Lec. 04: Electricity Markets Flashcards
What is missing?
Frequency “…” 50 Hz –> Supply < Demand
Frequency “…” 50 Hz –> Supply > Demand
”<”
”>”
What is missing?
Voltage
- Transmission network: “…”
–> European transmission network is mostly at “…”
–> Undersea “…” are often used - Distribution network: “…”
–> In residential houses: “…”
The different levels of the network are traditionally connected via “…”.
”> 110 kV”
“220 kV and 380 kV”
“high voltage direct current (HVDC) cables”
”<= 110 kW”
“230 V”
“Generating step up transformers and substation step down transformers”
Electricity markets
Describe how the technical infrastructure differs from the commercial infrastructure.
Technical infrastructure
- Power plants produce electricity
- Produced electricity is transported to final consumers via the transmission and distribution grid
- Final consumer consumes electricity
Commercial infrastructure
- Power plants produce electricity
- Produced electricity is often offered and traded in the wholesale market
- Electricity retailers procure electricity in the wholesale market for supplying final consumers
- Final consumers buy electricity from retailers
(procure = beschaffen)
Briefly summarize the historical development of European electricity markets.
Historical development of European electricity markets
Before 1996
- A few vertically-integrated companies with regional monopoly power performed all activities (generation to transmission to retail for final consumers)
After 1996
- EU introduced liberalization (deregulation/restructuring/unbundling) to the electricity market
- Disaggregated regulation approach
–> Introduction of competition: generation, trade, retail
–> State regulation in areas of natural monopolies: transmission and distribution
1) What are natural monopolies?
2) Why are transmission and distribution network operators natural monopolies?
3) How does the state deal with the transmission and distribution network operators?
1) Natural monopolies
- Have subadditive cost functions
–> It is only economically efficient to have a single provider due to economies of scale (decreasing average costs with increasing scale of production) - Monopolies tend to overprice and underserve
2) Transmission and distribution network operators are natural monopolies
- Have subadditive cost functions
–> Duplicating the grid is economically inefficient
3) How does the state deal with the transmission and distribution network operators?
- Strong state regulation e.g. by German Federal Network Agency
How are the competition areas (generation and retail) seperated from the monopoly areas (transmission and distribution networks)?
Unbundling
- Is a set of organisational measures to separate the competition areas (generation, trade and retail) from the monopoly areas (transmission and distribution)
- It aims at preventing discrimination and cross-subsidies
What types of unbundling do you know?
Types of unbundling
- Accounting unbundling
–> Monopoly area (networks) and competitive areas (e.g. sales) must have seperate accounting
–> Must be implemented by all - Informational unbundling
–> Between monopoly area (networks) and competitive areas (e.g. sales) commercially sensitive information must not be shared
–> Otherwise: non-discriminatory disclosure to all market participants
–> Must be implemented by all - Operational unbundling
–> Monopoly area (networks) and competitive areas (e.g. sales) must be organized independently
–> Only applies to network operators with 100,000 connected network customers (de minimis rule) - Legal unbundling
–> Monopoly area (grids) and competitive areas (e.g. sales) must be separate, independent legal entities
–> Only applies to network operators with 100,000 connected network customers (de minimis rule) - Ownership unbundling
–> Monopoly area (grids) and competitive areas (e.g. sales) must not have the same owners
–> Only applies to the 4 TSOs/16 TSOs
What is missing?
Main actors of the electricity value chain
1) “…”
- Primary energy is transformed into electricity and injected into the grid
–> “…”
–> Competition
2) “…”
- Energy is traded/sold on the wholesale market
–> “…”
–> Competition
3) “…”
- Electricity is transmitted via high voltage grid until the local distribution grid
–> “…”
–> Natural monopolies + regulation
4) “…”
- Electricity is transformed from high to medium/low voltage and distributed to final consumers
–> “…”
–> Natural monopolies + regulation
5) “…”
- Electricity is supplied to final consumers based on their demand
–> “…”
–> Competition
1) “Generation” + “Power plant operator”
2) “Wholesale” + “Energy traders”
3) “Transmission incl. dispatch” + “Transmission system operators (TSO)”
4) “Distribution and metering” + “Distribution system operators (DSO)”
5) “Retail” + “Retailers”
Name the objectives of an electricity market design.
Short-run efficiency
- I.e. promoting efficienct short run generation decisions with the existing capacities (generation capacities etc.)
(- I.e. making the best use of existing resources (generation capacities etc.))
Long-run efficiency
- I.e. promoting efficienct long run investment decisions (generation assets, grid, storage etc.)
Reliability
- I.e. ensuring security of supply
Sustainability
- I.e. preserving health, environment and climate
What electricity market structure types do you know?
