Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Energy Economics > Lec. 04: Electricity Markets > Flashcards

Lec. 04: Electricity Markets Flashcards

1
Q

What is missing?

Frequency “…” 50 Hz –> Supply < Demand

Frequency “…” 50 Hz –> Supply > Demand

A

”<”

”>”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

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 “…”.

A

”>= 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”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Electricity markets

Describe how the technical infrastructure differs from the commercial infrastructure.

A

Technical infrastructure

  1. Power plants produce electricity
  2. Produced electricity is transported to final consumers via the transmission and distribution grid
  3. Final consumer consumes electricity

Commercial infrastructure

  1. Power plants produce electricity
  2. Produced electricity is often offered and traded in the wholesale market
  3. Electricity suppliers/retailers procure electricity in the wholesale market for supplying final consumers
  4. Final consumers buy electricity from suppliers/retailers

(procure = beschaffen)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Briefly summarize the historical development of European electricity markets.

A

Historical development of European electricity markets

Before 1996

  • A few vertically-integrated companies with regional monopoly position 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, retail
    –> State regulation in areas of natural monopolies: networks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

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?

A

1) Natural monopolies

  • Occur in industries for which 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 overcharge and underserve

2) Transmission and distribution network operators are natural monopolies

  • It is a decreasing cost industry
    –> 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 well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How are the competition areas (generation and retail) seperated from the monopoly areas (transmission and distribution networks)?

A

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 of other market participants (e.g. non-discriminatory grid access) and cross-subsidies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What types of unbundling do you know?

A

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
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

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
A

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”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Name the objectives of an electricity market design.

A

Short-run efficiency

  • I.e. making the best use of existing resources (generation capacities etc.)

Long-run efficiency

  • I.e. promoting efficient investment into new resources (generation assets, grid, storage etc.)

Reliability

  • I.e. reserves for satisfying demand at times of generation shortage

Sustainability

  • I.e. preserving health, environment and climate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What electricity market structure types do you know?

A

Electricity market structure types

  • Single buyer
  • Power pool
  • Free wholesale competition
  • Fully liberalised market with retail competition
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Explain the following electricity market structure type: Single buyer

A

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
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Explain the following electricity market structure type: Power pool

A

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
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Explain the following electricity market structure type: Wholesale competition

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Explain the following electricity market structure type: Wholesale and retail competition

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Discrete Consumers Aggregation

True or false?

The discrete actions of individual consumers smooth out statistically if we aggregate over many consumers.

A

True!

Compare slide 23

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

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.

A

True!

Compare slide 25

17
Q

1) What is the load curve?

2) What is the load duration curve?

A

Compare slide 47

1) Load curve

  • Load [GW] over Time [days or months]
  • Show the specific load [GW] depending on the time of 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
18
Q

Electricity generation

What is the conservation of energy?

A

Conservation of Energy

  • Energy cannot be created or destroyed: it can only be converted from one form to another
19
Q

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
A

“‘primary’ sources of energy”

“electrical energy”

20
Q

Electricity generation

What is missing?

With the exception of solar photovoltaic panels (and electrochemical energy and a few other minor exceptions), all generators convert to electrical energy “…”

A

“via rotational kinetic energy and electromagnetic induction in an alternating current generator.”

21
Q

Electricity generation

Thermal power plants:
1) What is the calorific energy?
2) What is the efficiency?

A

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]
22
Q

Electricity generation

How are the marginal costs of power plants determined?

A

+ 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]

23
Q

Electricity generation

1) What is the capacity factor?

2) What are full load hours?

3) How are both connected to each other?

A

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

24
Q

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
A

True!

25
Q

Matching consumption to generation

True or false?

Electricity markets have several important differences compared to other commodity markets.

  • At every instant in time, consumption must be balanced with generation.
    (If you throw a switch to turn on a light, somewhere a generator will be increasing its output to compensate.)
  • If the power is not balanced in the grid, the power supply will collapse and there will be blackouts.
  • It is not possible to run an electricity market for every single second, for practical reasons (the network must be checked for stability, etc.).
  • So electricity is traded in blocks of time, e.g. hourly, 14:00-15:00, or quarter-hourly, 14:00-14:15, well in advance of the time when it is actually consumed (based on forecasts).
  • Additional markets trade in backup balancing power, which step in if the forecasts are wrong.
A

True!

26
Q

Baseload vs. Peaking Plant

What is missing?

Load (= Electrical Demand) is low during night; in Northern Europe in the winter, the peak is in the evening. To meet this load profile, baseload generation “…” runs the whole time; “…” peaking plant covers the difference.

A

“with low fuel and running costs”

“more expensive”

27
Q

What is the merit order?

Draw an example merit order.

A

Merit order

  • Is the arrangement of generation capacities by marginal costs, i.e. the electricity inverse supply function.
  • As long as there is sufficient capacity in the market, the market clearing price equals the marginal cost of the last (i.e. most expensive) generation unit required to match the load (= marginal power plant)

Compare slide 43

28
Q

Describe the general spot market price development in Germany.

A

General spot market price development

  • As a result of so much zero-marginal-cost renewable feed-in, spot market prices steadily decreased until 2016. This is called the Merit Order Effect.
  • Since then prices have been rising due to rising gas and CO2 prices.
29
Q

Explain the merit order effect.

A

Merit order effect

  • Renewables have zero marginal cost
  • As a result they enter at the bottom of the merit order, reducing the price at which the market clears
  • This pushes non-CHP gas and hard coal in many hours out of the market
  • This is unfortunate, because among the fossil fuels, gas is the most flexible and produces lower CO2 per MWh_el than e.g. lignite
  • It also reduces the profits that nuclear and lignite make
  • Will there be enough backup power plants for times with no wind/solar?

–> This has led to lots of political tension, but has been counteracted in recent years by the rising CO2 price.

30
Q

Draw the merit order with CO2 price and explain what happens.

A

Merit order with CO2 price

  • The CO2 price can alter the merit order (pulling gas before coal) and increase the revenue for low-emission generators like nuclear and renewables.
  • Compare slide 56

(Windfall profit)

31
Q

What is the residual load duration curve?

Draw the residual load duration curve.

A

Residual load duration curve

  • The residual load is the regular load minus variable renewable energy (wind and solar).
  • The positive part must be met by dispatchable generators or storage
  • The negative part must either be curtailed or stored.

–> Compare slide 57

Energy Economics (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions