FLEXIBILITY. VREG Beleidsplatform Slimme netten' June 30,

Transcription

1 FLEXIBILITY VREG Beleidsplatform Slimme netten' June 30,

2 MEMBERS June 30,

3 FLEXIBILITY CHALLENGES June 30,

4 GROWING NEED FOR FLEXIBILITY Controlled by BRP via nominations Import Export Market Forecasting Production Balancing Responsible Party (BRP) Forecasting Consumption Dispatchable PRODUCTION = CONSUMPTION BEFORE Centralized Dispatchable Predictable Flow of flexibility Inelastic demand NOW More de-centralized Less dispatchable Less predictable Flow of flexibility Flow of flexibility More elastic demand June 30,

5 NEED TO INTEGRATE AGGREGATOR European Commission, Regulators andsystem Operators stronglysupport the developmentof demandresponse aggregation E.g. Directive 2012/27/EU: Member Statesshallpromotedemandresponse participation in spot and balancing markets Aggregatorsare alreadyentering the market, but without a clear market model Different market designs in different countries in Europe Issues arisewhenindependent aggregators (= thirdparties) affect the existingbusiness positionof othermarket participants without proper compensation or settlement How canthe independent aggregatorbeintegratedin the market while limiting impact on existing market parties? June 30,

6 CENTRAL ROLE BRP Source: Elia BRP usesandvalorisesflexibility in his sourcing in alltimeframes in order tobalancehis portfolio. Due to the increasing share of intermittent RES the BRP tasks becomes more and more challenging! June 30,

7 ENFORCING ROLE BRP Everyunilateralaction of a thirdparty (aggregator, SO, ) in the perimeter of the BRP createsan imbalanceforthe BRP, e.g. flexibleaccess, load shifting by SO, R3 Dynamic Profile, BRP shouldnothave anynegativefinancial impact duetoanimbalancecausedbyan intervention of a third party Thirdpartiesare responsiblefortheirownactions: a BRP cannotbeheld responsibleforactions of thirdpartieswhichhe didnotwant andwhichhe cannot controle BRP shouldbeproperlyandtimelyinformedtobe able to fulfill its tasks June 30,

8 FLEXIBILITY TOWARDS A NEW MARKET DESIGN June 30,

9 Confidentiality Fair split of value and risks BALANCE BETWEEN PRINCIPLES Liberalized market (market based and tailor made solutions,.) Sustainability (future proof and upscalable solutions) Consumer protection Right of property Market integrity Costefficiency (no over-regulation, limited administrative burden, ) Presumption of innocence Avoidingmarket abuse(risk of BRP blocking flexibility) Freedomof enterprise and contracting Level playing field between market parties Transparency andinformation needsof market parties June 30,

10 A GOOD MARKET DESIGN shall work in congestion, spot and balancing markets Coherent market design for different markets Keep flexibility available for both market parties as well as system operators shall put no additional costs on third parties without proper neutralization Additionalinformation flowsandoperationaltasksrequireroom forproper pricing byexistingmarket parties No seepageof additionalcostsform demandflexibility aggregatorpresencetoexistingmarkets, e.g. activation by third parties of flexibility services shall not increase balancing settlement prices shall value flexibility correctly Aggregator flexibility is not only sourced from the customer, but also from its BRP (balance perimeter) The impact on the BRP is notlimitedtothe activationwindow, e.g. rebound, load shifting, ramp up, should be scalable Current market models are created ad-hoc and based on a limited number of customers/aggregators Large-scale-roll-out requiresoperationalprocessesandcontractsthatcanbeautomatedor standardized FEBEG envisagesa robustmarket design in whichcostsandbenefits are allocated correctly! June 30,

11 IMPACT ACTIVATION FLEXIBILITY Activation period Pmax Diverted energy REBOUND RAMP UP Supply flexibility t June 30,

12 SINGLE BRP VERSUS MULTIPLE BRP/TSO SINGLE BRP BRP 1 BRP Source BRP Requestor Source-BRP with available flexibility = requestor BRP MW/h ormwh Necessarytotransfer diverted energy from Source-BRP to Requestor-BRP Transfer of diverted energy implies determinationof volume and price MULTI BRP BRP 1 BRP Source Diverted energy BRP 2/TSO BRP Requestor/TSO Source-BRP with available flexibility MWh Unbalanced requestor June 30,

13 FLEXIBILITY CONGESTION MANAGEMENT ON DSO LEVEL June 30,

14 TYPES OF CONGESTION MANAGEMENT Curtailment of generation or load High risk of congestionin the gridor grid is congested SO intervenesbycurtailinggenerationor load Controlling of flexibility activations Gridis notcongested FSP wants toactivateflexibility tooffer to thirdparty (BRP, SO, ) SO limits flexibility activations to prevent congestion May 12,

15 FLEXIBILITY CURTAILMENT OF GENERATION June 30,

16 BALANCE OF SYSTEM IS KEY FEBEG congestion management model is based on neutralizingimpact on balancingmarket ( redispatch ) Inspired by Elia congestion rules in CIPU : Outcome of learning curve EU supported system Respects the BRP-balancing obligation Main goal: system balance is guaranteed (on BRP portfolio level) at all times June 30,

