A Capacity Market for the German Power Industry

Transcription

1 A Capacity Market for the German Power Industry What s the Gist? Lukas Schuffelen

2 Grid consulting Management consulting Market consulting Company BET has been a leading consultancy for the energy and water industry for 20 years, with offices in Hamm and Leipzig, and a subsidiary in Switzerland. BET stands for concepts that boost competition and guarantee effective markets. We are an independent consultancy that is free from individual interests. All company shares are owned by the management and staff. Customers BET customers include municipal utilities, grid operators, energy traders, decentralised generators, large power plant operators, cooperatives and energy-intensive industrial customers. We offer policy counselling to government agencies, ministries and political decision-makers. Germany is our core market. However we are increasingly directing our attention to the European energy market. Consultancy Our work covers all steps from the strategic concept to implementation in all stages of added value produced by the energy and water industry. Jointly with our customers, we work out innovative and practicable solutions because we are comprehensively proficient in all aspects of business and energy industry economics and also the technical fundamentals. We draw upon an experienced team of experts comprising more than 50 engineers, industrial engineers and economists. The project teams are staffed on inter-disciplinary principles and drawn from all business units corresponding to the task being addressed. This approach unifies conceptual and technical strengths to find the ideal solution and to support it during its realisation in practice. 2

3 Areas of Business & Teams Grid consulting Management consulting Market consulting Grid evaluation & grid planning Company strategy Large power plants & storage Comercial grid management Company management Decentralised energy systems Regulation Organisational- and personnel development Energy markets, sales & portfolio management Organisation & data management Energy systems & fundamental models 3

4 Short CV Born 1985 Focus areas: Dipl.-Wirt.-Ing Lukas Schuffelen Study of Electrical Engineering and Business Administration at RWTH Aachen, Diplom 2011, Germany Study abroad at UCLA - University of California, Los Angeles, USA, 2008 Internship at Göteborg Energi AB, Göteborg, Sweden, 2010 Since June 2011: Consultant at BET - Büro für Energiewirtschaft und technische Planung GmbH in Aachen, Germany Author of diverse surveys and publications Asset valuation Power plants Market design Capacity markets Modeling and optimization of assets and markets 4

5 Content Motivation I Teil 1 I Opportunities I Teil 2 I Consequences I Teil 3 I Conclusion I Teil 4 I 5

6 BET Model of the European Power Market Motivation - Opportunities - Consequences - Conclusion Political framework Demand Construction and shut down of plants Development renewable energies Development CHP Electricity exchange with satellite regions Fuel and CO 2 certificate prices Power plant park Existing plants Construction and shutdown Exchange capacities btw. model regions Residual load Optimisation model for power market Minimisation of all costs pertaining to power generation (variable costs, yearly fixed costs and capital costs) Model inputs per country Supply Model outputs per country installed capacities Generation short-term marginal costs (Basis for electricity prices in model regions) Electriyity exchange btw. model regions Fuel consumption and CO 2 emissions 6

7 Motivation - Opportunities - Consequences - Conclusion Initial position Prior feed in of renewables. Fixed fee according to EEG. => Investment in renewables not based on market prices/incentives. Comissioning of adjustable technologies (AT) is done model endogen. Operation of AT is done model endogen. Model endogen comissioning & decomissioning Generation per technologie 7

8 The end of base load: Example residual load 2030 Motivation - Opportunities - Consequences - Conclusion load Residual load Decrease of residual load and neccity of base load power plants Heavy increase of volatility Sustainable need for storage disconnection of renewables without compensation! Ramps > MW/h Clear increase in flexibility requirements! 8

9 Motivation - Opportunities - Consequences - Conclusion Energy only vs. Capacity market Energy only Capacity market Separate capacity market Only new thermal power plants would get a subsidy. If applicable also retrofit. Small investment pool. Extensive capacity market Every thermal power plants would get a subsidy. If applicable and double payment is forbidden also renewables. Big investment pool. There is not the right solution. It s a trade off! 9

10 Price [EUR/MWh] Motivation - Opportunities - Consequences - Conclusion Energy only What would change? Nothing! Expectation and 10 simulations of the whole sale price in 2035 Consequences? Big 4 Existing power plants stay comsissioned and market position remains. Mixed portfolio Difficult profitability situation because of capex. Investor No incentives for new investments. Dominating market position stays with the big four Necessary number of hours at spot with /MWh for a CCGT

11 Motivation - Opportunities - Consequences - Conclusion Extensive capacity market What would change? Every (thermal) power capacity plant would that get is a operating capacity payment. would receive payments. Consequences? Big 4 Existing Existing power power plants plants stay stay comsissioned comsissioned and and market additional position revenues. remains. Young Mixed portfolio timer Difficult Profitability profitability is secured situation by capacity because of capex. payments. Investor No No incentives incentives for for new new investments. investments. Immense windfall profits! Feed-in in Germany [%] EnBW E.ON RWE Vattenfall Others Source: referring to BKartA, Sektoruntersuchung Stromerzeugung,

