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Clean energy and the role for regulators
 

Clean energy and the role for regulators

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This session explains how clean energy has impacted on the economic regulation of the energy sector. The discussion starts with how the role of the regulator is defined, the differences in legal ...

This session explains how clean energy has impacted on the economic regulation of the energy sector. The discussion starts with how the role of the regulator is defined, the differences in legal mandates for regulators in different jurisdictions, and the trade-offs regulators need to make in balancing the various, often competing, objectives set out in statute. This will then be followed by a discussion on how clean energy policy has resulted in major changes to the energy sector, and how regulators are responding. The regulatory responses include market design issues, addressing network investment, system operation issues and stimulating innovation to facilitate cost effective clean energy.”

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    Clean energy and the role for regulators Clean energy and the role for regulators Presentation Transcript

    • Clean Energy and the Role for Regulators Garrett Blaney Commissioner Commission for Energy Regulation Clean Energy Regulators Initiative Webinar Programme 5 December 2013
    • What is the role of a regulator? Appeal and/or Legal challenge Industry/ Capital Markets Legislation Economic Energy Regulator Consumers Government Policy
    • Typical Regulatory Objectives • • • • • the lights stay on the gas continues to flow prices for energy are fair and reasonable Complying with environment policy and laws Best practice regulatory processes
    • The Energy Trilemma Price Security Environment
    • The impact of clean energy • The wholesale market • The Transmission System • The Distribution System • Retail
    • European Renewable Electricity Targets for 2020
    • The Cost of Renewables 600 500 €/MWh 400 300 200 100 0 Hydro Wind Biomass Biogas and waste Photo-voltaic Geo-thermal
    • The Wholesale Market
    • European Context Creating the Single Market • Interconnectors historically underused, markets segmented • Uneconomic cross border flows undermine EU energy policy goals of sustainability, competitiveness and security of supply • EU has addressed this by forging an internal market in electricity to form part of single European market in goods and services
    • European Context Creating the Single Market (2) • 1st and 2nd electricity liberalisation packages (1996 and 2003): – Some success but price correlation between regional markets remained poor and cross border capacity was inadequate or inefficiently used • 3rd electricity liberalisation package (2009): – Establishment of ACER and ENSTO-E – harmonisation of market rules - market coupling – increase in physical cross border investment • Target Model – end 2014 – SEM derogation to end 2016
    •  Market Integration 2000 Implicit auctions Only explicit auctions Other methods Nord Pool
    •  Market Integration 2006 Implicit auctions Only explicit auctions Other methods
    •  Market Integration 2010 Only explicit auctions Other methods Implicit auctions APX EMCC CWE
    •  Market Integration 2014? Implicit auctions Only explicit auctions Other methods Euro Pool
    •  Market Coupling 2016 Implicit auctions Only explicit auctions Other methods Euro Pool
    • Different Market Designs • • Gross Pool markets are centrally dispatched with TSOs deciding centrally on generator running order Bilateral markets like those in Britain and continental Europe are self dispatch, where TSOs only balance the system close to real time SEM British Market
    • European Target Model Long-term allocation Day-ahead implicit auctions Intraday continuous trading Zone delineation Capacity calculation How it works… Common cross-border arrangements The interaction between the two should encourage harmonisation Diverse national arrangements Cross-border balancing
    • Forward Capacity Allocation • Rules for calculating and allocating cross border capacity – Auction Rules – Allocation Platforms • Cross Border Risk Hedging and Firmness – Physical Transmission Rights (PTRs) with UIOSI – Financial Transmission Rights (FTRs) – Other hedging tools if sufficient liquidity exists
    • Day Ahead Market Coupling • • • • Centrepiece of the Target Model Links separate day-ahead spot markets using cross-border (XB) transmission capacity It is an “implicit auction” – meaning cross border capacity allocation is integrated with the energy market (‘explicit auctions’ sell capacity separately) Common prices between spot markets when there is sufficient capacity
    • Market Coupling (2) If there are XB capacity constraints, these will limit the flows between the coupled markets and a price difference will persist
    • Hourly Capacity Utilisation - Explicit CAPACITY UTILISATION 100% Wrong direction A to B 0% B to A Wrong direction 100% A >> B A=B A << B PRICE DIFFERENCE 21
    • Hourly Capacity Utilisation - Coupled Optimal utilisation (same price unless congested) CAPACITY UTILISATION 100% A to B 0% B to A 100% A >> B A=B A << B PRICE DIFFERENCE 22
    • Future Issues – Capacity Mechanism • • Target Model is being finalised and is due to be implemented by 2014 But, in parallel several Member States have or are considering CRMs – Generation Adequacy– e.g. German nuclear closures and LCPD impacts – Missing money problem – Impact of RES on energy only markets
    • Does Clean Energy need Support? • • • • Limits of Energy Only market (marginal cost) High Capex, Low Opex Reducing cost of capital Regulatory/Policy Certainty
    • Elements of Market Dysfunction • Cheap Coal from US • Dropping gas demand • Good Utility/Bad Utility – security of supply? • Nuclear Support • Cost competitiveness for large industry
    • The Transmission System
    • Grid Roll-out • Much wind in west, demand in east • Rolling out the grid is critical to meeting 2020 renewable target • EirGrid has major Grid 25 plan • Over €1 billion in grid investment allowed by CER from 2011 to ‘15 • Planning and land access are a major challenge
    • DS3 Project Delivering a Secure, Sustainable, Electricity System (“DS3”) – integrating wind while maintaining secure operation of system • 75% instantaneous wind penetration; • Greater flexibility from conventional plant (existing & new); • RoCoF settings • Keep curtailment to “bankable” levels i.e. 5% • Better wind forecasting, real time data and controllability; • Demand Side Management; • Cost & Benefit to consumers
    • System Non-Synchronous Penetration (SNSP) 50% SNSP 75% SNSP
    • The Distribution System
    • Changes to DSO • New technologies such as embedded (e.g. micro) generation and electric vehicles • Smart grids • Smart metering • Demand Side participation • Ancillary service provision and flexibility
    • DSOs Issues for Regulators • • • • • • Distribution tariffs Promoting innovation The scope and extent of DSOs functions Price controls and incentives Data handling and protection Future unbundling/separation requirements
    • The Retail Market • • • • • • Green Tariffs Changing Consumption Behaviour Smart Meters – Static or Dynamic ToU Tariffs? Microgeneration Issues Consumer Confusion & impact on competition EV integration
    • Conclusions • Regulatory Change Needed to Delivery Green Targets: – Wholesale market evolution – Public Friendly Transmission Investment – New Role for DSO – New Engagement with Consumers