Intermittently renewable energy,optimal capacity mix and prices in a deregulated electricity market

This paper assesses the effect of intermittently renewable energy on generation capacity mix and market prices. We consider two generating technologies: (1) conventional fossil-fueled technology such as combined cycle gas turbine (CCGT), and (2) sunshine-dependent renewable technology such as photovoltaic cells (PV). In the first stage of the model (game), when only the probability distribution functions of future daily electricity demand and sunshine are known, producers maximize their expected profits by determining the CCGT and PV capacity to be constructed. In the second stage, once daily demand and sunshine conditions become known, each producer selects the daily production by each technology, taking the capacities of both technologies as given, and subject to the availability of the PV capacity, which can be used only if the sun is shining. Using real-world data for Israel, we confirm that the introduction of PV technology amplifies price volatility. A large reduction in PV capacity cost increases PV adoption but may also raise the average price. Thus, when considering the promotion of renewable energy to reduce CO₂ emissions, regulators should assess the behavior of the electricity market, particularly with respect to characteristics of renewable technologies and demand and supply uncertainties.     

The renewable energy targets of the Maghreb countries: Impact on electricity supply and conventional power markets

Morocco, Algeria and Tunisia, the three countries of the North African Maghreb region, are showing increased efforts to integrate renewable electricity into their power markets. Like many other countries, they have pronounced renewable energy targets, defining future shares of “green” electricity in their national generation mixes. The individual national targets are relatively varied, reflecting the different availability of renewable resources in each country, but also the different political ambitions for renewable electricity in the Maghreb states. Open questions remain regarding the targets’ economic impact on the power markets. Our article addresses this issue by applying a linear electricity market optimization model to the North African countries. Assuming a competitive, regional electricity market in the Maghreb, the model minimizes dispatch and investment costs and simulates the impact of the renewable energy targets on the conventional generation system until 2025. Special emphasis is put on investment decisions and overall system costs.     

Mathematical modelling of electricity market with renewable energy sources

The paper addresses the electricity market with conventional energy sources on fossil fuel and non-conventional renewable energy sources (RESs) with stochastic operating conditions.A mathematical model of long-run (accounting for development of generation capacities) equilibrium in the market is constructed. The problem of determining optimal parameters providing the maximum social criterion of efficiency is also formulated.The calculations performed have shown that the adequate choice of price cap, environmental tax, subsidies to RESs and consumption tax make it possible to take into account external effects (environmental damage) and to create incentives for investors to construct conventional and renewable energy sources in an optimal (from the society view point) mix.     

Trends in prices to commercial energy consumers in the competitive Texas electricity market

To date, the price of electricity to commercial or business energy consumers has generally increased at greater rates in the areas of Texas where retail competition has been introduced than in areas that do not enjoy competition. Trends in commercial competitive prices have largely mirrored trends in residential prices. Market restructuring has tended to increase the sensitivity of retail electricity prices to changes in the price of natural gas, the marginal fuel used for generation in Texas. Consequently, the rapid increases in the commodity price of natural gas following restructuring led to increases in competitive electric rates which exceeded the increases in areas not exposed to restructuring, where the fuel component of electric rates tend to reflect a weighted average of the utilities’ fuel costs. There is some evidence that pricing behavior by competitive retailers changed when the retailers affiliated with the incumbent utilities were permitted some pricing flexibility, resulting in a reduction in prices.     

