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Electricity Economics
This document discusses the electricity industry in Russia. It provides details on the history and structure of the electricity sector in Russia, including: 1. The United Power System (UPS) is the 4th largest electricity market in the world with 700 generating plants and installed capacity of 220 GW. 2. In the 1990s and 2000s, Russia reformed and restructured its electricity industry, splitting the formerly state-owned monopoly RAO UES into separate generating and grid companies. 3. Most power plants were built in the 1960s-1970s and have low efficiency ratios, highlighting the need for new investment in the industry.
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Electricity Economics
- 1. International business The electricityindustry Silvester van Koten PAHX CERGE-EI Florence School of Regulation
- 8. Transmission Principles of Transmission, applied to the EU transmission network 1. Line limits 2. Principles of dispatch 3. Role of frequency in ac lines and stability requirements 4. Transmission shortage, the internal market and the 2050 carbon targets
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- 17. Industrial consumers Transmission Other countries Distributors Power Plants Residential consumers: Households
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- 20. Baseload Large coal plants
- 21. Baseload Nuclear plants
- 22. Peaker Oil burning plants
- 23. Wind turbines Solar panels Renewable energies
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- 25. Peaker Gas burning plants OCGT CCGT http://iea-etsap.org/web/Highlights%20PDF/E02-gas_fired_power-GS-AD-gct%201.pdf
- 27. Multitude of generationtypes • Trade-off: – Economics of scale Baseload power plants • High fixed cost • Low variable costs – Flexibility • Low fixed costs Peaker power plants • High variable costs
- 28. Fixed cost per Variable cost MWh per MWh Baseload 40 0 Peaker 10 50
- 29. Peaker 60 40 Baseload 10 0 Capacity factor 60% 100% (=8760 hours/year) Fixed cost per Variable cost MWh per MWh Baseload 40 0 Peaker 10 50
- 30. Peaker 60 40 Baseload 10 0 Capacity factor 60% 100% Use peakers Use baseload when capacity when capacity factor < 60% factor > 60%
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- 32. Very expensive tobuilt a plant for only 87 hours! Cost? $1050/MWH (=100*10+50) 0 1% =87 hours
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- 34. Can price-spikes beavoided? - Cap the price, eg at $1000/MWH
- 35. Cost is $1050/MWH > price cap 0 1% =87 hours ?
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- 37. Cost is $1050/MWH > price cap 0 1% =87 hours ?
- 38. Can price-spikes beavoided? - Cap the price, eg at $1000/MWH - Capacity market - Pay power plants for being prepared to generate, even if they are not called upon
- 39. Income of apower plant: - Price of electricity - Capacity payments (reserve)
- 40. Setting of thewholesale electricity Price
- 41. Uniform price auction $/MWH Baseload plants Peaker plants (MC=0) D S=MC 80 PROFITS!
- 42. Uniform price auction $/MWH Baseload plants Peaker plants (MC=0) D S 80
- 43. Uniform price auction $/MWH Baseload plants Peaker plants (MC=0) D S 80
- 44. Uniform price auction $/MWH Baseload plants Peaker plants (MC=0) D S 80 60
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- 46. Wind turbines Solar panels Renewable energies
- 47. Greenhouse gasses heatup the earth Abate CO2
- 48. 2020 Targets: 20%decarbonization 2050 Targets: 80% decarbonization
- 49. Wind turbines Solar panels Renewable energies
- 51. Retire 1 coalor CCGT plant =(500 MW conventional) Install over 1000 wind turbines =(3000-5000 MW wind or solar)
- 52. • Wind andsolar needs conventional backup • Firm capacity 10%-15% http://ejournal.windeng.net/3/01/GGiebel- CapCredLit_WindEngEJournal_2005_right_links.pdf
- 54. Wind generation inGermany http://www.pnl.gov/main/publications/external/technical_reports/PNNL-19225.pdf
- 55. Feed-in tariffs Case of Germany 2004 2012 0.50 €/kWh 0.20€/kWh Coal or gas plant costs 0.04€/kWh
- 56. €/kWH Uniform price auction D S=MC 0.10 0 -0.10
- 57. €/kWH Uniform price auction Negative electricity wholesale price in Germany! D S=MC 0.10 0 -0.10
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- 59. Electricity prices 2001-2012 €24 billion deficit Czech Germany Spain Republic http://epp.eurostat.ec.europa.eu/portal/page/portal/energy/data/main_tables
- 60. EU Electricity industryAssociation
- 62. Need for long-distancetransmission
- 63. Hydro-plant and pumpedstorage
- 64. Hydro-plant and pumpedstorage
- 65. Hydro potential Need forlong-distance transmission
- 66. Need for long-distancetransmission
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- 68. Industrial consumers Transmission Other countries Distributors Power Plants Residential consumers: Households
- 69. September 28th, 2003 Hugeblackout cripples Italy!
