The Future of Electricity: A Market with Costs of Zero? Marginal

Transcription

1 The Future of Electricity: A Market with Costs of Zero? Marginal Richard Green, IAEE European Conference, 217 1

2 Supply /MWh Marginal Cost Nuclear CCGT OCGT GW 2

3 Demand and Supply Prices reflect Marginal Costs /MWh Marginal Cost Nuclear CCGT OCGT GW 3

4 Annual Generation Costs /kw-year Open Cycle Gas Turbine Combined Cycle Gas Turbine Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 4

5 Load-duration and Capacity GW OCGT CCGT Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 5

6 Generator Costs & Revenues /kw-year Open Cycle Gas Turbine Combined Cycle Gas Turbine Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 6

7 British Energy Prices per MWh of electricity /MWh Electricity Gas Coal Source: ElectricInsights.co.uk 7

8 British Energy Prices per MWh of electricity /MWh Electricity Gas Coal Source: ElectricInsights.co.uk 8

9 Austrian German Energy Prices: a market working well? Prices ( /MWh) Gas price / 45% Electricity price Installed capacity (relative to peak load) 14% 12% 1% 8% 6% 4% 2% % Source: Green and Staffell, Oxrep, 216 9

10 Austrian German Energy Prices: The Merit Order Effect Prices ( /MWh) Gas price / 45% Electricity price Installed capacity (relative to peak load) 14% 12% 1% 8% 6% 4% 2% % Source: Green and Staffell, Oxrep, 216 1

11 Renewables in a Power Market 11

12 Demand and Supply The The long-run merit order adjustment effect /MWh Marginal Cost Nuclear CCGT OCGT GW 13

13 Capacity and Load GW OCGT CCGT Nuclear After renewables OCGT CCGT Nuclear Hours per year 14

14 Generating Capacity Great Britain GW Solar Wind Conventional Peak Demand Source: Digest of UK Energy Statistics 15

15 Generators Load Factors UK-wide, including Northern Ireland 8% 7% 6% 5% 4% 3% 2% 1% CCGT Coal % Source: Digest of UK Energy Statistics 16

16 Capacity and Peak Demand Great Britain GW Solar Wind Conventional Peak Demand Source: Digest of UK Energy Statistics 17

17 A Low-Carbon Christmas GW Day-ahead Price /MWh December December December 216 Nuclear Biomass Gas Coal Hydro Peaking Imports Wind Solar D P R Source: ElectricInsights.co.uk

18 A Low-Carbon Christmas GW Day-ahead Price Real-time Price /MWh December December December 216 Nuclear Biomass Gas Coal Hydro Peaking Imports Wind Solar D P R Source: ElectricInsights.co.uk

19 Supply and Demand /MWh Demand Marginal Cost Price GW

20 A volatile market /MWh 8 Day-ahead Electricity Price (half-hourly) Great Britain, April 216-March April May June July Aug Sept Oct Nov Dec Jan Feb Mar Source: ElectricInsights.co.uk

21 Day-ahead Prices in 216 /MWh Source: ElectricInsights.co.uk hours 22

22 Day-ahead Prices in 216 Surplus over annual average fuel cost /MWh 8 7 Black bars are for coal-fired plant, blue for gas Source: ElectricInsights.co.uk hours 23

23 Day-ahead Prices in 216 Surplus over annual average fuel cost /MWh 15 Black bars are for coal-fired plant, blue for gas Source: ElectricInsights.co.uk hours 24

24 Day-ahead Prices in 216 Surplus over annual average fuel cost 15 /MWh Black bars are for coal-fired plant, blue for gas % 5% Coal Gas Cumulative surplus % Source: ElectricInsights.co.uk hours 25

25 More need for peaking plant? 216 Load-duration curves GW 216 Demands (Detail) Gross Gross Hours/year 42 4 Net Source: ElectricInsights.co.uk 26

26 More need for peaking plant? 216 Load-duration curves GW 216 Demands GW (Detail) Gross 46 2 Net 44 Gross Hours/year 42 4 Net Source: ElectricInsights.co.uk Hours/year 27

27 More risk for peaking plants? Usage over 17 years of demand and weather data Hours/year No Renewables Current Renewables (15 GW Wind, 12 GW PV) Double Renewables (3 GW Wind, 24 GW PV) No Renewables Current Renewables Double Renewables hour mean annual running time 2-hour mean GW 28

28 Scheduling model with start costs and no-load costs Capacity assumed infinitely divisible Reserve requirement of 3GW in all periods Demands from GB load profiles, scaled to common base Demand reduction linear in price above 4/MWh Renewable profiles for wind and PV from Iain Staffell and Stefan Pfenninger: renewables.ninja Assume 15 GW onshore wind Assume 5 GW offshore wind Assume 15 GW Solar PV A market of the future The Model With No Name 29

29 A simulated future Week 7 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 3

30 A simulated future Week 7 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 31

31 A simulated future Week 44 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 32

32 A simulated future Week 44 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 33

33 A simulated future Week 44 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 34

34 A barrier to renewables? Relative revenues by type of plant overall Gas OCGT Solar Wind 35

35 A volatile market /MWh 8 Day-ahead Electricity Price (half-hourly) Great Britain, April 216-March April May June July Aug Sept Oct Nov Dec Jan Feb Mar Source: ElectricInsights.co.uk

36 A less volatile market /MWh 8 Day-ahead Electricity Price (half-hourly) Norway, April 216-March April May June July Aug Sept Oct Nov Dec Jan Feb Mar Source: ElectricInsights.co.uk

37 Renewables in an Energy Market 38

38 Supply and Demand /MWh Demand Marginal Cost Price GW 39

39 Supply and Demand /MWh Demand Opportunity Cost ( Future Demand) Available Resource Price Remaining Resource Marginal Cost GW Finn s bathtub, from Forsund (27) Hydropower Economics 4

40 Reservoir Levels GWh Low price minimises the risk of throwing away energy Energy Capacity Low price again High price minimises the risk of running out of energy Time 41

41 A simulated future Week 7 of 21 GW 7 /MWh Nuclear Wind Solar Storage Demand Price (RHS) -1 42

42 A simulated future Week 7 of 21 GW 7 /MWh Wind Solar Gas OCGT Spilled Demand Price (RHS) -1 43

43 A simulated future Week 44 of 21 GW 7 /MWh Nuclear Wind Solar Storage Demand Price (RHS) -1 44

44 A simulated future Week 44 of 21 GW 7 /MWh Wind Solar Gas OCGT Spilled Demand Price (RHS) -1 45

45 A more level playing field? Revenues by type of plant Thermal Market Storage Market Average Gas Peaking/ Solar Wind Storage 46

46 Stored Energy Levels 876 hours of 21 TWh Seasonal Storage (LHS) Peaking Storage (RHS) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec GWh

47 Stored Energy Levels 876 hours of 21 TWh Seasonal Storage (LHS) Peaking Storage (RHS) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec GWh

48 Storage flows and prices Week 47 of 21 GW 25 /MWh Peaking Seasonal Price (RHS) -5-75

49 A storage-renewable market 876 hours in 21 GWh Seasonal Storage Price /MWh Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5

50 What have I left out? Balancing Uncertainty Transmission Distribution Inertia What happens with intermediate amounts of storage 51

51 Conclusions Markets based on power will have volatile prices in a high-renewable world Storage can smooth these prices, creating markets based on energy Prices would be set to meet the energy constraint over long periods of time Would we value generators on their expected energy output? 52

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