Impact of day-ahead market pricing rules on generation capacity expansion

Transcription

1 Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero 37 th IAEE International Conference Supervisors: Carlos Batlle & Pablo Rodilla New York, June, 2014

2 Content Introduction Objectives Methodology Results Conclusions Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 2

3 1 Introduction

4 Simple vs Complex auction Simple auction Complex auction Source: Market Results Source: - Energy Market Opportunity Costs for Generators with Environmental and Energy Generators with Environmental and Energy Limits Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 4

5 Complex auction Pricing rules Prices (EUR/MWh) Prices (EUR/MWh) System Load (MW) 60 06/06/2014 Load and prices 5000 Linear Pricing Dispatch + Marginal prices Non-Linear Pricing :00 8:30 11:00 13:30 16:00 18:30 21:00 23:30 Demand (MW) Shadow Price SMP Source: Market Data 0 6:00 8:30 11:00 13:30 16:00 18:30 21:00 23: Price higher than marginal Marginal price + Discriminatory payments Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 5

6 Complex auction Pricing rules Ireland ISO (SEMO) Linear Pricing Dispatch + Marginal prices Non-Linear Pricing Dispatchable Model (Vázquez, 2003) Minimum Uplift Prices (Hogan & Ring, 2003) Convex Hull Model (Gribik et al., 2007) Modified IP prices (Bjørndal & Jörnsten, 2008) Relaxed duality pricing (Ruiz et al., 2012) ELMP Proposal (MISO, 2013) NYISO PJM MISO ISO-NE CAISO Commitment Tickets (O Neill et al., 2005) Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 6

7 2 Objectives

8 Objectives How does the energy mix adapt to these pricing rules? Model long-term investor behavior Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 8

9 Objectives How does the energy mix adapt to these pricing rules? Model long-term investor behavior Which of the pricing rules is more efficient in the long term? Model price formation Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 9

10 Objectives How does the energy mix adapt to these pricing rules? Model long-term investor behavior Which of the pricing rules is more efficient in the long term? Model price formation How is the previous discussion affected by RES-E penetration? Model short-term thermal plants cycling Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 10

11 3 Methodology

12 Model overview 1 Capacity Expansion Cost minimization only (central planner) Data input: Cost data Hourly-demand Solar PV production Reference mix Set of possible mixes possibilities Unit Commitment Hourly dispatch Shadow prices 3 Remuneration 3.1 Non-linear pricing rule 3.2 Linear pricing rule 4 Market-based mix Search a competitive equilibrium (break-even) Non-linear pricing energy mix Linear pricing energy mix Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 12

13 4 Results

14 Base case generation mix 19 GWp solar PV Reference Mix Linear Pricing Non-Linear Pricing NUC CCGT OCGT NSE % -4.16% -0.03% +5.70% % -6.25% +33.3% +2.86% Installed Capacity (GW) Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 14

15 $/MWh Uniform prices: base case C NSE Linear PR Non-Linear PR Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 15

16 Linear Non-Linear Linear Non-Linear Linear Non-Linear Installed Capacity (GW) RES-E scenarios 45 Increasing solar PV penetration GW Solar 19.2 GW Solar 25.6 GW Solar OCGT CCGT NUC Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 16

17 RES-E scenarios: 3.2 GWp 28.8 GWp Increasing solar PV penetration Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 17

18 RES-E scenarios: 3.2 GWp 28.8 GWp Increasing solar PV penetration Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 18

19 5 Conclusions

20 Conclusions Different pricing rules = different mixes Different pricing rules = similar cost of supply in the long term Different ratio investment costs / operation costs Linear pricing > non-linear pricing RES-E penetration increases differences In the short term Changing the pricing rule has a big impact It takes time for the mix to adapt Impact of day-ahead market pricing rules on generation capacity expansion Ignacio Herrero (IIT) - 20

21 Thank you for your attention