17 GENERAL PROCESS Congestionbids= compensationbids Distribution Grid User + 3 MW -3 MW FSP TSO Compensation Tool -3 MW + 3 MW -3 MW + 3 MW + 3 MW DSO -3 MW DSO BSP Retailer -3 MW + 3 MW + 3 MW BRP BRP is balanced! June 30,

18 CONGESTION BIDS = COMPENSATIONS BIDS Congestionbids: DSO adaptsgeneration(= curtailment) to deal with system constraints Connection agreement: technicalflexibility imposedin the connection agreement between GU and DSO Commercial agreement: flexibility services offeredon a voluntarybasistoa DSO, e.g. generationdown bygu with firm capacity or consumption up Compensation bids: DSO activates a compensation bid on the TSO CompensationTool in order to compensate for the impact of the curtailment Transfer of energy via automatic correctionof BRP perimeter via TSO on requestof DSO. June 30,

19 FINANCIAL FLOWS - Curtailed volume is generated by other generator or compensated by load shedding - Griduser willbepaidbyretailer/brp forproductionas ifno activationwas done - FSP paysvariablerunning coststodso (fuelcost, CO 2 costs, maintenance, -green certicate*) - DSO pays TSO for compensation bid Contractual settlementas ifno activation was done DSO Distribution Grid User -3 MW -3 MW FSP GU/FSP pays DSO for congestion bid -3 MW DSO -3 MW + 3 MW DSO paysfor compensation bid TSO Compensation Tool BSP Retailer -3 MW + 3 MW Contractual settlement as if no activation was done BRP * FEBEG is in favor of shift towards investment support June 30,

20 COMPENSATION BIDS Only TSO can compensate perimeter BRP Needof cooperation betweendso andtso TSO Compensation Tool: To maximise liquidity, at least following means should be available via TSO Compensation Tool: Bidladder: compensation bids should have a locational signal Skip bids to avoid congestion Select specific bids to compensate locally CIPU: compensationbidsbyunits connectedtothe transmission grid Remuneration of compensation bid will generally be cheaper than imbalance price(imbalance price is cap) June 30,

21 ADVANTAGES No impact on commodity/balancing market (perimeter BRP) Proposal integrates existing tools or tools under development, e.g. know-how of bidladder Proposalcouldstrengthen-iffutureintegrationof redispatch tool in bidladder - the balancing market creating liquidity Proprosal looks for most cost-efficient solution Most favorable congestion bid (merit order) Cheapest compensation bid in whole system (merit order) DGO cost is limited to difference between both(net cost is incentive to invest) Extendabletoothercases, e.g. generationup, load down andup Neutral for BRP, retailer and grid user Level playing field between grid users June 30,

22 PROCESS FREE BAND - No congestion bids and no payments towards DSO: free band is compensation issue! - No counter-balancing by TSO initiated by DSO - Lossof qualityof generatedenergy resultingin a reducedcontract pricepaidbybrp/retailer togu - Free band could be integrated in FEBEG congestion management model (settlement discrepancies, ): no additonal operational processes needed Distribution Grid User FSP TSO Compensation Tool -3 MW DSO reduced price DSO BSP Retailer reduced price BRP BRP is not balanced! June 30,

23 MACRO-ECONOMIC ASSESSMENT Option of free band is a political decision Needformacro-economic assessment showing socialwelfare of introducing a free band, taking into account: Maximum integrationandpromotion of renewableswhilefree band has an impact on the profitability of renewables projects Objectivetoincentivizetobuildrenewablesin non-congestedzones, but whataboutincentive fordso toinvestin the grid Fair split of costs between involved parties Other prerequisites for introducing a free band: More transparency on congested zones Transparency on methodology for the determination of the free band Free band shouldbeknownupfront, i.e. beforeinvestment decision, and is thus only applicable on new connections Iffree band wouldbeconsidered, thenonlywithinrestrictive, transparent and non-discriminatory legal framework June 30,

24 LEGAL FRAMEWORK Onlyin congestedzones (andthusnot everywhere) Only temporary pending grid investments(and thus not permanently) General rule(in gridcode) or negotiableon individual basis (in connection agreement)? Interruptibility = fixed%? Peak, volume, time,? Legal framework is necessary to guarantee the incentive fordso stoinvestin the grid! June 30,

25 FLEXIBILITY CONTROLLING OF FLEXIBILITY ACTIVATIONS June 30,

26 PRE-QUALIFICATION AS ENDURING SOLUTION? Transparency? Grid planning Costbenefit analysis? System Operations Prequalification? Congestion management Public debate? Connecti on agreement Learning curve? May 19,

27 EVOLUTION TOWARDS Interactive, more transparant and closer to realtime process: Consecutiveprocess(forecast, day-aheadprevision, close to real time information, ) SO s provide information about(risk of) congestions BSP s/fsp s provide information about available flexibility andplannedflexibility actions SO manages the congestion by cancelling planned flexibility actions or activating available flexibility Processshouldeventually aftercostbenefit analysis - evolve towards real-time congestion management May 19,

