"Serving the energy market" - Articles - Energy market design

An Assessment of Benefits of Congestion Management Options for the Netherlands: A Case Study

no@spam.com (Sebastiaan Hers) — Tue, 20 Apr 2010 16:17:51 CEST

Keywords: Congestion Management, Re-Dispatch System, Welfare Impact, Locational Marginal Pricing; Published in: YEEES seminar 2010; Publication year: 2010; Co-author 1: Hers, J.S.; Co-author 2: Ozdemir, O.; Co-author 3: Kolokathis, C.; Co-author 4: Nieuwenhout, F.; Summary: By the end of 2008, a new policy regarding grid connection in the Netherlands was announced by the Dutch Minister of Economic Affairs. The policy implied renewed access to the grid for new generation capacity in congested regions, while anticipating the establishment of a required new congestion management system by the Minister of Economic Affairs. This study analyses the new connection policy in the Dutch power market and associated models for congestion management under consideration. In the first part of this paper a quantitative analysis of the net benefits of the new connection policy in the Netherlands is presented. Net benefits are calculated as the increase of consumer surplus and producers gross margin minus the cost of congestion. For all the scenarios considered, the benefits are shown to be roughly an order of magnitude higher than the congestion costs. Hence positive net benefits are expected to result from the implementation of the new connection policy. In the second part of this paper, four alternative designs for a congestion management system as laid down by the Dutch Ministry of Economic affairs are evaluated. The assessments were based on simulations using the COMPETES model, assuming a competitive wholesale market, efficient redispatch and both nonstrategic and strategic behaviour regarding congestion management.

Double-Sided Auction Mechanism Design in Electricity Based on Maximizing Social Welfare

no@spam.com (XIAOYAN ZOU) — Fri, 05 Feb 2010 14:31:34 CET

Keywords (max 10): electricity market; auction mechanism; social welfare contribution
Published in : Energy Policy
Production / Publication year (yyyy): 2009
Co-author 1 (last name, first name):
Co-author 2 (last name, first name):
Co-author 3 (last name, first name):
Summary / Abstract:An efficient electricity double-sided auction mechanism should control market power and enhance the social welfare of the electricity market. Based on this goal, the paper designs a new double-sided auction mechanism. In the new mechanism, the social welfare contribution of each participant plays a pivotal role, because this contribution is the critical factor in market clearing, payment settling, and transaction matching rules. In particular, each winner of the auction can gain transfer payments according to his contribution to social welfare in the electricity market, and this gives the mechanism the ability to control the market power of some participants. At the same time, this mechanism ensures that the market organizer balances his budget. We then conduct a theoretical and empirical analysis based on the Spanish electricity market. Both of the results show that compared to the uniform-pricing mechanism, the new mechanism can reduce market power of participants and enhance the social welfare of the electricity market.

Market implications large scale wind capacity

no@spam.com (Floris van Foreest) — Sat, 09 Jan 2010 12:15:44 CET

Keywords (max 10): Large scale wind capacity, grey production, price volatility, wind value implications
Published in (e.g. journal / magazine name, or blank):
Production / Publication year (yyyy): 2008
Co-author 1 (last name, first name): Thijs van den Berg
Co-author 2 (last name, first name):
Co-author 3 (last name, first name):
Summary / Abstract:The ambitioned integration of 10,000 MW Wind energy in the Dutch energy system will not only contribute to meeting the EU 2020 targets, but will also fundamentally alter the power market and underlying merit
order. This will have a serious impact on the utilization of grey production assets and price development on the APX and imbalance market. Furthermore, it is estimated that the amount of “wasted” wind power will increase as more wind capacity is built and the dispatch of grey assets is still driven by economic optimization and technological constraints. Consequently, the value outlook of wind deteriorates dramatically, which puts future investments in wind capacity in a different perspective.

A unified model for energy and environmental performance assessment of natural gas-fueled poly-generation systems

no@spam.com (Gianfranco Chicco) — Tue, 11 Aug 2009 15:54:58 CEST

Published in: Energy conversion and Management

Publication year: 2008
Co-Author 1: Pierluigi Mancarella

Poly-generation systems for combined production of manifold energy vectors such as electricity, heat at different enthalpy levels (for instance, in the form of hot water and steam), and cooling power from a unique source of primary energy (typically natural gas) are increasingly spreading, above all on a small-scale basis (below 1 MWe), owing to their enhanced energy, environmental and economic characteristics. Availability of suitable tools for assessing the performance of such systems is therefore fundamental. In this paper, a unified general model is proposed for assessing the energy and CO2 emission performance of any type of poly-generation system with natural gas as the energy input. In particular, the classical energy saving model for cogeneration systems is extended to include in the analysis further energy vectors by defining the novel PPES (Poly-generation Primary Energy Saving) indicator. In addition, equivalent efficiencies for CO2 emission assessment are defined and used in the formulation of the new PCO2ER (Poly-generation CO2 Emission Reduction) indicator, specifically introduced for environmental analysis. The formal analogy between the PPES and the PCO2ER indicators is highlighted. Numerical applications are provided to show the effectiveness of the proposed models and to quantify the typical benefits that poly-generation systems can bring. In particular, the new indicators are of relevant interest for both energy planners and policy makers, above all in the outlook of formulating financial incentive strategies, as it already occurs for cogeneration systems, or of participating to specific energy-related markets such as the ones for trading white certificates or emission allowances.

