Gerard L. Doorman

The Effect of Large-Scale Wind Power on System Balancing in Northern Europe

Summary form only given. The on-going development in the electrical system and the transition from a mainly thermal dominated power system into a system, widely affected by renewable production resources, requires a revision of future balancing strategies facilitating the secure integration of renewable energy. Especially the increasing wind power penetration with its uncertain production on all time scales will largely affect the system operation, requiring a higher flexibility and thus more reserve capacity providing balancing energy.

Vulnerability analysis of the Nordic power system

A comprehensive methodology is developed for the analysis of power system vulnerability with respect to energy shortage, capacity shortage, and power system failures. The basic method is risk analysis, where risk is defined in terms of the probability of events and their consequences. The objective is to identify medium- and high-risk situations that require corrective actions. The method is applied to the Nordic power system. The results show that the system is in a medium-risk state, implying the need to consider various measures. With respect to energy shortage, the probability of extremely high prices over a sustained period of time is once every ten years for todays system and similar in 2010. With respect to capacity shortage, the vulnerability is expected to deteriorate toward 2010. With respect to blackouts, the risk is related to large blackouts in southern Scandinavia, involving many consumers. There is concern with regard to the future effect of changed maintenance routines and reductions in qualified technical personnel.

Experience with the Nord Pool design and implementation

The electricity industry of the Nordic countries went through a major restructuring during the 1990s. A wholesale market with significant competition has been established. Nord Pool was established in 1993 as a Norwegian electricity exchange, and extended its trade to Norway and Sweden in 1996. It thus became the worlds first multinational exchange for trade in electric power contracts, and presently it is the only truly international electricity market. There is one market operator, and there are five system operators. Each country has its own regulatory agency. There are no general cross border tariffs. In 2001, power contracts worth nearly NOK 412 billion, about 55 billion Euro, were cleared by Nord Pool, and the combined volume of contracts traded was 2769 TWh, that is more than seven times the physical consumption. An open market with a common framework has made the Nordic market the most liquid electricity market in the world. Three of the countries have full retail market access. Since deregulation of the electricity industry started, restructuring has taken place in all countries resulting in mergers and acquisitions. There is an ongoing concentration of ownership in the wholesale market, and the concentration of the production side causes concern.

Balancing Market Integration in the Northern European Continent: A 2030 Case Study

Increased production flexibility will be needed for the operation of a future power system with more uncertainty due to an increased share of uncontrollable generation from renewable sources. Wind energy is expected to cover a large portion of the future renewable generation. In this paper, a comparison is carried out between two balancing market models, simulating a non- and fully-integrated northern European market in a future 2030 scenario. Wind power is modelled based on high resolution numerical weather prediction models and wind speed measurement for actual and forecasted wind power production. The day-ahead dispatch and balancing energy markets are settled separately. First, the day-ahead market is modelled with simultaneous reserve procurement for northern continental Europe. Available transmission capacity is taken into account in the reserve procurement phase. In a second step, the balancing energy market is modelled as a real-time power dispatch on the basis of the day-ahead market clearing results. The results show the benefit of balancing market integration for the handling of variable production. Cost savings are obtained from balancing market integration due to less activation of reserves resulting from imbalance netting and increased availability of cheaper balancing resources when integrating larger geographical areas.

Capacity subscription: solving the peak demand challenge in electricity markets

In competitive power systems, investment in generation capacity is left to market participants. As a consequence, due to the special characteristics of electricity, power systems may become unacceptably unreliable during peak demand. One way to solve this problem is self-rationing, a variant of priority service, adapted to a competitive environment. With this concept, consumers subscribe to their anticipated demand for capacity during system peak conditions. When these conditions occur, the individual consumers demand is limited to subscribed capacity. This paper proposes capacity subscription, self-rationing in a competitive market, as a solution to the challenge of matching generation to peak demand. It is shown that this can be economically efficient. Some illustrations are given, and a framework for market implementation is outlined. Capacity subscription enables consumers to pay for their individual preferences for uninterrupted supply, thus making the generation adequacy aspect of reliability a private instead of a public good.

