RE-POWERING MARKETS Designing capacity mechanisms

Transcription

1 資料 3-1 RE-POWERING MARKETS Designing capacity mechanisms Matthew Wittenstein Electricity Analyst Gas, Coal and Power Markets Division International Energy Agency May 22, 2017

2 Introduction: capacity markets can support long-term reliability goals Capacity mechanisms - or capacity markets - have been introduced with the objective of ensuring reliability needs are met. Targeted volume-based capacity mechanisms, such as strategic reserves, are quick to implement and can address short-term electricity security issues. Market-wide capacity mechanisms are more complicated to design, but may be better at meeting long-term adequacy needs In either case, administrative intervention is required.

3 Are capacity mechanisms necessary? A guide for decision makers Who is responsible for resource adequacy? Market organiser Non-market entity (e.g. State) Out-of-market mechanism Yes Scarcity pricing? No Sufficient demand response (price based)? No Reliability standard Yes Reliability standard Energy-only market Indicative target Resource adequacy floor Capacity mechanism

4 Europe: differing national paths conflict with EU harmonisation Capacity mechanisms in Europe (select countries) Europe has harmonised wholesale market design, but implementing capacity mechanisms remains a national decision, leading to market fragmentation.

5 US: capacity mechanisms aligned with wholesale market organisation Capacity mechanisms in US (regional wholesale markets) Restructured markets in the United States have tended to implement marketwide mechanisms, though there are significant differences in implementation

6 EUR/MWh Strategic reserves procure only capacity needed to meet RA needs 2500 Role of strategic reserve during scarcity conditions Merit Order Strategic Reserve Demand A strategic reserve can help meet short-term reliability needs while avoiding wholesale market distortions. Over the long-term, however, they may distort investment incentives.

7 $ 十億 Market-wide mechanisms remunerate all resources Capacity market revenues by resource type in PJM Wind Waste Solar Oil Nuclear Hydro Gas Coal 0 Existing New Existing New Existing New Existing New Existing New Existing New Existing New Existing New 2012/ / / / / / / /20 Baseload technologies like nuclear, coal and natural gas perform well in capacity markets because of their high availability.

8 USD/MWh Putting capacity revenues in context Components of the PJM Wholesale Price % Other 70 20% % Capacity % Energy 20 5% % of revenues (capacity) Source: Monitoring Analytics, Capacity payments can become a significant revenue source. Careful consideration of capacity needs is important to avoid distortions. 0%

9 Developing the demand curve PJM variable resource requirement (VRR) curve for 2017/18 The demand for capacity must be determined administratively. The price of capacity is determined through an auction process.

10 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 ICAP Price (USD/kW-month) Market resolution: capacity markets should reflect system constraints New York price zones and ICAP market prices ( ) NYC (J) LI (K) G-J NYCA (A-F) 0 Capacity markets should include a locational component, so that investments are targeted where they are needed most

11 Who should be compensated? Two concerns for market-wide mechanisms: 1. How to treat existing resources? Cost advantage because fixed costs are already recovered? 2. How to treat subsidized resources? Double payment problem: subsidy + capacity payment Price suppression effect: subsidized resources bid low, depress prices 1. Existing resources Is capacity provision a system service? 2. Subsidized resources Minimum Offer Price Rule (MOPR): required to bid at administratively determined price Tension between price suppression and paying twice

12 Alternative method for addressing subsidized resources (1/2) $12 ISO-NE Competitive Auctions with Subsidized Policy Resources (Mainly through RPS) proposal Subsidised resources (MOPR) $10 P1 $8 $6 $4 Resources willing to retire 1st Auction Supply (MOPR) Demand curve $2 $0 The CASPR proposal is a two stage auction process. The first stage operates in the same manner as the current process, determining the market-clearing price.

13 Alternative method for addressing subsidized resources (2/2) ISO-NE Competitive Auctions with Subsidized Policy Resources (Mainly through RPS) proposal $7 $6 $5 $4 $3 P2 < P1 2nd Auction Supply (No MOPR) Demand curve $2 $1 $0 In the second stage, supply is restricted to subsidized resources that did not clear, and demand is made up of resources willing to retire.

14 Conclusion Capacity mechanisms are an effective tool for meeting short- or long-term resource adequacy needs, but must be carefully designed to prevent market distortions Capacity mechanisms are not a replacement for getting wholesale market price signals right in the first place They are instead a safety net to meet policy driven reliability goals Strategic reserves can address short-term electricity security issues, but do not ensure that the energy market delivers adequate long-run investment. Market-wide capacity mechanisms should be technology neutral, should include both supply- and demand-side resources, and should be forward looking. Sound penalties can ensure the availability of contracted capacity To allow cross-border participation, clear and transparent rules for contracting of neighbouring generation and short-term cross-border flows are essential

15 Thank you