28 FLEXIBILITY CONCLUSIONS June 30,

29 A GOOD MARKET DESIGN shall work in congestion, spot and balancing markets shallput no additionalcostson thirdpartieswithout proper neutralization shall value flexibility correctly should be scalable June 30,

30 EXAMPLE OF (DES)ACTIVATION June 30,

31 QUESTIONS June 30,

32 FLEXIBILITY BACK UP SLIDES June 30,

33 FLEXIBILITY MARKET PARAMETERS TO TAKE INTO ACCOUNT June 30,

34 DIFFERENT LOAD TYPES Demand side flexibility Storable load (process and supply decoupled) Shiftable Non-storable load Non - shiftable Self generating clients Curtailable load Non curtailable load June 30,

35 LOAD TYPE MAKES A DIFFERENCE Storable and shiftable load (rebound): Activation of demand flexibility has impact Consumed energy remains more or less the same Complex and unpredictable in volume and time - impact after activationwindow(ramp up + rebound) Difficult to predict the full impact Curtailable load and self-generating clients(no rebound): Activation of demand flexibility has impact Less energy consumed Less complex impact after activation(ramp up) Total impact is more correlatedwiththe market requestingthe activation Impact is centralized around the activation window June 30,

36 DIFFERENT REMUNERATION TYPES Demand side flexibility Capacity based Fixed remuneration /MW/h Buyservice (option) Hybrid model Fixedremunerationto cover fixed costs + Variable remuneration to cover activation Activation based Variable remuneration /MWh Buy commodity Call option Back-to-back transaction June 30,

37 REMUNERATION TYPE DOES MATTER Capacity based Assumptions about commodity and operational costs are fixed upfront Fixed remuneration takes into account assumptions on the numbers of activations and the time of activation Idealforthe griduser torecuperateinvestment coststoparticipatein demand flexibility Fixed cost is controllable for contractual parties Unclear activation price(pre-paid option) Activation based Price available for each individual activation Price could therefore differ in time Allows a merit order approach optimizing the offers Fixed cost must be recuperated via activation(uncertainty for grid user) Combination of both models(hybrid model) is possible June 30,

38 TOWARDS ENDURING MARKET MODEL Cap Act/Cap Act Act/Cap Act/Cap Cap Act N/a Primary reserves Secondary reserves Uncontracted reserves ( Free Bids ) Tertiary reserves via Generation units Tertiary reserves via sheddable customers R3DP Reserve contracts with neighbouring TSO Disconnect customers (forced) Pre-contracted Reserves Bidladder Pre-contracted Reserves Bidladder Example R3 Dynamic Profile : No economic criterion that will lead to the activation of the cheapest pool/bsp Activation without increasing marginal cost and thus saturating imbalance price A merit order mechanism allows cost efficientactivationbut, therefore, an activation price is needed Integratingproduct groupstoclusters, e.g. R3-products, by harmonising activation rules Volume and priceof activatedenergy must be known for an activation based system /MWh /MW/h /MWh BRP/TSO BSP/FSP Grid user June 30,

39 DIFFERENT ACTIVATION FORMS Demand side flexibility Volume based Price based Caps & floors Direct load control Static Dynamic Coupled Uncoupled -DAM (before clearing) -CIM -Balancing market -DAM (After clearing) -Own developed price signal June 30,

40 ACTIVATION FORMS ARE IMPORTANT Volume based Limited freedomforthe end user becauseof steeringbyfsp Requested volume is known, also time of activation and de-activation Price formula is agreed upfront between concerned market parties Guarantee of volume could be useful for certain markets Price based Full freedomtothe end user tomodifyconsumptionbecausefsp is onlygivinga priceincentive Requested volume is not known, neither the time of activation and deactivation, but are probablypredictableat anaggregatedlevel (learning curve) Difficult to distinguish normal supply(normal client behavior) and demand flexibility (response to price signal) Price based activation is difficult for FSP and is mainly applied by integrated aggregators/suppliers/brp to influence load June 30,

41 DIFFERENT MARKETS Demand side flexibility DA, ID Balancing Real time Reserve Congestion Portfolio optimization Adequacy -ICH -R3 DP - BRP BRP BRP/BSP TSO TSO /DSO TSO June 30,

42 MARKET DETERMINES ACTIVATION FORM Portfolio optimization Both price(integrated FSP/supplier/BRP) as volume (integrated or third party) based activation are possible Balancing DA/ID/real time Both pricebased(integrated) as volume basedactivation(integratedor thirdparty FSP) are possible Balancing reserves Asks for volume based activation to have a guarantee on the available volume Activation should pass via FSP/BSP Congestion Volume based activation gives guarantee on volume impact (commodity) Activation(possibly through FSP) has impact on other parties in the value chain that should be neutralized to avoid impact on balancing market Adequacy Asks for volume based activation to have a guarantee on the available volume Activation should pass via FSP/BSP and has impact on other parties in the value chain that should be neutralized to avoid impact on balancing market June 30,

43 CONTACT Steven Harlem June 30,