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Creating the Internal Energy Market

Creating the Internal Energy Market. The Role of Wind Energy. Paul Wilczek Senior Regulatory Affairs Advisor – Grids and Internal Market The European Wind Energy Association. EWEA 2012 18 April 2012 .

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Creating the Internal Energy Market

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  1. Creating the Internal Energy Market The Role of Wind Energy Paul Wilczek Senior Regulatory Affairs Advisor – Grids and Internal Market The European Wind Energy Association EWEA 2012 18 April 2012

  2. Can the envisaged EU power market design up to 2014 integrate large amounts of wind power? Regulatory background: EU target model aims for EU market coupling and the creation of cross-border electricity markets at all timescales by 2014. Energy-only market Wind energy characteristics Variable Limited predictability Geographically dispersed Reduced capacity credit at large penetration • Generators’ revenues solely by selling power • Volatility of prices • System adequacy determined by scarcity prices • Demand response • Investments in generation

  3. Ongoing liberalisation and market integration efforts are promising, but… • Existence of imperfect power markets • Design • Regulatory implementation • Unfinished liberalisation -> Existing market distortions • Market concentration • Regulated prices • Market uptake and integration historically “voluntary”

  4. Overall market liquidity vs. biltateral trading remains low • Market rules in place not considering RES-E uptake

  5. Day Ahead Market integration – encouraging results so farin central western Europe • Convergence of prices • Reduced price volatility • Better use of interconnection capacity

  6. Day Ahead Market integration – Impacts for wind power • Aggregation of wind power forecasts from different control zones • Competition in different markets with a common merit order • MOE wind energy Source: IEA Wind, Task 25 Source: EWEA

  7. Intraday Market integration – much slower pace • Still far from enabling RES integration • Functioning Intraday Markets are the exception, not the rule across Europe • National intraday markets uptake is necessary first • Target model appraoch: continuous trading with implicit auctions • Design features “left out” from Target model such as e.g. gate closure timing and interactions with balancing markets • Design features need to consider • Liquidity measures • Harmonisation between countries and regions • Interactions with balancing markets

  8. Balancing Market integration – a white page so far • Technical differences of services and concepts across Europe is a challenge for market integration. • Current discussion focuses so far only on manually activated reserves • Possible roadmap: • Harmonisation of gate closures and technical characteristics • Regional pilot projects with x-b balancing trading • Case by case balancing market development under TSO consent • ACER FG on balancing and corresponding ENTSO-E network code only in the making

  9. Why are we talking about capacity markets ? • Motivation: Ensure investment/development of sufficient capacity • Variable RES tend to have low contribution to planning reserves • Variable RES tend to induce lower capacity factors from conventional units. • Business case for slow-ramping, inflexible power generation assets (typically mid-merit) seems to slip • High share of variable RES tend to increase • the need for flexible capacity

  10. Why are we talking about capacity markets ? Issues: • In theory, CM implementation is easy, in practise it is very complex • At your peril: further market distortion – examples of markets gone bad abound • Disincentivise investments in infrastructure and demand –side management Issues to be clarified: • Is there a capacity problem in the EU at all? • How much firm capacity do you get from variable RES in a Pan-european perspective? • How do you eliminate free riders and other externalities?

  11. Concluding: Market-related issues to be adressed To be solved on energy-only markets ideally with “no regrets”: • How can energy-only markets be made suitable for supporting the long term RES policy goals? • Increased price variability and lower average spot market prices might dampen investors appetite • Market transparency and cross-border integration • must be ensured • Provide for more market liquidity and a bigger • market place in general • New market forms (e.g. ancillary services) • might provide additional revenue stream • for generators without creating additional • market distortions -> Target Model 2.0 ? Short term <2014 Long term >2014

  12. Thank you EWEA 80 RUE D’ARLON B-1040 BRUSSELS T: +32 2 213 1811 F: +32 2 213 1890 E: ewea@ewea.org www.ewea.org

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