A two-stage stochastic programming model for electric energy producers

no@spam.com (Patrizia Beraldi) — Tue, 11 Aug 2009 15:46:31 CEST

Published in: Computers & Operations Research

Publication year: 2007
Co-Author 1: Domenico Conforti

Co-Author 2: Antonio Violi

The bilateral contract selection and bids definition constitute a strategic issue for electric energy producers that operate in competitive markets, as the liberalized electricity ones. In this paper we propose a two-stage stochastic integer programming model for the integrated optimization of power production and trading which include a specific measure accounting for risk management. We solve the model by means of a novel enumerative solution approach that exploits the particular problem structure. Finally, we report some preliminary computational experiments.

The future energy value chain

no@spam.com (Floris van Foreest) — Mon, 21 Jul 2008 21:17:44 CEST

Keywords (max 10): Energy transition, distributed energy, demand management, positioning in the value chain Production / Publication year 2008 Summary / Abstract: Energy transition and subsequent changes in the configuration and dynamics in the energy value chain create challenges and opportunities for energy companies. New product and service portfolio's, a shift in geographical focus or acquisitions down or upstream in the chain, are examples of possible responses. A multidimensional approach is required to capture the oppportunies and mitigate the threats. Energy companies have to find the right balance between enhancement of their vertical postion in the value chain, horizontal expansion in different stages of this chain by for example development of new propositions in supply next to electricity and gas, and finally capturing cross-sectoral opportunities.

Risk-aversion and willingness to pay in choice experiments

no@spam.com (Mehdi Farsi) — Fri, 15 Feb 2008 14:03:59 CET

Keywords: choice experiment, willingness to pay, risk aversion, energy efficiency, housing
Published in:
Publication year: 2007

This paper extends the linear utility model commonly used for estimating the willingness to pay for non-market goods to a non-linear model with decreasing marginal utility. The proposed approach relaxes the assumption of constant rate of substitution between income and non-market commodities, an assumption which can be especially restrictive in cases when the non-market good is a luxury commodity or a new good whose benefits are not completely known. The adopted non-linear formulation can therefore accommodate risk-averse behavior with respect to nonmarket goods particularly when the non-market attributes are measured by discrete variables. The proposed models have been applied to data from a choice experiment for energy efficiency measures in apartment buildings. The econometric specification is based on a fixed-effect logit model. The results suggest that ignoring consumers’ risk-aversion toward new non-market goods could lead to an underestimation of the marginal willingness to pay. However, consistent with previous studies the non-linear effect of income does not have a considerable effect on the estimation results.

Benchmarking and regulation in the electricity distribution sector

no@spam.com (Mehdi Farsi) — Fri, 15 Feb 2008 13:57:23 CET

Keywords:
Published in:
Publication year: 2007
Co-author 1: Aurelio Fetz
Co-author 2: Massimo Filippini

In the last two decades electricity distribution sector have witnessed a wave of regulatory reforms aimed at improving efficiency through incentive regulation. Most of these regulation schemes use benchmarking namely measuring a company’s efficiency and rewarding them accordingly. The reliability of efficiency estimates is crucial for an effective implementation of those incentive mechanisms. A main problem faced by the regulators is the choice among several legitimate benchmarking models that usually produce different results. After a brief overview of the benchmarking methodologies, this paper summarizes the methods used in the regulation practice in several OECD countries, in which the benchmarking practice is relatively widespread. Repeated observation of similar companies over time namely panel data, allows a better understanding of unobserved firm-specific factors and disentangling them from efficiency estimates. Focusing on parametric cost frontier models, this paper presents two alternative approaches that could be used to improve the reliability of benchmarking methods, and based on recent empirical evidence, draws some recommendations for regulatory practice in power distribution networks.

Economies of scale and scope in the Swiss Multi-Utilities Sector

no@spam.com (Mehdi Farsi) — Tue, 12 Feb 2008 11:22:31 CET

Keywords:
Published in:
Publication year: 2007
Co-author 1: Aurelio Fetz
Co-author 2: Massimo Filippini

This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the inte-grated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential im-provements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model have been used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies have been compared across different models and the effect of heterogeneity among companies have been explored. While indicating considerable scope and scale economies overall, the results sug-gest a significant variation in scope economies across companies due to unobserved heterogeneity.

Experimental tests of competitive markets for electric power

no@spam.com (Simon Ede) — Mon, 28 Jan 2008 17:05:24 CET

Keywords: electricity markets, auctions, load uncertainty
Published in:
Publication year: 2001
Co-author 1: Timothy Mount
Co-author 2: William Schulze
Co-author 3: Robert Thomas
Co-author 4: Ray Zimmerman

Testing the performance of electricity markets using POWERWEB has already shown that relatively inexperienced players can identify and exploit market power in load pockets. When transmission constraints are not binding, however, auctions with six players have been shown to be efficient. There is evidence from operating electricity markets that prices can be driven above competitive levels when the largest supplier controls less than 20% of total installed capacity. This is accomplished by causing price spikes to occur. In experiments, uncertainty about the actual load and paying standby costs regardless of whether or not a unit is actually dispatched contribute to volatile price behavior. The objective of this paper is to investigate characteristics of a market that affect price volatility. The tests consider three different sets of rules for setting price when there are capacity shortfalls, and the following four market structures:
1. Load is responsive to price
2. Price forecasts are made before
market settlement
3 A day-ahead market and a balancing
market auction
4. Suppliers are paid actual offers (a
discriminatory auction)