Market power in the European electricity market—The impacts of dry weather and additional transmission capacity

This paper uses a static computational game theoretic model of a fully opened European electricity market and can take strategic interaction among electricity-producing firms into account. The model is run for a number of scenarios: first, in the baseline under perfect competition, the prices differ due to the presence of various generation technologies and a limited ability to exchange electricity among countries. In addition, when large firms exercise market power, the model runs indicate that prices are the highest in countries where the number of firms is low. Second, dry weather would increase the prices in the hydro-rich Nordic countries followed by the Alpine countries. The price response would be about 20% higher with market power. Third, more transmission capacity would lower the prices in countries with high prices and it also reduces the impact of market power. Hence, more transmission capacity can improve market competitiveness.     

Analysis of the current energy storage market and energy storage economy

储能在未来电网以及可再生能源的应用中将起到至关重要的作用.它的应用范围涉及发电,传输,分配乃至终端用户.本文简要分析并总结了储能市场的经济性,重点阐述了储能应用的主要瓶颈问题----成本.通过分析与计算,确定了储能产品的目标成本,并且以历史上光伏产业规模效应的经验曲线为基础分析了能够降低储能成本的可行途径.储能应用市场将为传统能源结构带来根本性的变化,给社会经济带来巨大的福利,它的应用势在必行.但是,要实现储能的大规模应用还有诸多艰巨的任务与挑战,其中最重要的是要降低储能系统的成本,而实现这个目标需要多方面的共同努力.     

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.     

Demand response resources: Who is responsible for implementation in a deregulated market?

Demand response resources (DRR) have potential to offer substantial benefits in the form of improved economic efficiency in wholesale electricity markets. Those benefits include better capacity factors for existing capacity, reductions in requirements for new capacity, enhanced reliability, relief of congestion and transmission constraints, reductions in price volatility, mitigation of market power and lower electricity prices for consumers. However, DRR has been slow to penetrate. There has been substantial disagreement as to which entities in a restructured market should promote the expanded implementation of DRR. This paper contends that no single entity can perform this function. But rather, wider implementation will need to accrue from coordinated actions along the electricity supply chain.     

Strategic investment in merchant transmission: The impact of capacity utilization rules

In this paper we look at the relative merits of two capacity utilization regimes in the merchant electricity transmission network: Must offer (Mo) where the entire capacity installed has to be made available for transmission and Non Must Offer (NMo) where some capacity could be withheld. We look at two specific cases: (i) demand for transmission varies across time, and (ii) vertical integration is allowed between investors in transmission network and electricity generators. In the case of time-varying demand under Mo, we find that a monopolist may underinvest in transmission when compared to NMo, although NMo may lead to more capacity withholding. In the case of vertical integration, we find that when the market power is with the generators of the exporting node, without vertical integration no welfare-enhancing merchant investment would occur, neither under Mo nor NMo. Further, if the generators in the importing node have market power, in case vertical integration is allowed, Mo is better than NMo. Finally, we also argue that the incentive to collude among various transmission network investors is mitigated with Mo in place.     

Assessment of projected temperature impacts from climate change on the U.S. electric power sector using the Integrated Planning Model®

This study analyzes the potential impacts of changes in temperature due to climate change on the U.S. power sector, measuring the energy, environmental, and economic impacts of power system changes due to temperature changes under two emissions trajectories—with and without emissions mitigation. It estimates the impact of temperature change on heating and cooling degree days, electricity demand, and generating unit output and efficiency. These effects are then integrated into a dispatch and capacity planning model to estimate impacts on investment decisions, emissions, system costs, and power prices for 32 U.S. regions. Without mitigation actions, total annual electricity production costs in 2050 are projected to increase 14% ($51 billion) because of greater cooling demand as compared to a control scenario without future temperature changes. For a scenario with global emissions mitigation, including a reduction in U.S. power sector emissions of 36% below 2005 levels in 2050, the increase in total annual electricity production costs is approximately the same as the increase in system costs to satisfy the increased demand associated with unmitigated rising temperatures.     

