Experiencing the whole electricity market chain

Transcription

1 Experiencing the whole electricity market chain Pierre Pinson Technical University of Denmark. DTU Electrical Engineering - Centre for Electric Power and Energy mail: ppin@dtu.dk - webpage: 19 March Renewables in Electricity Markets 1

2 Learning objectives Through this lecture and additional study material, it is aimed for the students to be able to: 1 Have a complete understanding of the market timeline 2 Have a complete understanding of the various actors roles 3 Understand differences between one-price and two-price balancing mechanisms 4 Caculate revenues and payments of market players combining the various market floors Renewables in Electricity Markets 2

3 As part of the overall context... Now we look at it altogether! Renewables in Electricity Markets 3

4 Outline 1 Setting the scene 2 Case 1: Renewable energy impact in day-ahead electricity markets 3 Case 2: From day-ahead to balancing market (one-price) 4 Case 3: From day-ahead to balancing market (two-price) 5 Discussion: Impact one-price and two-price balancing settlement on strategic behaviour Renewables in Electricity Markets 4

5 1 Setting the scene Renewables in Electricity Markets 5

6 We will need... To direct and control the game: Mr. Market Mr. System Operator Mrs. Nature Renewables in Electricity Markets 6

7 We will also need... A number of market players: Mr. Greedy Miss Sunshine Mr. Clever and one more? Renewables in Electricity Markets 7

8 1 Setting the scene Renewables in Electricity Markets 8

9 2 Case 1: Impact of renewable energy on day-ahead electricity markets Renewables in Electricity Markets 9

10 3 Case 2: From day-ahead to balancing market (one-price) Renewables in Electricity Markets 10

11 4 Case 3: From day-ahead to balancing market (two-price) Renewables in Electricity Markets 11

12 5 Discussion: Strategic behaviour with one-price and two-price balancing mechanisms Renewables in Electricity Markets 12

13 Thanks for your attention! - Contact: ppin@dtu.dk - web: pierrepinson.com Renewables in Electricity Markets 13

14 6 Appendix: Reminder on balancing markets Renewables in Electricity Markets 14

15 Is the system (really) in imbalance? There may be 3 possible situations, for the system as a whole: Positive imbalance: Supply > Demand need for downward regulation Negative imbalance: Supply < Demand need for upward regulation No imbalance: Supply Demand no need for regulation Similarly, supply and demand participants may also have positive and negative imabalance: Positive imbalance: Actual generation > Scheduled generation (if supply) or... Negative imbalance: Actual generation < Scheduled generation (if supply) or... No imbalance: Actual generation Scheduled generation (if supply) or Renewables in Electricity Markets 15

16 Nomenclature From the (previously cleared) day-ahead market: Balance of generation and consumption at quantity: P S Day ahead price: λ S Generators schedules: ŷj G, j = 1,..., N G Demands schedules: ŷi D, i = 1,..., N D Then reaching the balancing market: Imbalance to be handled: P Assume N B balancing generators, able to move both up ( ) and down ( )... Their offers: Upward regulation: P j, at price λ j, j = 1,..., N B Downward regulation: P j, at price λ j, j = 1,..., N B One necessarily has: λ j λ j > λ S, j = 1,..., N B < λ S,, j = 1,..., N B Renewables in Electricity Markets 16

17 Example list of balancing offers This is a follow up on our basic example in the course on day-ahead markets! System price: 37.5 e - Accepted offers: see lecture (link) Deadline for offers: 9 th of February, 10:15 - Delivery period: 9 th of February, 11:00-12:00 Balancing offers include: Company id P j (MWh) λ j (e/mwh) P j (MWh) λ j (e/mwh) BlueHydro B 1 (/G 3) LastMinute B FlexiFast B DirtyPower B 4 (/G 8) already scheduled after day-ahead market clearing Here, only generators offer balancing - Demand could actually also contribute Renewables in Electricity Markets 17

