design of european balancing power markets

KIT – The Research University in the Helmholtz Association

Karlsruhe Institute of Technology, Technische Universität München, EnBW Energie Baden-Württemberg AG

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Design of European Balancing Power Markets An empirical study of 24 European countries

Fabian Ocker, Sebastian Braun and Christian WillS01 - Electricity market design, regulation and monitoring: EU Energy Market

Source: NASA

Fabian Ocker, Sebastian Braun and Christian Will2 Design of European Balancing Power Markets

Agenda

07.06.16

1 Research Question and Applied Method

2 Market Design Interactions

3 Inconsistency in Auction Characteristics

4 Conclusion

Fabian Ocker, Sebastian Braun and Christian Will3

Research Question and Applied Method

Main Research Question: How are European balancing power markets designed?

empirical study of 24 European countries members of the ENTSO-Eusing procurement auctions

Design of European Balancing Power Markets07.06.16

38

European Network of Transmission System Operators

for Electricity

x The second part of the chapter provides detailed requirements for the design, implementation and operation of the control processes.

5.1 RESPONSIBILITY FOR LOAD-FREQUENCY CONTROL PROCESSES The framework of the Load-Frequency Control processes is based on the current best practices in power system operation and in control engineering in general:

x The Frequency Containment Process stabilizes the frequency after the disturbance at a steady-state value within the permissible Maximum Steady-State Frequency Deviation by a joint action of FCR within the whole Synchronous Area.

x The Frequency Restoration Process controls the frequency towards its Setpoint value by activation of FRR and replaces the activated FCR. The Frequency Restoration Process is triggered by the disturbed LFC Area.

x The Reserve Replacement Process replaces the activated FRR and/or supports the FRR activation by activation of RR. For GB and IRE the Reserve Replacement Process replaces both, FCR and FRR. The Reserve Replacement Process is implemented by the disturbed LFC Area.

Figure 13: Dynamic hierarchy of Load-Frequency Control processes (under assumption that

FCR is fully replaced by FRR)

While implementation details (e.g. activation time frames) may differ between Synchronous Areas, the structure provided in the NC is harmonized on the European level.

As stated above, the operation of Load-Frequency Control processes are attached to operational areas. The area hierarchy is illustrated in figure 14. Each Synchronous Area consists of one or more LFC Blocks, each LFC Block consists of one or more LFC Areas, each consists of one or more Monitoring Areas and each Monitoring Area consists of one or more Scheduling Areas.

t

Power / Frequency

Frequency Containment Process Frequency Restoration Process

Reserve Replacement Process

RRFRRFCR manual FRR

Time to Restore Frequency

reserve activation

frequency

occurrence of thedisturbance

Joint Action withinSynchronous Area

LFC Area

Source: ENTSO-E 2013

FCR = Frequency Containment ReserveFRR = Frequency Restoration ReserveRR = Replacement Reserve

extensive overview and qualitative assessment of market design interactions


Research Question and Applied Method


FCR = Frequency Containment ReserveFRR = Frequency Restoration ReserveRR = Replacement Reserve

Additional Research Question: How can the heterogeneity be explained?


Market Design Interactions: Share of Volatile Renewable Energy Sources (vRES)

countries with high shares of power consumption served from volatilerenewable energy sources (vRES) tend to have more flexible auction procedures


significant share of wind and solar power flexible auction procedures

not consideredvRES-share: 45%

0%

France and DenmarkExample

Frequency Restoration ReserveFrequency Containment Reserve

Restoration Reserve

6%

# time slicesper day

auction frequency

min. bid [MW]

6

24 24n/

a

1010

vRES-share

year

lyda

ily

daily

mon

thly

0.3

0.3

45%


Two complementary intraday marketsContinuous since 2011: especially wind forecast corrections until 30 mins before deliveryAuction since 2014: precise trading day-ahead especially for solar power supply

New trading flexibility options reduced procured capacity by 15% between 2008 and 2015

Market Design Interactions: Short Term Trading Flexibility

Short-term intraday markets were introduced in all considered countries, except the Czech Republic, Iceland and SerbiaApplied trading mechanisms:

Intraday continuousIntraday auction (Spain, Portugal, Italy)


Intraday continuous

Intraday auction

no Intraday market

not considered

Source: Hirth and Ziegenhagen, 2015

short-term trading flexibility: intraday markets

reduced necessity for balancing power

Example Germany

balancing reserve

balancing costs

wind + solar capacity


in IGCC

Market Design Interactions: Market Coupling

Larger balancing regions provide more opportunities for positive/negative load compensations (“pooling effect”):

supply security ↑


Source: BNetzA 2015

coupled/joint balancing markets

increased “pooling effect”: less balancing requirement

+ in FCR-cooperation

not part of examples

not considered

Examples

TSO-cooperation in Germany introduced 2009/2010

IGCC in central Europe:cooperation for FRR-activation

Joint FCR-market

successful in reducing costs

TSO-cooperation:50Hertz, EnBW, Tennet in 2009;Ampiron in 2010

average energy activated (FRR, RR)[MWh]

balancing cost ↓


auction characteristics, i.e. scoring and pricing rules, vary greatly – why is that?

design of balancing power auctions is highly complexmulti-part auction: power bid (PB) & energy bid (EB), scoring rule, pricing rules, regular repetition, same suppliers, activation strategy

Chao & Wilson (2002) theorize a design with desirable propertiesà strong assumption: incentive-compatible bidding (ensuring efficiency)

scoring rules:lowest PBs: selection of suppliers with lowest opportunity costslowest total prices: one-dimensional total price [EUR/MWh]stochastic programming: minimizing expected costs

pricing rules:Pay-as-Bid Pricing (PaB): submitted bids equal compensationsUniform Pricing (UP): all suppliers receive an uniform price

Inconsistency in Auction Characteristics


combination of PaB/UP

Uniform Pricing (UP)

not considered

Pay-as-Bid Pricing (PaB)

no information available

map: applied pricing rules

Theo

ryAp

plic

atio

n

main challenges: overall efficiency & robustness against repetition


Conclusion and Outlook


share of vRES

short-term trading flexibility

market coupling

flexible auction procedures

reduced demand for balancing power

How are European balancing power markets designed?

extensive overview of 24 European countriesno predominant market design across Europe

How can the heterogeneity be explained?

certain power market characteristics influence balancing power design elements and demand

inconsistency in auction characteristics is due to high complexity

Further research on European balancing power markets required


Thank you for your attention!


Christian WillInstitute of Industrial Production (IIP)Karlsruhe Institute of TechnologyKarlsruhe, [email protected]

Sebastian BraunEnBW Energie Baden-Württemberg AGKarlsruhe, GermanyChair of Renewable and SustainableEnergy SystemsTechnische Universität MünchenMunich, Germany

[email protected]

Fabian OckerInstitute for Economics (ECON)Karlsruhe Institute of TechnologyKarlsruhe, [email protected]

design of european balancing power markets

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