Adjusting the energymarket Electricity Market Conference, 24th November 2016 Bente Hagem, Executive Vice President, Statnett
We agree on the main issues 1. Make energy markets work and we have to work hard to make energy markets work well 2. Do we still need to incentivize capacity? NO! YES! 3. Consider solution carefully! Regional adequacy assessment and regional coordination of solutions Ensure cross-border participation Market based and technology neutral Limit efficiency of energy markets as much as possible
We need to improve the energy market asap Integrate wholesale and retail markets Ensure dynamic pricing Expose renewables to cost of balancing Get rid of priority dispatch Make markets reflect physics getting the bidding zones right Finer time resolution Regional adequacy assessment using EU platform Accept price spikes
Failing to capitalize on cross-border trade Market areas not reflecting physical market conditions but national borders 2015
Market failing to mirror physics Fremtiden er elektrisk
Failing to activate citizens Regulated end-user prices, limited link to prices in the wholesale market Prices reflect costs Limited possibility for price response Situation is similar in many states across Europe
Now the power system is in transition Share of RES 2020 20% Share of RES 2040 60% Statnett study from fall 2015
We fix short-term challenges! Flexibility from thermal and DSR manage situations Demand response: Illustrates an extreme winter week: Total load and flexibility Low RES + high load + high industry response Thermal generation covers 70% of demand and additional capacity is available Load covers the rest and is reduced 20 GW for 3 days Fremtiden er elektrisk
We fix short-term challenges! Flexibility from thermal and DSR manage situations Demand response: Detail of the demand adjustment: Illustrates an extreme winter week: Total load and flexibility Low RES + high load + high industry response Thermal generation covers 70% of demand and additional capacity is available Load covers the rest and is reduced 20 GW for 3 days Fremtiden er elektrisk
But are we prepared for Dealing with weeks with low renewable generation Extreme experience Extreme future scenario December 2006 - a week with almost no wind Four consecutive weeks with low wind and PV generation (a 50 year event) How will we meet a growing demand for back-up with duration?
The way we prepare GRIDS & MARKETS
Connecting the Nordic to the Continent integration improves ability to handle stress >10 GW capacity by 2021
and Europe integrates further
MAJORITY OF INVESTMENTS ABOUT TO BE REALIZED (STATUS TYNDP 2014) Ahead of plan or on plan 40% Rescheduled 20% Cancelled 7% Commissioned 8% Delayed 25% Reasons for delays: Permitting (58%) Financing (24%) Other (18%) 14
Energy markets have to improve first! Integrate wholesale and retail markets Ensure dynamic pricing Expose renewables to cost of balancing Get rid of priority dispatch Make markets reflect physics getting the bidding zones right Finer time resolution Regional adequacy assessment using EU platform Accept price spikes
Statnett study, conclusions on the energy only market in 2030 Energy only is possible, however we have to accept: significant price spikes - without intervening periods of load shedding that industry can not be protected from price fluctuations that the decision to go for energy-only is sustainable the possibility that peak-load generation plants close down due to high business risk and we will still need thermal generation expected to meet up to 70% of residual load critically important when RES is out for days more grid helps, but wind/sun correlates across regions Finally, a capacity market with low capacity margins and significant DSR will be very similar to a pure energy only market Fremtiden er elektrisk
Thank you for the attention!