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- 71. 110 trains stoppednight” Rome’s “white Thousands of people stuck
- 73. Sils-Soazza Tree flashover! “Cross-border transmission lines” Mettlen- “Interconnectors” Lavorgo 03:01
- 74. Sils-Soazza Tree flashover! Mettlen- Lavorgo 03:01
- 75. Sils-Soazza Mettlen- Lavorgo 03:01 03:01-03.16
- 76. The Swiss TSOoperator asks the Italian TSO for countermeasures TSO= Transmission System Operator 03:11
- 77. Sils-Soazza Tree flashover! Mettlen- Italy reduces Lavorgo import by -300 MW 03:25 03:21
- 78. Sils-Soazza Tree flashover! Mettlen- Lavorgo 03:25
- 79. All interconnectors are automaticallydisconnected 03:26
- 82. 1. Transmission lineslimits 2. Dispatch 3. Frequency and synchronicity 4. Transmission shortage in the EU
- 83. Transmission lines limits Sils-Soazza Tree flashover! Mettlen- Lavorgo 03:01
- 84. Transmission lines limits flashover
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- 86. Transmission lines limits High load Sagging of the line
- 87. 1. Transmission lineslimits 2. Dispatch
- 88. Dispatch Sils-Soazza Mettlen- Lavorgo 03:01
- 89. Dispatch Net Injection: Injection: 50MW 100MW Injection: 20MW ? A B Withdrawal: Net Withdrawal: 50MW Withdrawal: 70MW 50MW
- 90. Dispatch Net Injection: 50MW Physical flow: 50MW A B Net Withdrawal: 50MW
- 91. Dispatch ∆-10MW Net Injection: 50MW 40MW ∆ -10MW Physical flow: 50MW 40MW A B ∆ -10MW Net Withdrawal: 40MW 50MW
- 92. Dispatch Net Injection: 40MW Physical flow: 40MW A B Electricity cannot just be “send” somewhere Net Withdrawal: Any flow is the RESULT of the 40MW injection and withdrawals
- 93. The Swiss TSOoperator asks the Italian TSO for countermeasures Dispatch is done by national TSOs 03:11
- 94. Dispatch Sils-Soazza Mettlen- Italy reduces Lavorgo import by -300 MW 03:25 03:21
- 95. 1. Transmission lineslimits 2. Dispatch 3. Frequency and synchronicity
- 96. Frequency and Synchronicity DirectCurrent (DC) Alternating Current (AC)
- 97. Frequency and Synchronicity 50 Hertz Alternating Current (AC)
- 98. Frequency and Synchronicity Doesa lamp in your house receive zero energy 100 times a second and is thus blinking? Raise your hand if you think that this is indeed the case.
- 99. Frequency and Synchronicity 50Herz is the frequency in Europe
- 100. Frequency and Synchronicity Ashortage of generation makes the frequency fall Slight shortage
- 101. Frequency and Synchronicity Asurplus of generation makes the frequency rise Slight surplus
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- 107. All generators aresynchronized UCTE = Continental Synchronous Area
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- 109. •Azerbaijan, Belarus, Georgia,Kazakhstan, Moldova, Mongolia, Ukraine •Armenia •Latvia, Lithuania, Estonia •Uzbekistan, Tajikistan •Kazakhstan, Kyrgyzstan? http://so-ups.ru/index.php?id=ees
- 110. Frequency and Synchronicity All interconnectors are automatically disconnected 03:26
- 111. Frequency and Synchronicity Minicircuit breakers
- 112. Frequency and Synchronicity Highvoltage circuit breakers
- 113. 1. Transmission lineslimits 2. Dispatch 3. Frequency and synchronicity 4. Transmission shortage in the EU
- 114. The future ofthe EU transmission network Interconnectors very high loaded at night! 03:26
- 115. The future ofthe EU transmission network Internal EU market induces increase in cross-border trading
- 117. The future ofthe EU transmission network Massive deployment of wind and solar energy
- 118. The future ofthe EU transmission network European 2050 Climate Increase from Foundation 34 GW to 127 GW Increase of almost 400%
- 119. Industrial consumers Transmission Other countries Distributors Power Plants Residential consumers: Households
- 120. Market organization andregulation Industrial consumers Other countries Transmission Distributors Power Plants Residential consumers: Households
- 121. 3. Market organization and regulation
- 122. Transmission: large returnsto scale Natural monopoly State monopoly
- 124. Vertically integrated Power Plants electricity Utility State Transmission monopoly Distributors
- 126. Vertically integrated Power Plants electricity Utility State Transmission monopoly Distributors
- 127. Competitive Open to the Power Plants market! Remains a monopoly Transmission Needs regulation: • Cost+ • Tariff • Benchmarking Distributors
- 128. 2003 and 2009Electricity laws (2003/54/EC and 2009/72/EC) • Separation from networks and generator activities • Non-discriminatory access of generators to networks • “EU regulator”: ACER
- 129. Most EU consumersno longer protected by electricity price regulation!
