The attached slides outline our ideas on how the value of flexibility could be traded in the European electricity markets, within the context of the Target Model. Contact Stephen Woodhouse at Pöyry for further details of an ongoing study
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European renewable targets mean that prices and dispatch
patterns will be dictated by wind and solar
Projected changes in wholesale prices from 2010 to 2030
Greater flexibility
will be needed to
operate the
electricity system
Four main options:
1. Flexible generation
2. Increased
interconnection
3. Demand Side
Response (DSR)
4. Electricity storage
20102030
Projected generation on a sunny day across N Europe in 2030
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Instead of flexibility, Europe is rewarding capacity
(but not across borders)
5
GB
Developing capacity
auctions
SEM
CCGT tender
(2002/3); Ongoing
price-based capacity
mechanism
France
Call for tender;
Capacity obligations
being developed
Portugal
Price based capacity
mechanism for new
units
Spain
Current price based
capacity mechanism
being re-developed
Italy
Proposals to replace
current mechanism (with
low payments) with
reliability contracts
Greece
Quantity based capacity
mechanism
Germany
Discussions about
introduction of national
capacity mechanisms;
Grid stability reserves in
south since 2011
Poland
Proposals for new market
with capacity mechanism
Sweden & Finland
Strategic reserve
supplements energy only
market
Belgium
Tenders for new CCGT
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There is a risk of inappropriate future levels of flexible capability
Market rules must be able to cope with uncertainty about the future value drivers
for flexibility
• Capacity mix and growth of
technologies with uncertain or variable
output
• Improvements in forecasting (demand,
wind/solar output)
• Policy environments – e.g. encouraging
rigid behaviour in demand and
generation
Drivers for future flexibility need
• Amount of existing older thermal plants
that remain open
• Level of cross-border coordination and
efficient use of interconnectors
• Development of innovative technologies
• Improvements in flexibility parameters
of thermal plant
• Technology and cost developments of
demand side response
Drivers for future supply of capability
Appropriate remuneration is the key factor
• Under- or overpayments are likely to deliver inappropriate levels of flexibility
• Basing payments on ‘wrong’ attributes (which are not scarce) brings regulatory risk
(as the payments may change in future)
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Intraday capacity could be traded as an explicit product (interim),
later moving to trading of energy options as a basis for ‘co-
optimisation’
18
€/MWh
MW
SNL
DNL
SNO
DNO
€12
20MW
€ 50
€ 40