34th IAEE International Conference, Stockholm , June 19-23, 2011 Juan Rosellon, CIDE and DIW Berlin

Regulated Expansion of Electricity Transmission Networks: the effects of

Fluctuating Demand and Wind Generation

Schill, Rosellón, Egerer

16 June 2011 2

Outline

• Motivation

• The model

• Model application

• Results

• Conclusions and challenges

16 June 2011 3

Motivation• Starting point: Hogan, Rosellón and Vogelsang (2010)

- “HRV“– Rosellón and Weigt (2011), and Rosellón, Myslikóvá and

Zenón (2011): “Seminal, but simplified”• Challenges:

– Demand and prices vary considerably over a day / over a year

– Increasing importance of fluctuating wind power– Comparison to other regulatory regimes

• Our approach:– Include hourly time resolution and appropriate data– Implement additional regulatory regimes How will the HRV model perform?

16 June 2011 4

The model• MPEC approach (Rosellón and Weigt,

2011)

• Dispatch problem (lower level):

, ,

1 2

3 4

, , , , , , , , , 1, , ,0, , ,

, ,

,, , , 1, , ,

,

,, , , 2, , ,

,

, , ,

1max ( )

1

. . 0 ( ) , ,

0 ( ) , ,

n tq

n t n t n t s s n t tq gt T n N s Sp s

l nn t l t l t

n l t

l nn t l t l t

n l t

n s t ns

p q dq c g

Is t P l t

X

IP l t

X

g B

, , , , , , ,

, , , , 4, , , ,

, , 5, , ,

0 ( ) , ,

0 ( ) , , ,

0 ( ) , ,

nn nn t n t n tnn

n s t n s n s t

n n t n t

q p n t

g g n s t

slack n t

16 June 2011 5

Maximization Transco Problem (upper level)

, , , , , , , , , , 1

1max

1n t n t n t s n t t l l tt tp

t T n N s S l L tt t

p q p g fixpart ec ext

16 June 2011 6

Additional equations

• HRV cap on fix part:

, 1, , , , 1, , , , 1n N

, , , , , , , , ,n N

1

HRVn t n t n t s n t t

s S

HRVn t n t n t s n t t

s S

p q p g fixpart

RPI X

p q p g fixpart

16 June 20117

Model application• Implementation in GAMS• Elmod framework for load

flows• Stylized central European

network

F

NL3

NL2

BE2

BE1

NL1

GER

Cross border lines

Zonal lines

Unlimited zonal lines

Country borders

Main nodes

Auxilliary nodes

l1

l2

l3

l4

l5

l6

l7

l8

l9

l10l12

l11

l13

l14l15l16

l17

l18 l19

l20

Technology Variable generation costs in €/MWh

Overall available capacity

Nuclear 9 64,858

Lignite 29 15,120

Hard coal 35 35,064

CCGT 43 16,358

Gas turbine 65 16,286

Oil 72 12,584

Hydro 0 9,841

Wind 0 29,790

Table 1: Variable generation costs and available capacity

16 June 2011 8

Different casesCase Representation of demand Wind generation

Static Yearly average Yearly average

DRes 144 hours, representing six characteristic days of the year Yearly average

WindRes 144 hours, representing six characteristic days of the year Fluctuating pattern

Hourly reference demand at different nodes

0

10

20

30

40

50

60

70

80

90

1 13 25 37 49 61 73 85 97 109 121 133

hours

GW

F

GER

NL1

BE1

NL3

BE2

NL2

WeekdaySummer

WeekendSummer

WeekdayWinter

WeekendWinter

WeekdayShoulder

WeekendShoulder

Figure 2: Hourly nodal reference demand in DRes and WindRes

6 October 2010 9

Hourly overall demand and wind pattern

Hourly reference prices

0

10

20

30

40

50

60

70

80

1 13 25 37 49 61 73 85 97 109 121 133

hours

€/M

Wh

F

BE

NL

GER

WeekdaySummer

WeekendSummer

WeekdayWinter

WeekendWinter

WeekdayShoulder

WeekendShoulder

Figure 3: Hourly nodal reference prices in DRes and WindRes

0

20

40

60

80

100

120

140

160

180

200

1 13 25 37 49 61 73 85 97 109 121 133

hours

GW

Reference demand Wind generation

WeekdaySummer

WeekendSummer

WeekdayWinter

WeekendWinter

WeekdayShoulder

WeekendShoulder

Figure 4: Wind generation and overall reference demand in WindRes

16 June 201110

Results: Static

Network extension: HRV closest to WF-max

0

1

2

3

4

5

6

l1 l2 l3 l4 l5 l6 l7 l8 l9 l10 l11 l12 l13 l14 l15 l16 l17 l18 l19 l20

GW

WFMax HRV CostReg NoReg

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Line expansion (Static)

Extension: Germany-Netherlands and France-Belgium

100%

105%

110%

115%

120%

125%

t0 t1 t2 t3 t4 t5

MW

WFMax

HRV

CostReg

NoReg

Figure 6: Time path of overall extension in the Static case

16 June 2011 12

Results: Static vs. DRes

Demand fluctuations increase extension in wf-max and HRV

Opposite effect in noreg and costreg cases!

