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N. Keith Tovey, M.A. PhD, C.Eng MICEUniversity of East Anglia
Norwich
22nd April 2003
The changing face of the Electricity Market in the UKИзменяющееся лицо рынка электроэнергии в Британии
Университета Восточной
Англии
The changing face of the Electricity Market in the UK
A brief review of the UK Electricity Industry prior to 1990.
Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г
The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and
Combined Heat and Power. Последствия для генерации на возобновляемых
источниках и для ГРЭС
A brief review of the UK Electricity Industry prior to 1990.
Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г
The changing face of the Electricity Market in the UK
Electricity Generation and Supply differences in approach between England / Wales and Scotland.
Генерация и сбыт - раличия между регионами
Fuels used for generation
Топливо, используемой для генерации
The Generation and Distribution of Electricity have always been different in Scotland compared to England and Wales
Scotland
Scotland:
Two vertically integrated companies supplying
discrete areas
England and Wales England and Wales:
One Generating Company (CEGB) and 12 Regional
Electricity Suppliers.
[CEGB did NOT supply electricity to consumers]
EdF Electricité de France2000 MW
+1643
+7525
-4709
-1963
+418
Generating Capacity Surplus/Deficit
on February 12th 18:00
+ve: generating capacity exceeding demand
-ve: demand exceeding generating capacity
Most Generating Capacity is in the North - most demand is in South
MWInterconnector
to Scotland
Interconnector to France
Fuel Input for Electricity Generation
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1970 1975 1980 1985 1990 1995 2000
Year
(Pe
taJo
ule
s)
Total Coal OilGas Nuclear HydroOther/Renewables
2001
37.6%
1.7%31.8%
24.6%
0.4%
3.9%
Coal
Oil
Gas
Nuclear
Hydro
Other/Renewables
1995
47.0%
5.4%
17.2%
27.5%
0.5%
2.3%Coal
Oil
Gas
Nuclear
Hydro
Other/Renewables
Immediately prior to Privatisation
Mid 1990sAt start of New Electricity
Trading Arrangments
1990
65.3%
11.0%
0.7%
0.6%
1.1%
21.3%
Coal
Oil
Gas
Nuclear
Hydro
Other/Renewables
Изменяющееся лицо рынка электроэнергии в Британии
0
50
100
150
200
250
300
350
400
1970 1975 1980 1985 1990 1995 2000
Year
TW
h
Coal & Oil CCGTNuclear RenewablesTotal
• Demand has risen by 50% since 1970• Large rise in output from CCGT since 1993
• Nuclear output increased steadily but is set to decline
• Coal [Oil] generation has fallen rapidly since Privatisation
• Decision on how electricity was to be generated was done on a generating set basis:
• Generating Sets to run were selected on Merit Order.
• Based on Marginal Costs (i.e. the fuel costs)
• Some generating sets were run OUT of MERIT ORDER where system constraints were an issue.
• Generators sold electricity to Regional Electricity Boards.
• Electricity Boards sold to consumers in their Area only.
• Prices to consumers varied between regions
Electricity Generation - pre 1990
•Most Generating Capacity in North
•Most coal-fired stations in North
•Most Oil-fired stations in South
•Nuclear stations - distributed around coast
•Most Hydro stations are in Scotland
Изменяющееся лицо рынка электроэнергии в Британии
Significant power flows North > South
Central Electricity Generating Board
12 Regional Electricity Companies
•Coal Fired Power Stations
•Oil Fired Power stations
•Gas Turbine Stations
• Hydro Stations
•Nuclear Stations
•Transmission
National Power
PowerGen
Nuclear Electric
National Grid Company
12 Regional Electricity Companies
Privatisation of Electricity Supply Industry 1990
0
10
20
30
40
50
60
0 24 48 72 96 120 144 168Hours
GW
4th - 10th January 2003
11th - 17th January 2003
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
30
35
40
45
50
55
0 4 8 12 16 20 24
Hour
GW
January 8th
January 15th
Typical UK Electricity Demand in Winter
2003
0
5
10
15
20
25
30
35
40
0 24 48 72 96 120 144 168Hours
GW
27th July - 2nd August 2002
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
15
20
25
30
35
40
0 4 8 12 16 20 24Hours
GW
Typical UK Electricity Demand in Summer
2002
1st August 2002
The changing face of the Electricity Market in the UK
A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед
приватизацией в 1990 г
The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации
The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and Combined Heat and
Power. Последствия для генерации на возобновляемых источниках и для ГРЭС
The Electricity Markets in the 1990s after Privatisation
Рынки электроэнергии в 1990 г после приватизации
The changing face of the Electricity Market in the UK
The bidding process - Pool Input and Pool Output
Процесс подачи заявок в системе пула
The Electricity Pool
Электрический пул
The
Pooloperated by
National Grid
Company
Электрический пул
Simplified Diagram of the Electricity Pool
England and Wales
Generators (> 100 MW)
bid into Pool to Supply Electricity
Suppliers purchase electricity from the
Pool
Consumers
• Only the Generators (>100 MW) bid into the POOL to supply electricity e.g. National Power (now Innogy), PowerGen etc.
• The National Grid Company published projected demands for the following day and invited bids.
• The Generators supplied bids for each generating set in each station for each half-hour period of the following day.
• The NGC sorted bids to determine which generating sets would be used for each particular period, and which ones would have capacity made available.
The Operation of The Electricity Pool: 1990 - 2001
Eastern **
Industry
Independents
Electricité de France
Innogy
Nuclear Electric *
BNFL (Magnox)
PowerGen Licensed Suppliers
RECs
Consumers
Second Tier
Consumers
The
Pool
пул
Scottish Nuclear * Consumers
Scottish Hydro
Scottish Power Scotland
England and Wales
Bid from company B £19.31 per MWh
Bid from company A £19.20 per MWh
Bid from company D £19.40 per MWhBid from company E £19.50 per MWh
Bid from company C £19.32 per MWh
Range of bids from companies in range £18 - £19 per MWh
Range of bids from companies in range £15 - £18 per MWh
Range of bids from companies in range <£15 per MWh
10000 MW
10000 MW
10000 MW
1250 MW1250 MW
1250 MW1250 MW1250 MW
32500 MW
System Marginal
Price
= £19.31
SMP
Companies up to and
including B successful
• All Companies who were successful are paid the SMP for all units generated irrespective of what their bid was.
• The bids were for the single half-hour period and fresh bids were required for all half hour periods.
• It was possible for companies to bid £0 and this would guaranteed that they generated and paid SMP.– However, if all Companies did the same they would have to
generate electricity for nothing.
• In addition to the SMP, there was also a capacity charge relating to the generating capacity which was requested to be available.
The Operation of The Electricity Pool
• Capacity Charge paid to all Generators who had been requested to have capacity available.
-based on formula:
LOLP * (VOLL - SMP)
Loss of Load Probability
The Operation of The Electricity Pool
VOLL: was set by the Regulator at around £2400 per MWH
LOLP: normally a very low figure but could become significant if there was a shortfall in generating capacity
Capacity Charge: signal to ensure sufficient capacity was available.
Pool Input Price (PIP) = SMP + LOLP * (VOLL - SMP)
Value of Lost Load
System Constraints:
•Some Power Stations constrained “ON” to ensure security of supply even when their bid was more expensive.
•Some Power Stations constrained “OFF” even when their bid was cheaper (-excess of capacity in one region).
•Constrained Stations paid their “Bid” Price
•POOL Output Price: (POP) = PIP + Uplift
•Uplift represented the additional charges incurred to National Grid Company because of System Constraints
•Suppliers purchased Electricity at POP
Электрический пул
Электрический пул: Supply Side
Regional Electricity Companies (RECs)
Before privatisation: Sole supplier in their region
After privatisation
• Consumers > 1MW could purchase from ANY REC not just their own regional Company.
• From 1994 Consumers > 100 kW were included in Deregulation
• From September 1998 All consumers could select their supplier.
Prices to consumer have fallen.
e.g. Domestic Consumer in East Anglia [Восточной Англии]7.48p per kWh before 1998 - now ~ 5.62p per kWh
Электрический пул: A Review
Need for strong Regulatory Body to ensure prices were not fixed.
Evidence suggested price manipulation took place in early years. Regulator required major generators to dispose of some stations. The lack of Demand Side Bidding was a weakness Charges for Transmission Losses were averaged over whole
Network.
•Customers in North subsidise those in South
•Generators in South subsidise those in North
•Issue not resolved
A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед
приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации
The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
The changing face of the Electricity Market in the UK
The New Electricity Trading Arrangements
Новая система оптовой торговли НЕТА
The changing face of the Electricity Market in the UK
The basic principles
Основные принципы
Gate Closure and Final Physical Notification
Закрытие периода и окончательная физическая нотификация
The Balancing Mechanism
Балансирующий механизм
The basic principles [Основные принципы]
Новая система оптовой торговли НЕТА
How does it differ from the Pool?
• Both Generating and Demand Side Bidding Takes Place
• Most Electricity (>90%) is traded outside NETA Balancing Mechanism
NETA favours generators and suppliers who can guarantee specific levels of generation/supply in advance.
NETA favours generators and suppliers who can guarantee flexibility in output / demand at short notice.