Market power in electricity supply

Restructuring of the power industry worldwide has brought the issue of market competitiveness to the forefront. While "vertical" market power has been limited by disaggregating generation and transmission, nondiscriminatory access to the transmission system by power suppliers, and the creation of the independent system operator (ISO), "horizontal" and localized market power still survives. In the last few years, the issue of a small number of generators exercising market power has received a great deal of attention, and much has been published on how to identify and mitigate such abuse by market management measures. This paper focuses on the analysis and mitigation of market power in electricity supply     

Mothballing in power markets: An experimental study

The deregulation of many electricity markets over the last two decades raises a number of issues, among which: securing adequate investments in capacity, and the possibility of cyclical behavior in capacity, are important for security of supply. A number of policies and market mechanisms aiming for capacity adequacy and market stability exist; in this paper we focus on one of these, mothballing of generation capacity. In electricity markets, mothballing is the possibility for a power generation company to temporarily withdraw generation capacity for a time, often for a year or more. Our hypothesis is that mothballing will help to stabilize markets, but at the same time increase prices. We test this hypothesis using laboratory experiments, with a simplified model of a generic electricity market. We report an experiment with twelve markets, where subjects make investment decisions; half of them had full capacity utilization (T1) and the other half had the option to mothball capacity (T2). The predictions of the effects of mothballing were confirmed in the experimental markets: prices and generation capacity exhibit clear cycles in T1, and damped cycles in the second set of experiments, T2. Furthermore, mothballing leads to higher prices on average.     

Economic and environmental implications of different approaches to hedge against wind production uncertainty in two-settlement electricity markets: A PJM case study

This paper examines the economic and environmental outcomes of four two-settlement electricity market clearing designs. The first design corresponds to a Deterministic Market Clearing (DMC) similar to the mechanism currently used in organized wholesale electricity markets in the United States. The other three designs account for the day-ahead (DA) wind power production uncertainty into the DA market mechanisms either implicitly or explicitly. An Augmented Deterministic Market Clearing (ADMC) design introduces DA ramp-capability products. These products ensure adequate and ramp-feasible electricity generation capacity commitments in the DA stage to cope with the real-time realization of wind power generation. A Hybrid Deterministic Market clearing (HDMC) design augments ADMC by explicitly integrating a characterization of wind power production uncertainty into the residual unit commitment (RUC) process, which is run after the DA market is closed, using stochastic programming. The last design, referred to as stochastic market clearing (SMC), uses stochastic optimization to explicitly account for wind power production uncertainty in the DA market clearing mechanisms (i.e. DA unit commitment and economic dispatch).The four market clearing designs are assessed by simulating the electricity market operations of a test system and comparing their results in terms of operating costs, prices, costs and revenues of different types of producers, consumer's payments, integration of wind power, and air emissions. The test system has 12% of the capacity of PJM's fossil-fired power generation fleet, and uses data on coincident demand and wind power production from the Bonneville Power Administration (BPA) system during years 2010–2014. The simulations are performed hourly for a whole year.Results show that SMC is superior as its costs reductions are more than two times the improvements attained by ADMC and HDMC. Also, SMC results in electricity prices that are better aligned with operation costs, cuts the spread between the day-ahead and real-time prices by >40%, reduces out-of-market short-term revenue sufficiency payments by 58%, reduces CO₂ emissions by 3.52%, and decreases power plants' cycling. HDMC is a distant second-best market design. Relative to DMC, it achieves a reduction in total costs that is less than half the reduction achieved by SMC, a reduction in out-of-market payments that is 80% of the reduction attained by SMC, and an increase in wind power integration that is <10% the improvement obtained under SMC.     

