Chapter 2 Basic Knowledge of Energy Markets · 2 Basic Knowledge Of Energy Markets 2.1 Energy and...

Chapter 2

Basic Knowledge ofEnergy Markets

European Energy Markets

2 Basic Knowledge Of Energy Markets

2.1 Energy and Its Measurement

2.1 Energy and Its MeasurementI When energy is performing physical labour it is denoted as

mechanical energy.I Joule measures the quantity of mechanical energy.I The power or capacity of an energy source (e.g., a power

plant) is the energy quantity that can be produced per timeunit.

I When an energy source can generate 1 J per second (s) ithas a power of 1 W (“Watt”):

1 W = 1J

s

I Watt is a unit of measure of power, named after the Scot-tish engineer James Watt (1736–1819).

Ludwig von Auer, Winter Semester 15/16 21 / 183




I The power (e.g., watt) multiplied by a time interval (e.g.,1 second) yields the energy quantity.

I For example,1 Ws = 1 J ,

where Ws stands for “wattseconds”.

I When an energy source can deliver 1000 J = 1 KJ (“kilo-joule”) per second, it has a power of 1 KW (“kilowatt”),that is, of 1000 W.

I Such an energy source provides within an hour an energyquantity of exactly 1 KWh (“kilowatthour”).





I Power (energy quantity per time unit) can be measured inother units than watt (W ) or kilowatt (KW ):

megawatt: 1 MW = 1000 KWgigawatt: 1 GW = 1000 MWterawatt: 1 TW = 1000 GW

I The generating unit of a large coal-fired power plant hasa power of up to 1 GW (e.g., block K of the RWE powerstation Niederaußem; the other eight blocks have an ag-gregated power of 2.6 GW ).





Figure 2 : Coal-Fired Power Plant Niederaußem.





Figure 3 : Coal-Fired Power Station Niederaußem (Photo Design).





I The units for the measurement of energy generation (en-ergy quantity and power) can be used also for the mea-surement of energy consumption (energy quantity, energyconsumption per unit of time).

I A 40W light bulb is a bulb that consumes 40 J per second.

I Question: Which energy quantity does this bulb consumeper minute?

Answer:





I The enery quantity (in the sense of mechanical energy) canbe expressed also in other units than Joule ( = wattsec-onds).

I Since 1 h = 3600 s, we have

1 Wh = 3600 Ws = 3600 J

I More common are the units:

1 KWh = 1000 Wh1 MWh = 1000 KWh1 GWh = 1000 MWh





I When energy produces heat, it is denoted as thermal en-ergy.

I To heat 1 gramme of water by 1 ◦C, 1 Cal (“Kalorie”) isrequired.

I Note that 1 Cal = 4.187 J.





I For energy quantities various units of measurement exist.I Mtoe = “million tons of oil equivalent”I Bboe = “billions of barrels of oil equivalent”I Cm = m3 = “cubic metre” (for gas)I Bcm = “billion cubic metre”I BBL = “barrel” = 158.987 litreI Gcal = gigacalorieI TJ = terajoule = 1.000 gigajoule (GJ)

I The various units of measurement can be transformed intoeach other.

1 TJ = 238.8 Gcal = 2.388 · 10−5 Mtoe = 0.2778 GWh




2.2 Some Terminology

2.2 Some TerminologyI Crude oil (petroleum), natural gas, lignite (brown coal, soft

coal), stone coal (hard cole) and peat (turf) are denotedas fossil burning.

I They are based on oxygenated hydrocarbons.

I The natural forms of energy are denoted as primary energy(e.g., coal, gas, wind, ...).

I Secondary energy is energy generated by conversion of pri-mary energies (e.g., electricity or heat generated from gas).




2.2 Some Terminology

I We differentiate between resources and reserves.

I Unfortunately, the use of these terms is not always consis-tent.

I Reserves are the estimated quantity of energy source (suchas coal, gas, or oil) known with reasonable certainty toexist, and which can be recovered with presently availabletechnology at an economically viable cost.

I Resources are all other quantities of energy source likely toexist that can be recovered in the future with some futuretechnology.




2.3 Energy Policy

2.3 Energy PolicyI Four levels of energy policy exist:

1. Local level: Cities and villages receive licence fees andconclude concession contracts.

2. Regional level: Regions can influence approval proce-dures (e.g., construction of power plants). There arealso regional agencies for regulation and competition.

3. Federal level: Laws are passed. There are federalagencies for regulation and competition (e.g., Bun-desnetzagentur, Bundeskartellamt).

4. European level: The European Commission has aDirectorate-General for Energy. It’s task is to coordi-nate coherent national European energy policies.




2.3 Energy Policy

I The four levels of energy policy pursue sometimes identicalbut sometimes deviating goals.

I The three most important goals are

1. economic efficiency,2. security of supply,3. environmental compatibility.

I Among the other goals are

4. generation of public revenues,5. industrial objectives (e.g., support of solar energy com-

panies),6. harmonisation of market regulation (in particular in

Europe).




2.4 Some Stylized Facts of Energy Markets

2.4 Some Stylized Facts of Energy MarketsI The following diagrams provide some general information

on the production and consumption of energy.

I The first diagrams are general, the subsequent diagramsare concerned with

I crude oil,I natural gas,I nuclear energy,I coal,I renewables, andI electricity.





Figure 4 : GDP, Energy Consumption, Emissions (Source: BP,2015).





Figure 5 : Consumption of Primary Energy (Source: BP, 2014).





Figure 6 : Global Green House Gas Emissions 2010 by Sectors(Source: JRC/PBL, 2012).





Figure 7 : World Crude Oil Production 1960 to 2013 by Regions(Source: OPEC, 2014).





Figure 8 : World Crude Oil Reserves (Source: OPEC, 2014).





Figure 9 : Country Ranking by Refinery Capacities (Source: OPEC,2014).





Figure 10 : Price of Oil (Source: Wikipedia 2015).





Figure 11 : Gas Consumption (Source: BP, 2014).





Figure 12 : Gas Reserves by Regions (Source: EIA, 2013).





Figure 13 : EU Imports of Natural Gas (Source: EU, 2014).





Figure 14 : Worldwide Trade Flows of Natural Gas (Source: BP,2014).





Figure 15 : Shale Oil and Shale Gas (Source: EIA, 2014).





Figure 16 : Nuclear Electricity Generation (Source: BP, 2014).





Figure 17 : Nuclear Electricity Generation by Countries, 2010(Source: WNA).





Figure 18 : Relevance of Coal (Source: BP, 2015).





Figure 19 : Share of Power Generated by Non-Fossil Fuels (Source:BP, 2015).





Figure 20 : Renewables Share of Power by Regions (Source: BP,2015).





Figure 21 : Falling Cost of Renewables (Source: BP, 2015).





Figure 22 : Electricity Transmission.





Figure 23 : Inputs to Electricity Production (Source: BP 2015).


Chapter 2 Basic Knowledge of Energy Markets · 2 Basic Knowledge Of Energy Markets 2.1 Energy and...

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