Social welfare

Producer rent

Consumer rent

Congestion rent

Extension costs

Transco profit

Fixed part

WFMax +1.94 +19.04 -15.57 -1.50 +0.03 -1.50 -

NoReg +0.13 -1.42 +1.36 +0.19 +0.00 +0.19 -

CostReg +0.11 -1.43 +1.37 +0.19 +0.01 +0.19 +0.02

HRV +1.81 +13.08 -11.13 -0.12 +0.02 +1.68 +1.82

Social welfare

Producer rent

Consumer rent

Congestion rent

Extension costs

Transco profit

Fixed part

WFMax +2.80 +11.13 -5.97 -2.27 +0.08 -2.27 -

NoReg +1.10 +1.82 -1.13 +0.42 +0.01 +0.41 -

CostReg +1.06 +1.77 -1.08 +0.41 +0.04 +0.42 +0.04

HRV +2.25 +6.59 -3.62 -0.68 +0.04 +1.79 +2.51

16 June 2011 13

Hourly prices in t5 (Dres, WFMax)

0

10

20

30

40

50

60

70

80

90

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139

€/M

Wh

GER

F

BE1

BE2

NL1

NL2

NL3

Hourly prices in t5 (Dres, HRV)

0

10

20

30

40

50

60

70

80

90

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139

€/M

Wh

GER

F

BE1

BE2

NL1

NL2

NL3

Hourly prices in t5 (Dres, CostReg)

0

10

20

30

40

50

60

70

80

90

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139

€/M

Wh

GER

F

BE1

BE2

NL1

NL2

NL3

Hourly prices in t5 (Dres, NoReg)

0

10

20

30

40

50

60

70

80

90

1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139

€/M

Wh

GER

F

BE1

BE2

NL1

NL2

NL3

Price convergence in DRes

Figure 18: Convergence of hourly nodal prices under different regulatory approaches in DRes

16 June 2011 14

WindRes

HRV again closer to wf-max than noreg and costreg

Social welfare

Producer rent

Consumer rent

Congestion rent

Extension costs

Transco profit

Fixed part

WFMax+2.80 +11.13 -5.97 -2.27 +0.08 -2.27 -

NoReg+1.10 +1.82 -1.13 +0.42 +0.01 +0.41 -

CostReg+1.06 +1.77 -1.08 +0.41 +0.04 +0.42 +0.04

HRV+2.25 +6.59 -3.62 -0.68 +0.04 +1.79 +2.51

Table 5: Welfare results DRes: Differences to baseline without extension in bn €

Social welfare

Producer rent

Consumer rent

Congestion rent

Extension costs

Transco profit

Fixed part

WFMax+2.82 +11.46 -6.31 -2.25 +0.08 -2.33 -

NoReg+1.09 +1.81 -1.15 +0.44 +0.01 +0.43 -

CostReg+1.09 +1.99 -1.30 +0.44 +0.05 +0.44 +0.05

HRV+2.30 +6.80 -3.69 -0.76 +0.04 +1.79 +2.59

Table 6: Welfare results WindRes: Differences to baseline without extension in bn €

16 June 201115

Comparison of welfare and extension results

HRV much closer to wf-optimum in all cases robust!

Fluctuating demand and wind power both increase the gap between wf-max and the regulatory cases

-20%

0%

20%

40%

60%

80%

100%

HRV NoReg CostReg

Ten regulatory periods Higher extension costs

More wind Endogenous line reactance

Figure 17: Social welfare gain of extension compared to WFMax for different model runs

16 June 2011 16

Conclusions• Details matter in electricity market modelling:

– Demand: simplified, static approach systematically underestimates the need for transmission upgrades

– Fluctuating wind: further increases expansion requirements

• HRV is robust against demand and wind fluctuations– WF: HRV closest to wf-max– Extension: HRV also leads to second-highest outcomes– Performance of HRV relative to alternatives increases with more

realistic setting!

• HRV has favourable characteristics for future large-scale wind integration (high extension)

further research necessary

16 June 2011 17

Challenges

• Computationally very intensive• Data:

– Better reference demands and prices– More realistic wind power fluctuations

• Strong assumptions:– Perfect competition in generation– A single Transco