新电改背景下广东省售电侧恶性价格竞争机理研究——基于Bertrand竞价模型

为理顺恶性价格竞争的形成机理,以广东省售电企业为研究对象,将售电企业分为有发电资产的第一类售电企业与无发电资产的第二类售电企业,通过建立Bertrand模型研究新电改背景下恶性价格竞争机理,并对售电企业进入或退出售电市场曲线进行了分析。结果表明:引入市场竞争后的售电侧有形成恶性价格竞争的可能性,相关部门应加以防范。     

风电与火电打捆外送相关问题研究

在中国风电连续四年翻番高速发展的大好形势下,风电发展较快的地区首先遭遇到风电消纳能力不足的市场"瓶颈",与此同时2010年年初华中、华东地区先后遭遇了煤电油气紧缺,如何摆脱风电消纳与能源供应能力不足"瓶颈"的影响,成为国内外广泛关注的焦点。本文分析了中国能源以及风电发展问题,以酒泉风电基地为例研究了能源资源与市场逆向分布、风电消纳和能源输送问题,通过输电与输煤的技术经济对比分析,得出了输电替代输煤是国家能源战略的合理选择。     

Optimising trans-national power generation and transmission investments: a Southern African example

Increased integration and co-operation within the Southern African power sector has opened up significant opportunities for reducing the economic and environmental costs of meeting increasing electricity demand in Southern Africa. This paper applies a linear programming model to investigate the economic and environmental benefits of regional integrated planning for electricity, and the impact of including environmental costs in the decision-making process. We find that, from a financial perspective, optimising generation and transmission investments in the region would result in savings of $2–4 billion over 20 years, or 5% of total system costs. Introducing a tax based on the external damage costs of carbon dioxide as part of the decision-making process would result in moderate increases in financial costs (15–20%), but would reduce regional carbon emissions by up to 55% at a mitigation cost of $11 per tonne of carbon dioxide. This raises the possibility of financing regional power projects with Clean Development Mechanism funding, which we explore with an example.     

Market protocols in ERCOT and their effect on wind generation

Integrating wind generation into power systems and wholesale electricity markets presents unique challenges due to the characteristics of wind power, including its limited dispatchability, variability in generation, difficulty in forecasting resource availability, and the geographic location of wind resources. Texas has had to deal with many of these issues beginning in 2002 when it restructured its electricity industry and introduced aggressive renewable portfolio standards that helped spur major investments in wind generation. In this paper we discuss the issues that have arisen in designing market protocols that take account of these special characteristics of wind generation and survey the regulatory and market rules that have been developed in Texas. We discuss the perverse incentives some of the rules gave wind generators to overschedule generation in order to receive balancing energy payments, and steps that have been taken to mitigate those incentive effects. Finally, we discuss more recent steps taken by the market operator and regulators to ensure transmission capacity is available for new wind generators that are expected to come online in the future.     

Market power analysis for the Iranian electricity market

The market power problem in Iranian electricity market is addressed in this study. This paper by using various structural indices of market power and reviewing market results analyzes the intensity of competition in Iran’s electricity market and examines whether this market is functioning at an appropriate level of efficiency. In this article the most well-known indices of market power are calculated in two approaches for two different scenarios (current situation and future outlook of generation sector’s ownership in Iran’s power industry). Comparing the results of these scenarios promises more competitive market for the second scenario. Calculating Residual Supply Index for Iran’s power market shows despite admissible values of concentration ratios, due to supply scarcity during periods when the demand is close to the total available capacity, some suppliers can exercise market power even with a relatively small market share. The most important price and load indices like weighted average prices and load/price duration curves of Iranian electricity market during March 2007–March 2008 are also analyzed in this paper. These results imply the existence of economic withholding. The main limiting factors of competition and significant implemented countermeasures for market power mitigation in Iran’s electricity market are also mentioned.     

