Showing papers on "Energy market published in 2005"

Electricity Market Reform in the European Union: Review of Progress toward Liberalization & Integration*

Abstract: The energy market liberalisation process in Europe is increasingly focused on electricity market integration and related cross border issues. This signals that the liberalisation of national electricity markets is now closer to the long-term objective of a single European energy market. The interface between the national electricity markets requires physical interconnections and technical arrangements. However, further progress towards this objective also raises important issues regarding the framework within which the integrated market is implemented. This paper reviews the progress towards a single European electricity market. We then discuss the emerging issues of market concentration, investments, and security of supply as well as some aspects of market design and regulation that are crucial for dynamic performance of a single European market.

Scheduling and Pricing of Coupled Energy and Primary, Secondary, and Tertiary Reserves

Abstract: Current practice in some electricity markets is to schedule energy and various reserve types sequentially, first clearing the energy market, followed by the reserves needed. Since distinct reserve services can in fact be strongly coupled, and the heuristics required to bridge the various sequential markets can ultimately lead to loss of social welfare, simultaneous energy/reserves market-clearing procedures have been proposed and are in use. However, they generally schedule reserve services subject to exogenous rules and parameters that do not relate to actual operating conditions. The weaknesses of the current approaches warrant the investigation of alternatives. In that regard, we present a different methodology to the simultaneous market clearing of energy and reserve services. This approach avoids the pitfalls of the sequential procedures, while at the same time its basis for scheduling reserve services does no longer rely on some rules of thumb. The salient feature of the proposed approach is that, under marginal pricing, it yields a single price for all reserve types scheduled at a bus, unlike the current approaches. We show that this common price is given by the nodal marginal cost of security. We present two specific implementations of a simultaneous security-constrained market-clearing procedure, one deterministic and one probabilistic. An example of joint market clearing of energy with reserves required for primary and tertiary regulation illustrates how their strong coupling affects their schedule and prices.

Constructing bidding curves for a price-taking retailer in the norwegian electricity market

Abstract: We propose a stochastic linear programming model for constructing piecewise-linear bidding curves to be submitted to Nord Pool, which is the Nordic power exchange. We consider the case of a price-taking power marketer who supplies electricity to price-sensitive end users. The objective is to minimize the expected cost of purchasing power from the day-ahead energy market and the short-term balancing market. The model is illustrated using a case study with data from Norway.

Minimization of imbalance cost trading wind power on the short term power market

Abstract: Present power markets are designed for trading conventional generation. For wind generation to participate in short-term energy market lengthy (up to 36 hours) wind power production forecasts are required. Although wind speed forecasting techniques are constantly improving, wind speed forecasts are never perfect and resulting wind power forecast errors imply imbalance costs for wind farm owners. This paper presents a method for minimization of imbalance costs. Stochastic programming is used to generate optimal wind power production bids for short term power market. Wind power forecast error is represented as stochastic parameter. The imbalance costs resulting from this strategy are then compared to the case when wind power production bids on short term power market are based only on wind speed forecast.

Supply function equilibrium bidding strategies with fixed forward contracts

Abstract: During the last 15 years, the regulatory framework for the wholesale sector of the electricity industry has been replaced in many countries by market competition. In such an environment, electric firms compete through both spot market bidding and bilateral contract trading. Firms have to consider their forward contract positions when they make spot market decisions. In this paper, we propose a linear asymmetric supply function equilibrium (SFE) model with transmission constraints to develop firms' optimal bidding strategies considering forward contracts. The characteristics of firms' behaviors are analyzed under the induced equilibrium conditions. The model is applied to the real-time energy market of the Electric Reliability Council of Texas (ERCOT). The effects of forward contracts on the ERCOT market are evaluated. It is shown that the model is able to capture features of bidding behaviors in the ERCOT market.

An oligopolistic power market model with tradable NO/sub x/ permits

Abstract: Models formulated as complementarity problems have been applied previously to assess the potential for market power in transmission-constrained electricity markets. Here, we use the complementarity approach to simulate the interaction of pollution permit markets with electricity markets, considering forward contracts and the operating reserve market. Because some power producers are relatively large consumers of permits, there could be interaction between market power in the permits and energy markets. Market power in the energy market is modeled using a Cournot game, while a conjectured price response model is used in the permits market. An illustrative application is made to Pennsylvania-New Jersey-Maryland Interconnection (PJM), which we represent by a 14-node dc load-flow model, and the USEPA Ozone Transport Commission NO/sub x/ Budget Program. The results show that forward contracts effectively mitigate market power in PJM energy market and both simulated solutions of perfect and Cournot (oligopoly) competition are a good approximation to actual prices in 2000, except that the Cournot model yielded higher peak prices. The NO/sub x/ market influences the Cournot energy market in several ways. One is that Cournot competition lowers the price of NO/sub x/ permits, which in turn affects on low- and high-emission producers differently. In general, because pollution permits are an important cost, high concentration in the market for such permits can exacerbate the effects of market power in energy markets.

