electricity system. Second, based on historical wholesale prices and wind and solar power generation data for Germany, a numerical ‘ceteris paribus’ example for Germany is presented which illustrates that the system price effect is already highly relevant for both wind and solar power generation in Germany.

Optimized Integral Gain Controllers for Price Based Frequency Regulation of Single Area Multi-Unit Power System

This Paper deals with the Price Based Load Frequency Control (PBLFC) using optimizedgain of integralcontroller with three different system marginal cost cases of single area four generator schemes. Case one having System Marginal Cost (SMC) value more than the nominal Unscheduled Interchange (UI) rate. Case two having system marginal cost value less than the nominal UI rate. Case three illustrates about the peak load condition following sudden loss of large generation to see whether PBLFC can handle such event or not. Particle Swarm Optimization (PSO) technique has been used to optimize gain of integral controllers in case one and two. An attempt has been made to achieve effective system frequency response using optimized gain controllers and also to explore the change in profit earned by Generation Companies (Gencos) in both the cases. For the analysis, UI rate of the year 2012, issued by Central Electricity Regulation Commission (CERC, INDIA) is used.