WIND POWER IN THE SPANISH ELECTRIC MARKET

Transcription

1 WIND POWER IN THE SPANISH ELECTRIC MARKET Alberto Ceña March 2015

2 REGULATORY FRAMEWORKS

3 3 Immediate Obstacles Until they are tackled, the numerous conditions affecting both the market and the internal regulation of renewables pose Obstacles to renewables development from the outset Main conditions may be defined: Technological development Pay ment mechanisms Administrative procedures Transmission development Capital intensive investments High investment cost in developing technology and learning curve Support policies required to encourage investments Non-existence of investment support deters development Land, special levies and biased treatment Environmental processing: lack of experience One stop shop or as close to one as possible The proliferation of clean energy sources requires: Tranmission network access. Grid investments, to ensure proper functioning Dispatch priority Source: Banco Santander and own elaboration

4 LCOE /MWh Regulatory frameworks should cover the present costs of producing wind power 120 LCOE ( /MWh) IN DIFFERENT WIND FARMS CONDITIONS 90 Interest rate % Equity 80% debt / 20% equity (r: 6,5%) 80% debt / 20% equity (r: 7,5%) Average pool price Nominal hours (CAPEX 1,2 MM /MW) Nominal hours CAPEX (MM /MW) (2.100 hours) Incremento del incentivo Fuente: AEE

5 5 Remuneration systems Despite falling investment costs in different technologies (trending towards grid parity), there still seems to be a need for remuneration incentives to make investments possible We can identify different incentive shemes around the world XFeed in Tariff The renewables producer is entitled to sell all power generated to the grid either at an established fixed price or at the hourly pool price plus an incentive. Characteristics: - Price or incentive fixed by law - The power produced has guaranteed priority grid access - Extensive duration of incentives (15-20 years) Green certificates The regulation obligates providers and producers to source a percentage of power to renewables To comply with that obligation, each agent must deliver a Green Certificate for each MWh of renewable power supplied The Green Certificate is sold by the renewable power generator based on actual production either through a specially organised market or directly to the power provider/producer Accordingly, the renewables producers income source is double : the market price + green certificate value Auctions The regulation incentivises renewable energy deployment through auctions for different technologies inviting bids from interested investors The acution establishes a maximum price, so fostering competitiveness among investor bidders The utilities are obliged to buy all power produced throughout the duration of the PPAs allocated Incentivos Fiscales The State promotes renewable energy deployment through direct or indirect fiscal incentives for the producer This system applies in USA, mainly through tax credits that can be sold to third parties (Production Tax Credits or PTC)

6 Key parameters to define the tariff incentive Key parameters Main comments 1 CAPEX WTG costs. BOP costs The size in MW should not be the main economic criteria for selecting a WTG Known margins could affect to the final price of the WTG 2 Generation Accurate evaluation of the wind conditions and WTG type. Curtailments risks It is important to have an accurate evaluation of the wind conditions for all WTGS Important also an adequate selection of the model and type of the WTGs 3 4 OPEX Tariff Maintenance and operation Rents, taxes and social returns Initial value Duration and up-dating Technical incentives As low as possible without affecting Wind Farm Reliability. Impact of local and regional restrictions It should give enough medium and long term vision It has to take into account the learning curve of the technology. Proj. IRR > Requested Profitability 4 Capital cost (WACC) Leverage level Rate of interest Country risk It should be based in the sector average, which is often not easy to evaluate. Source: AEE

7 Former regulatory framework based on premiums over the pool price ( /MWh): - Regulated, fix feed in tariff: variable premium - Pool price + premium with a cap and floor remuneration

8 Main changes of the regulatory reform It has been mainly driven by the tariff deficit (consumers do not pay all the electrical system costs). No more premiums ( /MWh) over the spot price, they have been changed for incentives to the investment ( /MW). To guarantee a project IRR is of 10 years bond bp. In was 7,398% All the installations should be assimilated to standard projects. For wind it is related to the starting year of operation The sole variable income is the spot market price, but with a cap and a floor too. The incentives are reviewed each three years following the market prices and each six following the public bonds rate of interest

9 Intallations standard >5 MW. The incentive Rinv, is received to complete the 20 years of project economic life CODE STARTI NG OPERAT ION YERA CAPEX ( /MW) Rinv ( /MW) Minimum equivalent hours Operational trehsold Uf Anual IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT IT