- 130. How is theelectricity price then determined? Competition But… Competition must work
- 131.
- 132. Well-developed financial electricity market - Exchanges and OTC - risk management
- 133. Financial market manipulation • US hedge fund, Amaranth Advisors LLC held 1. gas derivates at ICE and OTC markets 2. Gas futures on NYMEX • Then sold the gas futures on NYMEX to affect the settlement price at ICE and OTC markets • Profit: $60m-$170m
- 134. REMIT • Regulation on Energy Market Integrity and Transparency • Forbids: – Market abuse – Insider trading • Monitoring task for National Regulaturs and “EU regulator” ACER
- 135. 2003 and 2009Electricity laws (2003/54/EC and 2009/72/EC) • Separation from networks and generator activities • Non-discriminatory access of generators to networks • “EU regulator”: ACER • 2020 goals: 20% renewable energy in 2020 – Feed-in tariffs – Emission Trading Scheme
- 136. Greenhouse gasses heatup the earth Abate CO2
- 137. EMISSION PERMIT MARKET Competition for permits Decisions on abatement A B C
- 140. • United PowerSystem (UPS): 4-th largest electricity market in the World. • 700 generating plants Installed generating capacity 220 GW
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- 142. Reform of thesystem 1992-2015 • 1992 United Energy Systems of Russia (RAO- UES) replaces soviet ministerial units • 1998 Anatoly Chubais president of RAO-UES. • 2003–2011 – restructuring and private ownership – Partial price deregulation • 2011 full competition in generation • 2015 price deregulation for retail conconsumers
- 143. RAO UES splitup in 2008 • OGK 1: http://www.ogk1.com/en/ • TGK 7: http://en.votgk.com/ • OGK 2: • TGK 8: http://www.tgk-8.ru/ http://www.ogk2.ru/eng/index.wbp • TGK 9: http://www.tgk9.ru • OGK 3: http://www.ogk3.ru/en- main/ • TGK 10: http://www.fortum.ru/company/ • • TGK 11: http://eng.tgk11.com/about/ OGK 4: http://eng.ogk-4.ru/ • TGK 12: http://www.kuzbassenergo.ru/eng/ • OGK 5: http://www.ogk-5.com/en/ • TGK 13: http://eng.tgk13.ru/ • OGK 6: http://www.ogk6.ru/en/ • TGK 14: http://www.tgk-14.com/ • GidroOGK: http://www.eng.rushydro.ru/ • IDGC North-West: http://eng.mrsksevzap.ru/ • TGK 1: • IDGC Ural: http://www.mrsk- http://www.tgc1.ru/en/home/ ural.ru/eng/company/ • • IDGC South: http://www.mrsk-yuga.ru/ TGK 2: http://www.tgc- 2.ru:8101/en/index.shtml • IDGC Center: http://www.mrsk-1.ru/ • TGK 3: • IDGC Center and Volga Region: http://www.mosenergo.ru/Eng/Defa http://www.mrsk-cp.ru/ ult.aspx • Manager of the unified transport network: • TGK 4: http://www.quadra.ru/ http://www.fsk-ees.ru/ • TGK 5: http://www.tgc5.ru/rus.html • Rosenergoatom: http://www.rosenergoatom.ru/ • TGK 6: http://www.tgc6.ru/index.php? id=news&L=1
- 144. Largest 3 foreigninvestors: • E.ON (Germany) • Enel (Italy) • Fortum (Finland)
- 145. Need for newinvestment • Most power stations built in 1960-1970 – Low efficiency ratio of 33-35% instead of 40-52% • Ministry of Energy: modernization program for generators of 10 trillion rubles up till 2030 – Increase in demand for equipment • Russian technology behind western standards – heavy duty gas turbines – ultra supercritical steam turbines – gasification – process control systems
- 146. Electricity consumption Russia,2007 Gigantic losses
- 147. Growth of electricitydemand
- 148. Competition problems • Noworking retail markets yet • Fair access to gas for fair and equal prices – Gas fired generators 40% of production – Newcomers often CCGT – Gazprom (75% share) seems to favor its own subsidiary generators • Financial energy market not developed – Risk management
- 149. Regulation • regulatory authority:the Market Council • But not independent, government: – control over most pricing issues – Veto over Market Council decisions
- 150. Industrial consumers Transmission Other countries Distributors Power Plants Residential consumers: Households