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

Transcription

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

2 Running your mouse over the bubble in the top left corner should reveal my comments Demand and Supply Prices reflect Marginal Costs /MWh Marginal Cost Nuclear CCGT OCGT GW 2

3 Annual Generation Costs /kw-year Open Cycle Gas Turbine Combined Cycle Gas Turbine Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 3

4 Load-duration and Capacity GW OCGT CCGT Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 4

5 Generator Costs & Revenues /kw-year Open Cycle Gas Turbine Combined Cycle Gas Turbine Nuclear OCGT cheapest CCGT cheapest Nuclear cheapest Hours per year 5

6 British Energy Prices per MWh of electricity /MWh Electricity Gas Coal Imperial College Business School Source: ElectricInsights.co.uk 6

7 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 Imperial College Business School 7

8 Renewables in a Power Market Imperial College Business School 8

9 Demand and Supply The The long-run merit order adjustment effect /MWh Marginal Cost Nuclear CCGT OCGT GW 9

10 Capacity and Load GW OCGT CCGT Nuclear After renewables OCGT CCGT Nuclear Hours per year 1

11 Capacity and Peak Demand Great Britain GW Solar Wind Conventional Peak Demand Source: Digest of UK Energy Statistics Imperial College Business School 11

12 Generators Load Factors UK-wide, including Northern Ireland 8% 7% 6% 5% 4% 3% 2% 1% CCGT Coal % Imperial College Business School Source: Digest of UK Energy Statistics 12

13 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

14 Supply and Demand /MWh Demand Marginal Cost Price GW

15 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

16 Day-ahead Prices in 216 Surplus over annual average fuel cost /MWh 8 7 Black bars are for coal-fired plant, blue for gas Imperial College Business School Source: ElectricInsights.co.uk hours 16

17 Day-ahead Prices in 216 Surplus over annual average fuel cost /MWh 15 Black bars are for coal-fired plant, blue for gas % 5% Coal Gas Cumulative surplus % Imperial College Business School Source: ElectricInsights.co.uk hours 17

18 More need for peaking plant? 216 Load-duration curves GW 216 Demands GW (Detail) Gross 46 2 Net 44 Gross Imperial College Business School Hours/year 42 4 Net Source: ElectricInsights.co.uk Hours/year 18

19 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 19

20 Scheduling model with start costs and no-load costs Capacity assumed infinitely divisible A market of the future The Model With No Name 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 Imperial College Business School 2

21 A simulated future Week 7 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 Imperial College Business School 21

22 A simulated future Week 44 of 21 GW 5 /MWh Gas OCGT Wind Solar Spilled Demand Price (RHS) -1 Imperial College Business School 22

23 A barrier to renewables? Relative revenues by type of plant overall Gas OCGT Solar Wind Imperial College Business School 23

24 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

25 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

26 Renewables in an Energy Market Imperial College Business School 26

27 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 Imperial College Business School 27

28 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 Imperial College Business School 28

29 A simulated future Week 7 of 21 GW 7 /MWh Nuclear Wind Solar Storage Demand Price (RHS) -1 Imperial College Business School 29

30 A simulated future Week 7 of 21 GW 7 /MWh Wind Solar Gas OCGT Spilled Demand Price (RHS) -1 Imperial College Business School 3

31 A simulated future Week 44 of 21 GW 7 /MWh Nuclear Wind Solar Storage Demand Price (RHS) -1 Imperial College Business School 31

32 A simulated future Week 44 of 21 GW 7 /MWh Wind Solar Gas OCGT Spilled Demand Price (RHS) -1 Imperial College Business School 32

33 A more level playing field? Revenues by type of plant Imperial College Business School Thermal Market Storage Market Average Gas Peaking/ Solar Wind Storage 33

34 TWh Stored Energy Levels 876 hours of 21 Seasonal Storage (LHS) Peaking Storage (RHS) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Imperial College Business School 34

35 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 Imperial College Business School 35

36 Storage flows and prices Week 47 of 21 GW 25 /MWh Peaking Seasonal Price (RHS) Imperial College Business School

37 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 Imperial College Business School 37

38 What have I left out? Balancing Uncertainty Transmission Distribution Inertia What happens with intermediate amounts of storage Imperial College Business School 38

39 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? Imperial College Business School 39

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