Abuse of dominance and antitrust enforcement in the German electricity market

In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity in the German wholesale electricity market. The case was settled after E.ON agreed to divest 5 GW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices, after controlling for different demand and supply conditions as well as the change in generation mix due to the expansion of renewable technologies. Using daily electricity prices for the 2006–2012 period, we find economically and statistically significant convergence effects after the settlement of the case. In a richer specification, we show that the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Additional cross-country analyses support our results.     

Statistical analysis of negative prices in European balancing markets

The presence of renewable power generation technologies increases the need for system flexibility due to their variable nature. The increasing share of variable renewables in European power systems create a downward adequacy problem, which deals with the ability of power systems to cope with periods of excess generation. The occurrence of negative prices on Central Western European electricity markets confirms the relevance of this issue, which is referred to as “incompressibility of power systems” and is assessed as a barrier for further renewable power integration. The objective of this article is to identify the main drivers of negative price periods in European balancing markets, by means of both an empirical and regression analysis. Results confirm a positive relation with the scheduled generation of renewables and inflexible base load, as well as a negative relation with the scheduled system load. Furthermore, the occurrence of negative prices is related to the positive and negative forecast error of renewable generation and demand, respectively. It is concluded that negative balancing market prices provide a market signal for investments in flexibility sources such as flexible generation, demand response, electricity storage, and interconnector capacity.     

Demand side management: Benefits and challenges

In this paper, the major benefits and challenges of electricity demand side management (DSM) are discussed in the context of the UK electricity system. The relatively low utilisation of generation and networks (of about 50%) means that there is significant scope for DSM to contribute to increasing the efficiency of the system investment. The importance of the diversity of electricity load is discussed and the negative effects of DSM on load diversity illustrated. Ageing assets, the growth in renewable and other low-carbon generation technologies and advances in information and communication technologies are identified as major additional drivers that could lead to wider applications of DSM in the medium term. Potential benefits of DSM are discussed in the context of generation and of transmission and distribution networks. The provision of back-up capacity by generation may not be efficient as it will be needed relatively infrequently, and DSM may be better placed to support security. We also present an analysis of the value of DSM in balancing generation and demand in a future UK electricity system with significant variable renewable generation. We give a number of reasons for the relatively slow uptake of DSM, particularly in the residential, commercial and small business sectors. They include a lack of metering, information and communication infrastructure, lack of understanding of the benefits of DSM, problems with the competitiveness of DSM when compared with traditional approaches, an increase in the complexity of system operation and inappropriate market incentives.     

The potential of demand-side management in energy-intensive industries for electricity markets in Germany

This paper investigates the technical and economic potential of energy-intensive industries to provide demand-side management (DSM) in electricity and balancing markets through 2030. Increasing shares of renewables will lead to a rising demand for ancillary services at the same time that less conventional plants will be available to provide these services. This paper makes projections on the extent to which DSM from industrial processes can provide economic benefits in electricity markets with renewables by providing tertiary reserve capacity. Different industrial processes and their specific technical and economic properties are investigated and compared with other storage devices and electricity generation technologies. Based on an extension of an existing European electricity market model, simulations are used here to make long-term forecasts for market prices, dispatch and investments in the electricity markets through linear optimization.     

Shadow prices for heat generation in time-dependent and dynamic energy systems

Shadow prices for heat generation are used to study the impact of changes in heat demand on the total system cost of an existing district-heating system in Sweden. The energy system may be considered to be both dynamic, because there is energy storage, and time-dependent since the electricity tariff is time-differentiated and the heat demand varies over the year and day. The energy system has been analysed with and without energy storage. The analysis shows that despite a reduction in system cost, the use of energy storage can result in higher shadow prices for heat generation in some time periods.     

The cannibalization effect of wind and solar in the California wholesale electricity market

Increasing penetration of zero marginal cost variable renewable technologies cause the decline of wholesale electricity prices due to the merit-order effect. This causes a “cannibalization effect” through which increasing renewable technologies’ penetration undermines their own value. We calculate solar and wind daily unit revenues (generation weighted electricity prices) and value factors (unit revenues divided by average electricity prices) from hourly data of the day-ahead California wholesale electricity market (CAISO) for the period January 2013 to June 2017. We then perform a time series econometric analysis to test the absolute (unit revenues) and relative (value factors) cannibalization effect of solar and wind technologies, as well as the cross-cannibalization effects between technologies. We find both absolute and relative cannibalization effect for both solar and wind, but while wind penetration reduces the value factor of solar, solar penetration increases wind value factor, at least at high penetration and low consumption levels. We explore non-linearities and also find that the cannibalization effect is stronger at low consumption and high wind/solar penetration levels. This entails that wind and (mainly) solar competitiveness could be jeopardized unless additional mitigation measures such as storage, demand management or intercontinental interconnections are taken.     

