RES Revolution! How the Sun and the Wind changed the Italian Electricity Market

Transcription

1 RES Revolution! How the Sun and the Wind changed the Italian Electricity Market MEDREG 3 Capacity Building Seminar Nicolò Di Gaetano, Ph.D Senior Board Advisor 25/06/2014 1

2 Generation Mix ( ) 100% 90% 80% 32% 0% 4% 0% 16% 27% 70% 60% 50% 40% 30% 20% 10% 10% 19% 38% 27% 51% 3% 25% 21% 24% Other Nuclear Oil Coal RES Gas 0% Italy 2000 Italy 2012 EU Source: Italian Energy Strategy, March di 23

3 Who drives RES development? European Union Central Gov. Independent energy Regulator Directives to mitigate climate change and market liberalization Target National Energy Strategy & Policy Incentivation Regimes Market & System Regulation Cost Recovery Local Gov. Permitting and licensing 25/06/2014 3

4 Net Electricity Generation (2013) Gross Efficient Capacity(2013) Hydro, 19,39% PV, 7,61% Thermal, 61,00% Coal, 14,64% Wind, 5,31% Geothermal, 1,91% BioMass\Waste, 7,47% Geothermal, 0,60% Other fuels, 3,89% Oil, 1,76% Wind, 6,70% Natural Gas, 38,02% PV, 14,30% Hydro, 17,40% Total Demand = 318,5 TWh Peff = MW Peak Load = MW 4 di 23

5 Role of Renewable Energy Sources In 2012 electricity generated from RES has met nearly 27% of internal gross demand (342.4 TWh) and 31% of the total gross production (299.3 TWh). In % of electricity from RES, corresponding to over 32 TWh, was generated by wind and PV. Compared to the national gross production of electricity, wind and PV account for 10.8% 13,5% 6,1% 20,5% 14,5% 45,4% 5 di 23

6 Gross Power from RES (MW) Biomass PV Wind Geothermal Hydro di 23

7 Gross production from RES (GWh) Biomass and waste Photovoltaics Wind Geotermal Hydro di 23

8 Main issued raised Transmission and Distribution Networks management A different approach in dispatching Changing prices (wholesale & retail) 25/06/2014 8

9 Change in Power Flows (GWh) Main Power Flows from North (import from Europe and many efficient power plants) to South Siciliy and Sardinia exporting due to security issues Main Power Flows from South (CCGT and RES, Lower Demand) to North Congestion issues Decrease in Import due to similar prices at RES max offer) 9 di 23

10 Development of network infrastructures Transition from a service essentially passive (final consumers) to an active (production and management of loads). Congestion management (in particular in the South with high potential generation (PW and Wind) and low consumption. Promoting networks or network elements in most critical areas Promoting development and implementation of smart system. Storage systems: promotion of pilot projects (pilot projects for a total of 35 MW) 10 di 23

11 The influence on the supply of resources on MSD Modification of the residual load profile for hourly zonal loads Aleatory and partial invisibility of wind and PV power plants Higher ramps during the day Necessary rapid balancing action realized by programmable systems with high modulation capabilities, rapid response times and negligible constraints if remaining in service It s not possible to predict adequately the output of these plants to offer in MGP nor predict adequately the hourly residual load. Increasing in the need for reserve margins and in costs of MGP and MSD, as well as their variability. 11 di 23

12 Coverage of the load Ø In order to pursue the ramps (morning and evening), rapid balancing actions (between demand and supply of electricity) are necessary. They must be carried out by programmable systems with high modulation capabilities, rapid response times and negligible constraints if remaining in service. Ø The best resources for this service are the hydroelectric and pumping production units, because they can be put into service and vary the production very quickly. Ø Also thermoelectric plants can be used, but they must be kept to a minimum load even when their production is not needed (in fact they have very long ignition timing). 12 di 23

13 If we continue as in the past... Ø There should be an increasing in supplies of spare capacity (which can be ensured by thermal and big hydroelectric power plants) to cover the steep ramps accentuated by the absence of photovoltaics in the evening hours and, in some areas, by the absence of wind in the morning hours as well as to compensate the lack of random sources; this would lead to a continuous increase in the cost of dispatching. Ø In addition, if the electricity produced from non-programmable renewable power plants were not offered in the market energy, it wouldn t be possible to have benefit deriving from the lower variable costs characterizing wind and photovoltaic plants. 13 di 23