Large‐scale wind power integration in Norway and impact on damping in the Nordic grid

Abstract: The Nordic energy market is in need of new power generation capacity. Norway is today in shortage of electrical energy, and the hydropower-based system must rely on importing electrical power from its neighbours in a normal year of hydro inflow. One solution to this problem is to invest in new generation capacity, e.g. by integrating more wind power into the Norwegian grid. The Norwegian government has announced that 1000 MW of wind power will be installed in Norway by 2010, corresponding to an eventual energy production of approximately 3 TWh year−1. This article investigates the impact of wind power integration in Norway on the damping of interarea mode oscillations in the Nordic grid. The impact on the interarea mode oscillations is tested for various types of generators. Results from computer analyses of a simplified yet realistic equivalent of the Nordic power system are used to compute the interarea mode oscillations. Copyright © 2005 John Wiley & Sons, Ltd.

Optimal participation of a microgrid to the energy market with an intelligent EMS

Abstract: The interconnection of large amounts of nontraditional generation causes problems in a network designed for 'conventional' operation. A microgrid consists of a combination of generation sources, loads and energy storage interfaced through fast acting power electronics. The aim of operating microgrid sub-systems is to move away from considering DG as badly behaved system components, of which a limited amount can be tolerated in an area, to 'good citizens'. The paper is focused on the development of a novel energy management system (EMS) based on the application of neural networks (NN). The EMS is able to autonomously make decisions and determine hour by hour the correct dispatch of generators with the final goal of minimising the global energy costs. The application of the EMS to a small test case has showed significant saves in the global energy bill by using typical Italian energy and fuel price data

MCDA and Energy Planning

Abstract: The growing environmental awareness and the apparent conflict between economic and environmental objectives was the main impetus that pushed energy planners during the early eighties towards the use of MCDA methods. Thereafter, the rapid changes and the increasing complexity of the energy market gave rise to further methodological developments. Although the energy market restructuring and ongoing liberalization seemed to restrict the purpose for centralized energy decisions, they added new dimensions in energy planning. Increasing competition along with the prerequisite for sustainability have broadened the energy application field by bringing out new challenges for the development of integrated multicriteria and multi-stakeholders approaches also taking uncertainty into consideration. This paper aims at illustrating the evolution of MCDA approaches, in the context of the emerging problems faced by energy planners and other stakeholders involved in energy-related decision situations, one of the most active and exciting areas of application of MCDA models and methods.

Electricity Market Reform in the European Union - Review of Progress toward Liberalization & Integration

Abstract: The energy market liberalisation process in Europe is increasingly focused on electricity market integration and related cross border issues. This signals that the liberalisation of national electricity markets is now closer to the long-term objective of a single European energy market. The interface between the national electricity markets requires physical interconnections and technical arrangements. However, further progress towards this objective also raises important issues regarding the framework within which the integrated market is implemented. This paper reviews the progress towards a single European electricity market. We then discuss the emerging issues of market concentration, investments, and security of supply as well as some aspects of market design and regulation that are crucial for dynamic performance of a single European market.

Development and restructuring of Turkey's electricity sector: a review

Abstract: With a young and growing population, low per capita electricity consumption and rapid urbanization, Turkey for nearly two decades has been one of the fastest growing power markets in the world. The main objective of the present study is to review many aspects of the Turkish electricity sector, including its historical development, energy related emissions, and energy and exergy utilization efficiencies. With the foundation of the Republic in 1923, Turkey's electricity sector has grown rapidly from 32.8 MW to 26.1 GW at the beginning of 2000. During this period, different governments implemented various strategies and policies for the Turkish electricity industry. In the 1980s, a new era for the industry and regulations started, allowing the installation of electricity power plants. Regulations allowed different investment models and the decision was taken highly to attract foreign investors. Restructuring of the electricity sector in Turkey has started with the establishment of the Energy Market Regulatory Authority (EMRA) upon law No. 4628 which came into force on 3 March 2001. The Energy Market Regulatory Board, which runs the EMRA, was commissioned on November 19, 2001. In May 2002, the EMRA issued drafts of the Energy Market Licensing Regulation and the Electricity Market Tariffs Regulation, and these regulations went into effect in August 2002. The Electricity Market Implementation Manual was issued by the EMRA in April 2003. At present, not only the electricity sector, but also the whole Turkish energy sector is in a dynamic change.

