strategies of reliable transmission of energy in a competitive market
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Strategies of Reliable Transmission of Energy In A Competitive Market. Kerry Ray Shuang (Joyce) Zhao March 31, 2008. Agenda. Introduction Deregulation market Brief overview of regulations Issues Recommendations. The Natural Monopoly. Little competition among transmission providers - PowerPoint PPT PresentationTRANSCRIPT
Strategies of Reliable Transmissionof Energy In A Competitive Market
Kerry Ray
Shuang (Joyce) Zhao
March 31, 2008
AgendaAgenda
Introduction- Deregulation market- Brief overview of regulationsIssuesRecommendations
The Natural MonopolyThe Natural Monopoly
Little competition among transmission providers
Still a vertically integrated system
InvestmentInvestment
6% transmission versus 20% generation
Timeline of regulationsTimeline of regulations
1978 , Congress passed the Public Utility Regulatory policies Act .
Policy Act of 1992 1996, Order 888 and Order 889Order 2000
What happened to What happened to Deregulation?Deregulation?
What happened to What happened to Deregulation?Deregulation?
Deregulation encouraged wholesale trading– Caused more stress on transmission network
More plant generation into congested network
Reaching CapacityReaching Capacity
TLRs up drasticallySystem denies
transactions that would overload system
Merchant TransmissionMerchant Transmission
Divestiture of transmission and generation functions
Make rates profitable and attractive to private investors
Help eliminate loop flowRate freeze
Performance-Based Performance-Based RegulationRegulation
Compensation based on accomplishing a certain objective rather than the current cost based system
Decreased congestion and costs in the UK network
RecommendationsThe guidelines of market design
“Market mechanisms should be used where possible, but in circumstances where
conflicts between reliability and commercial objectives can not be
reconciled, they must be resolved in favor of high reliability”
Blackout Task Force Report, April 2004, p 139
RecommendationsThe guidelines of market design
- Successfully identify market failures and play the role where the market fails.
• Distinguish the “good high price” from “ bad high price”.
• Operation reserves, exercising market power.• Regulatory body should not over act in facilitating
market, which can lead to market intervention.
RecommendationsThe guidelines of market design - Consistent pricing mechanism.• Consistent between wholesale market and retail market.
• The consistency between areas pricing mechanism
- Seek workable market design in stead of perfect market design
Recommendations Network Pricing- Nodal Pricing
- Nodal Pricing is a method of determining prices in which market clearing prices are calculated for a number of locations on the transmission grid called nodes”. It is also called locational marginal Pricing (LMP) or Locational Based Marginal Pricing ( LBMP) . “Price at each node represents the locational value of energy, which includes the cost of the energy and the cost of delivering it”.
Network Pricing
Retail Market Pricing
Nodal Pricing and MW-mile Methods for Distribution: Have We Uncovered Mission Markets or Elements for Wholesale Power Markets or Elements for Wholesale Power
Markets? Presented at the Harvard Electricity Policy Group ,
Paul Sotkiewicz, Director Energy Studies , Public Utility Research Center, University of Florida.
Recommendations Benefit of Nodal Pricing- Reduce uncertainty and inefficiency from wholesale
market by appropriately aligning the transmission cost with generation cost.
- Nodal pricing integrates the high-voltage lines and low-voltage lines, thus encourages the investment on building network and encourage the new entrants to come into the market.
Recommendations Benefit of Nodal Pricing- The more efficient dispatch promoted by nodal pricing can
lead to overall lower energy price to consumers.• Reward the resources that reduce line losses and line
utilization.• Penalize the resources that increase line losses and
utilization - Both demand side and supply side get the same price
signal, thus it brings demand back to the equation of wholesale market.
Recommendations Cons• - “ Seams” problems might happen given the
transmissions and distributions sometimes happen across different states. It might also bring about more jurisdictional fights between FERC and states.
• - Since nodal price does not cover the fix cost, it might not provide long-term signal.
Recommendations Build up linkage between wholesale market
and retail market• Take off the cap on retail market gradually coupled with
energy subsidies to low-income families. • Free demand side facilitated by providing enough
information of wholesale market and transmission status to consumers.
• Put consumers back to fluctuate market by implementing nodal pricing mechanism, which can help make the information of price more transparent to consumers.
Questions&Comments?