Market design improvements in the German balancing power market A fundamental model analysis

Transcription

1 Market design improvements in the German balancing power market A fundamental model analysis ENERDAY th Conference on Energy Economics and Technology Dresden 17 April 2015 Diana Böttger Thomas Bruckner Chair for Energy Management and Sustainability Institute for Infrastructure and Resource Management - IIRM University of Leipzig Diana Böttger 1

2 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 2

3 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 3

4 Net costs [Million Euros] High costs for reserve capacity Reserve capacity most expensive system service Primary reserve specifically most expensive reserve type 1,200 Other system services* 1, Year Transmission losses Tertiary reserve Secondary reserve Primary reserve * Other system services encompass reactive power, black start capacity, national and international redispatch and countertrading. Source: Bundesnetzagentur and Bundeskartellamt (2014) Diana Böttger 4

5 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 5

6 Research question Current market design for primary reserve in Germany Symmetric product Auction on Tuesday for following week Duration: one week (168 hours) Monday Tuesday Wednesday Thursday Friday Saturday Sunday Validation of capacity prices by fundamental model Case study: More flexible market design product length one day Monday Tuesday Wednesday Thursday Friday Saturday Sunday Considered years: Diana Böttger 6

7 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 7

8 Profit differences for capacity price calculation Profit [ ] Capacity price for PR Capacity price for SR positive peak Capacity price for SR positive off-peak No reserve Only PR PR fixed, SR positive peak added PR fixed, SR positive off-peak added PR = primary reserve; SR = secondary reserve Diana Böttger 8

9 Overview of fundamental model Model assumptions Spot market prices (day-ahead) Installed capacity (thermal and pumped hydro storage power plants) - Technical and economic parameters - Power plant operator - Fuel- and CO 2 -price Demand for primary, secondary and tertiary reserve Model work flow 1. Primary reserve: a) Optimal dispatch spot market only b) Cost optimized capacity reservation from all power plants c) Capacity prices as opportunity costs 2. Secondary reserve: a) Cost optimized capacity reservation from all power plants b) Capacity prices as opportunity costs For positive/ negative and peak and off-peak product 3. Tertiary reserve: a) Cost optimized capacity reservation from all power plants b) Capacity prices as opportunity costs For positive/ negative and every 4 hour block Results Per pool: - Reserved capacity - Capacity prices for primary, secondary and tertiary reserve - Working prices for secondary and tertiary reserve Total costs for capacity reservation and call Diana Böttger 9

10 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 10

11 [Euro/MW and h] Validation of primary reserve capacity prices Historical capacity prices in summer months usually higher than in winter Seasonal pattern also reflected in modelled prices Modelled capacity prices are more volatile depending on day ahead spot prices Volume weighted average prices Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Historical capacity price Modelled capacity price Diana Böttger 11

12 [Euro/MW and h] Capacity prices for different market designs Capacity prices for 24 h bidding periods especially in the summer months lower than for weekly bidding periods Volume weighted average prices Week in 2012 Historical prices Model h Model - 24 h Diana Böttger 12

13 [Euro/MW and h] Capacity prices for daily auctions Daily prices for different week days vary partly considerably Difference between the weekly average of the daily prices and the prices for weekly bidding periods about 1.2 to 4 Euro/MW and h 20 Volume weighted average prices May Jun-12 9-Jul Jul-12 Days Model h Model - 24 h Weekly average of model - 24 h Diana Böttger 13

14 Possible savings due to market design change Model results show cost decrease potential of more than 10 % Volume weighted average capacity prices [Euro/MW and h] Year Historical prices Weekly auction (model results) Daily auction (model results) Difference between weekly and daily auction (model results) (and in percent) 1.69 (-12.9 %) 1.50 (-13.3 %) 1.19 (-10.8 %) Diana Böttger 14

15 Agenda Motivation Research question Methodology Results Conclusion Diana Böttger 15

16 Conclusion Fundamental model reproduced seasonal pattern of primary reserve capacity prices. Fundamental capacity prices vary much more from week to week depending on spot prices than historical prices. Today s bids of power plant operators seem to include a risk premium for unfavourable spot prices. Shorter lead time could lead to more than 10 % lower capacity prices for primary reserve with product length of one day. Diana Böttger 16

17 Thank you for your attention! Any questions? Diana Böttger 17

18 Contact Dipl.-Wirtsch.-Math. Diana Böttger Chair for Energy Management and Sustainability Faculty of Economics and Management Science University of Leipzig Grimmaische Str. 12 D Leipzig Tel.: / Diana Böttger 18

19 [MW] [MW] Provided capacity for primary reserve from different power plant types (average week for 2012) Positive primary reserve Hours of average week Negative primary reserve Hours of average week Pumped hydro storage Light fuel oil Natural Gas Hard coal Lignite Nuclear Pumped hydro storage Light fuel oil Natural gas Hard coal Lignite Nuclear Diana Böttger 19