The impact of photovoltaic on power market in Italy

Rome, 27 April 2017

Ing. Dario Migali, Ing. Valerio Covicchio

Forecasting and optimisation unit

Content

1. PV systems overview

1. GSE’s energy sold and relevance in PV market

2. Installed capacity of PV systems

3. Geographical Distribution of GSE’s PV capacity

2. Impact of PV systems on Day-Ahead Market

1. System Marginal Price

2. Demand

3. Constraints

4. Wholesale energy price (PUN)

5. Zero prices

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PV systems overview Gse’s energy sold and relevance in PV market

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During 2016 GSE has sold in the Italian electricity market*, commonly called Italian Power Exchange (IPEX), around 27 TWh of electricity produced by RES power plants.

The share of solar energy is 49% (13,4 TWh) of total renewable energy sources sold on the market.

(*) Data are reffered to Day Ahead Market’s sales

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Others

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%Share of RES 2016

PV Wind Hydro Biogas Others

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PV systems overview Installed capacity ,production

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Photovoltaic systems had a quick development during the last decade in Italy (mainly in 2011) due to support scheme for RES generation.

7 87 432

1.142

3.470

12.773

16.420

18.420 18.609 18.892

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PV italian capacity

During 2015 GSE managed in 2015 79% of total capacity installed in Italy . GSE is in charge to support the italian trasmission operator forecasting the total production of italian PV systems .

Source:Terna

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PV systems overview Geographical Distribution of PV power

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The italian market is splitted in 6 market zones (NORD , CNORD, CSUD, SUD, SICI, SARD), each of these zones is considered by TSO as a delivery point of elecrtical energy. The figure represents the GSE capacity of PV systems installed* for each zone.

NORD; 7143

CNORD; 1830

CSUD; 2058

SUD; 2419

SICI; 981

SARD; 499

(*) Year 2015

Zonal Capacity in MW

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Impact of PV systems on Day-Ahead Market Marginal price system and main actors

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The Day-Ahead market is based on marginal price system. In this kind of system offers and bids are collected and ordered by price. The clearing price (marginal price) is the highest price offered and accepted in the market session. Each power plant that offered a lower price is paid at the same price (marginal price). Accordingly the intoduction of PV systems (with almost zero variable costs) affects the accepted offer, lowering the clearing price.

RES

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Impact of PV systems on Day-Ahead Market Demand

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The economic impact of PV production on italian energy market is strictly linked to demand. In order to have a better understanding of price’s development it is necessary to analyze evolution of energy demand in time and geographical distribution of local requirement of energy.

317.533 318.953 319.037

299.915

309.885

313.792

307.220

297.288

291.084

297.180

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Consumption

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Impact of PV systems on Day-Ahead Market Demand

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The consumption of electrical energy is not homogeneously distributed over the grid. The NORD market zone consumption is 57% of the national consumption*.

(*) Year 2015, SourceTerna

Zonal Consumption in GWh

NORD; 169241,3

CNORD; 31344,4

CSUD; 45030

SUD; 25804,6

SICI; 17355,9

SARD; 8403,5

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Impact of PV systems on Day-Ahead Market Constraints

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Terna (TSO) evaluates power flows limitations on the grid and provide this information before Day-Ahead market opening. The market’s algorithm collects all natiolan supply offers and demand bids (described in terms of quantity and price) and calculates the marginal price of accepted quantities. If equilibrium between supply and demand does not satisfy these constraints the market algorithm runs again splitting one or more market zones.

Example of market split (14/04/2017)

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NORD CNOR CSUD SUD SARD SICI

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Impact of PV systems on Day-Ahead Market Wholesale energy price (PUN)

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The single national price (PUN) is the wholesale price of weighted average of zonal prices formed in each market zone. Contraction of demand, development of fuel’s cost, increase of PV installations and evolution of imports are the main factors that affect PUN’s evolution in time.

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Impact of PV systems on Day-Ahead Market Wholesale energy price (PUN)

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PV production has a direct impact on hourly national price evolution over a day. This penomenon is not evident in annual average PUN’s trend. The figure below shows the average value of hourly price.

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Impact of PV systems on Day-Ahead Market Wholesale energy price (PUN)

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PUN’s daily profile has been shaped by PV production during daylight hours. The absolute value is mostly affected by fuel’s cost because the clearing price of the market is fixed by marginal power plants.

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Impact of PV systems on Day-Ahead Market Wholesale energy price (PUN)

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Peak price hours shift and increased stability of mean hourly price over the day

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Impact of PV systems on Day-Ahead Market Zero Prices

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PUN is an averaged macro parameter which is not suitable to describe sporadic events that are nevertheless emblematic for the market. Italian market doesn’t allow dispatching users to offer negative prices. The floor is equal to zero. In the figure is shown the number of hours in which the marginal price of the power market have been equal to zero.

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Hours with zero zonal prices

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Impact of PV systems on Day-Ahead Market Zero Prices

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PUN is an averaged macro parameter which is not suitable to describe sporadic events that are nevertheless emblematic for the market. Italian market doesn’t allow dispatching users to offer negative prices. The floor is equal to zero. In the figure is shown the number of hours in which the marginal price of the power market have been equal to zero.

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Next steps

3

The anomalies underlined require investments in grid development and

improvement of market rules and structure The main issues authorities and stakeholders are working on are: • Capacity Market

• Dispacthing services in MT/BT (DSO)

• Ancillary services provided by FER

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Thanks for your attention