Daan Six

Feasibility of employing domestic active demand for balancing wind power generation

Wind power suffers from two problems: it is non-dispatchable and thus cannot be altered to coincide with power demand and the predictability of wind power is limited. Controllable flexible resources are thus crucial when managing a particular energy portfolio with a considerable share of wind power. This paper therefore assesses the feasibility of employing domestic active demand for balancing wind power generation in a BRP (Balancing Responsible Party) portfolio. The analysis starts from a BRP portfolio consisting of gas-fired power plants and generators of wind power on the generation side, and residential and industrial consumers on the consumption side. The optimal balancing options (upward/downward regulation of GFPPs, intraday market, active demand services or paying imbalance costs to the TSO) to be taken by the BRP to minimize imbalance volumes are determined for different wind scenarios and imbalance pricing schemes based on simulations. The paper describes the methodology used and discusses the potential profit for the BRP when active demand is employed as a supplementary balancing option within the different scenarios.

The value of residential flexibility to manage a BRP portfolio: A Belgian case study

This article focuses on the short term management of an energy portfolio with a considerable share of wind generation by a Balance Responsible Party. The portfolio consists of Gas Fired Power Plants and producers of wind energy on the supply side, and industrial and residential consumers on the demand side. Different balancing options are considered to manage the portfolio: upward or downward regulation of Gas Fired Power Plants, electricity market trading and shifting residential flexible demand (i.e. washing machines, dryers, dishwashers and electric hot water heaters). The remaining imbalance is settled via the balancing mechanism. The article presents a qualitative, multi-actor business model, but also includes a quantitative analysis based on a Belgian case study. Simulation results show yearly revenues for a residential consumer offering flexibility of up to €20.

Business case assessment of balancing large scale PV with flexible CHP

In a situation where the share of less predictable electricity production from renewable energy sources (like solar energy) in the overall electricity production-mix increases, the electricity system will be confronted with more imbalance. Balancing markets deal with these imbalances. In this context, a balancing responsible party (BRP) is responsible to maintain the balance in its portfolio on a quarter-hourly basis and is charged for any incurred imbalances. A BRP with less predictable electricity production in its portfolio, like PV production, has a higher imbalance risk and thus on average a higher imbalance cost. The case study under consideration aims at optimizing the portfolio of a BRP, which consists of a large scale PV installation and an industrial CHP unit. A software tool is used that is able to calculate to what extent the imbalance costs of the BRP can be decreased by actively controlling the available flexibility in its portfolio (in this case the CHP installation). The paper presents the results of the simulations and discusses the potential reduction in imbalance costs for the BRP if the flexibility of the CHP is used within different scenarios.

Influence of non-harmonized capacity mechanisms in an interconnected power system on generation adequacy

Insufficient incentives from the market lead to threats to generation adequacy. In order to create more steady investment signals, capacity mechanisms (CMs) are discussed in many European countries. CMs are discussed to complement energy-based market designs and ensure long-term generation adequacy. The introduction of a CM has an impact, both in the implementing but also in interconnected neighbouring countries. Hereby, the participation of non-domestic capacity at the CM through interconnection to enhance generation adequacy is often only limited or not at all possible. Current discussion is mostly based on qualitative studies. The possible joint impacts are discussed applying economic theory and transferred experience from world-wide implementations. This paper introduces an equilibrium model that allows for quantitative studies directly aiming on the possible interaction on interconnected countries with no, different or equal market designs including CMs. Changing market settings and increasing interconnection capacities can be researched to underpin the qualitative discussion. The cross-border effects are studied that arise if harmonization of CM or cross-border participation are neglected. A case study simulates two interconnected countries in a symmetrical set up to trace down the changes in the results to changes of market design and interconnection capacity. Results show that the change of market design in neighbouring countries has a strong impact on domestic generation adequacy. Increased interconnection capacity can have counter-intuitive effects on the overall generation adequacy.