10 Wind farms affected by the regulatory reform: all of them are merchan or quasi merchant plants Año Total Anual (MW) Potencia eólica instalada ACUMULADA (MW) Tasa de variación (%) ,04% ,22% ,43% ,08% ,20% ,00% ,39% ,79% ,27% ,70% ,71% ,77% ,08% ,12% ,77%

11 Change of remuneration 25 MW Wind farm miles Retribución después de la reforma Retribución antes de la reforma miles Retribución después de la reforma Retribución antes de la reforma miles Retribución después de la reforma Retribución antes de la reforma miles Retribución después de la reforma Retribución antes de la reforma

12 TECHNICAL AND ECONOMIC MARKETS OPERATION

13 Electric market processes FORWARD CONTRACTS (Price hedging mechanisms) DAY-AHEAD MARKET (D) Reference price INTRADAY MARKETS REAL TIME TECHNICAL CONSTRAINTS 12:00 Day-Ahead Result Hourly Final Schedule D-1 D

14 Different sessions of the day ahead and intraday markets CLOSING TIME 12 DAY AHEAD MARKET D 27 hours 24 hours 20 hours INTRA DAY MARKETS 17 hours 13 hours 9 hours DAY AHEAD MARKET D+1 27 horas

15 Wholesale electric market managed by the XP (OMIE ) and Ancillary services programmes managed by the TSO (REE) Market Operator System Operator Previous information DM Daily Market Reception of nominations Resolution of technical constraints Secondary Regulation Intra-day Market: Sessions 1 to 6 Resolution of technical constraints Deviation management Tertiary Regulation Resolution of technical constraints 15

16 Production Offers integration All the offers are agregated by technology First block: Energy 100,0 MWh, at 10,00 Euro/MWh Second block: Energy 110,0 MWh, at 30,00 Euro/MWh Third block: Energy 130,0 MWh, at 80,00 Euro/MWh Undispatchable plants

17 Purchase Offers integration All the purchase offers are agregated inclujding bilateral contracts First block: Energy 15,0 MWh, a t180,30 Euro/MWh Second block: Energy 10,0 MWh, At 100,00 Euro/MWh Third block: Energy 3,0 MWh, at 20,00 Euro/MWh

18 Both curves cross in the marginal price The crossing point fixes the energy finally matched (i.e MWh) and te marginal price (i.e. 40 /MWh) COGEN ESPAÑA. ASOCIACIÓN ESPAÑOLA PARA LA PROMOCIÓN DE LA COGENERACIÓN

19 The final price is in each our determined by the complex offers Production offers not matched in Spain Modification of programmes for complex offers: Minimum income Power gradient Stop condition Non divisible offers 19

20 Wind energy participate in all sessions OMIE (Market operator) REE (System operator) Schedule Wind farm 1 Programming +prediction (12:00h/D-1) International Bilateral C. MATCHES RESULTS Wind farm 2 Wind farm N DAILY MARKET Domestic Bilateral C. TECHNICAL CONSTRAINTS SOLUTIONS Ancillary Services BASE OPERATING SCHEDULE VIABLE DAILY SCHEDULE 6 INTRADAY MERCADOS INTRADIARIOS MARKETS OTHER TECHNICAL PROCESSES Programming adjusted 6 times per day FINAL HOURLY SCHEDULE Intraday Adjustment Real Time Process OPERATING HOURLY SCHEDULE 20

21 Wind farms forecast their production for the day market to optimize the balancing power GLOBAL METEOROLOGICAL DATA FORECASTERS WIND FARM PRODUCTION FORECASTS Wind Farm Deviation 30 % Wind farm individual deviation: 30% Wind Farm Deviation 30 % Offers are integrated in portfolio from different bassins Wind Farm Deviation 30 % Offer Unit 1 Offer Unit 2 Offer 1 Deviation 20% DAY AHEAD MARKET<10.00 A.M REDISPATCHING INTRA- DAY MARKETS DEVIATION: 15% Final devistion 11%-13% Offer 2 Deviation 17% DAY AHEAD MARKET<10.00 A.M REDISPATCHING INTRA- DAY MARKETS DEVIATION: 21 13%