18 Graphically as a supply curve... This is the same type of supply curves than for day-ahead auctions, except that: offers are for adjustment from the day-ahead quantity P S (both upward and downward) demand is here seen as inelastic (so, no demand curve - or seen as a vertical straight line) price [Euros/MWh] λ S P S quantity [MWh] Renewables in Electricity Markets 18

19 Intuitively, two possible situations P > 0 P < 0 price [Euros/MWh] λ B λ S P S P S + P price [Euros/MWh] λ S λ B P S + P P S quantity [MWh] quantity [MWh] Renewables in Electricity Markets 19

20 Writing the balancing auction as an LP Similarly to the day-market clearing, the auction can be solved through a Linear Program (LP): min {y },{y } j j subject to j j λ j y j y j 0 y i 0 y j y j λ j y j = P : λ B P i, j = 1,..., N B P j, j = 1,..., N B The balancing price λ B can then be obtained by solving the dual LP It corresponds to the lagrange multiplier for the updated balance equation Using this balancing price directly for the settlement yields one-price imbalance settlement being referred to as a one-price balancing market Renewables in Electricity Markets 20

21 The one-price imbalance settlement Basic properties: P > 0 P 0 P < 0 λ B > λ S λ B = λ S λ B < λ S Consequences on settlement for those dispatched through the day-ahead market: P > 0: Generator i producing less than scheduled must buy ŷi G yi G at price λ B Demand j consuming more than scheduled must buy ŷj D yj D at price λ B Generator i producing more than scheduled must sell yi G ŷi G at price λ B Demand j consuming less than scheduled must sell yj D ŷj D at price λ B P < 0:... basically, the same type of reasoning Meanwhile, balancing generators simply sell or buy at price λ B Renewables in Electricity Markets 21

22 Example case 1: Outage of G 5 Even though scheduled, the unit G 5 of KøbenhavnCHP will be down during that hour, and the operator could not get a match in the intra-day market... All others are producing and consuming as planned. For the balancing auction, one has: P = 60 MWh (since demand is higher than generation by 60 MWh for that hour) λ B = 45 e/mwh Scheduled balancing generators: B 1 and B 2 (only 30 MWh upward) The settlement leads to: G 5 paying = 2700 e B 1 (/G 3 ) and B 2 each receiving = 1350 e Considering both day-ahead and balancing stages: G 5 receives = 2250 e, and has to pay = 2700 e... That is a loss of 450 e(!) B 1 (/G 3 ) receives = 7500 e (day-ahead) and = 1350 e at the balancing stage Renewables in Electricity Markets 22

23 Example case 2: Wind forecast errors For both wind farms G 1 and G 2 (operated by RT R and WeTrustInWind), the actual generation is not equal to that foreseen when clearing the day-ahead market, i.e. for G 1 : ŷ1 G = 50 MWh but actual generation is y 1 G = 30 MWh for G 2 : ŷ2 G = 120 MWh but actual generation is y 2 G = 155 MWh All others are producing and consuming as planned. For the balancing auction, one has: P = 15 MWh (since generation is higher that demand by 15 MWh for that hour) λ B = 35 e/mwh Scheduled balancing generators: B 1 (only 15 MWh downward) The settlement leads to: G 1 paying = 700 e G 2 receiving = 1225 e B 1 paying = 525 e Considering both day-ahead and balancing stages: G 1 receives = 1875 e, then pays = 700 e - Gives 1175 e G 2 receives = 4500 e, then receives again = 1225 e - Gives 5775 e B 1 (/G 3 ) receives = 7500 e, then pays = 525 e - Gives 7175 e Renewables in Electricity Markets 23