Capacity remuneration mechanisms and the transition to low-carbon power systems

Market designs in their current form are facing challenges triggered by the increase of injection from renewable energy sources (RES). Insufficient remuneration of conventional generators in an energy-only market may lead to inadequate generation mixes to cover peak demands and balance intermittent RES injection. Various corrective actions to the market designs are discussed, amongst them capacity remuneration mechanisms (CRMs). In this paper, a model is applied to compare the outcome of an energy-only market, strategic reserves and a capacity market. The comparison is done based on total cost paid to the electricity generators, installed capacities and occuring load shedding. The total costs are split up into energy-based payments (e/MWh), subsidies for RES and capacity-based payments (e/MW). The results show that origin of remuneration change with the chosen market design and lead to different generation mixes. Total cost increase with a CRM. However, taking into account load shedding, the increase of cost must be weighted with indirect costs of energy non-served.

Asymmetry of information and demand response incentives in energy markets

The price set in electricity markets is given by the intersection of supply and demand during a given time period. The demand-side has traditionally been a price taker while the supply-side actively adjusts the output of the market clearing unit to fluctuations in consumption. Currently, there is a transition toward active demand participation that can adequately respond to market conditions. However, private knowledge of demand adjustments, such as the impact of modifying behavior or the availability to do so, creates asymmetry of information between the active supply side and the passive demand. This paper proposes a revelation mechanism that will prompt the demand-side to choose the best option for themselves among a menu of incentives. Rational behavior of consumers implies that demand will only shift when the benefit of doing so is higher than the costs of modifying consumption patterns. Given differences among demand participants and the objectives of the market operator, an analysis of the rationale of each market agent shows the feasible options for demand incentives. This study enables the design of appropriate market mechanisms aimed to discover customer categories and determine the adequate incentives for each case.

Myopic optimization models for simulation of investment decisions in the electric power sector

Generation expansion planning models optimize investment and operational decisions over a time horizon of multiple decades, thereby typically assuming perfect foresight (PF). Recently, myopic optimization models, in which the foresight is restricted to a certain period, have been suggested to more realistically simulate the short-sightedness of investment decision makers. The literature has shown that the modeled level of foresight can have a significant impact on the results obtained. However, the literature does not contain an in-depth analysis of the investment decision making process in myopic optimization models. As a result, the implications of using myopic optimization models to simulate the decision making of private agents in liberalized electricity markets are unclear. This paper provides fundamental methodological insights into the decision making in both PF and myopic optimization models. The projections, at the time the investment decision is made, of the short-run profits that can be obtained by investing in a generation asset are analyzed in this regard. This analysis reveals a major limitation of the decision making process in myopic optimization models, i.e., the approach does not extrapolate trends, in terms of changes in the projected SR profits, expected within the window of foresight to later periods. This leads to decision making which cannot be considered to reflect reality.

Innovation by Distribution System Operators: More than a question of remuneration

The energy sector is undergoing a structural transition due to the increasing share of Distributed Renewable Energy Sources. One of the main stakeholders is the Distribution System Operator (DSO) because of the massive investments that are needed at DSO level. Despite the urgency, studies show a declining DSO investment effort indicating that barriers exist that hamper innovative investments by DSOs. The goal of this article is to explain the link between innovation, investments and the regulatory framework. Relevant financial, structural and behavioral barriers are discussed and their underlying dimensions are clarified. Suggestions are made how the regulatory framework could support DSOs innovative behavior and resulting investment decisions. This study supports the view that the regulatory framework is able to facilitate innovation by using an integrated approach combining both financial and non-financial measures.

Best-practices for district heating implementation in Belgium: Policy analysis and benchmark from countries with high market penetration

District Heating (DH) is an essential technology in a low carbon society to attain the CO2 reduction targets of a country. Nevertheless, the implementation of DH is unevenly distributed across Europe. While some countries, like Denmark and Sweden, count with a mature heat market and a spread deployment of DH, some other countries, such as Belgium, have only installed specific projects until now. For an efficient DH implementation, the techniques and best-practices employed by the already developed countries must be evaluated and adapted to each particular regional and local circumstance. In this paper, the policy framework at the moment of starting the DH market in Denmark and Sweden is analyzed and benchmarked with the current Belgian situation. Both countries, Sweden and Denmark, initiated with a long term energy plan and clear supporting measures to enforce DH. On the contrary, Belgium does not yet count with a plan at national level, although some cities are taking the lead and the initiative in this field. The options to ensure the economic feasibility of the DH projects and to promote market penetration in Belgium are explored as well.