Emilie Rosenlund Soysal

Barriers for district heating as a source of flexibility for the electricity system

The Scandinavian countries Denmark, Norway and Sweden currently deploy large amounts of variable renewable energy (VRE) sources, especially wind power. This calls for additional flexibility in the power market. The right coupling to the underlying national and local district heating (DH) markets can generate large amounts of flexibility. However, regulatory barriers and different energy market designs may hinder the potential benefits from system integration, and lower the potential that can be realized. The Scandinavian countries have a large extension of DH with a good potential for providing flexibility services to the electricity market. We survey and discuss regulatory barriers and drivers for exploiting this potential for flexibility. Combined heat and power (CHP) is widely integrated in the power market, but it is threatened by low electricity prices due to the increasing amounts of wind power. Power-to-heat technologies, electric boilers and heat pumps are blocked by high tariffs and taxes. A calculation of the heat costs of different DH technologies demonstrates that, under the present price and tax conditions in Denmark and Sweden, CHP and power-to-heat are unable to compete with heat-only boilers that use tax-free biomass.

Regulatory barriers for activating flexibility in the Nordic-Baltic electricity market

The rapid growth of variable renewable energy (VRE) and the expected decrease of conventional generation capacities will generate more flexibility needs in power systems and require flexibility resources to be activated. Flexibility potentials do exist, whether they refer to installed generation, load adjustment or to a greater coupling to other energy sectors. In this paper, we identify the framework conditions that influence the provision of VRE-friendly flexibility in the Nordic and Baltic electricity sector, i.e., the market and regulatory settings that act as drivers or barriers to flexibility. We find that the most restrictive barriers against flexibility are emitted by public authorities as part of broader policy strategies. Overall, we find that current regulatory and market framework conditions do not hinder flexibility. However, despite that, flexibility remains limited due to a lack of coherent instruments intended to both the demand and supply-side to effectively act flexibly.

Intraday market asymmetries — A Nordic example

While the majority of electricity in the Nordic and Baltic countries is traded at the day-ahead market, producers and consumers can use the intraday market to adjust their production commitments according to updated forecasts closer to the time of delivery. This reduces the need for balancing, particularly important for VRE producers, but it also means that the price formation at intraday market can change optimal bidding strategy in the day-ahead market. Through econometric modelling of intraday price premiums, this paper investigates intraday price asymmetries, which potentially can lead to strategic bidding. The intraday market is per definition symmetric, as prices for power sales always correspond to prices for power purchases, however, we find that this symmetry is not reflected in the price structure in regards to the total load adjustment needs.

Design of grid tariffs in electricity systems with variable renewable energy and power to heat

Large shares of variable renewable energy (VRE), requires flexibility solutions are developed. Considerable flexibility potentials exist from large consumers, e.g. power-to-heat (P2H) in district heating (DH). However, the existing grid tariffs obliterate the price signals from the wholesale electricity market and diminish the business cases for these technologies by increasing the costs of their electricity consumption. With the present tariff structure, only a very small part of the flexibility potential is deployed or operated flexible. In this paper we compare two different grid tariff designs that facilitate more flexible energy demand of DH operators. This is illustrated by a case study of Denmark that clearly demonstrates that the introduction of innovative tariffs will improve the business case for flexible P2H technologies and increase the value of VRE. In this way larger flexibility potentials can be induced and larger shares of VRE become integrated in the energy systems.

Experiences with auctions for renewable energy support

Auctions is an increasingly popular instrument for introducing competitiveness in the support schemes for renewable energy, however, designing successful auctions appears to be a challenge. Policy makers seeking to introduce auctions are faced with a range of design choices, which may affect the auction outcome significantly. This paper investigates the past experiences with auction implementations in 13 countries. We highlight popular design choices and evaluate auction performances based on a set of assessment criteria. We find that as a market-based support mechanism auctions can help driving down support costs, however, they are also prone to design errors. Adjusting the auction design to the specific conditions (national and marked) is a key parameter for success.