Olga Gore

Capacity market in Russia: Possibilities for new generation entry and cost of CRMs

While many European countries are implementing different capacity remuneration mechanisms (CRMs) or capacity markets, the Russian electricity industry faces the consequences of the capacity market with CRMs, i.e. capacity oversupply. Russia introduced the capacity market and CRMs for new capacity construction in 2011. Ideally, old inefficient generation should have exited the market leaving new and efficient ones. However, high number of “must-run” power plants that cannot be excluded in the capacity auction and overestimated capacity demand have led to an oversupply of capacity. In this paper we estimate the capacity market clearing price based on sloping demand and supply functions as well as test the possibility of new efficient generation entry. The outcomes of the model are used to predict the consumer capacity price peak due to CRMs and to conclude on efficiency of implementing sloping capacity demand curve in capacity auctions.

Electricity production as an effective solution for associated petroleum gas utilization in the reformed Russian electricity market

Russia leads the list of countries in which most flaring occurs, with an estimated 15-37 BMC of associated petroleum gas (APG) being burned in Siberian oil fields annually. In view of the environmental impact of flaring and ineffective use of energy resource, fees for flaring are being increased from 2012. Significantly increased fines pose a challenge for oil producers, which have focused only on oil production. A number of solutions for utilizing APG are currently used in Russia: processing of APG in gas processing plants, re-injection of gas back into the oil field, and production of heat and power for the needs of the oil industry. These commonly used options for APG utilization are analyzed and discussed in this paper, taking into account the specific features of the Russian oil and gas market and barriers presented by monopolies in the gas export and gas processing industry. Analysis of the utilization options indicates the appropriateness of APG as a fuel for effective power production within Russias reformed electricity market.

Impacts of unilateral capacity remunerative mechanisms on cross-border electricity trade

This paper focuses on the impacts of capacity remunerative mechanisms (CRMs) on electricity cross-border trade. As an example case, we focus on the cross-border electricity trade between the Nordic and Russian electricity markets. These two markets have distinctively different market designs. The Nordic market is an energy-only market that rewards the electricity generators for the output they produce. The Russian market rewards generators for the output and availability of electricity generation. We analyse the prospects for the cross-border electricity trade between the two markets. Our findings suggest that the different market designs notably reduce the cross-border electricity trade between the two markets and also have significant impacts on the distribution of welfare amongst the consumers and producers. These results have significant implications because many European countries are currently considering unilateral CRMs. An obvious threat is that the particularly uncoordinated CRMs cause impediments to the cross-border electricity trade, and result in inefficient use of the interconnectors. Such a development could severely hinder the achievement of the internal electricity market in Europe.

Barriers and opportunities for new market players in the Russian power sector

Provision of adequate supplies of electricity is one of the most challenging policy issues in the recently restructured Russian electricity market. In 2008 a decision was taken to develop a capacity market in order to ensure reliability of supply and timely investments. At the time, Russia experienced a considerable capacity deficit and thus waiting for market-based investments was not a viable option. For this reason, obligatory investment programs were launched. The programs close the market from new entrants, distort competition and make it impossible to attract investments in a market-based manner. This paper highlights the trade-off between designing a market that can ensure the timely development of new generation, through the introduction of capacity delivery agreements (CDAs), and running the power system as efficiently as possible. Introduction of CDAs seems to eliminate the risk of supply scarcity and ensures the development of new generation. However, it creates real threats to competition and the efficiency of the power sector.

100 % renewable energy system - challenges and opportunities for electricity market design

How energy is produced and consumed affects the whole society and cannot be dealt with as solely technical or economical issue. In this paper we look at the renewable energy systems in year 2050 through society scenario descriptions. We describe a framework for electricity market design in four transformative, qualitative scenarios and assess of possible market design outcomes. In the process, we highlight the key issues in determining applicable market designs.

Profit Optimization of the Cross-Border Trade Between the Nordic and Russian Electricity Markets

Europe aims for internal market in electricity. The target is to ensure the efficient use of interconnections, increase in social welfare and electricity price convergence. However, different market designs across Europe may create a threat to the efficiency of market integration. This paper presents results of a case study of the current operational principles of cross-border trade between Russian energy+capacity market and Nordic energy-only market. The results suggest that interraction of markets with different designs may lead to the non-optimal use of the interconnection.