Creating the Internal Energy Market in Europe

transcript

Creating the internal Energy Market in Europe

Key findings • Structural market distortions

remain the main obstacle for the IEM and wind energy integration– Large incumbents, high market

concentration, regulated prices

• Support mechanisms for wind and RES should be seen in the context of unfinished liberalisation

• Exposure of wind generators to market risks require a level playing field

Key findings (…continued)• Integration of large amounts of

wind in a cost efficient manner requires changing current market arrangements

Key findings (…continued)• The EU Target Model (TM) does

not effectively enable optimal wind energy integration – No emphasis on wind integration

to the extent of NREAPs– No provisions for more

competition– Lack of emphasis on intraday

and balancing markets liquidity, harmonisation and interactions. These are wind energy integration cornerstones!

Key findings (…continued)• Flexibility is the main feature of

tomorrow’s power system– Low marginal costs– Fast ramping power plants– Investment recovery over fewer

running hours

• Wind energy is able to contribute significantly to system operation and flexibility– Grid support services– System adequacy

Policy recommendations1. Creating a level playing field2. Implementing the EU-wide

Target Model with large share of wind power

3. Assessing system adequacy properly in a renewable EU integrated power system

4. Ensuring cost-effectiveness of the future power system: a market-based approach for ancillary services

Policy recommendations1. Creating a level playing field• Tackle market distortions rather

than only focus on RES provisions – Implement and transpose

properly liberalisation packages– Provide incentives for extensive

use of commercial power exchanges

• Design market rules that recognise the intrinsic characteristics of wind energy– Large control zones for

smoothing output variability– Shorter trading time horizons for

improved forecast accuracy and reduced balancing needs

Policy recommendations2. Implementing the EU-wide

Target Model with large share of wind power

• Implement the EU-wide Target Model as a minimum– Provide integrated intraday and

balancing markets– Make the best use of available

transmission capacity

• TSOs must be encouraged to analyse all aspects of firm capacity from wind power and other RES in an integrated system at EU level– Challenge for capacity payments

Policy recommendations3. Assessing system adequacy

properly in a renewable EU integrated power system

• TSOs must be encouraged to analyse all aspects of firm capacity from wind power and other RES in an integrated system at EU level

• Challenge for capacity payments

Policy recommendations4. Ensuring cost-effectiveness of

the future power system: a market-based approach for ancillary services

• Grid codes in Europe should first consider market options for ancillary services instead of compulsory requirements

• Establish grid support services markets to create additional non-discriminatory revenue streams for all generators

Electricity volume traded day-ahead in power exchanges (PX) vs. forward bilateral contracts (OTC). [MW as percentage of national gross electricity production], 2009 data

GreeceNorthern Ireland*

Denmark*Spain*

PortugalSweden*

ItalyFinland*

LithuaniaGermany

The NetherlandsRomaniaBelgium

FranceAustria

Slovak RepublicCzech Republic

Great BritainPoland

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

OTC PX

Sources: European Parliament , Cornwall, N (2006)

How wind power influences the power spot price at different times of the day through the so-called “Merit order effect”

Source: Risø DTU

Intraday Day ahead 2 days ahead0.00%

stalled p

Increasing wind forecast error (Root Mean Square Error) as time horizon increases. Results from regional wind power production from Germany

Source: IEA Wind Task 25

Intraday Markets in the EU (2011)

Source: EWEA

Volume of electricity traded in intraday markets, 2011 and 2010* data

Sources: EPEXSPOT, CREG, NordPool, OMIE

Balancing services

Sources: ETSO and EWEA

Relevant EU directives and regulations in electricity

Source: Adapted from REKK & KEMA (10), EC, DG Energy

Number of countries with regulated electricity prices (2009) EU-27

Sources: European Commission 2011

Household Industrial

Degree of market concentration in the EU power sector

Source: European Commission 2011

The EU Target Model (TM) for electricity trading

Source: Florence Forum, Project Coordination Group (PGC), 2009

ATC – Available Transmission Capacity NTC – Net Transfer Capacity GCT – Gate Closure Time

Roadmap for day-ahead market coupling as per TM

Market coupling effects on volatility of energy prices

BE DE FR NL

Explicit Implicit Explicit-Implicit difference

tion (

Source: CWE

Decrease of forecast error prediction for aggregated wind power production due to spatial smoothing effects. Error reduction = ratio of RMSE regional and RMSE of a single site. Results based on 40 German wind farms

- 500.000 1000.000 1500.000 2000.000 0.0

reduct

Source: Energy and Meteo Systems in IEA Wind Task 25

Market coupling mechanisms used in the EU. *Ongoing initiative

Level of accuracy of wind power predictions for larger areas and shorter time scales

Source: Rorhig, K. in IEA Wind Task 25

Opposite imbalance exchange of two countries

Source: Andersen & Detlefsen, 2011

Market integration and wind power deployment benefits

Increase in capacity credit in Europe due to wind exchange between countries in 2020

No wind energy exchange Smoothing effect0%

ENTOS-E continental Europe Top ten wind countries All European countries

tive C

, perc

stalled

capaci

Source: TradeWind project

Increase in capacity credit in Europe due to wind exchange between countries in 2020

Source: TradeWind project

No wind energy exchange Smoothing effect0

ENTOS-E continental Europe Top ten wind countries All European countries

Capaci

About the European Wind Energy Association

EWEA is the voice of the wind industry, actively promoting wind power in Europe and worldwide. It has over 700 members from almost 60 countries making EWEA the world's largest and most powerful wind energy network.

Rue d'Arlon 80B-1040 BrusselsBelgiumwww.ewea.org

To download the pdf version click here

To download the Ipad (Ibooks) version click here

If you want to see more statistics, reports, news and information about wind energy event please visit EWEA’s website www.ewea.org or contact us at communication@ewea.org

Creating the Internal Energy Market in Europe

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