PUBLIC POLICIES FOR ENERGY ELECTRICITY MARKETS

Transcription

1 PUBLIC POLICIES FOR ENERGY ELECTRICITY MARKETS José P. Sucena Paiva Prof. Catedrático tico do IST

2 CHARACTERISTICS OF ELECTRIC ENERGY It is simultaneously a good (energy) and a service (transmission, distribution and system operation); It does not possess a proper identity, after it is delivered to the network; It cannot be stored, therefore supply must exactly equal demand at any instant; It does not necessarily flow in the transmission lines over the most convenient route. 2

3 MODEL 1 MONOPOLY a) Vertical Integration b) Separated distribution Produtor Produtor Transportador ( grossista) Transacções entre concessionárias Transportador ( grossista) Distribuidor (retalhista) Distribuidor (retalhista) C lien te C lien te Transacções de energia Trânsitos de energia na m esm a em presa a b 3

4 MODEL 2 SINGLE BUYER a) Separated production and distribution b) Integrated production (partially) and distribution Produtor Independente Produtor Independente Produtor Independente Produtor Independente Produtor Integrado Produtor Independente Comprador Único Comprador Único Distribuidor Distribuidor Distribuidor Distribuidor Cliente Cliente Cliente Cliente Cliente Transacções de energia Trânsitos de energia na mesma empresa a b 4

5 MODEL 3 COMPETITION IN THE WHOLESALE MARKET Produtor Produtor Produtor Produtor Produtor Rede de transporte Mercado grossista Distribuidor Distribuidor Distribuidor Distribuidor Cliente Cliente elegível Cliente Cliente elegível Transacções de energia Contratos bilaterais 5

6 MODEL 4 COMPETITION IN THE RETAIL MARKET Produtor Produtor Produtor Produtor Produtor Rede de transporte Mercado grossista Comercializador Distribuidor/ Retalhista Comercializador Distribuidor/ Retalhista Comercializador Rede de distribuição Mercado retalhista Cliente Cliente Cliente Cliente Cliente Transacções de energia Contratos bilaterais 6

7 WHOLESALE MARKET (1) Since electricity cannot be stored, it is not possible to establish a true spot market in which the delivery of a good is immediate, with recourse to the stored reserves, which are reestablished by the producers in non-real time. Transactions are contracted some time before physical delivery one day, one hour or even some minutes based on the predicted consumption. Inevitably, there are differences between the contracted and observed values which are corrected by procedures which can or not be competitive (ancillary services) 7

8 WHOLESALE MARKET (2) Disadvantages: In a spot market with few players, they can use their market power to artificially increase the price. The highest marginal price applied to all producers in the market can result in an increase in the cost applied to the consumers. 8

9 MARGINAL PRICE IN THE WHOLESALE MARKET Preço ( /MWh) Excedente dos consumidores Oferta p m Procura Excedente dos produtores q m Quantidade (MWh) 9

10 DAILY MARKET HOURLY PRICE IN THE OMIE (12/12/2013) 10

11 DAILY MARKET HOURLY PRICE IN THE OMIE (14/12/2015) 11

12 INTRADAILY MARKET HOURLY PRICE IN THE OMIE (12/12/2013) 12

13 DAILY MARKET HOURLY PRICE IN THE OMIE (25/12/2013) 13

14 INTRADAILY MARKET HOURLY PRICE IN THE OMIE (25/12/2013) 14

15 DAILY MARKET MINIMUM, AVERAGE AND MAXIMUM PRICE IN THE OMIE (12/2013) 15

16 INTRADAILY MARKET HOURLY PRICE IN THE OMIE (01/04/2013) 16

17 DAILY MARKET MINIMUM, AVERAGE AND MAXIMUM PRICE IN THE OMIE(04/2013) 17

18 BILATERAL CONTRACTS (1) They are not compatible with an optimized dispatch, traditional in electric power systems. Price transparency is diminished, which points out at least in the initial phase of a market system to its limitation, at least for the dominant utilities. Setting tariffs for the final customers becomes difficult if the prices in the wholesale market are not realistic (in a market with many participants and choice for the final customers there are market prices and not tariffs). They can lead to an implicit form of vertical integration between producers and distributers, when it has been abolished by the regulator. 18

19 BILATERAL CONTRACTS (2) If bilateral contracts are allowed as is the case of MIBEL system and market operation must be separated. System Operator: technical coordination functions, namely real time dispatch. Market operator: organization and management of the transactions between participants. 19

20 FINANCIAL CONTRACTS They assure protection against price risk (the contracted energy may not be delivered): Contracts for differences Futures contracts Options contracts 20

21 NETWORK CONGESTION The price set in the wholesale market does not take into account the network capacity the key element that allows competition. The TSO (Transmission System Operator) is responsible for the relief of the network congestion typically transmission line overloads which impede commercial transactions. NETWOR CONGESTION IS NOT SOLVED THROUGH WAITING LINES 21

22 CONGESTION MANAGEMENT Generation redispatch Load management through transmission of real time prices Selective load shedding last resource. 22

23 NODAL PRICING Price differentiation of the energy supplied in each node of the network. The principle of tariff uniformity is not respected which corresponds to the socialization of the total system operation costs. High nodal prices induce reduction of the consumption short term efficiency and lead to an incentive to invest in new transmission lines long term efficiency. Low nodal prices stimulate the consumption, contributing to a better use of existing resources. 23

24 ZONAL PRICING Simplified version of nodal pricing. Partition of a control area in several zones with differentiated prices, which are the average of the nodal prices. Congestion management between zones and price setting in the interconnecting lines adds complexity. 24

25 COUNTER-TRADE TRADE The TSO uses a parallel market to buy and sell to the participants, ts, indirectly acting on the dispatch. The resulting additional cost is allocated to the costumers in the t proportion of their consumption. The price of energy remains uniform throughout the system. It does not supply an incentive to the relief of congestion the result being a loss of economic efficiency. On the other hand, it encourages competition in the market, which h is nor split by network restrictions. 25

26 IBERIAN ELECTRICITY MARKET (MIBEL) (1) Competitive activities: Generation Commercialization Regulated activities: Transmission Distribution In principle, competitive activities should not coexist with regulated activities in the same company. 26

27 IBERIAN ELECTRICITY MARKET (MIBEL) (2) There must be a single Market Operator, although the management of the spot market and of bilateral contracts may be separated. The System Operator (TSO) has not to be single: two distinct control areas have been defined (Portugal and Spain). The role of REN and REE as single buyers was ended. Decentralized generation renewables and CHP are remunerated with a feed-in tariff to compensate the environmental benefits. 27

28 IBERIAN ELECTRICITY MARKET (MIBEL) (3) Long term contracts (PPAs( PPAs) ) are incompatible with a wholesale market (a compensation was due the generators with PPAs). Capacity payments were terminated (although they reduce the investment risk and the cost of capital). The capacity of the interconnection lines with France must be reinforced. 28