12 Motivation - Opportunities - Consequences - Conclusion Separate capacity market What would change? Every Onay new (thermal) (thermal) power capacity plant that would is get operating a capacity would payment. receive payments. Generic power plants without investments incentives German peak load ca. 80 GW Deficit Consequences? Big 4 Existing Existing power power plants plants stay decomsission comsissioned and Consequences? and market market share position decreases. remains. The Young Mixed necessary portfolio timer amount of capcacity would Difficult Profitability be availabe profitability is unsecure, at required situation but depends because places. on of capex. specific portfolio. Only the needed additional power plants Investor would receive payments. No Incentives incentives for new for new investments investments. and opportunity to get into the market. Small amount of capacity payments GW GW Source: BET regio model 12

13 Motivation - Opportunities - Consequences - Conclusion Pressespiegel Der EnBW-Chef weist darauf hin, dass es hier nicht nur um technische Fragen geht, sondern auch um das "Marktdesign Für einen solchen Kapazitätsmarkt schlägt er eine eigene Regulierungsbehörde und Auktionsverfahren zur Preisfindung vor. Handelsblatt vom Kapazitätsmärkte sind eine Erneuerbare-Energien- Ausfallversicherung bne Geschäftsführer Robert Busch RWE-Vorstand Leonhard Birnbaum warnt vor Kapazitätsmärkten. Energate messenger vom Doch diese Probleme können und sollten nicht durch die Einführung eines Kapazitätsmarkts angegangen werden, wenn das Resultat daraus Überkapazität und Kraftwerke wären, die ausschließlich für die Bereitstellung von Systemdienstleistungen für die ÜNB eingesetzt würden. Signale für Investitionen in neue Kraftwerke sollten aus dem Markt und nicht durch den Staat kommen, sagt ein Eon-Sprecher. TAZ vom Daher sollte ein Marktdesign entwickelt werden, das auch Betreibern von Kraftwerken, die noch Kapitaldienst leisten, die Teilnahme ermöglicht (mit Ausnahme von KKW). Zur Reduktion der Komplexitat könnten Kraftwerke zugelassen werden, die zum Zeitpunkt der Auktion jünger als 20 Jahre sind. Pressemitteilung Statkraft Es ist wichtig, dass Investoren klare Anreize brauchen, um diese Kapazitäten bereitzustellen., sagte der VKU-Hauptgeschäftsführer Trianel, Baumgart et al. in et Dez Energiekonferenz München vom September

14 Motivation - Opportunities - Consequences - Conclusion Press review The EnBW-CEO points out, that it is not only a technical question but rather about the market design For such a capacity market he suggests a new regulator authority and auction based procedure to gain the capacity price. Handelsblatt from Capacity markets are a renewables outage insurance bne CEO Robert Busch RWE-chairman Leonhard Birnbaum warns of capacity markets. Energate messenger from But these problems should not be solved by introducing a capacity market, if hence overcapacity and power plants result that are only needed for system services of the TSOs. Signals for new investments should be initiated by the market and not by the government, says a Eonspeaker. TAZ from Therefore a market design should be created that also gives owners of existing capacity with capex a possibility to participate at a capacity market(excluding combined heat and power). For simplification only power plants that are younger then 20 years could be admitted to participate. Press release Statkraft It is important that investors get clear incentives to invest in capacity, says VKU-CEO Trianel, Baumgart et al. in et Dec Energy conference Munich from September

15 Motivation - Opportunities - Consequences - Conclusion Statements of different companies pro 01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 contra Trend towards a capacity market. 15

16 Upcoming influences to the energy system Motivation - Opportunities - Consequences - Conclusion Peak shaving effect on Removal of prior feed in and a better market Demand side management the whole sale market?! integration!? Market integration of renewables Grid expansion Allocation of capacity can lower the grid Merger of electricity and heating sector through power-to-gas!? Heating sector Future Energy system Centralized vs. decentralized expansion?! Small production close by consumption in future?! Rising number of Emobility or gas fired vehicles?! Mobility Storage Can smooth the volatility if there is a peak/off-peak spread?! Need for research! 16

17 Motivation - Opportunities - Consequences - Conclusion Summary In future there will be a need for additional thermal capacity. In the existing framework of the energy market there are not enough incentives to invest in new power plants. The longterm functionality of the energy only market is not proven. Maybe the importance of a stabile energy system justifies a capacity market as an insurance concept. Companies with a lot of existing thermal capacity try to maintain there market position through supporting energy-only market design or an extensive capacity market design. Investors support a separate capacity market for obvious reasons. Companies with a mixed portfolio tend to favour special solutions. There is a need for research to find a coherent energy market system design. 17

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