The basic principles [Основные принципы]
Новая система оптовой торговли НЕТА
How does it differ from the Pool? - continued
• Generators and Suppliers are penalised if they deviate from their agreed level of generation / supply.
• System security is maintained via the Balancing Mechanism [Балансирующий механизм]
• Renewable Generators e.g. Wind and small CHP (~10 MW) can be adversely affected.
The basic principles [Основные принципы]
Generation and Supply focuses on
Новая система оптовой торговли НЕТА
• Balancing Mechanism [Балансирующий механизм]
(BM) Units
Generating BM Units may be a single generating set or a
collection of small generating sets.
Demand BM Units may be a single large demand consumer or a
collection of small consumers.
• Trading can take place between Generating and Demand BM Units
• Only the volume traded ( not price) has to be notified.
The New Electricity Trading Arrangements
• Each Generating or Demand BM Unit notifies System Operator of the projected Volume of Electricity to be Traded for each half hour period by 11:00 on preceding day.
Initial Physical Notification (IPN)
System Operator checks sufficient capacity is available.
Initially 3.5 hours before REAL Time - later reduced to 1 hour.
Final agreed Volumes to be traded noted before Gate Closure.
Final Physical Notification (FPN)
окончательная физическая нотификация
Gate Closure and Final Physical Notification
Закрытие периода и окончательная физическая нотификация
GATE CLOSURE : Закрытие периода
The Balancing Mechanism Балансирующий механизм
Day Before Current Day
IPN FPN
Gate Closure
Real
Time
30
mins3.5 hours 1 hour
Operation of Balancing Mechanism
Summary
• Changes to contract position cannot be made after Gate Closure
• The Balancing Mechanism is operated after Gate Closure to provide System Security
The Balancing Mechanism Балансирующий механизм
The New Electricity Trading Arrangements
Новая система оптовой торговли НЕТА
• To allow system to remain stable
• Too little electricity on the system
– Generators can OFFER to INCREASE output
– Suppliers can OFFER to REDUCE consumption
Time
FPNOFFER
Time
FPNOFFER
• If OFFER is agreed then Generators / Suppliers are PAID for any electricity increased / reduced under the OFFER.
The Balancing Mechanism Балансирующий механизм
The New Electricity Trading Arrangements
Новая система оптовой торговли НЕТА
• Too much electricity on the system
– Generators can BID to REDUCE output
– Suppliers can BID to INCREASE consumption
• If BID is agreed then Generators / Suppliers PAY for any reduction in generation / increase in demand under the BID.
Time
FPNOFFER
Bid
FPNOFFER
Bid
Time
The Balancing Mechanism Балансирующий механизм
Generators / Suppliers may submit OFFERs or BIDs which differ for different levels of deviation from the Final Physical Notification
25 - 50 MW: £30 per MWh 50 - 100 MW: £50 per MWh
National Grid Company normally accepts OFFERS / BIDS which are cheapest unless System Constraints prevent this.
0 - 25 MW: £20 per MWhFPN окончательная физическая нотификация
Example of Differential Offers from a Generator
The Balancing Mechanism Балансирующий механизм
What happens if System Operator has got it wrong?
• OFFERs / BIDs cannot be cancelled
• UNDO BID removes an OFFER and is usually less than the OFFER
• UNDO OFFER removes a BID and is usually more than the BID
• OFFERs / UNDO BIDs [ or BIDs / UNDO OFFERs] are submitted in pairs
OFFER / UNDO BID: Pair +2
OFFER / UNDO BID: Pair +1
BID / UNDO OFFER: Pair -1
BID / UNDO OFFER: Pair -2
FPN
Новая система оптовой торговли НЕТАWhat happens if a Generator / Supplier is out of balance?
• Unexpected changes in Demand• Equipment Failure
Generator / Supplier has too much electricity on the system [too much generation / too little demand]
* charged for imbalance at System Sell Price
Generator / Supplier has too little electricity on the system [too little generation / too much demand]
* charged for imbalance at System Buy Price
0
10
20
30
40
50
60
0 3 6 9 12 15 18 21 24 3 6 9 12
Time (hours)
Pri
ce £
/MW
h
System Sell Price
System Buy Price
Friday 14th February 2003 15th February 2003
Example from last month
Новая система оптовой торговли НЕТАHow well has it performed since starting on 27th March 2001?
From OFGEM: Review of First Year of NETA
Wholesale prices of electricity are now 40% lower than they were 5 years ago.
Новая система оптовой торговли НЕТАHow well has it performed since starting on 27th March 2001?
Average Prices
From OFGEM: Review of First Year of NETA
April June August October December February
28
26
24
22
20
18
16
14
£/M
Wh
Baseload Peak
2001 2002
Новая система оптовой торговли НЕТАHow well has it performed since starting on 27th March 2001?
