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Cross-Border Exchange and Sharing of Generation Reserve Capacity

Fridrik M. Baldursson, Ewa Lazarczyk, Marten Ovaere, and Stef Proost

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.fbal
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Abstract:
This paper develops a stylized model of cross-border balancing. We distinguish three degrees of cooperation: autarky, reserves exchange and reserves sharing. The model shows that TSO cooperation reduces costs. The gains of cooperation increase with cost asymmetry and decrease with correlation of real-time imbalances. Based on actual market data of reserves procurement of positive and negative automatic frequency restoration reserves in Belgium, France, Germany, the Netherlands, Portugal and Spain, we estimate the procurement cost decrease of exchange to be €165 million per year without transmission constraints and €135 million per year with transmission constraints. The cost decrease of sharing is estimated to be €500 million per year. The model also shows that voluntary cross-border cooperation could be hard to achieve, as TSOs do not necessarily have correct incentives.



Optimal Procurement of Distributed Energy Resources

David P. Brown and David E. M. Sappington

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.dbro
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Abstract:
We analyze the optimal design of policies to motivate electricity distribution companies to adopt efficient distributed energy resources (DER) and manage associated project costs. The optimal policy often entails a bias against new DER projects and implements cost sharing when DER projects are undertaken in order to foster cost containment while limiting excessive profit for the utility. Failure to adequately tailor the degree of cost sharing to the prevailing environment can raise procurement costs substantially. The distribution company may optimally be awarded more than the cost saving it achieves.Keywords: Distributed Energy Resources, Procurement, Regulation



Imperfect Competition in Electricity Markets with Renewable Generation: The Role of Renewable Compensation Policies

David P. Brown and Andrew Eckert

Year: 2020
Volume: Volume 41
Number: Number 4
DOI: 10.5547/01956574.41.4.dbro
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Abstract:
We analyze the effects of commonly employed renewable compensation policies on firm behavior in an imperfectly competitive market. We consider a model where firms compete for renewable capacity in an auction prior to choosing their forward positions and competing in wholesale markets. We focus on fixed and premium-priced feed-in tariff (FIT) compensation policies. We demonstrate that compensation policies impact both the types of resources that win the auction and subsequent competition. While firms have stronger incentives to exercise market power under a premium-priced FIT, they also have increased incentives to sign pro-competitive forward contracts. In net firms have stronger incentives to exercise market power under the premium-priced policy. We find conditions under which renewable resources that are more correlated with market demand are procured under a premium-priced design, while the opposite occurs under a fixed-priced policy. If the cost efficiencies associated with the �more valuable� renewable resources are sufficiently large, then welfare is higher under the premium-priced policy despite the stronger market power incentives in the wholesale market.





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