Www.mitportugal.org Doctoral Program in Sustainable Energy Systems 2009 NOV 17 Ricardo Bessa...

www.mitportugal.org

Doctoral Program in

Sustainable Energy Systems

2009 NOV 17

Ricardo Bessa ([email protected])

Wind Energy, Support Schemes and Deregulated

Electrical Market

Energy Economics

mailto:[email protected]

09

European Union Policy Background

2Wind Energy, Support Schemes and Deregulated Electrical Market

1997 White Paper• Community strategy & Action Plan• Community overall RE target of 12% by 2010

• Community RE target of 22.1% by 2010• National indicative RE targets• EC evaluate (in 2005) the application of direct and

indirect support schemes

Directive 2001/77/EC

• Proposal for a new legislative framework for RE• Proposal for mandatory overall RE target of 20% gross

consumption by 2020

2007 Renewable Energy Road Map

• 20% from RES by 2020 and a 10% share of RES in the transport sector

• Mandatory national targets (e.g. 31% Portugal)• National Action Plans before March 2010

Directive 2009/28/EC

09

Support Schemes for RES

• Established to correct market’s failure for account the full cost to society of electricity generation (externalities)

• Two groups: investment support; operating support


Fixed Feed-in Tariff

Market Price + FI premium

Market Price + bounded FI premium

Market Price + TGC revenues

Price based Quantity basedTendering

09

Support Schemes Comparison (1/2)


Viewpoint

A) Fixed Feed-in Tariff

B) Market Price + Premiums

C) Market Price + TGC

D) Tendering

Government

Consumers

(+) technology-specific(+) attractive to investors(-) no contribution to decrease market prices(-) not certain how much RE is promoted (-) no encouragement of RE consumption(-) difficult operation of the power system (-) no incentive to cost reductions(-) windfall profits with decrease of operational costs

(+) technology-specific (+) forecasting tools (+) incentive to efficient operation and cost reduction (+) contribution to decrease market price(-) premium is paid by consumers (-) no encouragement of RES consumption

Like B)(+) stimulate RES consumption (+) reduce the costs of expanding RES capacity(+) possible extension to other countries (-) windfall profits

(+) competition between investors(+) no need to guess the tariff(+) optimal location of RES(-) high administrative costs and a complex procedure(-) intentional delays in the project

09

Support Schemes Comparison (2/2)


Viewpoint

A) Fixed Feed-in Tariff

B) Market Price +

Premiums

C) Market Price + TGC

D) Tenderin

g

Investors

(+) long-term stability and low risk(--/+) only windfall profits for low-cost technologies(+) no planned maintenance with market prices (-) the support could become negative

(+) windfall profits(+) possibility of planned maintenance(+) low risk associated to the premium(+) chance of rising prices (-) price is less predictable(-) penalizations due to forecast errors(-) risk of failing prices (-) reduced windfall profits if premium is bounded

Like B) (-) additional risk of TGC prices

Like A)

Conclusion

for introduction

phase

developed markets

with higherpenetration

like B) and with mature

RE technologies

introduction phase

09

Effectiveness Against Expected Profit


Source: OPTRES, 2007

09

Portuguese Support Scheme for Wind Energy


Before DL 33A/2005 After DL 33A/2005

Wind farms licensed until Feb. 2006

Wind farms licensed after Feb. 2006

85 and 95 €/MWh depending on the load factor. Updated

according to the CPI

73 and 74 €/MWh depending on the load factor. Updated after

the park start operation

15 years since the publication 33 GWh of production or 15 years

• The new regulation is less rewarding

• Prices are not subject to market volatility (only to nature volatility)

• Future: green certificates + market prices

• Installed capacity increased 41.2% from 2005 to 2006

• Fixed feed-in tariff

09

Spanish Support Scheme for Wind Energy


RD 436/2004 RD 661/2007

Wind farms in operation before 2008 Wind farms in operation after 2008

Two options:1. Fixed tariff: 68.9 €/MWh

2. Market price + premium (38.3 €/MWh) + incentive

Two options:1. Fixed tariff: 75.6 €/MWh (20 years)

and 63.2 thereafter2. Market price + variable premium,

cap at 87.79 and floor at €73.66 €/MWh

1. fixed for the whole life2. automatically transferred to the

new regime in 2012

1. fixed for the whole life2. Wait to see...

• The new regulation is less rewarding, due to price cap

– many producers will only change after 2012

• The former regulation has an higher risk (no price floor)

• 2007 was a special year with a growth of 3515 MW

09

Why the wind farms started to sell in the market?

9

Source: OMEL&AEE, 2009Source: CNE&AEE, 2008

Source: AEE, 2007

Wind Energy, Support Schemes and Deregulated Electrical Market

09

Wind Power and Electricity Prices

10

• Price reduction of 2 €/MWh for each additional 1000 MW in 2007 (AEE, 2008)

• The reduction in the market price (2005-2007) subtracted from the wind energy support scheme does not entail an additional cost for consumers (Miera, 2008)

• The correlation between the market prices and the wind generation is negative (maximum in 2008 with -0.24) (Bludszuweit, 2009)

• The 64% increase in the market price from 2007 to 2008 was due to natural gas and CO2 allowances prices (AEE, 2009)


09

Wind Power Bidding Periods

• They make a bid for the DM and update it in the ID markets

11

WPF 36 hrs ahead are required

PPIITI devIDMDM

T

t

spottpE

1

*

T

t

spott

dailybt

bt pEE

1

,int,

T

t

deviationtt

bt pEE

1

*int,

Premium [€/MWh]


Total Income:

E*: produced energyEb: energy of the bid

09

The Economic Value of Wind Power Forecast

12

• Three months participation of a wind farm in MIBEL (Angarita, 2007)

– A) Daily Market

– B) Daily Market + Intraday

• Small producers need to invest in forecasting (or buy forecasting services) and IT tools

• For smaller wind farms (<30 MW) the benefits depend on the cost of purchasing forecasts and accuracy of the forecast (Barthelmiea, 2008)

Persistence

Advanced Model

Income [k€] 1150.7 1206.3 5%

Imbalance Penalties Cost/Income

9.5% 4.5% 5%

Persistence

Advanced Model

Income [k€] 1203.2 1224.8 1.8%

Imbalance Penalties Cost/Income

4.3% 3% 1.3%


09

Is Spain a Good Example?

• 4h-7h wind generation covered 53% of the load (max of 10300 MW)

• The average over the whole day was 45 % of the load (max of 11500 MW)

• 1000 MW were disconnected due to a short-circuit and no consequences were verified for the consumers


8 of November of 2009

09

Conclusions

• There is no perfect support schemes (each country is a special case)

• Lower risk and stability (associated to the feed-in tariffs) is the main criterion for investors

• Maybe the green certificates + market price will appear more early in Portugal to achieve EU targets

• Spain offers an attractive remuneration and with low risk

• Wind power in the market removes market power, smooth the price peaks during peak hours, gives transparency and decreases financial burden

• Market rules should be adapted to include wind power

– the decrease of gate closures will decrease system deviations and increase wind power income and the system security

• As more wind power is installed, wind power forecast will become more and more important for both sides


09

Some references…

• P.E. Morthorst et al., “Support schemes for renewable energy. A comparative analysis of payment mechanisms in the EU,” Technical Report, May 2005

• Council of European Energy Regulators, “Status review of renewable and energy efficiency support schemes in EU,” Technical Report, Dec. 2008

• M. Ragwitz et al., “Assessment and optimization of renewable energy support schemes in the European electricity market,” Technical Report, Karlsruhe, Feb. 2007

• G.S. de Miera, P.R. González, and I. Vizcaíno, “Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain,” Energy Policy, vol. 36(9), pp. 3345-3359, Sept. 2008

• J. Usaola, J. Angarita, “Benefits of short term wind power prediction programs for the integration of wind energy in electricity markets,” In Proc. of the European Wind Energy Conference, Athens, Greece, 2006

• R. J. Barthelmiea, F. Murraya, and S.C. Pryor, “The economic benefit of short-term forecasting for wind energy in the UK electricity market,” Energy Policy, vol. 36, pp. 1687-1696, 2008

• AEE Wind Power Anuario, Madrid, 2007




09

State-of-the-art WPF Errors

16

Important for daily market (~11-15% of rated power)Important for intraday market (~7-12% of rated power)

Source: Pinson, 2006


Www.mitportugal.org Doctoral Program in Sustainable Energy Systems 2009 NOV 17 Ricardo Bessa...

Documents

Transcript of Www.mitportugal.org Doctoral Program in Sustainable Energy Systems 2009 NOV 17 Ricardo Bessa...