22 WIND ENERGY SUBSTITUTES MORE EXPENSIVE POWER PLANTS AND THEN POOL PRICE IS REDUCED RELATIONSHIP BETWEEN WIND ENERGY AND POOL PRICE IN THE DAILY MARKET Price ( /MWh) Demand Night Day Peak CCG T Wind & Nuclear MWh Source: RISOE y AEE Offer Gas Fuel oil Pool market (cent /kwh) Pool market (cent /kwh) y = -0,0003x + 5,0921 R 2 = 0, Wind power (MW) y = -0,0002x + 5,0193 R 2 = 0, Wind pow er (MW) Reduction of prices is estimated in around 2-3 /MWh every 1000 MW of wind power in the system and it almost covered the cost of premium linked to wind 22 energy

23 IMPACT OF THE WIND ENERGY IN THE POOL MARKETPool market (January 2007-July 2007) 5,5 5,0 4,5 4,0 <1000 MW 1000 MW-2000 MW 2000 MW-3000 MW 3000 MW-4000 MW 4000 MW-5000 MW >5000 MW cent /kwh 3,5 3,0 2,5 2,0 1, Hours Fuente: AEE This graph shows by levels of wind generation the average pool price per hour The range <1000MW shows the average pool price by hour if the contribution of the wind energy was null. The following curves show increases of wind production, this shows how the pool price decrease when increase the contribution from wind power. 23

24 Average deviation of wind farms offers is between -13% and +11% RE Eolico medida-programa RE Eolico medida-programa Fuente: ESIOS 24

25 Deviation (%) GWh Deviations of the load are still much more important than wind power differences Net demand deviation Wind Energy deviation helping the System Wind Energy deviation against the System In absolute terms, the deviation of the demand is much more important than the wind generation one, 14% 12% 10% 8% 6% 4% 2% 0% 13,3% 12,4% 11,0% 10,7% 2,6% 3,7% 1,9% 0,8% % Wind Energy Deviation % Demand Deviation

26 Wind energy in the electrical market Programming +prediction (10:00h/D-1) OMIE (Market operator) REE (System Operator) Wind farm 1 Wind farm 2 DAILY MARKET Matches results Technical constraints solutions Other technical operating processes OPERATING HOURLY SCHEDULE (PHF) Wind farm N Intraday Adjustment INTRADAY MARKETS Programming adjusted 6 times per day INCIDENCE OF WIND ENERGY IN THE BALANCING POWER: The main incidence of wind power is in tertiary regulation (between 15 and 3 hours) and management of deviations between generation and load (before closing day and intraday markets). Unforeseen variation of power demand is more important (with 40% 0f deviations) than prediction errors of wind power plants (slightly over 30%). Costs in balancing power caused by wind energy is paid by wind producers. The unitary cost was of 1,4 /MWh much lower than initially foreseen.

27 The coordinated operation of the system is crucial Parque R.E. 1 CECRE TSO: Centro de Control centralizado del Régimen Especial Parque R.E. 2 Parque R.E. n Solución provisional CC 1 CC2 CC n CECRE: REE Control Center of the Renewable Energy CC: Control Center of generation. 27

28 All wind farms over 5 MW of capacity are controlled by the TSO HUB VSAT Remote control WIND FARM... CECRE Point by Point Control Center ADSL WIND FARM... CECRE Dedicated line WIND FARM... REASONS FOR CURTAILMENTS Overload risks in transmission and distribution grids. Risks of lost of power by transient instability (LVRT). Limited short circuit capacity of the installed wind farms which could restrict the operation of neighbourhood protections. Excess of generation which cannot be consumed by the demand (limited exchange capacity with France). 28

29 Limitation of wind energy production Nov 9th, Spain. The TSO orders reduce wind energy production Order to reduce production Demand coverage reached in the night 29

30 GWh Wind power curtailments in (without compensation) GWh GWh GWh 85, ,5 108 GWh 121GWh 14,2 70 GWh 73 GWh ,2 13,9 28,5 5,6 13,3 3,6 57,4 40,7 93,0 27,9 6,9 19, Excedente generación RdT RdD Huecos de tensión 30

31 Thank you very much for your attention