Energy Economics
• Presentations
• Literature
– Taylor, G., Tanton, T. 2012. The hidden cost
of wind electricity. American tradition institute.
http://www....
• How expensive are renewables
after all?
The technology behind crystalline
silicon solar cells has profited from
extensive developments in the multi-
billion-dolla...
• http://www.cityam.com/article/1392944530/how-free-markets-are-making-solar-energy-feasible-without-subsidies
http://cleantechnica.com/2013/12/16/solar-gird-parity-infographic-important-addendum/
http://solarcellcentral.com/cost_page.html
2013
€1-2/W
Capital costs of PV have fallen with 85%-90% since 1998
(from $12 -> $1-2 per Wpc)
http://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studien-und-konzeptpapiere/study-levelized...
• Refinements:
1. Explicitly model intermittent (solar+wind) +
backup
2. Model the value of electricity produced by
interm...
1. Explicitly model intermittent (solar+wind)
+ backup
• Wind and solar should better be seen as:
– Wind and solar + gas backup (round 90%)
– Wind and solar + coal backup (round...
• Taylor, G., Tanton, T. 2012. The hidden
cost of wind electricity. American tradition
institute. http://www.atinstitute.o...
Source: Energy Information Administration 2012 Annual Energy Outlook
Source: Energy Information Administration 2012 Annual Energy Outlook
• This report has shown that the cost wind
electricity is not approaching parity with
conventional sources, and is unlikel...
• Study applies to US
– 3% of energy generated by wind
• Germany
– Has higher wind penetration
– 7~8% of energy generated ...
2. Model the value of electricity produced
by intermittent generation
• Hirth, L. 2013. The optimal share of
variable renewables. How the variabiity of
wind and solar power affects their welfa...
Levelized costs:
Levelized value:
Where (exact):
Over lead
times
Over timesOver places
Approximation
• We define profile costs as the price spread between the load-
weighted and wind-weighted day-ahead electricity price for...
• wind “cannibalizes” itself because the
extra electricity supply depresses the
market price whenever wind is blowing
Remember how wind was cannabalized in the model of lecture W07.2F
• Profile cost: wind produces most when the price is low
• Profile cost: wind produces most when the price is low
• Balancing cost: forecasting errors
– wind produces is “out-of-b...
• Profile cost: wind produces most when the price is low
• Balancing cost: forecasting errors
– wind produces is “out-of-b...
European Climate
Foundation 2050:
• Increase from 34
GW to 127 GW
• 400% increase
The future of the EU transmission networ...
• Profile cost: wind produces most when the price is low
• Balancing cost: forecasting errors
– wind produces is “out-of-b...
• Cost change with penetration
(cannabilization effect)
• So far are theoretical models, what do the
numbers tell us?
– Use of a dispatch model, feeding realistic data
– Northwes...
3% 20%
Wind
Wind
If wind blew constantly
If wind was variable but
perfectly predictable
True situation
Note that losses due to
location (gr...
Assuming 30% fall in wind cost wrt today
• What is remarkable about this curve?
• Optimal wind share with doubling of:
– Coal price -> increases
– Gas price -> dec...
• Doubling coal prices -> optimal wind up by
5% points
• Halving gas prices (“shale gas”) -> optimal
wind down
• Doubling ...
• Doubling coal prices -> optimal wind up by 5%
pointsfive percentage points (Figure 17).
• Lowering gas prices by half (“...
Solar
• Even at 60% cost reduction, the optimal solar share is
below 4% in all but very few cases.
• Reason: the marginal ...
2013
€1-2/W
http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy-2013.html
• Energy revolutions
http://vaclavsmil.com/wp-content/uploads/scientificamerican0114-52.pdf
• Coal supplies more than 5 percent of
energy
– 1840
• fossil fuels (coal) surpasses use of
biomass (wood and charcoal)
– ...
• Oil supplies more than 5 percent of energy
– 1915
• Oil surpasses use coal
– 1964
Organization of
electricity markets
• Organization of electricity markets
1. Liberalization
2. Transmission pricing (Nodal versus Zonal)
• Organization of electricity markets
1. Liberalization
Kirchen. Chapter 1
Allow Independent Power Producers (IPP)
(US: PURPA law 1978)
Add wholesale competition
Add retail competition
Close to the present model in EU
(but wholesale market and transmission system
are separate)
Unbundling was a
process over
several years
S. van Koten, A. Ortmann
/ Energy Economics 30
(2008) 3128–3140
Unbundling was a
process over
several years
S. van Koten, A. Ortmann
/ Energy Economics 30
(2008) 3128–3140
Unbundling was a process over several years
S. van Koten, A. Ortmann / Energy Economics 30 (2008) 3128–3140
http://www.cer...