Financial ratio analysis of the electric power industry

Abstract: Financial Ratio Analysis is newly proposed to examine the financial performance of the American power/energy industry. The new approach compares the financial performances of 147 non-default firms with those of 24 default firms in the US power/energy market. The proposed approach is a new type of nonparametric discriminant analysis that provides a set of weights of a linear discriminant function, consequently yielding an evaluation score for group membership. Such weight estimates, along with an evaluation score, of the discriminant function provide a total financial evaluation measure, based upon which we can determine the financial performance of the power/energy firms. This empirical study informs that both leverage (debt) and profitability (returns on equity) are important financial factors in terms of avoiding corporate distress or bankruptcy. The empirical results obtained from the American power/energy industry are further extended to the international comparison of other major industrial nations including Japan and the European nations. The international comparison concludes that Japanese electric power firms have enough managerial and financial capabilities even if the American financial standard is hypothetically introduced into the evaluation of their financial performances. However, the empirical results also indicate that the Japanese power industry performs barely above the American standard. Thus, corporate leaders in the Japanese power industry need to pay more serious attention to their corporate finances and financial strategies. Such financial perspective will be increasingly important along with the current deregulation policy of the Japanese government.

The economic viability of fusion power

Abstract: Although fusion power is being developed because of its large resource base, low environmental impact and high levels of intrinsic safety, it is important to investigate the economics of a future fusion power plant to check that the electricity produced can, in fact, have a market. The direct cost of electricity of a fusion power plant and its key dependencies on the physics and technology assumptions, are calculated, as are the materials requirements. The other important aspect of costs, the external costs which can arise from effects such as pollution, accidents and waste are also given. Fusion is found to offer the prospect of a new energy source with acceptable direct costs and very low external costs. This places fusion in a strong position in a future energy market, especially one in which environmental constraints become increasingly important.

A capacity market that makes sense

Abstract: We argue that a capacity market is needed in most restructured electricity markets, and present a design that avoids problems found in the early capacity markets. The proposed market only rewards capacity that contributes to reliability as demonstrated by its performance during hours in which there is a shortage of operating reserves. The capacity price responds to market conditions, increasing when and where capacity is scarce and decreasing to zero when and where it is plentiful. Market power in the capacity market is addressed by basing the capacity price on actual capacity, rather than bid capacity, so generators cannot increase the capacity price by withholding supply. Actual peak energy rents (the short-run energy and reserve profits of a benchmark peaking unit) are subtracted from the capacity price. This allows the capacity market to more accurately control short-run profits and suppresses market power in the energy market. This design both avoids and hedges energy market risk, and by suppressing market power avoids regulatory risk. Risk reduction saves consumers money as do the performance and investment incentives inherent in the pay-for-performance mechanism.

An Anatomy of China’s Energy Insecurity and its Strategies

Abstract: China’s energy insecurity largely originates from its constrained availability, questionable reliability, and uncertain affordability of its oil supplies. The country’s fast industrialization and urbanization, together with demand for infrastructure and increasing popularity of automobiles, requires a lot of energy, but it consumes energy both intensively and inefficiently, threatening the environmental well-being of China and its neighbors. China’s risk aversion and poor energy policy making system further magnifies its perceptions of the low availability, reliability and affordability of oil imports, which further compounds its sense of energy insecurity. Distrustful of the market, and suspicious of other major energy players in the international market, the Chinese leadership relies on the state-centered approach, or economic nationalism, rather than a market approach to enhance its energy security. However, the country lacks not only an energy policy making system that can make and implement sound energy policies but also an energy market that relies on market prices to allocate energy resources efficiently. As a result of this domestic failure, China has pushed its national flagship companies to undertake a global scavenger hunt for energy while muddling along a messy road of energy reform at home. Setbacks in acquiring new sources of oil have validated the Chinese leadership’s belief that the international oil market is not free and China’s access to international oil is not guaranteed through the market. China’s problems in the international energy market are also perceived as evidence of attempts to prevent China from exerting international influence. China’s leadership is convinced that China should focus on areas where western capital is not heavily concentrated or where western influences are weak. With the recent revaluation of Chinese currency and growing economy, China has both the wherewithal and appetite to acquire more oil assets abroad. Both China and the United States stand at a critical juncture of history where China’s rise depends on reliable energy supplies which it increasingly imports from abroad and where the growing wealth of the United States is increasingly dependent upon China’s success. If China does not have energy security it’s 1.3 billion fuel-starved people will prevent the rest of the world from achieving energy security.

