merit order effect of wind power – impact on eu 2020 ... · results: merit order and volume merit...
TRANSCRIPT
Merit Order Effect of Wind Power –Impact on EU 2020 Electricity Prices
15 June 2010AEE Madrid 20102
AEE Wind Energy Convention, Madrid June 15-16
Jesper MunksgaardPh.D., Senior Consultant
Agenda
• Background
• Literature review
15 June 2010AEE Madrid 20103
• Modeling analysis
• Conclusions
Background
• By 2020 wind power will increase significantly
• Wind power will reduce average wholesale power price levels
• For EWEA we have analyzed the price impact when wind power replaces high cost thermal power plants in the “merit order curve”
15 June 2010AEE Madrid 20104
replaces high cost thermal power plants in the “merit order curve”
• Study carried out in two phases:I. Review of previous studiesII. Analyses made by Pöyry power market model
What is Merit Order Effect ?
Coal
Gas
Marginal costs Demand
Merit ordereffect
Coal
Gas
Marginal costs Demand
Merit ordereffect
15 June 2010AEE Madrid 20105
Coal
Generation volume
Renewables
Wind
Original merit order curve New merit order curve with additional wind generation
Nuclear
Coal
Generation volume
Renewables
Wind
Original merit order curve New merit order curve with additional wind generation
Nuclear
A1
Diapositiva 5
A1 I exchanged the picture with the latest one form the report where nuclear is inlcuded!Administrator; 10/06/2010
Phase I: Literature Review
• 14 studies within three categories:
a) Impact of wind power on spot market prices in a single country
b) Costs and benefits of renewable energy support schemes
15 June 2010AEE Madrid 20106
b) Costs and benefits of renewable energy support schemes� analyze costs and benefits of support schemes from an end-user point of
view
c) Wind power and the power grid infrastructure � i.e. transmission capacities and dispatch mechanisms
MOE Price and Volume Effect in 2009 Prices
23
15
20
25P
rice
effe
ct in
Eur
o/M
Wh
3
4
5
6 Volum
e effect in billion Euro/year
MOE Price effect
MOE Volume effect
Merit Order Effect in € per MWh and billion € per year
15 June 2010AEE Madrid 20107
8
17
4
23
11
3
5
0.1 1.3
0
5
10
Sensfu
ss e
t al.,
DEJo
nsso
n et
al.,
DK
Mun
ksga
ard
et a
l., DK
Delaru
e et
al.,
BE
Weig
t, D
ENeu
barth
, DE
Pric
e ef
fect
in E
uro/
MW
h
0
1
2
3
Volum
e effect in billion Euro/year
Phase Il: Pöyry‘s Modeling Analysis
• Aim: – To quantify merit order effect from wind power in Europe in 2020
• Methodology: – Scenario analysis: Compare a Reference to a Wind scenario– Marginal cost curves (short term) assuming a long term market
equilibrium– Grid investments are not considered
15 June 2010AEE Madrid 20108
– Grid investments are not considered
• Pöyry applied The Classic Carbon Model – A power and carbon market model for the European power market– Conventional investments are determined by the model– Model results include wholesale and end-user prices for each market
area, trade flows, generation, demand, fuel use, CO2 emissions and the carbon (EUA) price
Coverage of the analysis
• EU 27 plus Norway and Switzerland
3000 (143)
11000 (1021)
2350 (430)
6500 (3180)
7000(102)
600(78)
300(27)
1100
MW installed in 2020
(MW installed in 2008)
Legend:
Total EU265 GW(65 GW)
3000 (143)
11000 (1021)
2350 (430)
6500 (3180)
7000(102)
600(78)
300(27)
1100
MW installed in 2020
(MW installed in 2008)
Legend:
MW installed in 2020
(MW installed in 2008)
Legend:
Total EU265 GW(65 GW)
15 June 2010AEE Madrid 20109
4000 (995)
52000 (23903)
12500 (472)
(3180)34000(3241)
26000(3404)
42500(16740) 18000
(3736)
9000(2862)
1800(150)
1200(127)
1000(3)
3500(10)
3500(158)
8500(985)
700(0)
11400(2225)
4500(384)
(102)1100(54)
500(0)
700(35)
160(20)
4000 (995)
52000 (23903)
12500 (472)
(3180)34000(3241)
26000(3404)
42500(16740) 18000
(3736)
9000(2862)
1800(150)
1200(127)
1000(3)
3500(10)
3500(158)
8500(985)
700(0)
11400(2225)
4500(384)
(102)1100(54)
500(0)
700(35)
160(20)
The figure indicate assumed installed wind capacities in accordance to EWEAs Pure Power Scenario!
Modeling Analyses for 2020
• Two scenarios defined by EWEA:
– Reference Scenario: Renewable power generation mix in 2020 equals in shares the actual mix of 2008. No further wind and other RES investments are assumed
Wind Scenario: Wind power
Input ParameterReferenceScenario
Wind Scenario
Fuel prices
Forecast from IEA
Coal: 10.5 €/MWh, Gas: 28 €/MWh, Oil: 110 $/boe
Wind capacities As 2008High growth compared to
2008
EU target: -20% EU target: -20%
15 June 2010AEE Madrid 201010
– Wind Scenario: Wind power capacities increased by 300% from 2008 until 2020 (~200 GW)
• The merit order effect is estimated as difference in market prices between the two scenarios
Carbonpolicies/targets
EU target: -20% to 1990
CO2 price: 48 €/ton
EU target: -20% to 1990
CO2 price: 30 €/ton
Conventionalinvestments
According tolong run
marginal costs
According to long run
marginal costs
Capacities of RESother than wind
As base year 2008
Share as base year 2008
For the same “Input Parameter”, blue marked cells represent the same value. Red marked cells are representing a different input value compared to the other scenario.