• Organization of electricity markets
1. Liberalization
2. Transmission pricing
• Nodal and zonal dispatch in meshed
networks
• Peak-load pricing
900MW
@20$/MWh
800MW
@50$/MWh
900MW
@20$/MWh
800MW
@50$/MWh
Nodal pricing Zonal pricing
A B
400MW 300MW 400MW 300MW
A B
A B
900MW
@20$/MWh
+ @35$/MWh
- (@-10$/MWh
400MW 300MW
@20$/MWh @20$/MWh
300MW
400MW 300MW
@20$/MWh @20$/MWh
300MW
Nodal p...
A B
900MW
@20$/MWh
+ @35$/MWh
- (@-10$/MWh
400MW 300MW
@20$/MWh @50$/MWh
200MW
400MW 300MW
@20$/MWh @20$/MWh
300MW
Nodal p...
A B
900MW
@20$/MWh
+ @35$/MWh
- (@-10$/MWh
400MW 300MW
@20$/MWh @50$/MWh
200MW
400MW 300MW
@20$/MWh @20$/MWh
200MW
Nodal p...
A B
900MW
@20$/MWh
+ @35$/MWh
- (@-10$/MWh
400MW 300MW
@20$/MWh @50$/MWh
200MW
400MW 300MW
@30$/MWh @30$/MWh
200MW
Nodal p...
40MW
A B
40MW
Limit: 50MW
Limit: 50MW
Net
Withdraw:
80MW
Net
Injection:
80MW
3 node network
A
B
Injection: 120MW
С
Demand: 120MW
Withdrawal: 120MW
70$/MWh
40MW80MW
40MW
Marginal Cost?
Dispatch with 3
nodes
30$/MWh
...
A
B
Injection: 120MW
С
Demand: 120MW
Withdrawal: 120MW
70$/MWh
40MW80MW
40MW
Dispatch with 3
nodes
30$/MWh
Limit: 500MW
Li...
Demand: 120MW
Withdrawal: 120MW
A
B
Injection: 120MW
С
Limit: 500MW
Limit: 20MW
40MW80MW
40MW
Injection: 60MW
20MW
20MW
60...
Demand: 120MW
Withdrawal: 120MW
A:40M
W
A
B
Injection: 120MW
30$/MWh
С
Limit: 500MW
Limit: 20MW
70$/MWh
A:80M
W
A: 40MW
So...
A:40M
W
A
B
Injection: 120MW
30$/MWh
С
Limit: 500MW
Limit: 20MW
70$/MWh
A:80M
W
A: 40MW
Solution 3:
Counter flow &
proport...
• Up till 60MW from A no problem
A
B
Injection: 60MW
30$/MWh
С
Limit: 500MW
Limit: 20MW
70$/MWh
A:20MWA:40MW
A: 20MW
Limits
Demand: 120MW
Withdrawal: 60MW
A: +⅓ MW
A: 20MW
A
B
Injection: 60MW
30$/MWh
С
Limit: 500MW
Limit: 20MW
70$/MWh
A: 40MW
A: 20MW
Limits
+1 MW
B: + ⅓ MW
+1 ...
A:+10 MW
A: 20MW
A
B
Injection: 60MW
30$/MWh
С
Limit: 500MW
Limit: 20MW
A: 40MW
A: 20MW
Limits
+30 MW
B: +10 MW
+30 MW
70$...
• When
– A can inject maximally 90MW?
– And B increases demand with 10MW
• what is then the MC and AC?
• Nodal & Zonal
• Peak-load pricing
Peak-load pricing
Example: Transmission interconnector line
ST-MC
Off-peak
Peak
LT-MC
Ppeak
POff-peak=0
91
Peak-load pricing
Gives clear economic signals!
ST-MC
Off-peak
Peak
LT-MC
Ppeak
POff-peak=0
92
ST-MC
Off-peak
Peak
LT-MC
P...
