Rupert Hartel

Compressed-air energy storage power plant investments under uncertain electricity prices: an evaluation of compressed-air energy storage plants in liberalized energy markets

In this paper a combined approach is introduced, integrating electricity prices simulated with the help of a financial model into an optimization model that evaluates a compressed-air energy storage (CAES) plant investment. The financial model based on a regime-switching approach delivers suitable price paths. Based on these price paths, the optimization model maximizes the annual return of the CAES plant, taking bidding strategies on the spot and reserve power markets into account. A Monte Carlo simulation is carried out for the annual return, which, in turn, is used to determine the expected net present value (NPV). A negative NPV is obtained when applying an interest rate of 6%. Thus, the investment in current CAES plants is not attractive, as energy companies generally expect an annual yield over 8%.

Analysis of Structural Changes of the Load Profiles of the German Residential Sector due to Decentralized Electricity Generation and e-mobility

In this paper, a bottom-up energy demand model is applied to a scenario-based analysis of the load profiles of the German residential sector until the year 2040. This analysis takes into account the increasing diffusion of e-mobility and decentralized electricity generation and addresses questions such as: How much demand has to be met by the electricity supply system and what kind of structural changes in the load profile are to be expected. In order to assess the maximum contribution of decentralized electricity generation, a weekday in summer was chosen for the analysis. Assessing the future residential electricity demand on an hourly basis clearly depicts an increased volatility due to the shift in demand from night-time to daytime hours which is mainly caused by the greater number of ICT appliances. Furthermore, electric vehicles lead to a significant increase in the evening demand peaks. At the same time, electricity generation from photovoltaic sources can entirely compensate this additional demand by e-mobility, if decentralized electricity generation can be matched with the electricity demand via demand-side-management (DSM) or storage devices.

Market Design Options for Promoting Low-Carbon Technologies

The increasing share of electricity production from renewables is achieved by political promotion strategies like feed-in tariffs, which foresee payments for renewables outside of the electricity market. Assuming a phase out of the existing promotion strategies, the question arises if other or additional market design options for promoting low carbon technologies are necessary. In this paper, we have made an assessment based on the literature to identify possible market designs that are focusing on the promotion of low carbon technologies. The discussed options for altering the current market design range from providing greater certainty for future carbon prices, over capacity mechanisms for conventional as well as for renewable energy to a complete restructuring of the market design. The study shows that there seems to be three main tendencies to promote low carbon technologies, namely existing EOM with market add-ons for low carbon technologies, a separate market for low carbon technologies or an overall single market based on levelized costs.

Chapter 18 – Case Study: Design Options for the German Electricity Market

Abstract The reliability of the energy-only market (EOM) in Europe is currently heavily disputed. The primary reason for this is the so-called missing-money problem. Model-based analyses regarding the functionality of the EOM and selected capacity mechanisms indicate that capacity markets have the potential to provide investment signals that are necessary for a decarbonization of the electricity mix. But an appropriate parameterization of capacity markets is difficult and major changes in the electricity market design can unsettle investors and lead to additional risk premiums and transaction costs. Several opportunities exist to improve the functionality of the EOM. In the short term, the EOM could be extended by a strategic reserve to guarantee the security of supply. However, if the EOM does not work in the long term, despite the necessary and reasonable adjustments, a more comprehensive redesign of the electricity market needs to be considered. The introduction of a capacity market is one example of such a redesign.

Impact on Electricity Markets: Merit Order Effect of Renewable Energies

Abstract The increase in renewable energy sources has contributed to lowering electricity wholesale prices in many markets (although not necessarily retail prices) by causing a shift in the merit order curve and substituting part of the conventional generation, which has higher marginal production costs. This merit order effect, along with priority dispatch, can affect revenues of conventional power plants, especially in Member States experiencing rapid deployment of variable renewables. This chapter quantifies the merit order effect in 2030 and 2050 in European electricity wholesale markets by comparing electricity systems in a Reference and Mitigation Scenario for both years. Scenario results show that the reduction in wholesale electricity price between scenarios is on average €1.6/MWh and €4.2/MWh for 2030 and 2050, respectively. A simplified approach is also used to assess the impact of demand response on system costs.The increase in renewable energy sources has contributed to lowering electricity wholesale prices in many markets (although not necessarily retail prices) by causing a shift in the merit order curve and substituting part of the conventional generation, which has higher marginal production costs. This merit order effect, along with priority dispatch, can affect revenues of conventional power plants, especially in Member States experiencing rapid deployment of variable renewables. This chapter quantifies the merit order effect in 2030 and 2050 in European electricity wholesale markets by comparing electricity systems in a Reference and Mitigation Scenario for both years. Scenario results show that the reduction in wholesale electricity price between scenarios is on average €1.6/MWh and €4.2/MWh for 2030 and 2050, respectively. A simplified approach is also used to assess the impact of demand response on system costs.