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Perspectives on Benchmarking Central Grids

Perspectives on Benchmarking Central Grids. Prof. Per AGRELL CORE/IAG School of Management Université Catholique de Louvain BELGIUM. Presentation. Outline. Three central questions on benchmarking: Why? Whom? What?. TRADERS. CUSTOMERS. GENERATORS. GENERATORS. GENERATORS. GENERATORS.

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Perspectives on Benchmarking Central Grids

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  1. Perspectives on Benchmarking Central Grids Prof. Per AGRELL CORE/IAG School of ManagementUniversité Catholique de LouvainBELGIUM

  2. Presentation Stockholm 09.04.2002

  3. Outline • Three central questions on benchmarking: • Why? • Whom? • What? Stockholm 09.04.2002

  4. TRADERS CUSTOMERS GENERATORS GENERATORS GENERATORS GENERATORS GENERATORS GENERATORS GENERATORS DISTRIBUTORS OTHER TSO GENERATORS GENERATORS GENERATORS GENERATORS The European Electricity Market LEGISLATOR INVESTORS regulator transmission operator Stockholm 09.04.2002

  5. Key challenges for the regulator • How to provide the transmission service operator with • Motivation incentives • Cost efficiency • Coordination incentives • Technical efficiency Stockholm 09.04.2002

  6. Possible approaches • Laissez-faire • Monopolies under competition law (D) • Light-handed regulation • Selective intervention (S) • Relative norms • Pseudo-market arrangements (N, NL) • Absolute norms • Technical (ES) and ad hoc revenue caps (UK) Stockholm 09.04.2002

  7. Scope of the analysis • National • Sunk costs and PSO etc. can ultimately be paid by final demand. • International • Social obligations, past inefficiency and sunk costs may distort market effectiveness. Stockholm 09.04.2002

  8. Transmission is the key to the electricity market • The physical grid defines • the market place for supply and demand • The congestion management defines • market liquidity, reliability and • market power • The access pricing defines • market entry and future capacity Stockholm 09.04.2002

  9. Why benchmarking? • The TSOs are the backbone of the electricity market • their incentives and costs directly affect social welfare • The regulators are responsible for the implementation • they need to coordinate incentives and signals to achieve a coherent cooperation • national comparisons do not make sense • Benchmarking provides feasible and relevant estimates. Stockholm 09.04.2002

  10. TSO Benchmarking • Three central questions on benchmarking: • Why? • Whom? • What? Stockholm 09.04.2002

  11. The TSO is multi-tasking • Open access scheduling • Ensuring supply reliability • Congestion management • Real-time dispatching services • Grid planning • Ancillary services • Information provision • Financial settlements (administration, billing, ..) • Clearing energy markets • …. Stockholm 09.04.2002

  12. Market facilitator System operator Grid planner Grid constructor Grid maintainer Grid owner/leaser Central grid services Transmission services Stockholm 09.04.2002

  13. Independent system operator Transmission company Hybrid Wire company TO ISO WO PJM (US) Transelec (Chile) Statnett (N) ? Function and organization Market facilitator Systems operator Grid planner Grid constructor Grid maintainer Grid owner/leaser examples: Stockholm 09.04.2002

  14. Institutional compromise TSO Efficiency Controllability Externalities Independence Stockholm 09.04.2002

  15. Independence • Access rights • Capacity investments • Operations • Supply/demand implications • Independence requirement favors tight public control Stockholm 09.04.2002

  16. Efficiency • Information and motivation problems in • Public enterprises • Large structures • Organizations with unclear objectives • Market power • Allocative and productive efficiency favors privatization Stockholm 09.04.2002

  17. Task interdependency Stockholm 09.04.2002

  18. Externalities • Information • Investment reviews • Non-transmission options • Externalities favor integrated TSOs Stockholm 09.04.2002

  19. Controllability • Information asymmetry • Scope of operations • Comparability • Complexity of control • Controllability increases with unbundling Stockholm 09.04.2002

  20. New solutions for ISO/TO Stockholm 09.04.2002

  21. Whom to benchmark? • TSOs are heterogenous, integrated multi-output firms • they are constrained, empowered and incentivized in different ways. • externalites between tasks give different options • Benchmarking needs to • focus on a selected set of « TSO roles » to inform • acknowledge its partial information • Benchmark selected dimensions, but keep the big picture! Stockholm 09.04.2002

  22. TSO Benchmarking • Three central questions on benchmarking: • Why? • Whom? • What? Stockholm 09.04.2002

  23. Budget and impact Share of TSO budget Social welfare impact Grid planner Facilitator Systems operator Grid constructor Grid maintainer Grid owner/leaser Stockholm 09.04.2002

  24. Benchmarking scope • Input (unobserved/exogenous output) • Output (fixed/sunk input) • Process (complex system) • Procedures (ISO9000, control systems) • Incentive systems (int/ext contracts) • Competence (profile, training) • Cooperation (int. organizations, regulators) Stockholm 09.04.2002

  25. Benchmarking Construction and maintenance Market facilitator Systems operator Grid planner ECOM Grid constructor Grid maintainer Grid owner/leaser ECOM Stockholm 09.04.2002

  26. What to benchmark? • ECOM is a spotlight on construction and maintenance • the two roles are less complex. • ECOM will be complemented • models to address other activities • ECOM gives one service dimension, • together we will address some other Stockholm 09.04.2002

  27. Finally • Regulators and TSOs share the responsibility • A common goal • Different roles • Benchmarking is a strong incentive to aim for excellence. • Benchmarking is looking forward to find good local solutions to global challenges. Stockholm 09.04.2002

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