Zonal pricing -> averaging
(EU)
Nodal pricing (also Locational Marginal
Pricing) -> peak-load pricing
(USA)
Peak-load pricing
Example: Transmission interconnector line
ST-MC
Off-peak
Peak
LT-MC
POff-peak
Ppeak
PAVERAGE
94
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
Ee  w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling
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  • Figure 2: From the average electricity price to wind’s market value (illustrative). At high penetration, timing and location as well as forecast errors typically reduce the market value
  • Figure 2: From the average electricity price to wind’s market value (illustrative). At high penetration, timing and location as well as forecast errors typically reduce the market value
  • • This graph from Aptech Engineering Services shows the different types of
    load cycles (megawatts versus time) that a unit could be exposed to and
    the relative damage that occurs each cycle.
    • Three different low load cycling points LL1, LL2 and LL3 are defined on
    this slide. Each point affects the degree of thermal cycle transient
    experienced during a load following event because the metal incurs larger
    temperature changes.
    • Three on/off cycles are defined based on hours off-line (hot, warm and cold
    starts) with the worst damage occurring during a cold start cycle.
    • Definition of Equivalent Hot Start – Standardized in a 1985 EPRI study of
    Haynes Unit 5 (Supercritical 350 MW unit)
    • Load follows each have relatively low damage costs but because there are
    so manyof them, the cumulative impact of manyload follows leads to the ypy damage of an equivalent hot start.
  • Figure 2: From the average electricity price to wind’s market value (illustrative). At high penetration, timing and location as well as forecast errors typically reduce the market value
  • Figure 2: From the average electricity price to wind’s market value (illustrative). At high penetration, timing and location as well as forecast errors typically reduce the market value
  • Figure 2: From the average electricity price to wind’s market value (illustrative). At high penetration, timing and location as well as forecast errors typically reduce the market value
  • Figure 3: Average electricity price and market value as a function of the quantity of wind power in the system. At low penetration, the wind market value can be higher than the average power price, because of positive correlation between generation and load.
  • Figure 6: Wind’s market value falls with penetration. The intersection between LEC and market value gives the optimal share (section 2.4). At LEC of 68 €/MWh the optimal share is around 3%; if generation costs fall by 30%, the optimal share is about 20%.
  • Figure 7: The optimal share of wind power in total electricity consumption as function of wind power cost reduction under benchmark assumptions. In Northwestern Europe, the share increases from 2% to 20%
  • If wind generation was constant, its optimal share would rise above 60%. The impact of forecast errors is much smaller: switching off the reserve requirement and balancing costs increases the optimal share by only eight percentage points. This endorses previous findings that temporal variability is significantly more important for welfare analysis than uncertainty-driven balancing
  • Figure 17: The effect of fuel price shocks. As expected,
    lower gas prices reduce and higher coal prices increase the
    optimal wind share. However, higher gas prices reduce the optimal share. The reason is the investments in baseload
    technologies triggered by high gas prices.
  • Ee w09.1 m_ organization of electricity markets_ liberalisation, competition, nodal and zonal, coupling

    1. 1. Energy Economics
    2. 2. • Presentations
    3. 3. • Literature – Taylor, G., Tanton, T. 2012. The hidden cost of wind electricity. American tradition institute. http://www.atinstitute.org/wp-content/uploads/2012/12/Hidden-Cost.pdf – Hirth, L. 2013. The optimal share of variable renewables. How the variabiity of wind and solar power affects their welfare-optimizing deployment. FEEM Working Paper 90.2013. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2351754 – Kirchen. Chapter 1
    4. 4. • How expensive are renewables after all?
    5. 5. The technology behind crystalline silicon solar cells has profited from extensive developments in the multi- billion-dollar microelectronics industry. About 20 years ago, a kilowatt of solar energy cost about 50 euro cents ($0.69) to produce, today in Germany it's about 10 euro cents - while in sunny regions it's between 5 and 8 euro cents. So worldwide, we're totally competitive with, and often even cheaper than, fossil fuels. http://www.dw.de/at-the-floodgates-of-a-solar-energy-boom/a-17259267 Professor Eicke R. Weber is the Director of the Fraunhofer Institute for Solar Energy Systems ISE and professor of physics/solar energy at the Department of Mathematics and Physics and the Department of Engineering respectively at the University of Freiburg, Germany. http://www.ise.fraunhofer.de/en/about-us/director-and-division-direc Can this be true? Why give subsidies still?
