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2015/08: Analysing the sensitivity of electricity system operational costs to deviations in supply and demand

Increasing renewable penetration has given rise to a series of challenges as regards the ability of electricity systems to balance supply and demand, particularly with high levels of intermittent renewable generation. This new scenario requires a detailed quantitative assessment of the way in which the electricity system might both deliver and accommodate higher levels of RES-E generation and of the associated economic costs for the consumer. The estimations reported in this paper for the Spanish electricity system stress the importance of demand imbalance when accounting for the cost of balancing services, in contrast with previous studies that have focused their attention more specifically on supply effects.

International Academic Symposium «Energy Markets and Sustainability»

The Symposium on Energy Markets and Sustainability will bring together high ranking researchers in the field of energy economics. The meeting will examine various questions related to the energy markets (gas and electricity markets, adjustment markets, and markets design), the infrastructure (auction designs for smart grids, electricity transmission networks, and gas interconnection), and the policies for sustainability (renewables promotion, greenhouse gas emissions, and energy efficiency).

The meeting, to be held in Barcelona on 03 February 2015, forms part of the activities organised by the UB-IEB Chair in Energy Sustainability, sponsored by the Foundation for Energy and Environmental Sustainability (FUNSEAM). The group hopes that the symposium will help disseminate the work of leading researchers in the field of energy economics, with a particular emphasis on markets and sustainability.

2014/34 : Costs of power supply flexibility: the indirect impact of a Spanish policy change

The increase in the share of supply from intermittent power sources changes the demand for power from traditional power plants. The power system demands more volume flexibility from traditional plants. Our goal is to better understand the impact of a reduction of flexibility in power supply on the costs of volume adjustments. We define flexibility as the capacity with which nominated power plants can adjust their output to unexpected changed in residual demand. We exploit a policy change in Spain that affected the power market. The policy, implemented in 2010, aims to provide a stimulus for producing power with domestic coal. The policy, in combination with a year with scant rainfall in the year after the policy was implemented, decreased the amount of flexibility in power supply and we use this to examine the effect of a change in flexibility on the costs of the power system. We find that a decrease in flexibility resulted in an increase in the costs of adjustments as those flexible plants driven out of the spot market by the coal fired plants compensated themselves by charging higher prices in the adjustment market. Policies as the one evaluated in this paper oriented to stimulate generation from less flexible and more pollutant conventional plants should therefore in any case be abandoned. In contrast to the Spanish coal policy, more flexible power plants should remain online and be prioritised against less flexible power plants.

2014/31 : The diffusion of patented oil and gas technology with environmental uses: a forward patent citation analysis

Relevant advances in the mitigation of environmental impact could be obtained by the appropriate diffusion of existing environmental technologies. In this paper, we look at the diffusion of knowledge related to environmental technologies developed within the oil and gas industry. To assess knowledge spillovers from oil and gas inventions as a measure of technology diffusion, we rely on forward patent citations methodology. Results show that there is a strong likelihood that the citing patent will be eventually linked to environmental technologies if the original oil and gas invention has already environmental uses. Moreover, both intra and intersectoral spillovers produce a «turnabout» effect, meaning that citing patents show the opposite quality level of the cited patent. Our results support the idea that more sector-specific environmental policies, with an emphasis on diffusion, would significantly improve the use of environmental technologies developed within the oil and gas industry.

2014/30 : The stabilizing effect of hydro reservoir levels on intraday power prices under wind forecast errors

The power system has to deal with three main sources of uncertainty: demand uncertainty and load prediction errors, failure of power plants and uncertainty of wind. The growing share of wind and other intermittent generation sources in the European supply increases the uncertainty about power production in day-ahead and longer-term predictions. As EU member states increase the deployment of wind power and other intermittent renewable energy sources, the intraday and balancing market will gain more interest, as additional demand for reserve and response operations is needed. Hence, it becomes relevant to analyse the effect of wind power forecasting errors on intraday power prices. A higher forecast error will increase the need of intraday markets to balance out the oversupply or deficit of wind power on an hourly basis. This oversupply or deficit can be corrected though flexible hydropower plants; however the power price is highly influenced by the fluctuations in the reservoir level (Huisman et. al [2013]). In this paper, we question to what extent hydropower a stabilizing effect has on the impact of wind forecast errors on NordPool intraday prices. To do so, we examine the peak and off peak imbalance power prices for the Scandinavian market (ELBAS) from 2011 until 2013 with a Markov regime-switching model in periods with low and high hydro reservoir levels. Results indicate that under wind forecast error, the use of hydropower capacity in intraday markets is proven to be an effective volatility control mechanism. However, the price stabilizing effect of hydropower capacity does not take place at all times.

2014/29 : Retail price effects of feed-in tariff regulation

The feed-in tariff regulation is the wider spread promotion scheme used to encourage the take-up and development of generation from renewable energy sources in the EU, and the costs of resources devoted to this promotion are usually borne by final consumers. Two components of the electricity retail price are expected to be influenced by feed-in tariff regulation: the incentive to those firms producing electricity from renewable energy sources and the wholesale price of electricity. In this study we analyze the effects that feed-in tariff regulation has on electricity retail price for industrial consumers. This analysis is performed by estimating the relative intensity of the effects from the cost of incentives for electricity generation under the feed-in tariff and the electricity wholesale price over the Spanish industrial retail price. Especial attention is devoted to technology-specific considerations, as well as short and long run effects. In general, results show that there is not a strong link between the retail and wholesale market for Spanish industrial consumers. Moreover, taking into account technology-specific characteristics, results indicates that an increase of solar generation leads to a higher increase in the industrial retail price than in the case of a proportional increase of wind generation. This implies that, when evaluating the feed-in tariff regulation impact on the industrial retail price, the cost of incentives effect prevails over the wholesale price effect, and this is stronger for solar than for wind generation.