Modelling of prices using the volume in the Norwegian regulating power market

A statistical model of the regulating market based on the regulating volume is proposed. The modelling process is divided into two steps; a long term and a short term study. The long term study is based on recorded data for 5 years. This analysis provides a statistical model of regulating prices and volumes for the whole market for the considered period. The combination of the long term model with expected regulating states and volumes is used in order to generate short term scenarios of the regulating market. The regulating state determination uses a Seasonal Auto Regressive Integrated Moving Average (SARIMA) process. The regulating volume scenarios are generated by using the statistical properties of the regulating volume based on recorded data. The proposed model is based on data from southern Norway and the result is a model estimating the regulating prices using the estimated regulating volumes. The resulting model makes it possible to estimate regulating market prices under changing conditions, like those occurring when different national markets are integrated.

Market Price Calculations in Restructured Electricity Markets

In the traditional organisation of the power market, the generation Unit Commitment and Dispatch problem was solved as a cost minimisation problem. After deregulation of the electricity sector, the problem must be solved as a profit maximising problem. It is necessary to find feasible market prices. This is difficult, because simple marginal cost based prices not always cover startup and operation-independent costs, with the result that the generator would choose not to run with such prices. In this paper a market structure is proposed with a central market operator computing the market equilibrium for both energy and reserves, based on generator offers and consumer bids. It is shown that it is possible to find feasible market prices. Using a simple test system, it is shown that demand elasticity can have a profound impact on prices and generator revenues and profits during peaking hours.

Flow based activation of reserves in the Nordic power system

In the Nordic market, manually activated tertiary control based on bids for upward and downward regulation is used for system balancing. Although a system wide merit order list is used, the resulting regulation is suboptimal because of the congestion and the effect of losses, which are not taken into account. This paper proposes an algorithm for the dispatch of regulation resources based on an incremental DC optimal power flow formulation. The results of this model are compared with todays practice for some cases of up- and downward regulation, and a potential for cost reduction is observed. However, the method requires Automatic Generation Control that is not in use in the system, although it is presently evaluated. Also pricing of regulation is an issue, because Location Marginal Prices probably are unacceptable to market participants.

Optimal wind farm bids under different balancing market arrangements

If a wind power producer must pay the costs of imbalances, the question arises of what is the optimal bid, given the market rules and the statistical properties of the wind forecasts and the imbalance prices. In this paper we derive optimal wind power bids for two sets of market rules, reflecting previous and new rules in the Nordic power system. The optimal bids are based on the evaluation of a large number of scenarios for the realizations of the wind forecasts and the balancing market prices respectively. Scenario aggregation is used to limit the total number of scenarios. The wind forecast errors are described by a traditional ARMA model. The balancing market prices are described by a model that uses time series and statistical models of the volumes and prices on the balancing market. The optimal bid in the so-called 1-price system will normally be to either bid zero or maximum production. In the alternative 2-price system, the optimal bid will be close to expected production. For the particular case study in this paper, the optimal bid for the 1-price system gives an improvement in total revenues of 2.5%, while there is no observable improvement for the 2-price system. As such, the new system does give incentives to wind power producers to bid “correctly”. However, the total revenues for the wind park are reduced with 2% in the 2-price system, compared with the 1-price system.

Impact of large scale wind integration on power system balancing

With an increasing wind power penetration, more generation intermittency will be added to the power system, requiring higher flexibility and thus more regulating reserves. Based on high resolution numerical weather prediction models and wind speed measurements, the actual and the forecasted wind power production is simulated for five scenarios covering the years 2010, 2015 and 2020. These scenarios are taken as an input to an integrated northern European market model, analyzing the procurement of regulating reserves and their activation. Further on, the possible benefit of integrating the northern European regulating power markets for handling the intermittent production is investigated.