    6. 6. • http://www.cityam.com/article/1392944530/how-free-markets-are-making-solar-energy-feasible-without-subsidies
    7. 7. http://cleantechnica.com/2013/12/16/solar-gird-parity-infographic-important-addendum/
    8. 8. http://solarcellcentral.com/cost_page.html
    9. 9. 2013 €1-2/W Capital costs of PV have fallen with 85%-90% since 1998 (from $12 -> $1-2 per Wpc)
    10. 10. http://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studien-und-konzeptpapiere/study-levelized-cost-of-electricity-renewable-energies.pdf/view
    11. 11. • Refinements: 1. Explicitly model intermittent (solar+wind) + backup 2. Model the value of electricity produced by intermittent generation
    12. 12. 1. Explicitly model intermittent (solar+wind) + backup
    13. 13. • Wind and solar should better be seen as: – Wind and solar + gas backup (round 90%) – Wind and solar + coal backup (round 90%)
    14. 14. • Taylor, G., Tanton, T. 2012. The hidden cost of wind electricity. American tradition institute. http://www.atinstitute.org/wp- content/uploads/2012/12/Hidden-Cost.pdf
    15. 15. Source: Energy Information Administration 2012 Annual Energy Outlook
    16. 16. Source: Energy Information Administration 2012 Annual Energy Outlook
    17. 17. • This report has shown that the cost wind electricity is not approaching parity with conventional sources, and is unlikely to reach parity – unless the price of natural gas, the price of coal and the capital cost of nuclear facilities were all to increase dramatically.
    18. 18. • Study applies to US – 3% of energy generated by wind • Germany – Has higher wind penetration – 7~8% of energy generated by wind • What is the effect of an increase in wind penetration on costs?
    19. 19. 2. Model the value of electricity produced by intermittent generation
    20. 20. • Hirth, L. 2013. The optimal share of variable renewables. How the variabiity of wind and solar power affects their welfare- optimizing deployment. FEEM Working Paper 90.2013. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2351754
    21. 21. Levelized costs: Levelized value: Where (exact): Over lead times Over timesOver places Approximation
    22. 22. • We define profile costs as the price spread between the load- weighted and wind-weighted day-ahead electricity price for all hours during one year. Profile costs arise because of two reasons. On the one hand, demand and VRE generation are often (positively or negatively) correlated. A positive correlation, for example the seasonal correlation of winds with demand in Western Europe, increases the value of wind power, leading to negative profile costs. • On the other hand, at significant installed capacity, wind “cannibalizes” itself because the extra electricity supply depresses the market price whenever wind is blowing. In other words, the price for electricity is low during windy hours when most wind power is generated. Fundamentally, profile costs exist because electricity storage is costly, recall physical constraint i). A discussion of profile costs and quantitative estimates are provided by Lamont (2008), Borenstein (2008), Joskow (2011), Mills & Wiser (2012), Nicolosi (2012), Hirth (2013), and Schmalensee (2013).
    23. 23. • wind “cannibalizes” itself because the extra electricity supply depresses the market price whenever wind is blowing
    24. 24. Remember how wind was cannabalized in the model of lecture W07.2F
    25. 25. • Profile cost: wind produces most when the price is low
    26. 26. • Profile cost: wind produces most when the price is low • Balancing cost: forecasting errors – wind produces is “out-of-balance”, produces more or less than promised – Cycling costs of plants
    27. 27. • Profile cost: wind produces most when the price is low • Balancing cost: forecasting errors – wind produces is “out-of-balance”, produces more or less than promised – Cycling costs of plants
    28. 28. European Climate Foundation 2050: • Increase from 34 GW to 127 GW • 400% increase The future of the EU transmission network Authors wont model the losses due to location (grid costs) were not modeled
    29. 29. • Profile cost: wind produces most when the price is low • Balancing cost: forecasting errors – wind produces is “out-of-balance”, produces more or less than promised – Cycling costs of plants • Grid costs: wind produces far away from demand – Cost of additional transmission
    30. 30. • Cost change with penetration (cannabilization effect)
    31. 31. • So far are theoretical models, what do the numbers tell us? – Use of a dispatch model, feeding realistic data – Northwestern Europe: Germany, Belgium, Poland, The Netherlands, and France
    32. 32. 3% 20% Wind
    33. 33. Wind
    34. 34. If wind blew constantly If wind was variable but perfectly predictable True situation Note that losses due to location (grid costs) were not modeled LCoE use the simplification that wind blows constantly. This simplification seems to explains the wide gap in the debate on the usefulness of wind.