Competition policy and regulation in hydro-dominated electricity markets

This paper discusses the main competition issues that arise in electricity systems dominated by hydro generation, arguing that technological differences between hydro and thermal plants may allow hydropower producers to exert market power in different and subtler ways compared to thermal generators. The key for market power in hydro-based systems is the strategic allocation of a given amount of output across periods, rather than a straightforward reduction of total output. The paper examines the interaction between strategic hydro reservoir operation and transmission capacity constraints, and summarizes the implications of market power for system reliability. A review of recent relevant literature is included. Finally, possible interventions to mitigate market power are analysed.     

Resource externalities and the persistence of heterogeneous pricing behavior in an energy commodity market

In competitive product markets, repeated interaction among producers with similar economic characteristics would be expected to result in convergence of their behaviors. If convergence does not occur, it raises fundamental questions related to the sustainability of heterogeneous competitive strategies. This paper examines the prices submitted to the British wholesale electricity market by four coal-fired plants, separately owned, approximately of the same age, size and efficiency, and located in the same transmission network zone. Due to the repetitive nature of the spot market, one would expect convergence in strategies. Yet, we find evidence of persistent price dispersion and heterogeneous strategies. We consider several propositions for these effects including market power, company size, forward commitments, vertical integration and the management of interrelated assets.     

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.     

Risk adjusted financial costs of photovoltaics

Recent research shows significant differences in the levelised photovoltaics (PV) electricity cost calculations. The present paper points out that no unique or absolute cost figure can be justified, the correct solution is to use a range of cost figures that is determined in a dynamic power portfolio interaction within the financial scheme, support mechanism and industry cost reduction. The paper draws attention to the increasing role of financial investors in the PV segment of the renewable energy market and the importance they attribute to the risks of all options in the power generation portfolio. Based on these trends, a former version of a financing model is adapted to project the energy mix changes in the EU electricity market due to investors behaviour with different risk tolerance/aversion. The dynamic process of translating these risks into the return expectation in the financial appraisal and investment decision making is also introduced. By doing so, the paper sets up a potential electricity market trend with the associated risk perception and classification. The necessary risk mitigation tasks for all stakeholders in the PV market are summarised which aims to avoid the burden of excessive risk premiums in this market segment.     

Long term climate change mitigation goals under the nuclear phase out policy: The Swiss energy system transition

The Swiss electricity system is dominated by low-carbon hydro and nuclear generation. The Government's decision to phase-out nuclear energy exacerbates Switzerland's climate change mitigation goals. Response to this challenge requires systemic changes to the energy system, which is generally a long-term, uncertain and systemic process, affected by technology choices across the entire energy system. A comprehensive Swiss TIMES Energy system Model (STEM) with high temporal detail has been developed for the analysis of plausible low-carbon energy pathways focusing on uncertainties related to policy (climate change mitigation and acceptability of new centralised electricity generation) and international fuel prices. Increasing electrification of end-uses is seen across the scenarios, resulting in continuous growth in electricity demands. The electrification of heating and e-mobility substitute direct use of fossil fuels in end-use sectors and contribute to a significant carbon dioxide emission (CO₂) reduction. Centralised gas power plants and renewables become key source of electricity supply. Given the phaseout of nuclear generation, clear policy signals are required to ensure capacity is built to achieve a low-carbon energy system. At the same time, it is also essential to ensure consistency between the electricity sector and end-use energy policies. For the long-term carbon reduction target, some non-cost-effective conservation measures are important early in the period because they are available only at the time of building renovation.     

Recommendations for the market introduction of solar thermal power stations

Until 2010, solar thermal power stations based on parabolic trough concentrating collectors can become a competitive option on the world's electricity market, if the market extension of this mature technology is supported by a concerted, long-term programme capable of bundling the forces of industry, finance, insurance and politics. Technical improvements based on the experience of over ten years of successful operation, series production and economies of scale will lead to a further cost reduction of 50% and to electricity costs of 0.06 - 0.04 US$/kWh for hybrid steam cycles and hybrid combined cycles, respectively. Until 2010, a capacity of 7 GW will be installed, avoiding 16 million tons of carbon dioxide per year. The programme comprises an investment of 16 billion US$ and requires external funding of 6%.