Lecture 4: Balancing Power Market Flashcards Preview

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Flashcards in Lecture 4: Balancing Power Market Deck (19)
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1
Q

What are the ancillary (System) Services for a TSO?

A
  • Frequency stability
  • Voltage stability (reactive Power)
  • Black start capability
  • System operation
2
Q

Explain the Primary frequency control

A

The drop in frequency must be counteracted as quickly as possible by activating the Frequency Containment Reserve (FCR). In suitable power plants with thermal or hydraulic capacity, local speed controllers are turned up to counteract the drop in frequency. All TSOs with their speed-controlled power plants participate in the primary control system. The primary control is a pure frequency control as proportional control and does not lead the frequency to the setpoint.

In the control power market, the minimum quantity offered for FCR is +-1MW and it should be ensured that an automatic and complete activation takes place within 30sec and that for 15 min. The FCR is only paid according to the reserved power price and not according to the energy price.

3
Q

Explain the Secondary frequency control

A

Secondary restoration with the automatic frequency restoration service aFFR is activated by the TSO where the failure happened. Hereby the frequency is reduced to the original value of 50 Hz.No symmetrical bids necessary. Minimum offered quantity is 5MW and with an increase 1MW is possible. Automatic and complete activation after 30s and up to one hour. In this case, the price is also paid according to the price of the work done.

4
Q

Explain the Minute Reserve

A

Can be delivered as spot market / intraday regular delivery.
Minimum bid size 15 MW, increments 1 MW
Free reserve capacities from +/ 15 MW can be offered.
Invitation for bids in day ahead modus.

5
Q

UE04

Define the terms
generation adequacy

A

Generation adequacy:

  • The way in which the **power system can match the evolution in electricity demand **is expressed as ‘system or generation adequacy.’
  • Generation adequacy measures the ability of a power system to cope with its load in all the steady states it may operate under standard conditions.
  • This adequacy has different components:
    1. The ability of the generation assets to cover the peak load, taking into account uncertainties in the generation availability and load level.
    2. The ability of the transmission system to perform, with the flexibility provided by interconnection and import and export flows.
6
Q

UE04

Define the term “missing
money problem”

A

The „Missing Money Problem “ addresses the problem of** insufficient cost coverage** for base load power generation, especially coal or gas fired power plants

It occurs especially in energy only markets (EOM) due to subsidization of renewable energies with zero marginal costs, which result in extremely low price levels

Thus, power plant operators can no longer cap the fixed costs and may lead to a gap of capacity

7
Q

UE04

What is an energy only market (EOM) and why does it need to be improved?

A

In an EOM the power plants are getting paid for the energy they really supply in the grid per kWh and not for the possible availabilty of the supply capacity.

There are several problems resulting from this market mechanism:
1. The effectivness of the EOM is currently being discussed, wheter it is providing sufficient incentives for investments in flexible technolgies to ensure long term supply.
2. As the supply from RES rises, the operating hours of conventional plants decreases and so their revenues. They have the so called “Missing Money Problem” so thez have diffuculties in covering ther Fix Costs.
3. However these flexible capacities are still necessary in the times of low RES production. The Question arises about the “Ensuring Generation Adequecy

8
Q

UE04 Extra

What is the main question arising from the EOM Marcet Structure?

A

The main question is wheter the marginal cost based EOM provides enough incentives for investments in new power plant capacity or wheter a capacity market should be intriduces in order the secure capacity.

9
Q

UE04 Extra

How is the effectiveness of a market design is defined?

A

The effectiveness of a market design is defined by its ability to trigger investments in power plants or flexible capacity to serve the demand in every point of time.

10
Q

UE04 Extra

It is stated that the price spikes are necessary for ensuring generation adequecy. The are requiered to cover fixed costs. Theoreticaly a capacity market is not needed but the real market has two failures:

A
  1. inelastic demand // if the demand can be shiefted in time of high prices, for example the E autos not chatging in heigh demand times, less capacity is needed in longer period
  2. consumers not willing to paying in security for supply // If concumers pay a fee for supply security additional capacties can be build.
11
Q

UE04

Describe the mechanisms of the “strategic reserve” capacity market” to enhance the current EOM system.

//Extra: How does the SR enhances the incentives for new investment in flexible Power Capacity in order the enhance current EOM

A
  • A strategic reserve consist several PowerPlants which arent participating in regular market but rather kept exclusively for situations where the market is not able to cover the demand
  • These are dispatced by TSO but operated by their owners.
  • Dispatchad in VOLL situations, so if the stock exchange price exceeds a exceeds a specified level
  • Their capacity is procured by uniform price auctions or via bilateral contracts and the price is setteled by the market
  • Mainly old gas or oil fired power plants with low fixed costs
  • In order to avoid any retroactive effects of the Strategic Reserve on investment decisions for the electricity market, the plants in the Strategic Reserve should also not be allowed to be used on the electricity market at a later date.