    35. 35. Assuming 30% fall in wind cost wrt today
    36. 36. • What is remarkable about this curve? • Optimal wind share with doubling of: – Coal price -> increases – Gas price -> decreases
    37. 37. • Doubling coal prices -> optimal wind up by 5% points • Halving gas prices (“shale gas”) -> optimal wind down • Doubling gas prices -> optimal wind down.
    38. 38. • Doubling coal prices -> optimal wind up by 5% pointsfive percentage points (Figure 17). • Lowering gas prices by half (“shale gas”) has a similarly expected effect,dramatically lowering optimal wind deployment. • Surprisingly however, doubling gas prices reduces the optimal wind share. – As in the case of CO2 pricing, the reason for this seemingly counterintuitive result can be found in the capital stock response to the price shock. Higher gas prices induce investments in hard coal, which has lower variable costs, reducing the value of wind power and its optimal deployment.
    39. 39. Solar • Even at 60% cost reduction, the optimal solar share is below 4% in all but very few cases. • Reason: the marginal value of solar power drops steeply with penetration, – Even more so than wind. Why? – Because solar radiation is concentrated in few hours • In line with earlier studies (Nicolosi 2012, Mills & Wiser 2012, Hirth 2013). Now: €1-2/W Hirth + 60% cost reduction:€0.6/WHirth uses€1.6/W
    40. 40. 2013 €1-2/W
    41. 41. http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy-2013.html
    42. 42. • Energy revolutions
    43. 43. http://vaclavsmil.com/wp-content/uploads/scientificamerican0114-52.pdf
    44. 44. • Coal supplies more than 5 percent of energy – 1840 • fossil fuels (coal) surpasses use of biomass (wood and charcoal) – 1885 USA – 1875 France – 1901 Japan – 1930 U.S.S.R – 1965 China – 1970 India
    45. 45. • Oil supplies more than 5 percent of energy – 1915 • Oil surpasses use coal – 1964
    46. 46. Organization of electricity markets
    47. 47. • Organization of electricity markets 1. Liberalization 2. Transmission pricing (Nodal versus Zonal)
    48. 48. • Organization of electricity markets 1. Liberalization Kirchen. Chapter 1
    49. 49. Allow Independent Power Producers (IPP) (US: PURPA law 1978)
    50. 50. Add wholesale competition
    51. 51. Add retail competition Close to the present model in EU (but wholesale market and transmission system are separate)
    52. 52. Unbundling was a process over several years S. van Koten, A. Ortmann / Energy Economics 30 (2008) 3128–3140
    53. 53. Unbundling was a process over several years S. van Koten, A. Ortmann / Energy Economics 30 (2008) 3128–3140
    54. 54. Unbundling was a process over several years S. van Koten, A. Ortmann / Energy Economics 30 (2008) 3128–3140 http://www.cerge-ei.cz/pdf/pb/PB13.pdf
    55. 55. • Organization of electricity markets 1. Liberalization 2. Transmission pricing
    56. 56. • Nodal and zonal dispatch in meshed networks • Peak-load pricing
    57. 57. 900MW @20$/MWh 800MW @50$/MWh 900MW @20$/MWh 800MW @50$/MWh Nodal pricing Zonal pricing A B 400MW 300MW 400MW 300MW A B
    58. 58. A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 400MW 300MW @20$/MWh @20$/MWh 300MW 400MW 300MW @20$/MWh @20$/MWh 300MW Nodal pricing Zonal pricing 800MW @50$/MWh + @70$/MWh - (@-20$/MWh A B Bids for ancillary market (balancing market) 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 800MW @50$/MWh + @70$/MWh - (@-20$/MWh
    59. 59. A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 400MW 300MW @20$/MWh @50$/MWh 200MW 400MW 300MW @20$/MWh @20$/MWh 300MW Nodal pricing Zonal pricing 800MW @50$/MWh + @70$/MWh - (@-20$/MWh A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 800MW @50$/MWh + @70$/MWh - (@-20$/MWh Max: 200MWMax: 200MW @30$/MWh Price of transmission? 20 50 900 1700700 1st dispatch