Investigating the real situation of Greek solar water heating market

Abstract: Solar thermal applications have been acknowledged among the leading alternative solutions endeavouring to face the uncontrollable oil price variations, the gradual depletion of fossil fuel reserves and the chain environmental consequences caused by its excessive usage. Almost 30 years after the initial emergence of the commercial domestic solar water heating system (DSWHS) in the European market, the corresponding technology is qualified as quite mature. On top of this, the European Commission expects that 100,000,000 m2 of solar collectors are to be installed in Europe by the year 2010 to facilitate durable and environment-friendly heat. In this context, the Greek DSWHSs market is highly developed worldwide, having a great experience in this major energy market segment. The present study is devoted to an extensive evaluation of the local DSWHSs market, including a discerning analysis of its time variation, taking seriously into account the corresponding annual replacement rate. Accordingly, the crucial techno-economic reasons, limiting the DSWHSs penetration in the local heat production market, are summarized and elaborated. Subsequently, the national policy measures—aiming to support the DSWHSs in the course of time—are cited, in comparison with those applied in other European countries. Next, the financial attractiveness of a DSWHS for Greek citizens is examined in the local socio-economic environment. The present work is integrated by reciting the prospects and mustering certain proposals that, if applied, could stimulate the local market. As a general comment, the outlook for penetration of new DSWHSs in the local market is rather grim, as the current techno-economic situation of solar heat cannot compete with oil and natural gas heat production, unless the remarkable social and environmental benefits of solar energy are seriously considered. Hence, the Greek State lacks stimulus to further DSWHSs installations, being strongly in support of the imported natural gas. As a result, the future of domestic solar thermal market and the survival possibilities of the local manufacturers are at stake.

Definitions for Distributed Generation : A revision

Abstract: The current electricity supply structures, which are characterised through large, centralised power stations, will develop into a system consisting both of centralised and decentralised electricity suppliers. The European integrated grid system will be subject to substantial restructuring due to the ongoing liberalisation of the energy market and the planned increase of the share of renewables in electricity production to 22 % by 2010. Reduction in gaseous emissions (mainly CO2), energy efficiency or rational use of energy, deregulation or competition policy, diversification of energy sources, national power requirement and commercial considerations (availability of modular generating plant, ease of finding sites for smaller generators, short construction times and lower capital costs of smaller plant and the fact that this generation may be sited closer to load, which may reduce transmission costs). have been reported [1,2,3] as some of the drivers of this new philosophy of generation.

Alternative Models to Analyze Market Power and Financial Transmission Rights in Electricity Markets

Abstract: One of the main concerns with the introduction of competition in the power sector is the strategic behaviour of market participants. Computable models of strategic behaviour are becoming increasingly important to understand the complexities of competition. Such models can help analyze market designs and regulatory policies. In this thesis, further developments on the modelling and analysis of strategic behaviour in electricity markets are presented. This thesis work has been conducted along three research lines. In the first research line, an oligopolistic model of a joint energy and spinning reserve market is formulated to analyze imperfect competition. Strategic behaviour is introduced by means of conjectured functions. With this integrated formulation for imperfect competition, the opportunity cost between generation and spinning reserve has been analytically derived. Besides, inter-temporal and energy constraints, and financial transmission rights are taken into account. Under such considerations, competition in electricity markets is modelled with more realism. The oligopolistic model is formulated as an equilibrium problem in terms of complementarity conditions. In the second research line, a methodology to screen and mitigate the potential exacerbation of market power due to the ownership of financial transmission rights is presented. Hedging position ratios are computed to quantify the hedging level of financial transmission rights. They are based on the actual impact that each participant has in the energy market, and on the potential impact that it would have with the ownership of financial transmission rights. Thus, hedging position ratios are used to identify the potential gambling positions from the transmission rights bidders, and, therefore, used to prioritize critical positions in the auction for transmission rights. In the last research line, alternative equilibrium models of markets for financial transmission rights are formulated. The proposed equilibrium framework is more natural and flexible for modelling markets than the classic cost-minimization markets. Different markets for financial transmission rights are modelled, namely: i) forwards, ii) options, and iii) joint forwards and options. Moreover, one-period, multi-period and multi-round markets for forwards are derived. These equilibrium models are proposed to analyze the bidding strategies of market participants. The potential impact of bidders on congestion prices is modelled by means of conjectured transmission price functions.