Valuation framework for large scale electricity storage in a case with wind curtailment

This paper investigates the value of large scale applications of electricity storage in selected European power systems in the context of wind generation confronted with a grid bottleneck. It analyzes the market value to 2030 of two storage technologies, assuming the market situation projected for Germany and France. The analysis assesses the evolution of storage economics based on the net present value of cash flows. Sensitivities to market and regulatory drivers of value are assessed, e.g. electricity price spreads, ancillary services revenues, wind curtailment and the level of carbon prices. The paper concludes by suggesting possible ways to improve the competitiveness of electricity storage, such as research and development and deployment programmes, and changes to the design of power markets and regulatory arrangements to enable storage owners to better capture the benefits of storage. Such changes would allow electricity storage, where economically viable, to play a critical role in establishing a future sustainable European power system.     

The large-scale integration of wind generation: Impacts on price,reliability and dispatchable conventional suppliers

This work examines the effects of large-scale integration of wind powered electricity generation in a deregulated energy-only market on loads (in terms of electricity prices and supply reliability) and dispatchable conventional power suppliers. Hourly models of wind generation time series, load and resultant residual demand are created. From these a non-chronological residual demand duration curve is developed that is combined with a probabilistic model of dispatchable conventional generator availability, a model of an energy-only market with a price cap, and a model of generator costs and dispatch behavior. A number of simulations are performed to evaluate the effect on electricity prices, overall reliability of supply, the ability of a dominant supplier acting strategically to profitably withhold supplies, and the fixed cost recovery of dispatchable conventional power suppliers at different levels of wind generation penetration. Medium and long term responses of the market and/or regulator in the long term are discussed.     

High penetration wind generation impacts on spot prices in the Australian national electricity market

This paper explores wind power integration issues for the South Australian (SA) region of the Australian National Electricity Market (NEM) by assessing the interaction of regional wind generation, electricity demand and spot prices over 2 recent years of market operation. SA's wind energy penetration has recently surpassed 20% and it has only a limited interconnection with other regions of the NEM. As such, it represents an interesting example of high wind penetration in a gross wholesale pool market electricity industry. Our findings suggest that while electricity demand continues to have the greatest influence on spot prices in SA, wind generation levels have become a significant secondary influence, and there is an inverse relationship between wind generation and price. No clear relationship between wind generation and demand has been identified although some periods of extremely high demand may coincide with lower wind generation. Periods of high wind output are associated with generally lower market prices, and also appear to contribute to extreme negative price events. The results highlight the importance of electricity market and renewable policy design in facilitating economically efficient high wind penetrations.     

A dynamic network analysis of spot electricity prices in the Australian national electricity market

This study applies dynamic network analysis to the power sector, examining the relationship between regional spot electricity prices in the Australian National Electricity Market (NEM). In particular, we employ principal component analysis and generate Granger causality networks to examine the degree of interconnectedness of the NEM in a time-varying setting. We find that the derived measures of interdependence can be related to actual market events such as price spikes, unexpected high demand for electricity, sudden increases in price volatility, rebidding of dominant generators, the temporary or permanent outage of major power stations, and upgrades and limitations in transmission capacity. In the analysed network, we find that stronger dependence is exhibited by regional markets that are linked through interconnectors, while the direction of Granger causality can be related to interregional trade. We further examine the usefulness of the derived measures for forecasting distributional characteristics of spot prices such as the maximum price, volatility, price spreads, or upcoming periods of price spikes. Our results suggest that the derived network measures have predictive power, albeit limited, for the behaviour of spot electricity prices in the NEM.     

How does market power affect the impact of large scale wind investment in 'energy only' wholesale electricity markets?

In the short run, it is well known that increasing wind penetration is likely to reduce spot market electricity prices due to the merit order effect. The long run effect is less clear because there will be a change in new capacity investment in response to the wind penetration. In this paper we examine the interaction between capacity investment, wind penetration and market power by first using a least-cost generation expansion model to simulate capacity investment with increasing amounts of wind generation, and then using a computer agent-based model to predict electricity prices in the presence of market power. We find the degree to which firms are able to exercise market power depends critically on the ratio of capacity to peak demand. For our preferred long run generation scenario we show market power increases for some periods as wind penetration increases however the merit order counteracts this with the results that prices overall remain flat. Returns to peakers increase significantly as wind penetration increases. The market power in turn leads to inefficient dispatch which is exacerbated with large amounts of wind generation.     