Average Sell and BuyPrices
From OFGEM: Review of First Year of NETA
Новая система оптовой торговли НЕТАHow well has it performed since starting on 27th March 2001?
Average OFFER and BID Prices for different Generators
From OFGEM: Review of First Year of NETA
Impacts of Pool and NETA on one Coal Fired Power Station
Fiddler’s Ferry
• 2000 MW Coal Fired Station• built 1971• 110 MW Auxiliary Gas Turbines• [ now only 55 MW of AGT] Coal Stock
AGT
Boiler HouseTurbine Hall
Impacts of Pool and NETA on one Coal Fired Power Station
Coal:
•Used to come from Lancashire and Yorkshire
•High Sulpher Content
but:
• Coal is cheaper from Poland and Russia and South Africa
• Low Sulphur Content
• Electro-Static Precipitators don’t work
• Inject sulphur into exhaust gases.
Labour Force
• Approximately 650 in 1989
• Now approximately 250 for same output
The changing face of the Electricity Market in the UK
A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед
приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
0
200
400
600
800
1000
1200
1400
< 1 1 - 10 10 - 100 >100
Size (MW)
Num
ber
Most CHP Schemes in UK are small
average size for those under 10 MW is 650 kW
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
Small CHP Generators• Often do not have resources to compete in Trading
• Rely on Suppliers who are not so keen to take electricity as their Imbalance position might be affected
• Since 2000
• 61% reduction in output from small CHP Generators after NETA
• At same time have seen prices for fuel for generators increase by around 14%
• The few Trading in NETA saw reduction of 17% in income
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
Wind Generation has been affected -
•cannot predict wind so cannot guarantee output
•cannot trade in Balancing Mechanism.
In 2002 the Renewables Obligation will assist Wind but there was one year before this was introduced
• Consolidation of groups of small CHP units together has been shown to reduce risk of NETA trading.
• However, only marginally improvements are possible from consolidation of several Wind Farms.
Some Implications for Renewable Generation and Combined Heat and Power.
Последствия для генерации на возобновляемых источниках и для ГРЭС
GeneratorBoiler
Condenser
• CHP units using Pass Out Turbines should be suited to NETA because of flexibility
• In UK there are very few schemes like this ~10 MW
District
Heating
Conclusions (1)Key Changes in Electricity Market in UK
• April 1st 1990: Privatisation: Electricity POOL Established
• Large Consumers benefit from Deregulation
• 1994: Intermediate Consumers benefit from Deregulation
• 1998 + All Consumers benefit from Deregulation
• 27th March 2001: NETA replaced POOL• 1st April 2002: Renewable Obligation comes into force
• The POOL and NETA were not used in Scotland
The Future
BETTA (British Electricity Transmission and Trading Arrangements). It is planned to extend NETA to include Scotland in October 2004
Conclusions (2)Key Changes in Electricity Market in UK
• Prices to consumers have fallen as a result of Deregulation (up to 20% in some cases)
• Wholesale prices of Electricity have fallen by 40% over last 4 years, and 20% since introduction of NETA
• Prices to consumers have changed little since introduction of NETA - to early to see full effect as prices by Suppliers only tend to change once a year or so.
• Most electricity >> 90% is traded outside Balancing Mechanism Trading
• NETA favours Generators / Suppliers who can guarantee output / supply in advance
• NETA favours Generators / Suppliers who can be flexible to make adjustments during Balancing Mechanism Trading.
The changing face of the Electricity Market in the UK
Изменяющееся лицо рынка электроэнергии в Британии
Some Useful WEB Sites
•www.bmreports.com/ : Up to date information of NETA Market
•www.ofgem.gov.uk/ : The UK Regulator
•www.elexon.co.uk/ : Documents and Modifications to NETA
•www.nationalgrid.com/uk/ : The System Operator
•www2.env.uea.ac.uk/gmmc/energy/enpoint.htm
the Energy Web Page at UEA giving links to many Energy Web Sites in UK and overseas.
This presentation is available over Internet atwww2.env.uea.ac.uk/gmmc/energy/env2e02/NETA.ppt
N. Keith Tovey, M.A. PhD, C.Eng MICE
Н.К.Тови М.А., д-р технических наук
Факультет экологических исследований Университета Восточной Англии
School of Environmental SciencesUniversity of East Anglia
Norwich NR4 7TJ
N. Keith Tovey, M.A. PhD, C.Eng MICE
Energy Sciences Director
Low Carbon Innovation Centre
University of East Anglia
Norwich
NR4 7TJ
CredWill be aiming to reduce Carbon Dioxide
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