Energy market reforms in Turkey: An economic analysis

Abstract: In the early 2000s, the Republic of Turkey has initiated an ambitious reform program in the most important segments of her energy market; namely, electricity, natural gas, petroleum and liquefied petroleum gas industries, which requires privatization, liberalization as well as a radical restructuring of these industries. However, there is no consensus that the measures introduced are optimal. The present dissertation attempts to answer, first, whether or not recently introduced energy market reforms in Turkey are optimal from an economic perspective to ensure a fully functioning energy market; and second, what still needs to be done to improve them. The dissertation not only provides an economic analysis of these reforms but also lists some policy suggestions with crucial importance. Since the rapid electricity demand growth is the most contentious reason behind the recent reforms; the dissertation specifically focuses on the issue by both providing an electricity demand estimation and forecast, and comparing the results with official projections. The study concludes that despite relatively good legislative framework, in practice, the reforms in Turkey are far from ideal as they are mainly in the form of "textbook reforms"; and therefore a significant amount of work still lies ahead of Turkey to set up a fully-fledged energy market.

Reliability analysis for systems with large hydro resources in a deregulated electric power market

Abstract: This work describes a procedure that determines the optimal allocation for the yearly energy resulting from random water inflows to the different subperiods of a year so that the expected benefits are maximized. Its main idea is to distribute the energy stored in reservoirs in each period into two parts: one is directly sold in the energy market, while the other is made available to cover any unplanned outages of thermal units. The method proposed fulfills two objectives, to distribute the hydro energy optimally according to economic criteria and to assess the impact of new market rules on the reliability of an electric system. The procedure will be illustrated by an example based on the Spanish generating system.

Integral resource optimization network - a new solution on power markets

Abstract: Many of today's European power systems are influenced by the deregulated energy market. Although demand and supply result in free prices and customers are free to choose their supplier, the flow of information and motivation does not reach the end customer. Optimization is done on the energy spot market, and customers usually cannot benefit from the freedom and chances the free energy market offers. By means of information and automation technology, the IRON (integral resource optimization network) project tries to increase this flow of information. Every member of an energy distribution network /sub i/stributed generation, end customer, etc. - should be able to actively take part in the energy business. Currently, only big power plants are "networked" and coordinate their behavior, according to the demand and market situation. New trends and ideas in the energy business require a more detailed network, the IRON project started to investigate the technical feasibility of such networks.

Screening and mitigation of exacerbated market power due to financial transmission rights

Abstract: A methodology is proposed for taking into account potential exacerbation of market power due to financial transmission rights (FTR) allocations. Hedging position ratios (HPRs) are computed for FTR bids. These ratios quantify the relationship between the positions of an FTR bidder in the energy market and in the transmission rights allocation (based on the transmission rights bids). These ratios are used to identify the potential gambling positions from the transmission rights bidders and, therefore, used to prioritize critical positions in the auction. The transmission-right auction is modeled as a quadratic programming problem with a direct current (DC) approximation. The methodology is illustrated by a three-node network and then extended to larger networks.

Decentralized approach to intermarket congestion management

Abstract: When transmission bottlenecks affect dispatches and prices of neighboring Regional Transmission Organization (RTO) markets, intermarket congestion management and coordination are needed to mitigate congestion and to compute economically efficient prices in the day-ahead markets. This paper discusses and proposes two decentralized processes with which each RTO administers its energy market and also acts as a transmission coordinator to achieve feasible and efficient use of congested transmission by all markets in the region (interconnection). With this arrangement, a new decomposition technique is introduced without breaking a network model at the RTO's geographical boundaries. The paper then presents two decentralized congestion management formulations to model markets interactions in the interconnection. The coordination between market operators and transmission operators is based on the use of congestion price signals or allocated megawatt capacities, as well as their sensitivity information. The proposed solution ensures not only feasible schedules but also efficient and consistent congestion path prices for the final schedules in the entire interconnection. Numerical examples are given to illustrate the application of the proposed models.

The need for fusion

Abstract: World energy use is predicted to double in the next 40 years. Currently 80% is provided by burning fossil fuels, but this is not sustainable indefinitely because (i) it is driving climate change, and (ii) fossil fuels will eventually be exhausted (starting with oil). The resulting potential energy crisis requires increased investment in energy research and development (which is currently very small on the scale of the $3 trillion p.a. energy market, and falling). The wide portfolio of energy work that should be supported must include fusion, which is one of the very few options that are capable in principle of supplying a large fraction of need. The case for fusion has been strengthened by recent advances in plasma physics and fusion technology that are reflected in the forthcoming European Fusion Power Plant Conceptual Study, which addresses safety and cost issues. The big questions are – How can we deliver fusion power as fast as possible? How long is it likely to take? I argue for a fast track programme, and describe a fast-track model developed at Culham, which is intended to stimulate debate on the way ahead and the resources that are needed.