Modelling electricity storage systems management under the influence of demand‐side management programmes

Electricity storage systems (ESS) for bulk energy storage are principally used for load levelling purposes or for relieving the intermittency of renewables. Another use is electricity arbitrage through the rule of ‘buy low, sell high’. This operation tracks the market‐clearing price (MCP) profiles and produces profit by exploiting the differences between peak and off‐peak prices. The profits made in this way depend on technology characteristics and the market competition level. We investigate the influence of demand‐side management (DSM) on ESS profitability when the only income is from provision of electricity arbitrage services, by optimizing the time allocation of the charge and discharge operations. Two scenarios of DSM in the market have been selected for two management periods (MP): 1 day and 3 days. The longer MP is examined in order to investigate the potential for higher economic value when energy transfer to the next day is permitted. The key finding is that a very small load shifting from peaks to off‐peaks, due to DSM, significantly affects the ESS profit. The significant profit losses the ESS showed are a result of the high capital costs and the small difference of the peak and off‐peak electricity prices in the Greek market. Therefore, under the assumptions we have made for this research, any attempt to use ESS in ‘buy low, sell high’ operation is not profitable. Copyright © 2008 John Wiley & Sons, Ltd.     

Comparative impacts of wind and photovoltaic generation on energy storage for small islanded electricity systems

This paper addresses the annual energy storage requirements of small islanded electricity systems with wind and photovoltaic (PV) generation, using hourly demand and resource data for a range of locations in New Zealand. Normalised storage capacities with respect to annual demand for six locations with winter-peaking demand profiles were lower for wind generation than for PV generation, with an average PV:wind storage ratio of 1.768:1. For two summer-peaking demand profiles, normalised storage capacities were lower for PV generation, with storage ratios of 0.613:1 and 0.455:1. When the sensitivity of storage was modelled for winter-peaking demand profiles, average storage ratios were reduced. Hybrid wind/PV systems had lower storage capacity requirements than for wind generation alone for two locations. Peak power for storage charging was generally greater with PV generation than with wind generation, and peak charging power increased for the hybrid systems. The results are compared with those for country-scale electricity systems, and measures for minimising storage capacity are discussed. It is proposed that modelling of storage capacity requirements should be included in the design process at the earliest possible stage, and that new policy settings may be required to facilitate a transition to energy storage in fully renewable electricity systems.     

Impact of wind farm integration on electricity market prices

Wind generation is considered one of the most rapidly increasing resources among other distributed generation technologies. Recently, wind farms with considerable output power rating are installed. The variability of the wind output power, and the forecast inaccuracy could have an impact on electricity market prices. These issues have been addressed by developing a single auction market model to determine the close to real-time electricity market prices. The market-clearing price was determined by formulating an optimal power flow problem while considering different operational strategies. Inaccurate power prediction can result in either underestimated or overestimated market prices, which would lead to either savings to customers or additional revenue for generator suppliers.     

Optimizing biogas plants with excess power unit and storage capacity in electricity and control reserve markets

Increasing shares of intermittent power sources such as solar and wind will require biomass fueled generation more variable to respond to the increasing volatility of supply and demand. Furthermore, renewable energy sources will need to provide ancillary services. Biogas plants with excess generator capacity and gas storages can adapt the unit commitment to the demand and the market prices, respectively. This work presents a method of day-ahead unit commitment of biogas plants with excess generator capacity and gas storage participating in short-term electricity and control reserve markets. A biogas plant with 0.6 MW annual average electric output is examined in a case study under German market conditions. For this biogas plant different sizes of the power units and the gas storage are compared in consideration of costs and benefits of installing excess capacity. For optimal decisions depending on prices, a mixed-integer linear programming (MILP) approach is presented.The results show that earnings of biogas plants in electricity markets are increased by additional supplying control reserve. Furthermore, increasing the installed capacity from 0.6 MW to 1 MW (factor 1.7) leads to the best cost–benefit-ratio in consideration of additional costs of excess capacity and additional market revenues. However, the result of the cost–benefit-analysis of installing excess capacity is still negative. Considering the EEG flexibility premium, introduced in 2012 in the German renewable energy sources act, the result of the cost–benefit-analysis is positive. The highest profit is achieved with an increase of the installed capacity from 0.6 MW to 2 MW (factor 3.3).     