24 Comments on the one-price balancing markets The total payment/revenue of day-ahead market participants for deviations from schedule equals the revenue/payment of the balancing generators Regarding deviations: if one s own deviation contributes to setting the system off-balance (e.g., generator overproduce while there is too much power overall), this leads to a loss but... if one s own deviation is of the helping the system go back to balance (e.g., generator overproduce while there is a lack of power overall), this leads to extra profit(!) What could be the consequences? And, how could we fix that? Renewables in Electricity Markets 24

25 The two-price imbalance settlement Basic properties: (well, the same for market clearing) P > 0 P 0 P < 0 λ B > λ S λ B = λ S λ B < λ S Settlement is rethought: those putting the system off-balance are to be penalized those supporting the system (unintentionally) will not get extra rewards P > 0: Generator i producing less than scheduled must buy ŷi G yi G at price λ B Demand j consuming more than scheduled must buy ŷj D yj D at price λ B Generator i producing more than scheduled must sell yi G ŷi G at price λ S Demand j consuming less than scheduled must sell yj D ŷj D at price λ S P < 0:... basically, the opposite type of reasoning Meanwhile, balancing generators simply sell or buy at price λ B Renewables in Electricity Markets 25

26 Example case 1: Outage of G 5 Even though scheduled, the unit G 5 of KøbenhavnCHP will be down during that hour, and the operator could not get a match in the intra-day market... All others are producing and consuming as planned. For the balancing auction, one has: P = 60 MWh (since demand is higher than generation by 60 MWh for that hour) λ B = 45 e/mwh Scheduled balancing generators: B 1 and B 2 (only 30 MWh upward) The settlement leads to: G 5 paying = 2700 e B 1 (/G 3 ) and B 2 each receiving = 1350 e Considering both day-ahead and balancing stages: G 5 receives = 2250 e, and has to pay = 2700 e... That is a loss of 450 e(!) B 1 (/G 3 ) receives = 7500 e (day-ahead) and = 1350 e at the balancing stage Renewables in Electricity Markets 26

27 Example case 2: Wind forecast errors For both wind farms G 1 and G 2 (operated by RT R and WeTrustInWind), the actual generation is not equal to that foreseen when clearing the day-ahead market, i.e. for G 1 : ŷ G 1 = 50 MWh but actual generation is y G 1 for G 2 : ŷ G 1 = 120 MWh but actual generation is y G 1 All others are producing and consuming as planned. For the balancing auction, one has: = 30 MWh = 155 MWh P = 15 MWh (since generation is higher than demand by 15 MWh for that hour) λ B = 35 e/mwh (while day-ahead price is λ S = 37.5 e/mwh) Scheduled balancing generators: B 1 (only 15 MWh downward) The settlement leads to: G 1 paying = 750 e (instead of 700 e in the one-price case) G 2 receiving = 1225 e B 1 (/G 3 ) paying = 525 e Considering both day-ahead and balancing stages: G 1 receives = 1875 e, then pays = 750 e - Gives 1050 e G 2 receives = 4500 e, then receives again = 1225 e - Gives 5775 e B 1 (/G 3 ) receives = 7500 e, then pays = 525 e - Gives 7175 e Renewables in Electricity Markets 27

28 Final remarks We gave here the big picture, and there may be additional aspects that could deserve consideration (for another time...), e.g. There can be both up- and down-regulation situations at the same time... The actual time step of operations is much smaller (for instance, 5 minutes) than the market time unit (say, 1 hour) Demand-side could also be pro-active and participate in the balancing market Network effects and inter-zone coordination can substantially impact the balancing mechanisms etc. Let s have a look at the current situation in Scandinavia: Nord Pool s balancing page Renewables in Electricity Markets 28

29 Further readings For those who want to go into the more mathematical aspects of balancing markets: J.M. Morales et al. (2014). Integrating Renewables in Electricity Markets, Chapter 4: Balancing markets (pdf) For those interested in current challenges and discussion at the European level: F. Borggrefe and K. Neuhoff (2011). Balancing and intraday market design: Options for wind integration (pdf) Renewables in Electricity Markets 29