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“Investments to guarantee network reliability ” Robert Haffner Office for Energy Regulation DTe The Hague, 6 October 2004 comment on David Newbery Outline presentation Reliability of electricity markets Short term reliability of Dutch networks Instruments for regulation of quality

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Investments to guarantee network reliability l.jpg
“Investments to guarantee network reliability

Robert Haffner

Office for Energy Regulation DTe

The Hague, 6 October 2004

comment on David Newbery


Outline presentation l.jpg
Outline presentation

Reliability of electricity markets

  • Short term reliability of Dutch networks

  • Instruments for regulation of quality

  • Role of DTe

Long term security of supply

  • Security of supply in the Netherlands

  • Key policy issues


Netherlands has high reliability l.jpg
Netherlands has high reliability

Average interruption duration per client (unplanned and planned, minutes, 2001)


Differences in reliability between largest operators small l.jpg
Differences in reliability between largest operators small

Sectoral average 2001-2003 = 27 minutes


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Quality regulation on 3 levels

Instrument

  • N-1 /power quality

  • Decisions DTe

  • Capacity and quality plans

  • Measurement outages

  • Intervention Minister

  • Liability (BW)

  • Compensation (technical codes)

  • Tariff adjustment (q-factor)

Kind

Input

Process

Output


Ladder of outputregulation l.jpg

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage- high costs of legal procedures

Ladder of outputregulation:

Liability

Market price through negotiation for each client with damages


Ladder of outputregulation7 l.jpg

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage- high costs legal procedures

Ladder of outputregulation:

Liability

Market price through negotiation for each customer with damages

Compensation

Standard price for each

customer with damages

Advantage- transparent

Disadvantage- link between administration

outages and clients

- high administrative costs


Ladder of outputregulation8 l.jpg

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage- high costs legal procedures

Ladder of outputregulation :

Liability

Market price through negotiation for each customer with damages

Compensation

Standard price for each

customer with damages

Advantage- transparent

Disadvantage- link between administration

outages and clients

- high administrative costs

Advantage- works well for smaller customers/outages

Disadvantage- no direct relation between

compensation and damages

Tariff adjustment (q-factor)

Standard average price for

each customer


Ladder of outputregulation9 l.jpg

Advantage - `right` price through negotiation

- works well for large customers

Disadvantage- high costs legal procedures

Ladder of outputregulation :

Liability

Market price through negotiation for each customer with damages

DTe takes care of compensation and tariff adjustment;

liability claims are individual responsibility

Compensation

Standard price for each

customer with damages

Advantage- transparent

Disadvantage- link between administration

outages and clients

- high administrative costs

Advantage- works well for smaller customers/outages

Disadvantage- no direct relation between

compensation and damages

Tariff adjustment (q-factor)

Standard average price for

each customer


Optimal level of quality l.jpg
Optimal level of quality

Depends on:

  • Preferences consumers for quality

  • Costs of network operators to improve quality

  • Internalise external effect in regulation (q—factor)

  • Companies compete on quality

  • Equalize marginal costs and benefits of reliability



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Long term security of supply: policy issues

  • Allow markets to signal need for new investments

  • Develop demand responses

  • Beware of wholesale market manipulation

  • Improve functioning gas market

  • Provide predictable investment environment

    => Zero risk of black-outs very costly



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