    60. 60. A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 400MW 300MW @20$/MWh @50$/MWh 200MW 400MW 300MW @20$/MWh @20$/MWh 200MW Nodal pricing Zonal pricing 800MW @50$/MWh + @70$/MWh - (@-20$/MWh A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 800MW @50$/MWh + @70$/MWh - (@-20$/MWh Max: 200MWMax: 200MW @30$/MWh Price of transmission? 20 50 900 1700700 -100MW @-10$ = +10.000$ +100MW @70$ = -80.000$ Cost of 70.000 1st dispatch 2nd dispatch
    61. 61. A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 400MW 300MW @20$/MWh @50$/MWh 200MW 400MW 300MW @30$/MWh @30$/MWh 200MW Nodal pricing Zonal pricing 800MW @50$/MWh + @70$/MWh - (@-20$/MWh A B 900MW @20$/MWh + @35$/MWh - (@-10$/MWh 800MW @50$/MWh + @70$/MWh - (@-20$/MWh Max: 200MWMax: 200MW @30$/MWh Price of transmission? 20 50 900 1700700 2nd dispatch -100MW @-10$ = +10.000$ +100MW @70$ = -80.000$ 1st dispatch
    62. 62. 40MW A B 40MW Limit: 50MW Limit: 50MW Net Withdraw: 80MW Net Injection: 80MW
    63. 63. 3 node network
    64. 64. A B Injection: 120MW С Demand: 120MW Withdrawal: 120MW 70$/MWh 40MW80MW 40MW Marginal Cost? Dispatch with 3 nodes 30$/MWh 30$/MWh
    65. 65. A B Injection: 120MW С Demand: 120MW Withdrawal: 120MW 70$/MWh 40MW80MW 40MW Dispatch with 3 nodes 30$/MWh Limit: 500MW Limit: 20MW Limits
    66. 66. Demand: 120MW Withdrawal: 120MW A B Injection: 120MW С Limit: 500MW Limit: 20MW 40MW80MW 40MW Injection: 60MW 20MW 20MW 60MW 30$/MWh 60MWh is shed! Solution 1?: lower injection 40MW 70$/MWh 30$/MWh Limits
    67. 67. Demand: 120MW Withdrawal: 120MW A:40M W A B Injection: 120MW 30$/MWh С Limit: 500MW Limit: 20MW 70$/MWh A:80M W A: 40MW Solution 2?: Add counter flow Inject 60 MWB:20M W B:20M W B: 40MW180MW ANET:20M W Limits
    68. 68. A:40M W A B Injection: 120MW 30$/MWh С Limit: 500MW Limit: 20MW 70$/MWh A:80M W A: 40MW Solution 3: Counter flow & proportional downturning Inject 60 MWB:20M W B:20M W B: 40MW Injection: 80MW 30$/MWh A:53.33 M W A:26.67M W A: 26.67 MW Inject 40 MW B:13.33M W B:13.33M W B: 26.67 MW Demand: 120MW Withdrawal: 180MW120MW
    69. 69. • Up till 60MW from A no problem
    70. 70. A B Injection: 60MW 30$/MWh С Limit: 500MW Limit: 20MW 70$/MWh A:20MWA:40MW A: 20MW Limits Demand: 120MW Withdrawal: 60MW
    71. 71. A: +⅓ MW A: 20MW A B Injection: 60MW 30$/MWh С Limit: 500MW Limit: 20MW 70$/MWh A: 40MW A: 20MW Limits +1 MW B: + ⅓ MW +1 MW Demand: 120MW Withdrawal: 60MW
    72. 72. A:+10 MW A: 20MW A B Injection: 60MW 30$/MWh С Limit: 500MW Limit: 20MW A: 40MW A: 20MW Limits +30 MW B: +10 MW +30 MW 70$/MWhDemand: 120MW Withdrawal: 60MW A: 30MW A: 60MW B: 20MW B: 10MW 90MW120MW Marginal Cost? 50$/MWh
    73. 73. • When – A can inject maximally 90MW? – And B increases demand with 10MW • what is then the MC and AC?
    74. 74. • Nodal & Zonal • Peak-load pricing
    75. 75. Peak-load pricing Example: Transmission interconnector line ST-MC Off-peak Peak LT-MC Ppeak POff-peak=0 91
    76. 76. Peak-load pricing Gives clear economic signals! ST-MC Off-peak Peak LT-MC Ppeak POff-peak=0 92 ST-MC Off-peak Peak LT-MC Ppeak POff-peak=0 Invest in expansion of transmission capacity on the line Do not invest in expansion (wait or even remove a line)
    77. 77. Zonal pricing -> averaging (EU) Nodal pricing (also Locational Marginal Pricing) -> peak-load pricing (USA)
    78. 78. Peak-load pricing Example: Transmission interconnector line ST-MC Off-peak Peak LT-MC POff-peak Ppeak PAVERAGE 94

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