14 It s therefore necessary Ø Involve renewable non-programmable plants in the operation of the electricity system, both from ü the technical point of view (giving services such as frequency and power regulation, both increasing and decreasing, improving the correct forecast of the electricity injected into the grid); ü from the economical point of view (sharing with the final consumers costs that arise from non-programmable source). Ø Make sure that the markets and the regulation of the dispatching service can use the potential and characteristics of such systems and also that DSO/TSO can make use of these facilities for the management of electricity networks. This would allow the integration and the further spread of non-programmable renewable and distributed generation, ensuring the safety of the electrical system. Possible reduction or lesser increase in the cost of dispatching determined by the presence of RES 14 di 23

15 What has been already done Ø Definition of the transitional provisions for the application of imbalance payments to non-programmable renewables power plants. Ø Up to 2012 imbalances were not charged to non-programmable renewables but only to final consumers. Ø The aim is to promote better forecasting of electricity fed into the grid from renewable sources and avoid that costs due to poor predictability of these systems continue to affect only the generality of consumers. New regulation will be cost reflective. Ø The value of imbalances doesn t depend on the source or the technology. It should reflect the real value of electricity produced in real time (without forecasting). This value may be upper or lower than the hourly zonal market price. Ø However, during an initial period, a threshold (20%) is applied within which imbalances continue to be valued at the zonal hourly price (allocating therefore the related costs to the community), in order to ensure the required gradualness in the management of production facilities. 15 di 23

16 What to do Ø General revision of dispatching rules taking into account the new context and the consequent need for more flexibility in the system. Ø Ensure that the market and the TSO can exploit the potential of unpredictable renewable power plants and of distributed generation (for example enabling them to join the market for ancillary services, above all for the reduction of load). In this regard, it is also necessary to distinguish between global network services (necessary for the safe operation of the electrical system as a whole) and local network services (necessary for the safe operation of the distribution network) for which the distributed generation could have a significant role. Ø Evaluate the best solution regarding the evolution of the distribution network, for which the dispatching service should still be defined. Nowadays three different models of dispatching have been recently presented. 16 di 23

17 Wholesale Market Prices Changes 17 di 23

18 Past higher prices in peak hours with high demand (11-13) Now higher prices around 17-21, when PV generation decreases 1,5 1,4 1,3 1,2 1,1 1,0 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 Ratio between Rapporto Medium tra il Hourly PUN medio National orario Price e il PUN / Medium medio complessivo National Price Anno 2010 Anno 2011 Anno 2012 Anno di 23

19 What Happens? In the Daily Hours, large quantity of electricity is offered by NON-Programmable RES with (almost) zero variable costs and incentivation; The large number of PV plants (ca ) concentrates production in daily peak hours Thermal power plants experience a reduction of hours, when they may recover Capex and Opex lost due to their technical constraints Thermal plants are requested a great flexibility, with a severe decrease in their efficiency A decreasing demand, mainly due to the economic crisis (2014vs2010 = - XX %) jointly with the growth of RES production, reduces the quantity of energy that is negotiable in the wholesale market. Thermal power plants needs to recover their costs in less hours, tipically when sun goes down.. contributing to prices increase.. 19 di 23

20 What else? Until electricity is almost 50% generated from natural gas, wholesale market will be affected by its price. A large amount of RES zero-bid energy have affected the decrease of PUN, jointly with low demand. Contestable energy on IPEX is decreasing Further increase in PV plants affects less and less sunny hours prices until, in Day Ahead Market, system marginal cost will be mainly set by most efficient gas power plant Opex. It s necessary to include Non Programmable RES and DG to the energy market, in order to consider them in price setting. 20 di 23

21 Effects on Retail Market Prices 21 di 23

22 Incentivated Energy (TWh) New incentivation to EES PV incentivation Feed in tariff Green Certificates Other (Cip 6 only RES) di 23

23 Incentivated Energy (TWh) Biomass Wind Hydro PV Geothermal di 23

24 Incentivation Costs (mln euro) New incentivation regimes to EES PV Incentivation Feed in Tariff Green Certificates Other (Cip 6, only RES) di 23

25 Retail Reference Price* Network Costs 18% Taxes and VAT 13% Annual Electricity Bill* Euro/y Energy 231,39 NetworkCosts (t&d&m) 88,83 Energy 46% System Costs 23% System Costs (share of res) 117,45 (97,5) Tax 67,77 Total 505,44 RES Incentivation 83 % *from 1 Jan 2015, Protected Market, Domestic household, kwh/y 11/02/15 25 di 2523

26 Some conclusions 11/02/15 26 di 2623

27 Warnings Gradual approach with continuous monitoring Regulation quick tuning Policy & Regulation alignment Central & Local Governance coordination Clear and stable rules Benefits Reduction of fossil fuels import Decrease of O2 emissions Energy prices decrease Job creations 25/06/

28 Thank you!! Nicolò Di Gaetano /06/