Renewable energy sources in the Egyptian electricity market: A review

This review paper presents an appraisal of renewable energy RE options in Egypt. An appraisal review of different REs is presented. The study shows that electric energy produced from REs in Egypt are very poor compared with other energy sources. The utilization of the renewable energies can also be a good opportunity to fight the desertification and dryness in Egypt which is about 60% of Egypt territory. The rapid growth of energy production and consumption is strongly affecting and being affected by the Egyptian economy in many aspects. It is evident that energy will continue to play an important role in the development of Egypt's economy in coming years. The total installed electricity generating capacity had reached around 22025 MW with a generating capacity reached 22605 MW at the end of 2007. Hydropower and coal has no significant potential increase. During the period 1981/82-2004/05 electricity generation has increased by 500% from nearly 22 TWh for the year 1981/1982 to 108.4 TWh in the year 2004/2005 at an average annual growth rate of 6.9%. Consequently, oil and gas consumed by the electricity sector has jumped during the same period from around 3.7 MTOE to nearly 21 MTOE. The planned installed capacity for the year 2011/2012 is 28813 MW and the required fuel (oil and gas) for the electricity sector is estimated to reach about 29 MTOE by the same year. The renewable energy strategy targets to supply 3% of the electricity production from renewable resources by the year 2010. Electrical Coverage Electrical energy has been provided for around 99.3% of Egypt's population, representing a positive sign for the welfare of the Egyptian citizen due to electricity relation to all development components in all walks of life. The article discusses perspectives of wind energy in Egypt with projections to generate ∼ 3.5 GWe by 2022, representing ∼9% of the total installed power at that time (40.2 GW). Total renewables (hydro + wind + solar) are expected to provide ∼7.4 GWe by 2022 representing ∼ 19% of the total installed power. Such a share would reduce dependence on depleting oil and gas resources, and hence improve country's sustainable development.     

The development of a green certificate market

Liberalizing the electricity industry and attempting to reduce the emissions of greenhouse gases are the two dominant trends in European energy policy. The last-mentioned issue might require the contribution from renewable energy technologies, but at present most renewables cannot compete on their own with conventional technologies. Thus, it can be expected that if renewables must compete solely on market conditions alone this will slow down or even halt the development of new renewable capacity. One model in which additional payments to renewable technologies are generated is based on the development of a separate green market. In Holland a voluntary green certificate market has existed since the beginning of 1998. In Denmark a comprehensive restructuring of the legislation for the electric power industry has just been completed, including the framework for developing a separate green market for renewable electricity production. The main objectives of introducing this type of electricity market in Denmark is to secure the development of renewable energy technologies (including contributions to greenhouse gas reductions), while at the same time releasing the Government from the (by now) quite heavy burden of subsidising renewable technologies. Finally, a green market will make it possible for these renewable technologies to be partly economically compensated for the environmental benefits, which they generate compared to conventional power production. With the recent Danish legislation as starting point this paper analyzes possible ways to set up a green certificate market, treating as well some of the consequences produced when the market is actually funtioning. The analysis is applicable for all renewable technologies, but special attention is given to wind power.     

Electricity market auction settings in a future Danish electricity system with a high penetration of renewable energy sources - A comparison of marginal pricing and pay-as-bid

The long-term goal for Danish energy policy is to be free of fossil fuels through the increasing use of renewable energy sources (RES) including fluctuating renewable electricity (FRE).The Danish electricity market is part of the Nordic power exchange, which uses a Marginal Price auction system (MPS) for the day-ahead auctions. The market price is thus equal to the bidding price of the most expensive auction winning unit. In the MPS, the FRE bid at prices of or close to zero resulting in reduced market prices during hours of FRE production. In turn, this reduces the FRE sources’ income from market sales. As more FRE is implemented, this effect will only become greater, thereby reducing the income for FRE producers.Other auction settings could potentially help to reduce this problem. One candidate is the pay-as-bid auction setting (PAB), where winning units are paid their own bidding price.This article investigates the two auction settings, to find whether a change of auction setting would provide a more suitable frame for large shares of FRE. This has been done with two energy system scenarios with different shares of FRE.From the analysis, it is found that MPS is generally better for the FRE sources. The result is, however, very sensitive to the base assumptions used for the calculations.     

Economical considerations of renewable electric energy production—especially development of wave energy

Investments in renewable energy plants normally only take standard economic key figures into account, such as installed rated power, the market price of energy and the interest rate. The authors propose that the degree of utilisation, i.e. the ratio of yearly produced energy in the installation to the installed power, must be included due to its significant impact on the present value of the investment. A site with a limited average wave height could be of economic interest if the utility factor for the installation is high, since the investment cost (associated with the power installed) can be better adjusted to conditions at the particular site. In the case of wave power from the Baltic Sea with its limited variation in wave height (and limited average wave height), this indicates that the economic potential is best for smaller units.     