Electricity market structure types
- Single buyer
- Power pool
- Free wholesale competition
- Fully liberalised market with retail competition
Explain the following electricity market structure type: Single buyer
Electricity market structure type: Single buyer
Compare slide 17
1) Generator + Generator + Generator
2) (PPA = power purchase agreement)
3) Single buyer
4) (PSA = power selling agreement)
5) Distributor + Distributor + Distributor
6) Supplier + Supplier + Supplier
7) Customers + Customers + Customers
2) - 4) Transmission + System Operation
- No access arrangements and direct trading between generators and distributors/suppliers
Explain the following electricity market structure type: Power pool
Electricity market structure type: Power pool
Compare slide 18
1) Generation unit 1 + Generation unit 2 + Generation unit 3
2) Mandatory power pool
(System operation)
3) Supplier + Supplier + Supplier
4) Customers + Customers + Customers
2) Transmission + Distribution
(Optional: bilateral contracts (physical) or CfD (financial))
- All generators must sell their entire production to the pool
- All suppliers must purchase their entire demand from the pool
Explain the following electricity market structure type: Wholesale competition
Electricity market structure type: Wholesale competition
Compare slide 19
1) Generator + Generator + Generator
2) Wholesale market
3) Supplier + Supplier + Supplier
4) Customers + Customers + Customers
2) Transmission + Distribution + System operation
Explain the following electricity market structure type: Wholesale and retail competition
Electricity market structure type: Wholesale and retail competition
Compare slide 20
1) Generator + Generator + Generator
2) Wholesale market
3) Supplier + Supplier + Supplier
4) Retail market
5) Customers + Customers + Customers
2) Transmission + Distribution + System operation
Electricity consumption
Discrete Consumers Aggregation
True or false?
The discrete actions of individual consumers smooth out statistically if we aggregate over many consumers.
True!
Compare slide 23
National yearly load curve
True or false?
The Germany load curve (around 500 TWh/a) shows daily, weekly and seasonal patterns; religious festivals are also visible.
True!
Compare slide 25
1) What is the load curve?
2) What is the load duration curve?
3) What is the load duration curve useful for?
Compare slide 47
1) Load curve
- Load [GW] over Time [days or months]
- Show the load [GW] for every point in time during the year [days or months]
2) Load duration curve
- Load [GW] over Percentage of time during the year [%] or Cumulative hours during the year [h]
- Shows percentage of time during the year [%] in which a minimum load of X [GW] is consumed
- The hourly consumption values of the regular load curve are sorted from highest to lowest from right to left
3) What is the load duration curve useful for?
- It shows the extent of the demand for baseload and dispatch able peakload power plants and therefore can be used to help sizing the optimal power plant fleet
Electricity generation
What is the conservation of energy?
Conservation of Energy
- Energy cannot be created or destroyed: it can only be converted from one form to another
Electricity generation
There are several “…” which are converted into “…” in modern power systems:
- Chemical energy, accessed by combustion (coal, gas, oil, biomass)
- Nuclear energy, accessed by fission reactions, perhaps one day by fusion too
- Hydroelectric energy, allowing water to flow downhill (gravitational potential energy)
- Wind energy (kinetic energy of air)
- Solar energy (accessed with photovoltaic (PV) panels or concentrating solar thermal power (CSP))
- Geothermal energy
“‘primary’ sources of energy”
“electrical energy”
Electricity generation
What is missing?
With the exception of solar photovoltaic panels (and electrochemical energy and a few other minor exceptions), all generators convert primary energy sources to electrical energy “…”
“via rotational kinetic energy and electromagnetic induction in an alternating current generator.”
Electricity generation
Thermal power plants:
1) What is the calorific energy?
2) What is the efficiency?
Thermal power plants
1) Calorific energy [MWh_th / t]
- Thermal energy/calorific value [MWh_th] per tonne of fuel
2) Efficiency [MWh_el / MWh_th] = [%]
- Is the ratio of input thermal energy/calorific value [MWh_th] to output electrical energy [MWh_el]
Electricity generation
How are the marginal costs of power plants determined?
+ Fuel costs [€/MWh_el]
(mostly provided in [€/kg] or [€/MWh_th] –> use caloric value and/or efficiency to calculate [€/MWh_el])
+ CO2 costs [€/MWh_el]
(CO2 intensity of fuel is usually provided in [t_CO2/t_fuel] –> use caloric value and/or efficiency to determine CO2 intensity in [t_CO2 /MWh_el]; CO2 price [€/t_CO2] is given)
+ Variable operation and maintenance costs (VOM costs) [€/MWh_el]
= Marginal costs of power plants [€/MWh_el]
Electricity generation
1) What is the capacity factor?
2) What are full load hours?
3) How are both connected to each other?
1) Capacity factor (CF)
- Is for a given generator the average power generation divided by the power capacity
2) Full load hours (FLH)
- Are for a given generator the equivalent number of hours at full capacity required to produce its yearly energy yield
3) How are both connected to each other?
FLH = per unit capacity factor * 8760 h
Electricity generation
True or false?
Capacity factor
- Depends in case of renewables on the weather, generator model and curtailment
- Depends in case of conventional on market conditions and maintenance schedules
True!