Results: Merit Order and Volume Merit Order Effect
• Wind generation displaces conventional gas and coal generation
• Average power market price in Europe is thereby reduced in
Wind generation
volume
Merit ordereffect
Volume order effect
Merit order effect per wind MWh
Year TWh/a €/MWh bio €/a €/MWh
2020 648 10.8 41.7 64.4
MOE has been estimated at
15 June 2010AEE Madrid 201011
Europe is thereby reduced in Europe
• The Wind Scenario reduce wholesale market revenue by nearly 42 billion € per annum
MOE has been estimated at 10.8 €/MWh
Wholesale Prices in Europe in 2020
• Reference ScenarioIn Czech, Poland, Hungary and Slovakia average prices are about 50% higher than EU average
20
30
40
50
60
70
80
90
100
4
6
8
10
12
14
16
18
20
Price
diffe
ren
ce in
%
Wh
ole
sale
pri
ce in
€ce
nts
pe
r k
Wh
Average wholesale prices in 2020
Reference 2020
WIND 2020
Price difference
15 June 2010AEE Madrid 201012
• Wind ScenarioIn Czech, Poland, Hungary and Slovakia the price level is about 15% higher than the EU average
0
10
20
0
2
4
Au
str
ia
Be
lgiu
m
Cze
ch
De
nm
ark
Fin
lan
d
Fra
nce
Ge
rma
ny
Hu
ng
ary
Ita
ly
Ne
the
rla
nd
s
No
rwa
y
Po
lan
d
Po
rtu
ga
l
Slo
va
kia
Slo
ve
nia
Sp
ain
Sw
ed
en
Sw
itze
rla
nd
Esto
nia
La
tvia
Lit
hu
an
ia UK
Wh
ole
sale
pri
ce in
4
6
8
10
12
14
16
18
20
Mar
gina
l Cos
ts in
€ c
ent/k
Wh
Demand
Equilibrium price
8.58 €c/kWh
Reference Scenario 2020 – Merit Order Curve
• European power demand is first served by waste, hydro and wind technologies with low short term marginal costs
• Nuclear provide 780 TWh at marginal costs of on average 1.5 €cent/kWh
15 June 2010AEE Madrid 201013
Fuel Wind Hydro Nuclear Lignite Coal Peat Biomass HFO Oil Gas Waste
Colour
0
2
4
0 500 1000 1500 2000 2500 3000 3500 4000 4500
Cumulative generation in TWh
Mar
gina
l Cos
ts in
€ c
ent/k
Wh
1.5 €cent/kWh
• Major share of Europe’s demand is supplied at cost levels between 5 and 7 €cent/kWh, mainly by hard coal technologies
• At higher cost levels, gas technologies are dominating
4
6
8
10
12
14
16
18
Mar
gina
l Cos
ts in
€ c
ent/k
Wh
Demand
Equilibrium price
7.5 €c/kWh
Wind Scenario 2020 – Merit Order Curve
• Merit order curve and its technology mix and sequence very much resembles the Reference Scenario
• Wind power mainly replaces coal and gas
15 June 2010AEE Madrid 201014
Fuel Wind Hydro Nuclear Lignite Coal Peat Biomass HFO Oil Gas Waste
Colour
0
2
4
0 500 1000 1500 2000 2500 3000 3500 4000 4500Cumulative generation in TWh
Mar
gina
l Cos
ts in
€ c
ent/k
Wh
replaces coal and gas power as compared with the Reference Scenario
• Marginal cost levels for the conventional technologies vary in the two scenarios mainly due to the resulting difference in the CO2 price
Comparison of the two scenarios’ merit order curve
10
12
14
16
18S
hort
term
mar
gina
l Cos
ts in
€
cent
/kW
h
Fuel price sensitivity in Reference Scenario
Reference Scenario 2020 Wind Scenario 2020
Merit order effect:
1.08 €c/kWh
Merit order effect
15 June 2010AEE Madrid 201015
0
2
4
6
8
0 500 1000 1500 2000 2500 3000 3500 4000 4500
Sho
rt te
rm m
argi
nal C
osts
in
Cumulative generation in TWh
Merit order effect of different sensitivity cases
The sensitivity analysis included the increase of the EU GHG reduction targetfrom -20% to -30% and -40% as well as the increase of fuel prices by 25%.
15 June 2010AEE Madrid 201016
Conclusions
• Wind power will have a strong impact on future spot market prices in European power market
• Previous studies find merit order effects in range 3-23 € per MWh
15 June 2010AEE Madrid 201017
• Pöyry’s analyses find merit order effect of nearly 42 billion € per year on European level
• Wind power reduces EU carbon price level by one third in 2020
15 June 2010AEE Madrid 201018