Electricity and Energy Flashcards
What the main similarities and differences about electricity supply chains globally?
Physically they are very much the same.
Regulatory they are very much differerent.
What is the importance of interconnected systems?
Interconnected systems can provide ‘insurance’
Large interconnected systems can better address electricity outages and can improve reliability of service.
When one generator fails or needs maintenance another one can step in.
Some generators are more reliable (can generate with more certainty) than others. Renewable generators (e.g. wind and solar) tend to be less reliable than others.
What do networks provide for generators
A marketplace
What WAS the typical form of government intervention in electricity markets
To address monopoly power - A typical policy response by governments has been direct provisioning of network services.
Government provided the network services as a form of ‘insurance’ to improve ‘reliability’.
In many countries governments invest in network services and ‘socialize’ these costs across all electricity users.
What is the problem with government provision of services?
Governments lack the commercial incentives to efficiently run a business.
Govs also have ‘split interests’:
When facing competition (e.g. from new technology or business models) their interest is ‘split’.
On the one hand their role is to do the best for the long term interest of consumers but on the other hand they have investments (e.g. generation and network assets) that were paid from taxpayers’ money and could be devalued as a result of increased competition.
What BECAME the typical form of government intervention?
Privatisation of assets, control of service charges.
countries assets have been privatised or the business leased. The government intervention shifted to ‘price controls’.
Government regulates the fee that networks can charge their users.
Such businesses are often referred to as ‘regulated monopolies’.
Define a regulated monopoly
There is no competition among networks.
Networks have an obligation to service all consumers.
In return, they have exclusive access to all consumers within a geographic area (i.e. consumers have no choice of network).
What remains the basis of government intervention?
network has elements of a natural monopoly.
There is a market failure in the form of imperfect competition in networks.
How are frequency variations an externality?
Electricity supply and demand MUST equal at any given time. TITS The power system is run at a specific ‘frequency’.
Because generation or consumption of electricity changes frequency. Both supply and demand decisions create externalities for others in the form of frequency variations.
How do systems overcome the problem of changing demand and supply?
Dispatch system - Consumption (demand) is not controlled. TITS It is changed autonomously by consumers.
Generation (supply) is dynamically adjusted to match demand.
Describe a market based dispatch system
Economic efficiency is at the core of the market design
Dispatch is based on ‘economic merit order’ (ie lowest cost generators is dispatched before higher cost generators)
Describe a centrally planned dispatch system
The principles of the market are more difficult to gauge
Dispatch is based on some criteria other than costs.
For example: China :“each generator operates similar number of hours each year regardless of its efficiency or fuel consumption costs”
Describe the NEM
The NEM is a wholesale spot market.
Wholesale market: Electricity retailers buy electricity at the wholesale market and pass it on to their customers at a pre-agreed tariff (on the retail market).
Spot market: Prices at the market are determined for “the current time period” - every 5 minutes
What is the difference between a spot and forward market
Spot market:
The market where electricity is sold for the current period is called the ‘spot’ market .
Actual commodity is traded.
For example: 10MWh ‘right now’ for $2000.
Forward market:
The market where electricity is traded for future periods is called the forward (or futures) market.
Contracts are traded that specify when, at what price, and how much electricity is traded.
For example: A contract to sell 10MWh electricity during Q1 in 2018 for $10,000.
How do generators compete in a market based dispatch system
Every dispatch period generators are required to bid in their supply curve.
For each generator the supply curve consists of multiple different price-quantity combination.
The market operator aggregates the individual supply curves.
The aggregate supply curve is often called the ‘merit order’.
What is the retail service?
Electricity retailers purchase wholesale electricity, pay for the distribution and transmission networks, and bill customers for their electricity use.
Retail service costs include the cost of billing, customer service centres, advertising, etc.
Retail service competition varies in different countries or states.
What is the problem with cumulative meters?
If everyone has cumulative meter than the same aggregate profile will apply to all electricity users.
Retailer cannot distinguish between (high-cost and low cost) customers.
Cannot determine who is a peak time electricity user.
What is the difference between using cumulative and smart meters when the retailer tariff rate is a flat rate (i.e. the each unit of electricity is sold at the same retail tariff rate to customers)?
LECTURE
What tariffs can be offered with a cumulative meter?
Cumulative meters - Average cost pricing
Averaging high-cost consumers with low-cost consumers.
Noone pays their true cost of electricity and thus is inefficient. (some pay more and some less than what their true cost is)
What type of pricing is available with smart meters?
Consumers using power during peak periods are charged higher rates during the peak periods.
Attempts to impose the full marginal cost of supplying peak power on those consuming peak power by charging higher prices during the peak period.
Explain different contract types?
Time of Use (TOU) - peak, off-peak, shoulder periods
Real Time Pricing (RTP) - actual half hourly prices
Critical Peak Pricing (CPP) - Penalty for load increase during high price periods
Peak Time Rebates (PTR) - reward for reduction below a customer specific baseline
WHERE is the environmwntal negative externality in electricity?
negative externalities are on the production and not at the consumption side
Which generation creates a negative externality?
There are negative externalities with all types of electricity generation. The type and the extent of the negative externality differs