// By lowering the available capacities in the regular market via SR, by exculiding capacities from the regular market, market prices should increase, which in turn should incentive new investments. Over time available capacities shoekd reach a similar level as before.

12
Q

UE04

Describe the mechanisms of the “strategic reserve”
* Compliance mechanism
* Dispatch mechanism
* Market participation
* Capacity planning
* Price settlement
* Power plants

A
  • Compliance mechanism : Plants are exclusively
    dispatched by TSO nut operated by owners
  • Dispatch mechanism : in the extreme situations when the market price is close to VoLL.
  • Market participation: not regular participation in normal market, earning exclusivly from SRM
  • Capacity planning: Central Regulator determines
    the size of the strategic reserve it is about 5% of peak load
  • Price settlement: Market settles the price via
    uniform price auctions or via bilateral contracts
  • Power plants: Mainly old gas or oil fired
    peak load power plants
13
Q

UE04

What are the advantages and drawbacks of the SR?

A

**Advanteges **
on of the advantages is it is easy to implement and easy to adapt because the capacity is already existing.
impact of the existing markets are marginal, because these cap. are 5% of peak power and nevertheless peak load PP.
Disadvanteges
* Inefficient dispatch under normal market conditions, as the capacity in the strategic reserve is withheld from the regular electricity market
* *Difficult determination of the optimal volume of the strategic reserve *because available future capacity is subject to uncertainty
* Difficult determination of the price at which the strategic reserve bids into the market—Lower price can reduce scarcity rents and lead to fewer investments
* No reduction of investment related risks (price volatility)
* No reduction of the missing money problem– because there is still an Inadequate cost coverage for baseload power plants in the market

14
Q

UE04

Compare the results of the two mechanisms, considering the development of the future capacity and the adequacy ratio.

Strategic Reserve

A

Development of flexible capacities
* the overall capacity of thermal power plants is larger than in a scenario without a strategic reserve
* primarily built power plants: gas
* fired peak load power plants
* the total capacity of the strategic reserve is never fully dispatched

Adequacy ratio
* increased generation adequacy
* prevented brownouts that may occur in simulations based on the EOM

15
Q

UE04

Describe the mechanisms of the “central capacity market” to enhance the current EOM system

A

Capacity market:

  • Two separate markets: produced energy and keeping generation capacity available to produce electricity when required
  • Derivatives of generation capacity are traded between power generators and load serving entities (LSE) or large consumers to ensure generation adequacy in times of shortages
  • By providing payments to encourage investment in new capacity or for existing capacity to remain open, sufficient reliable capacity is available
16
Q

Q3) Describe the mechanisms of the “central
capacity market
” to enhance the current EOM system
* Compliance mechanism
* Dispatch mechanism
* Market participation
* Capacity planning
* Price settlement
* Power plants

A
  • Compliance mechanism : *
    Capacity is contracted by central authority
    Financial penalties if capacity cannot be provided
  • Dispatch mechanism : iIn case of electricity shortage.
    When market price exceeds a predefined value, the “strike
    price”
  • Market participation: Earnings from spot, futures,
    reserve and capacity market are possible, but if needed the cap. should be provided in every case
  • Capacity planning: Central instance estimates
    the residual future load (load minus capacity credit of
    renewables), purchases a certain level of capacity and
    determines price
  • Price settlement: Descending Clock/Dutch
    auction auctioneer announces first price, calls for
    supply bids and lowers the price until the necessary
    capacity is found or until floor price is reached
  • Power plants: *
    Existing and new power
    plants Flexible power plants (gas)
    RES can participate in combination with storage
17
Q

UE04

What are the advantages and drawbacks of the capacity Market?

A

Advantages:
Decline of investment related risks (price volatility)
Incentive for investment due to additional revenue
Dispatch is more efficient
Addresses missing money problem
Protects consumers from high price peaks and price volatility
Disadvantages:
New market structure needs to be implemented
The appropriate parameterization to avoid overcapacities (and related costs)
The adequate integration of RES technologies

18
Q

Compare the results of the two mechanisms, considering the development of the future capacity and the adequacy ratio.

Central capacity market

A

Development of flexible capacities
higher volume of power plant capacity compared to the EOM
* overcapacities of thermal power plants
* nearly constant investments during the whole period until 2050 without generating higher total system costs
* the capacity payments are compensated by avoided price peaks

Adequacy ratio
the adequacy ratio is continuously over 1.1
overcapacity

19
Q

UE04

Define the terms “consumer surplus” and “producer surplus

A

Net Consumer Surplus (Konsumentenrente)
Occurs when the consumer actually ready to pay more then the setteled price on the Market
A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price

Producer Surplus
Economic measure of producer benefit- the Amaunt that the proucer actually would have already sold but sells at a higher price anyway in a uniform price

Difference between the amount received and minimum amount willing to accept