clean energy and the role for regulators
TRANSCRIPT
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Clean Energy and the Role for Regulators
Garrett Blaney Commissioner
Commission for Energy Regulation Clean Energy Regulators Initiative Webinar Programme
5 December 2013
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What is the role of a regulator?
Legislation
Economic Energy
Regulator
Appeal and/or Legal
challenge
Government Policy
Consumers
Industry/ Capital
Markets
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Typical Regulatory Objectives
• the lights stay on • the gas continues to flow • prices for energy are fair and reasonable • Complying with environment policy and laws • Best practice regulatory processes
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The Energy Trilemma
Environment
Price
Security
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The impact of clean energy
• The wholesale market
• The Transmission System
• The Distribution System
• Retail
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European Renewable Electricity Targets for 2020
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The Cost of Renewables
0
100
200
300
400
500
600
€/M
Wh
Hydro Wind Biomass Biogas and waste Photo-voltaic Geo-thermal
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The Wholesale Market
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• Interconnectors historically underused, markets segmented
• Uneconomic cross border flows undermine EU energy policy goals of sustainability, competitiveness and security of supply
• EU has addressed this by forging an internal market in electricity to form part of single European market in goods and services
European Context
Creating the Single Market
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• 1st and 2nd electricity liberalisation packages (1996 and 2003):
– Some success but price correlation between regional markets remained poor and cross border capacity was inadequate or inefficiently used
• 3rd electricity liberalisation package (2009): – Establishment of ACER and ENSTO-E – harmonisation of market rules - market coupling – increase in physical cross border investment
• Target Model – end 2014 – SEM derogation to end 2016
European Context
Creating the Single Market (2)
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Market Integration 2000
Nord Pool
Implicit auctions
Only explicit auctions Other methods
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Market Integration 2006 Implicit auctions
Only explicit auctions Other methods
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Market Integration 2010
APX
CWE
EMCC
Implicit auctions
Only explicit auctions Other methods
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Market Integration 2014?
Euro Pool
Implicit auctions
Only explicit auctions Other methods
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Market Coupling 2016
Euro Pool
Implicit auctions
Only explicit auctions Other methods
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• Gross Pool markets are centrally dispatched with TSOs deciding centrally on generator running order
• Bilateral markets like those in Britain and continental Europe are self dispatch, where TSOs only balance the system close to real time
Different Market Designs
SEM British Market
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European Target Model
Long-term allocation
Day-ahead implicit auctions
Intraday continuous trading
Cross-border balancing
Zone delineation Capacity calculation
Common cross-border arrangements
Diverse national arrangements
The interaction between the two should encourage harmonisation
How it works…
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• Rules for calculating and allocating cross border capacity – Auction Rules – Allocation Platforms
• Cross Border Risk Hedging and Firmness – Physical Transmission Rights (PTRs) with UIOSI – Financial Transmission Rights (FTRs) – Other hedging tools if sufficient liquidity exists
Forward Capacity Allocation
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• Centrepiece of the Target Model • Links separate day-ahead spot markets using cross-border (XB) transmission
capacity • It is an “implicit auction” – meaning cross border capacity allocation is integrated
with the energy market (‘explicit auctions’ sell capacity separately) • Common prices between spot markets when there is sufficient capacity
Day Ahead Market Coupling
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Market Coupling (2)
If there are XB capacity constraints, these will limit the flows between the coupled markets and a price difference will persist
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21
Wrong direction
Hourly Capacity Utilisation - Explicit
Wrong direction
CA
PAC
ITY
UTI
LISA
TIO
N
A to B
B to A
100%
0%
100%
PRICE DIFFERENCE
A = B A << B A >> B
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22
Hourly Capacity Utilisation - Coupled
Optimal utilisation (same price unless congested) C
APA
CIT
Y U
TILI
SATI
ON
A to B
B to A
100%
0%
100%
PRICE DIFFERENCE
A = B A << B A >> B
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Future Issues – Capacity Mechanism • Target Model is being finalised and is due to be implemented by 2014 • But, in parallel several Member States have or are considering CRMs
– Generation Adequacy– e.g. German nuclear closures and LCPD impacts – Missing money problem – Impact of RES on energy only markets
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Does Clean Energy need Support?
• Limits of Energy Only market (marginal cost) • High Capex, Low Opex • Reducing cost of capital • Regulatory/Policy Certainty
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Elements of Market Dysfunction
• Cheap Coal from US
• Dropping gas demand
• Good Utility/Bad Utility – security of supply?
• Nuclear Support
• Cost competitiveness for large industry
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The Transmission System
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• Much wind in west, demand in east
• Rolling out the grid is critical to meeting 2020 renewable target
• EirGrid has major Grid 25 plan
• Over €1 billion in grid investment allowed by CER from 2011 to ‘15
• Planning and land access are a major challenge
Grid Roll-out
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DS3 Project Delivering a Secure, Sustainable, Electricity System (“DS3”) – integrating wind while maintaining secure operation of system • 75% instantaneous wind
penetration; • Greater flexibility from
conventional plant (existing & new);
• RoCoF settings • Keep curtailment to
“bankable” levels i.e. 5% • Better wind forecasting,
real time data and controllability;
• Demand Side Management;
• Cost & Benefit to consumers
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System Non-Synchronous Penetration (SNSP)
50% SNSP 75% SNSP
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The Distribution System
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Changes to DSO
• New technologies such as embedded (e.g. micro) generation and electric vehicles
• Smart grids • Smart metering • Demand Side participation • Ancillary service provision and flexibility
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DSOs Issues for Regulators
• Distribution tariffs • Promoting innovation • The scope and extent of DSOs functions • Price controls and incentives • Data handling and protection • Future unbundling/separation requirements
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The Retail Market
• Green Tariffs • Changing Consumption Behaviour • Smart Meters – Static or Dynamic ToU Tariffs? • Microgeneration Issues • Consumer Confusion & impact on competition • EV integration
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Conclusions
• Regulatory Change Needed to Delivery Green Targets: – Wholesale market evolution – Public Friendly Transmission Investment – New Role for DSO – New Engagement with Consumers