Cost-efficient Power Balancing â Intraday Trade
Cost-Efficient Power Balancing Intraday Trade and Imbalance Pricing GEERT VAN MOER – UNIVERSITY OF ANTWERP all errors are my own 1 The challenge • Organize markets such that the cheapest units available generate Why do we care about an ARP’s costs? 1. Costs are passed through to consumers 2. By shifting generation from expensive to cheap units, all parties (ARPs, Elia, consumers, …) can be made better off GEERT VAN MOER 2 Overview 1. Two claims • ARPs self-balance too much • ARPs trade too little 2. One suggestion • An alternative imbalance pricing mechanism GEERT VAN MOER 3 A setting ARP A WIND CCGT PEAKER ARP B WIND CCGT PEAKER TSO PEAKER CCGT • ARPs have cheap and expensive technologies • The TSO can activate cheap and expensive reserves GEERT VAN MOER 4 Day-ahead ARP A WIND? CCGT PEAKER ARP B WIND? CCGT PEAKER • Wind availability is uncertain • ARPs schedule the activation of their units: GEERT VAN MOER TSO PEAKER CCGT or 5 Real time ARP A WIND CCGT PEAKER ARP B WIND CCGT PEAKER TSO PEAKER CCGT • Will ARPs self-balance with their peaker ? or outsource from the TSO in return for imbalance settlements? GEERT VAN MOER 6 Make (in-house) or buy (TSO settlement) It would be cost-efficiënt if • An ARP MAKES whenever in-house generation is cheaper • An ARP BUYS whenever the TSO’s reserves are cheaper My claim • ARPs self-balance too much GEERT VAN MOER 7 Numerical example GEERT VAN MOER 8 Numerical example ARP is 50 MWh short and pays red area without action Does it activate a unit of 25 MWh? system shortage GEERT VAN MOER 9 Numerical example: benefit of activation (1) 1. Quantity effect Avoid tariff for this generation 100 * 25 = 2500 € GEERT VAN MOER 10 Numerical example: benefit of activation (2) 2. Price-zone effect Move to low-price zone 40 * 25 = 1000 € GEERT VAN MOER 11 Numerical example: what do we learn? • The price-zone effect motivates the ARP to activate expensive units, even while the TSO has cheaper reserves available Reason The ARP thereby reduces the tariff applied for its remaining shortage CLAIM 1 • ARPs with a shortage generate too much in-house • ARPs with a surplus reduce in-house generation too much (similar reasoning) GEERT VAN MOER 12 Bunching? Imbalance price buy at low price 100 sell at high price 60 ˆ2 ˆ1 R3- & free bids R2- IGCC R2+ GEERT VAN MOER System shortage R3+ & free bids 13 .04 .02 0 GDV – ˆ1 . .01 Histogram Density .03 Belgian data -400 GEERT VAN MOER -200 GDV_gamma1 0 200 14 Balancing market <-> ARPs that trade Two objectives: 1. Shift generation from expensive to cheap plants 2. Shape each other’s position on the balancing market objective 2 interferes with objective 1 CLAIM 2 ARPs trade too little Intraday markets can only work if balancing markets work! GEERT VAN MOER 15 A suggestion: alternative imbalance pricing mechansim • Hold each ARP responsible for its externality on the grid operator • Each time period, for each ARP, calculate the grid operator’s costs as if the ARP incurred zero imbalance Charge the cost differential, if positive Pay the cost differential, if negative GEERT VAN MOER 16 Numerical example 1 Penalty for an ARP that is 50 MWh short GEERT VAN MOER 17 Numerical example 2 Payment for an ARP that is 10 MWh long GEERT VAN MOER 18 About the proposed mechanism • ARPs self-balance efficiently • The cheapest units generate => everyone can be made better off • What is the effect on ID markets? • What is the effect on ARPs/grid operator? GEERT VAN MOER 19 Reference Van Moer, G. (2015). Cost-Efficient Power Balancing: Intraday Trade and Imbalance Pricing. Manuscript in preparation, Department of Economics, University of Antwerp, Belgium. GEERT VAN MOER 20 THANK YOU !! Any question or suggestion is welcome GEERT VAN MOER 21
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