3. Electricity Market Design Models Flashcards
How has generation management and scheduling changed over time?
- From central dispatch to whole sale markets
(Wholesale markets based on audited costs) - From cost-based prices to the bid-based prices
What does the liberalisation of generation investment mean?
Opening the door to wholesale markets
from central dispatch?
Why can’t the exchange of electricity be fully left to the free market alone?
- Technical restriction
(Infrastructure / network industry)
- delivering electricity requires a transmission network
- the operation of this network is a technically complex task
- this requires the coordination of both generationand demand resources - Business restriction
- The liberalization started in an environment characterized by
- fully regulated and vertically integrated monopolistic utilities
What does PURPA stand for?
Public Utilities Regulatory Policies Act, 1978
What is PURPA?
- enables a
- certain kind of non-utility electricity power producers “qualifying facilities” (e.g. RE)
- to become alternative electricity suppliers
- by requiring electric utilities
- to buy power from these facilities
- at the “avoided cost rate”
What’s the avoided cost rate?
The cost the electricity utility would incur where it to generate or purchase from another source.
Which are acts that opened the electricity market in the US?
- PURPA (Public Utilities Regulatory Act), 1978
2. Electricity Act, 1992
What does the Electricity Act state?
- It allowed independent power producers
- to trade freely in
- the power system and sell wholesale power
- to any vertically integrated utility or distribution company
(In PURPA, trading between IPP and any other parties except the verticcally integrated utility were banned/limited.)
What’s the main difference between PURPA and the Electricity Act?
Trading between IPP and any other parties except the vertically integrated utility were banned in PURPA.
How did PURPA affect customers?
The cost involved were passed on to consumers and laid down in PPAs.
Principles of the Chilean reform
- Deregulation of generation investment = free entry principle
- Replace cost-of-service remuneration with market prices for the generated electricity
Which country was the first to make progress toward the liberalisation of the generation expansion in the 80s?
Chile
What did the Chilean reform establish?
- An electric system,
- in which private investors
- could freely install new plants
- and sell the electricity generated at market prices
What’s the unit commitment?
- A mathematical optimization problem
- used to determine which units should be in operation or remain disconnected
- at every hour interval,
- to match the energy demand
- at minimum cost
How did investment decisions change under the Chilean model?
- They were no longer incumbent upon the regulator
- Generators are remuenrated on the grounds of system marginal cost
Which where the 2 new entitites created in Latin America in the context of the deregulation?
- System Operator
2. Market Operator
Which characteristics does the system operator have?
- Must be independent of generators and marketers
2. Responsible for managing the transmission network
Which characteristics does the market operator have?
- Obtains the unit commitment on the basis of the generators’s bids
- Calculates the system marginal cost for each time block
In which way were England & Wales as well as Norway pioneers?
The system marginal price was not based on costs but on bids submitted by the generating units
How do the bidding formats differ in the US and Europe?
US
- multi-part offers with operational costs & technical constraints
EU
- price-quantity pair
(opt. more complex formats available)
What are the main differences between the market in the EU and that in the US?
- In the EU, system operation is decoupled from the market, while in the US the ISOhas both market and system operation
- In the US physical constraints are included
How is the EU clearing algorithm called?
EUPHEMIA
Pan-European Hybrid Electricity Market Integration Algorithm
What’s the exchange for Spain/Portugal, central Europe & Nordic-Baltic region called?
- OMIE
- EPEX SPOT
- Nord Pool
What is LMP?
Locational Marginal Prices
What’s the difference between zonal and nodal pricing?
- Zonal pricing: you look at the different zone within a market
- Nodal pricing: you look at different markets (see Texas)
What is the primary purpose of long-term markets?
To provide hedging mechanisms for producer and consumer entities