Grid integration of intermittent renewable energy sources using price-responsive plug-in electric vehicles

Plug-in electric vehicles (PEVs) are expected to balance the fluctuation of renewable energy sources (RES). To investigate the contribution of PEVs, the availability of mobile battery storage and the control mechanism for load management are crucial. This study therefore combined the following: a stochastic model to determine mobility behavior, an optimization model to minimize vehicle charging costs and an agent-based electricity market equilibrium model to estimate variable electricity prices. The variable electricity prices are calculated based on marginal generation costs. Hence, because of the merit order effect, the electricity prices provide incentives to consume electricity when the supply of renewable generation is high. Depending on the price signals and mobility behavior, PEVs calculate a cost minimizing charging schedule and therefore balance the fluctuation of RES. The analysis shows that it is possible to limit the peak load using the applied control mechanism. The contribution of PEVs to improving the integration of intermittent renewable power generation into the grid depends on the characteristic of the RES generation profile. For the German 2030 scenario used here, the negative residual load was reduced by 15–22% and the additional consumption of negative residual load was between 34 and 52%.     

Solar energy storage in German households: profitability,load changes and flexibility

The developments of battery storage technology together with photovoltaic (PV) roof-top systems might lead to far-reaching changes in the electricity demand structures and flexibility of households. The implications are supposed to affect the generation mix of utilities, distribution grid utilization, and electricity price. Using a techno-economic optimization model of a household system, we endogenously dimension PV system and stationary battery storage (SBS). The results of the reference scenario show positive net present values (NPV) for PV systems of approx. 500–1,800 EUR/kW_p and NPV for SBS of approx. 150–500 EUR/kWh. Main influences are the demand of the households, self-consumption rates, investment costs, and electricity prices. We integrate electric vehicles (EV) with different charging strategies and find increasing NPV of the PV system and self-consumption of approx. 70%. With further declining system prices for solar energy storage and increasing electricity prices, PV systems and SBS can be profitable in Germany from 2018 on even without a guaranteed feed-in tariff or subsidies. Grid utilization substantially changes by households with EV and PV-SBS. We discuss effects of different incentives and electricity tariff options (e. g. load limits or additional demand charges). Concluding, solar energy storage systems will bring substantial changes to electricity sales.     

Electric vehicles in imperfect electricity markets: The case of Germany

We use a game-theoretic model to analyze the impacts of a hypothetical fleet of plug-in electric vehicles on the imperfectly competitive German electricity market. Electric vehicles bring both additional demand and additional storage capacity to the market. We determine the effects on prices, welfare, and electricity generation for various cases with different players in charge of vehicle operations. Vehicle loading increases generator profits, but decreases consumer surplus in the power market. If excess vehicle batteries can be used for storage, welfare results are reversed: generating firms suffer from the price-smoothing effect of additional storage, whereas power consumers benefit despite increasing overall demand. Strategic players tend to under-utilize the storage capacity of the vehicle fleet, which may have negative welfare implications. In contrast, we find a market power-mitigating effect of electric vehicle recharging on oligopolistic generators. Overall, electric vehicles are unlikely to be a relevant source of market power in Germany in the foreseeable future.     

一种新型太阳能冷库系统的模拟及实验研究

针对太阳能光伏发电技术、需求侧管理（DSM）技术和储能技术提出一种新型太阳能冷库系统。探讨利用冷能储存和光伏发电来减少和转移峰值电力需求、降低电力消耗成本的潜力。建立系统的仿真模型并通过实验进一步修正,结果表明系统在5—8月份基本可节约60%以上的电费,能源节约率最高可达48.38%,相应的电费支付最高可节省65.40%。     

Financial optimization in the Turkish electricity market: Markowitz's mean-variance approach

Electricity constitutes the input into many products that produced by industry and used by people. Hence, it can be considered as a product or service that has vital importance in human life and economy. Since it has such special properties of instantaneous production and consumption obligation and unfeasible storage, electricity market is not like other markets. In a competitive electricity market, generation company faces price risks and delivery risks. So that risk management is an important part of a generation company and can deeply effect companies’ profitability. This paper focuses on electricity generation asset allocation between bilateral contracts, such as forward contracts, and daily spot market, considering constraints of generating units and spot price risks. The problem is to find the optimal portfolio based on known electricity generation total costs, bilateral contract prices, it employed Turkish historical balanced market hourly system marginal and day-ahead hourly market prices between of 2006 and 2011. There are limited studies about portfolio optimization in electricity markets in literature and this paper should be considered frontier study taking spot market's hourly prices separately as risky assets. Markowitz mean-variance optimization which is claimed to be the beginning of modern portfolio theory in financial sector is used to demonstrate this approach. Mean-variance optimization has been successfully applied to all cases that modeled for electricity market. Some suggestions for future work are also listed in this paper.