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Reliability in Multi-regional Power Systems: Capacity Adequacy and the Role of Interconnectors

Simeon Hagspiel, Andreas Knaut, and Jakob Peter

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.shag
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Abstract:
Based upon probabilistic reliability metrics, we develop an optimization model to determine the efficient amount and location of firm generation capacity to achieve reliability targets in multi-regional electricity systems. A particular focus lies on the representation and contribution of transmission capacities as well as variable renewable resources. Calibrating our model with a comprehensive dataset for Europe, we find that there are substantial benefits from regional cooperation. The amount of firm generation capacity to meet a perfectly reliably system could be reduced by 36.2 GW (i.e., 6.4%) compared to an isolated regional approach, which translates to savings of 14.5 bn EUR. Interconnectors contribute in both directions, with capacity values up to their technical maximum of close to 200%, while wind power contributions are in the range of 3.8-29.5%. Furthermore, we find that specific reliability targets heavily impact the efficient amount and distribution of reliable capacity as well as the contribution of individual technologies.Keywords: Reliability of supply, Capacity adequacy, Multi-regional power system, Interconnector, Variable renewable energy



On Entry Cost Dynamics in Australia's National Electricity Market

Paul Simshauser and Joel Gilmore

Year: 2020
Volume: Volume 41
Number: Number 1
DOI: 10.5547/01956574.41.1.psim
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Abstract:
In theory, well designed electricity markets should deliver an efficient mix of technologies at least-cost. But energy market theories and energy market modelling are based upon equilibrium analysis and in practice electricity markets can be off-equilibrium for extended periods. Near-term spot and forward contract prices can and do fall well below, or substantially exceed, relevant entry cost benchmarks and associated long run equilibrium prices. However, given sufficient time higher prices, on average or during certain periods, create incentives for new entrant plant which in turn has the effect of capping longer-dated average spot price expectations at the estimated cost of the relevant new entrant technologies. In this article, we trace generalised new entrant benchmarks and their relationship to spot price outcomes in Australia's National Electricity Market over the 20-year period to 2018; from coal, to gas and more recently to variable renewables plus firming, notionally provided by - or shadow priced at - the carrying cost of an Open Cycle Gas Turbine. This latest entry benchmark relies implicitly, but critically, on the gains from exchange in organised spot markets, using existing spare capacity. As aging coal plant exit, gains from exchange may gradually diminish with 'notional firming' increasingly and necessarily being met by physical firming. At this point, the benchmark must once again move to a new technology set...



Pricing and Competition with 100% Variable Renewable Energy and Storage

Tommi Ekholm and Vilma Virasjoki

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.tekh
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Abstract:
Electricity production is a key sector in global decarbonization efforts, and variable renewable energy (VRE) technologies are a primary way to produce carbon-free electricity. We study an electricity market where generation is 100 % VRE, while storage and elastic demand resolve temporal supply-demand imbalances. We model hourly market equilibrium to analyze price formation and imperfect, Cournot-type competition with varying levels of ownership concentration. Market power is exerted either with storage-only or with both VRE and storage. In such a system, prices are determined dynamically by demand and intertemporal storage decisions, breaking the static logic of "merit order" with dispatchable generation. The numerical results indicate that market power with storage has a relatively moderate effect on prices and market efficiency. However, market power exerted with VRE has far larger welfare impacts, resulting from curtailed generation. However, such actions could be more readily observed by a regulator via monitoring.



Optimal Allocation of Variable Renewable Energy Considering Contributions to Security of Supply

Jakob Peter and Johannes Wagner

Year: 2021
Volume: Volume 42
Number: Number 1
DOI: 10.5547/01956574.42.1.jpet
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Abstract:
Electricity markets are increasingly influenced by variable renewable energy such as wind and solar power, characterized by a pronounced weather-induced variability and imperfect predictability. As a result, the evaluation of the capacity value of variable renewable energy, i.e., its contribution to security of supply, gains importance. This paper develops a new methodology to endogenously determine the capacity value in large-scale investment and dispatch models for electricity markets. The framework allows balancing effects to be accounted for that arise due to the spatial distribution of generation capacities and interconnectors. The practical applicability of the methodology is shown with an application for wind power in Europe. We find that wind power can substantially contribute to security of supply in a decarbonized European electricity system in 2050, with regional capacity values ranging from 1-40%. Analyses that do not account for the temporal and spatial heterogeneity of the contribution of wind power to security of supply therefore lead to inefficient levels of dispatchable back-up capacity. Applying a wind power capacity value of 5% results in an overestimation of firm capacity requirements in Europe by 66 GW in 2050. This translates to additional firm capacity provision costs of 3.8 bn EUR per year in 2050, which represents an increase of 7%.





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