electricity market framework in - neo carbon energy2016/02/02 · lappeenranta university of...
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Electricity Market Framework in Neo-Carbon Scenarios
Samuli Honkapuro & Kaisa SalovaaraLUT School of Energy Systems
From transformative scenarios to market design scenarios
1) Outlining market design in top-down approach. • What kind of market design is feasible in each scenario?• Which are required elements of the market model that promote
scenario?
2) Analyzing the possible path and necessary steps from present market framework to scenario
3) Recognizing the roles of the stakeholders in market design scenarios
Electricity Market, objectives
€
Technical requirement; keep power balance in every second Production = consumption
Elements of market design in scenario work
What are the required elements of the market design that enable each scenario – what kind of market elements are possible in each scenario?Is there a common market for electricity?• Open and public price formation vs. fragmented price formation with bilateral
agreements.• Integrated system vs. scattered system (strong network connections vs. weak
network)How is the needed capacity obtained?
Applied capacity mechanismsDriving forces for market development
Consumer driven vs. corporate driven developmentWhat is the impact of disruptive technology to market design and vice versa?
Illustration of market design 1 – consumer activity and energy system design
Two driving forces perceived from the scenarios are inspected more closely: consumer activity and energy system designConsumer activity• Consumer driven market: consumers or communities are the
driving force behind the market design• Corporate driven market: corporates are the driving force behind
the market designEnergy system design (Technology enabled)• Scattered system: small to medium scale solutions, energy
generation dispersed• Integrated system: large scale solutions, integrated energy
generation
Integrated system
Scattered system
Consumer driven market
Corporate driven market
Illustration of market design 1
Value-driven techemoths
New consciousness
Radical startups
Green DIY engineers
Illustration of market design 2
In the second market design illustration a more tradition approach to market design is discussed: price formation and network capacity adequacy Price formation• Open and public price formation: there is a market where price is
formed and that is informed to market participants. • Fragmented price formation: price is formed in bilateral
agreements. Basis for network development• The market adapts to the limits set by the network: transmission
capacity limits power flow, markets have to adjust • The network adapts to the needs of the market: transmission
network is capable of transmitting power from generation to consumption according to demand
The market adapts to thelimits set by the network
The network adapts to the needs of the market
Open and public price formation
Fragmented price formation
Illustration of market design 2
Green DIY engineers
Radical start-ups
Value-driventechemoths
New consciousness
Example of market modelsZonal pricing
Uniform price area for whole market area (e.g. Nordic area), if congestions exist, market is split to predefined price areas (e.g. Finland as separate price area)Prerequisite is enough transmission capacity (no bottlenecks inside price area)Applied in Europe
Nodal pricingDifferent electricity price in each nodeIn addition to the energy component, the electricity price includes a transmission congestion fee and lossesA node may be for instance area of couple primary substations (for instance in Russia over 6 000 nodes)Applied for instance in Russia and US
If there are congestions in transmission network, nodal pricing may prove to be a better market model => Market model is chosen based on the robustness of the network
Market models
If there are congestions in transmission network, nodal pricing may prove to be a better market model => Market model is chosen based on the robustness of the network
Integrity of price areas201420132012
Source: Fingrid
Nordic electricity prices
0
10
20
30
40
50
60
70
801.
1.20
14
1.2.
2014
1.3.
2014
1.4.
2014
1.5.
2014
1.6.
2014
1.7.
2014
1.8.
2014
1.9.
2014
1.10
.201
4
1.11
.201
4
1.12
.201
4
1.1.
2015
1.2.
2015
1.3.
2015
1.4.
2015
1.5.
2015
1.6.
2015
1.7.
2015
1.8.
2015
€/M
Wh
Nordpool system price 1/14 - 8/15
0
10
20
30
40
50
60
70
80
€/M
Wh
DS Futures
What is feasible market design, if the price of electricity is 0 €/MWh?
Thank you!
Lappeenranta University of Technology (LUT)
D.Sc. Samuli HonkapuroLUT Energy
Lappeenranta University of TechnologyLappeenranta, [email protected]