Options for coordinating different capacity mechanisms

Transcription

1 Options for coordinating different capacity mechanisms Håkan Feuk, Chair of EURELECTRIC Working Group on Wholesale Market Design Brussels, 12 December 2013 Generation adequacy measures have clear cross-border implications Security of supply is coupled in synchronized markets. Cross-border participation in CRM is mandated by Directives and Treaties: Member States are not allowed to discriminate between cross-border contracts and national contracts when taking safeguard measures or resolving congestions. Generation adequacy should take into account contribution of cross border interconnectors: this requires a firm commitment between involved MS and high degree of cooperation/coordination between involved TSOs Day-ahead, intra-day and balancing markets will make sure that electricity flows in the efficient direction. Any capacity mechanism should not lead to inefficient day-ahead, intra-day and balancing markets Non-harmonised solutions will short-term lead to free riding and unfair competition and long-term to structural changes with investments in the most favourable area, which should drive harmonisation 1

2 EURELECTRIC proposal This EURELECTRIC proposal for a cross-border participation mechanism is only one possible design The basic idea is to build on how cross-border day-ahead markets work Is there a need to use physical transmission rights when selling capacity cross-border? 2

3 Is there a need to use physical transmission rights when selling capacity cross-border? Market coupling between all bidding zones will ensure efficient flow between bidding zones Any nominated physical transmission rights will be netted in the market coupling process and are therefore not relevant for the resulting flows Due to legal requirement of the European treaties, export should not be curtailed in case of emergency, which will ensure efficient flows also without cross-border reservations No, there is no need to use physical transmission rights or reserve cross border capacity Should everyone be allowed to participate in capacity mechanims? 3

4 Should everyone be allowed to participate in capacity mechanims? Everyone that is fulfiling the requirements should be able to participate within ist own bidding zone, given that they do not already participate in another capacity mechanism with the same capacity The amount of capacity that can participate cross-border should be proposed by TSOs and approved by NRAs The suppliers of capacity that can participate cross-border should be decided by a market based process All capacity within its bidding zone, but cross-border only up to the volume that can be considered for generation adequacy Who should get the right to participate cross-border in a capacity mechanism? 4

5 Who should get the right to participate cross-border in a capacity mechanism? In case of capacity auctions the market coupling principles could be applied A common auction to determine the CRM price in different bidding zones (market coupling arrangement for CRM) could be arranged in case of a common CRM based on auctions Cross-border participation up to allocated cross-border CRM capacity could be organized implicitly in case of a CRM based on auction in a single bidding zone The right to cross-border participation could be auctioned separately (explicit auction) in case of a CRM not based on auctions. Strategic reserve has to be within bidding zone to be efficient The most competitive offers will be accepted in the auctions Example with a common CRM in 2 bidding zones Bidding zone 1 Bidding zone 2 (MW) Price (k /MW/Y) (MW) Price (k /MW/Y) Capacity Capacity Individual biddings corresponding to the amount of money needed to keep the plant or to invest the plant merit order bidding list in the local BZ auctions Without XB CRM participation: what would the CRM value in BZ 1 be if 7500 MW is needed, and in BZ 2 if adequacy requires 500 MW?: see next slide Bidding zone 1 Bidding zone 2 Capacity (MW) Capacity (MW) Price (k /MW/Y) Price (k /MW/Y)

6 Outcome of separated CRM markets (i.e. without XB CRM) Bidding zone 1 Bidding zone 2 Capacity (MW) Price (k /MW/Y) Capacity (MW) Price (k /MW/Y) In BZ 1, the needed CRM would be 112 k /MW/Y In BZ 2, the needed CRM would be 52 k /MW/Y Total CRM cost for BZ1 = k /Y Total CRM cost for BZ2 = k /Y Total CRM cost for BZ1+2 = k /Y The red resources both in BZ1 and BZ2 would not be accepted in the CRM Outcome of coupled CRM markets subject to a XB CRM of 250 MW between BZ1 and BZ2 Bidding zone 1 Bidding zone 2 Capacity (MW) Price (k /MW/Y) Capacity (MW) Price (k /MW/Y) In BZ 1, the needed CRM would be 87 k /MW/Y for 7250 MW local capacity and 250 MW XB CRM capacity In BZ 2, the needed CRM would be 67 k /MW/Y for 500 MW local and 250 MW capacity exported CRM to BZ1 Operator would buy 250 MW capacity in /MW/Y and sell /MW/Y Total CRM cost for 7500 MW BZ1 = k /Y Total CRM cost for 500 MW BZ2 = k /Y Total CRM cost for BZ1+2 = k /Y TSO XB CRM rent = k /Y Total net CRM cost for BZ1+2 = k /Y The red resources both in BZ1 and BZ2 would not be accepted in the CRM 6

7 Would there be a congestion rent from cross-border participation in capacity mechanisms? Would there be a congestion rent from cross-border participation in capacity mechanisms? There will be a separate congestion rent for the CRM C-B capacity allocation This congestion rent should be used in the same way as the energy congestion rent from forward and day-ahead allocation This means that the benefit from C-B capacity and energy trading shall be considered when calculating the benefit of new transmission investments Yes, there will be an additional congestion rent for the CRM C-B capacity calculation 7

8 Would all capacity suppliers be treated in the same way? Would all capacity suppliers be treated in the same way? The suppliers from other bidding zones have to fulfil the same requirements as suppliers within the bidding zone. Certification requirements should be the same Controls of if obligations are fulfiled should be the same Penalty regime should be the same in case capacites are not available when there is scarcity in the market Coordination between MS/TSO is fundamental as well as mechanisms for availability checking and penalties in case of non-compliance Yes, everyone should be treated in the same way 8

9 Conclusions It is possible to let capacity providers from other bidding zones participate in capacity mechanisms in a market based way There is no need to reserve C-B capacity, as market coupling will ensure efficient flow between bidding zones The cross-border participation in CRM should have no influence on the crossborder allocation for forward, day-ahead, intra-day and balancing markets There can be a market value on C-B capacity for capacity mechanisms in addition to energy Even if cross-border CRM can be relatively marginal in many cases, it can be a fundamental element to ensure the convergence of nationally designed CRM mechanisms, as arbitrage opportunities will reinforce that convergence EURELECTRIC recognises the complexity of the CRM cross-border participation concept and pleads for harmonisation/coordination of the national CRM to facilitate the participation of foreign generation, demand response and storage 9