The merit-order effect: A detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany

The German feed-in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies. Critics state that the costs for consumers are too high. An important aspect to be considered in the discussion is the price effect created by renewable electricity generation. This paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in Germany. The central aspect to be analysed is the impact of renewable electricity generation on spot market prices. The results generated by an agent-based simulation platform indicate that the financial volume of the price reduction is considerable. In the short run, this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits. In the case of the year 2006, the volume of the merit-order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers.     

Cost-effectiveness of renewable electricity policies

We analyze policies to promote renewable sources of electricity. A portfolio standard (RPS) raises electricity prices and primarily reduces gas-fired generation. A knee of the cost curve exists between 15% and 20% goals for 2020 in our central case, and higher natural gas prices lower the cost of greater reliance on renewables. A renewable energy production tax credit lowers electricity price at the expense of taxpayers, which limits its effectiveness in reducing carbon emissions, and it is less cost-effective at increasing renewables than a portfolio standard. Neither policy is as cost-effective as a cap-and-trade policy for achieving carbon emission reductions.     

Capacity commitment and price volatility in a competitive electricity market

The long lead time required to add new capacity in the electricity generation industry means that daily demands are necessarily served by capacity already installed. However, in a competitive market, even if the installed capacity was designed to serve the projected demands, frequent surpluses and occasional full utilization inevitably lead to price volatility. This paper develops a two-stage model of the generation market in which capacity construction occurs in stage 1, before demand realization, and price determination occurs in stage 2, when the equilibrium price ensures that the realized demand does not exceed the installed capacity. We show that price volatility and price spikes are inevitable, and that while price capping can mitigate high and volatile prices, it causes unmet demands and reduction in system reliability. This paper accentuates the interdependence among generating capacity, price volatility and service reliability, a primary cause of concern in the debate on electricity market reform.     

Financing renewable energy projects via closed-end funds—a German case study

During recent years, closed-end funds have become one of the dominant financing schemes for wind farms in Germany. Having evolved out of the traditional model of local citizen-financed wind farms (‘Bürgerwindpark’), closed-end wind funds can be seen as a logical consequence of the increasing professionalism and specialisation trend within the wind business as a whole. This article illustrates the basic market mechanisms behind the project development and financing approach based on closed-end funds and gives an overview on recent market developments in Germany. Finally, the transferability of this approach to other technologies or other regional markets is discussed.     

A regulatory policy to promote renewable energy consumption in China: Review and future evolutionary path

Renewable energy has become the world's strategic choice to solve environmental pollution, address the energy crisis and achieve social sustainable development. The establishment of a regulatory system coincides with the development stage of renewable energy and electricity market operation is significant in standardizing the market competition and guaranteeing healthy development of renewable energy in China. This paper analyses the current situation of renewable energy development and the existing renewable energy regulation system in China, pointing out that the main problems restricting renewable energy development are institutional mechanisms and market factors. The existing regulatory mechanisms also have deficiencies, such as the inclination towards economic regulation and the lack of a market adjustment mechanism. This paper proposes that China should comprehensively consider the renewable energy development stage, electricity market trading mechanisms and other factors in electricity regulatory requirements when policy making, actively exploring a new renewable energy regulation model adapted to different development phases. In addition, this paper suggests China's regulatory policy path based on the forecasting of renewable energy developing models.     

Optimizing hydrogen production capacity and day ahead market bidding for a wind farm in Texas

Producing green hydrogen from wind energy is one potential method to mitigate curtailment. This study develops a general approach to examine the economic benefit of adding hydrogen production capacity through water electrolysis along with the fuel cell and storage facilities in a wind farm in north Texas. The study also investigates different day ahead market bidding strategies in the existence of these technologies. The results show that adding hydrogen capacity to the wind farm is profitable when hydrogen price is greater than $3.58/kg, and that the optimal day ahead market bidding strategy changes as hydrogen price changes. The results also suggest that both the addition of a fuel cell to reconvert stored hydrogen to electricity and the addition of a battery to smooth the electricity input to the electrolyzer are suboptimal for the system in the case of this study. The profit of a particular bidding scenario is most sensitive to the selling price of hydrogen, and then the input parameters of the electrolyzer. This study also provides policy implications by investigating the impact of different policy schemes on the optimal hydrogen production level.     

Between fragmented authoritarianism and policy coordination: Creating a Chinese market for wind energy

The Chinese grid-connected wind energy sector has undergone a number of fundamental changes during its 20 years of existence. The scope of this article is to track the reforms of the energy bureaucracy and its policy approach on the one hand and changes in wind energy installations on the other. By comparing three historically distinct phases of wind energy in China it is shown how policy reforms have changed largely from a state of “fragmented authoritarianism” towards policy coordination. In the initial phase (1986–1993), wind energy was expanding very slowly with disjointed policy making and in the incremental phase (1994–1999), the energy authorities were in dispute over the strategy and launched conflicting policy initiatives with poor results in wind energy output. The latest coordinated phase (2000–2006), however, developed a coherent renewable energy agenda and policy regime for the wind power sector. It is found that this phase with coordinated market regulations and incentives has helped give birth to a take-off in Chinese wind energy installations and substantial cost reductions, although the latter is threatening the profitability of wind farms. The article contributes to the academic debate over the role of policy making in renewable energy development and argues that China should continue, and improve, the coordination of regulations and incentives.     

Optimum energy storage techniques for the improvement of renewable energy sources-based electricity generation economic efficiency

The high wind and solar potential along with the extremely high electricity production cost met in the majority of Greek Aegean islands comprising autonomous electrical networks, imply the urgency for new renewable energy sources (RES) investments. To by-pass the electrical grid stability constraints arising from an extensive RES utilization, the adaptation of an appropriate energy storage system (ESS) is essential. In the present analysis, the cost effect of introducing selected storage technologies in a large variety of autonomous electrical grids so as to ensure higher levels of RES penetration, in particular wind and solar, is examined in detail. A systematic parametrical analysis concerning the effect of the ESSs’ main parameters on the economic behavior of the entire installation is also included. According to the results obtained, a properly sized RES-based electricity generation station in collaboration with the appropriate energy storage equipment is a promising solution for the energy demand problems of numerous autonomous electrical networks existing worldwide, at the same time suggesting a clean energy generation alternative and contributing to the diminution of the important environmental problems resulting from the operation of thermal power stations.     

China’s renewable energy policy: Commitments and challenges

The passing of the Renewable Energy Law (REL) in 2005 demonstrated China’s commitment to renewable energy development. In the 3 years after the REL, China’s renewable electricity capacity grew rapidly. From 2006 to 2008, China’s wind capacity installation more than doubled every year for 3 years in a row. However, three facts prevent us from being optimistic about China’s renewable electricity future. First, considered as a share of total capacity, renewable electricity capacity is decreasing instead of increasing. This is due simply to the rapid growth of fossil fuel capacity. Second, a significant amount of renewable generation capacity is wasted because it is not connected to the electricity grid. Finally, renewable electricity plants are running at a low level of efficiency. Based on an in-depth analysis of China’s existing renewable energy policy, we suggest that these challenges should be dealt with by introducing a market-based mandatory renewable portfolio requirement coupled with strong regulatory monitoring of grid enterprises.     

Overview of energy storage systems for storing electricity from renewable energy sources in Saudi Arabia

Renewable power (photovoltaic, solar thermal or wind) is inherently intermittent and fluctuating. If renewable power has to become a major source of base-load dispatchable power, electricity storage systems of multi-MW capacity and multi-hours duration are indispensable. An overview of the advanced energy storage systems to store electrical energy generated by renewable energy sources is presented along with climatic conditions and supply demand situation of power in Saudi Arabia. Based on the review, battery features needed for the storage of electricity generated from renewable energy sources are: low cost, high efficiency, long cycle life, mature technology, withstand high ambient temperatures, large power and energy capacities and environmentally benign. Although there are various commercially available electrical energy storage systems (EESS), no single storage system meets all the requirements for an ideal EESS. Each EESS has a suitable application range.