 |
|||||
 |
SESSION III: HOW CAN RES BE INTEGRATED IN THE MARKET?
Professor Green stressed that creating bigger markets based on price
areas that are able to accommodate grid constraints - while not being
related to any specific country borders – will foster electricity trade by
moving electricity from surplus to deficit areas.
Mr Constantinescu championed a specific grid access mechanism based on an
innovative transmission calculation model known as Driving-Point power
transfer, which will incentivise transmission system operators (TSOs) to
maximise their available capacity and foster cooperation in a multi–TSO
environment, while also providing greater transparency to market players.
When congestion occurs, capacity should be allocated on the basis of
implicit auctions – as opposed to explicit auctions – as being best suited
to incentivise TSOs to do redispatching or countertrading. He also stressed
that if TSOs were involved in the management of interconnector constraints
as part of their normal operation, it would significantly facilitate the
convergence of cross-border and national capacity allocation. Audience voting An electronic audience voting session was designed to provide input to the panel debate that followed. The audience felt that the most critical impact of RES-integration on EU electricity markets would be the technical constraints in the grid, changes to the conventional power generation mix and higher balancing costs. Surprisingly for many panel participants, a significant section of the audience saw electricity storage technologies as the best way to manage RES-integration. Asked to identify the biggest challenges to developing off-shore “supergrids”, the audience saw financing and governance issues as the main problems to be overcome. Asked what improvements in the legislation would most facilitate RES-integration, only 1% of the audience thought that preserving the current nationally-based approach was the right way to go. The rest of the participants divided almost equally in supporting all options, with EU-wide harmonisation of RES-support schemes slightly in the lead. As for how the support schemes will look in 2020, the audience showed little faith that one common EU-wide support scheme for all RES would be achieved by 2020, the vast majority expecting that a mix of EU and national support mechanisms would prevail.
For the panel, which was chaired by Asta Sihvonen Punkka, Director General of the Finnish Electricity and Gas Market Regulator and Chair of the Electricity Working Group under European regulators’ bodies CEER and ERGEG, the two keynote speakers were joined by Jukka Ruusunen, President & CEO of Fingrid and Vice-President of TSO association ENTSO-E, Leonhard Birnbaum, Executive Board Member at RWE, Gunnar Lundberg, Vice-President for Regulatory Affairs at Vattenfall and Chairman of the EURELECTRIC Markets Committee and David Porter, Chief Executive of the UK Association of Electricity Producers and Chairman of the EURELECTRIC Energy Policy and Generation Committee.
Jean Constantinescu on the other hand stressed the value of having targets. They “send a message and set the direction even if time is short to fulfil them,” he argued. He stressed however that providing the right incentives to TSOs to build capacity is crucial to facilitate the removal of both the internal and cross border bottlenecks and ensure the strengthening of the grid that is critical for RES-integration. Nevertheless he insisted that allowing TSOs to garner congestion rents was not the right way. “It is a nonsense to auction a monopoly service” when it is scarce, he added. Mr Constantinescu suggested that, as in Romania, those who suffer from the congestion could be compensated or congestion income could be specifically earmarked for investment to remove the congestion, and he looked forward to seeing a harmonised system for this in Europe one day. Professor Green agreed with Mr Constantinescu on congestion rents, suggesting that a stronger incentive might be to operate a bonus-malus system, penalising a TSO which fails to act in time to overcome a congestion blockage and rewarding prompt action. He agreed with Mr Porter that ideally the market would provide a price that would ensure the availability of plant when needed, but argued that “stability” might be more valuable than a theoretical “best” solution, ie a system of capacity payments might be needed in order to avoid delays in investment decisions. Regarding the general issue of providing national support to stimulate RES-development, the Professor pointed out that governments would always prefer to see things built in their own country and thus in many ways “industry policy is opposed to a cross-border approach”. However he reminded the audience of the old economists’ adage that “infant industries never grow up”, underlining that RES must be allowed to stand on its own merits within the foreseeable future. Asta Sihvonen Punkka stressed the importance of sharing the costs and benefits related to regional grid planning and the primary role of TSOs in reaching an agreement on this challenging issue. She pointed out that the issue of incentives for TSOs to remove congestion is quite a difficult one, which will be the subject of consultations by regulators in the near future. In response to comment from the audience that reaching the RES targets is
perceived by many industry representatives as unrealistic, the panel
participants agreed that the targets are a given political reality, they
point in the right direction and that all stakeholders should make maximum
efforts to attain them. Most of the panellists agreed that in the medium
term there should be a gradual move away from special treatment of RES, some
arguing that a political agreement should be reached that no support schemes
will be preserved after 2020. |
||||
| Copyright © 2009 EURELECTRIC | |||||
Professor
Richard Green, Director of the Institute for Energy Research and
Policy at Birmingham University, opened his presentation by pointing out the
role of the market in giving the right price signals to power generators and
consumers to take decisions on how much and where to produce or consume
electricity. In his opinion, integrating renewable energy into the market
will require changes to the current market design in order to accommodate
additional load and price volatility and ensure that short-term reserve
capacity and peak capacity are built.
The
President of the Romanian Institute for Energy Development Studies (IRE)
Jean Constantinescu highlighted the challenges of integrating large-
scale RES-power into electricity markets and discussed how to turn these
challenges into opportunities. In order to do so, the development of
fully-fledged regional markets must be accompanied by harmonised
network-access arrangements, grid reinforcement and a proper inter-TSO
compensation payment model.
Gunnar Lundberg identified grid reinforcement as the most crucial
action to ensure that markets are able to cope with a large share of
intermittent power and stressed that prompt action is needed here from the
TSOs, otherwise it is likely that RES-integration into electricity markets
will have adverse effects leading to negative electricity wholesale prices
in some parts of the markets. Another major challenge is to develop a price
mechanism capable of delivering proper price signals for investment in both
base-load and peak-load plants and design a suitable way of rewarding
electricity companies for building or maintaining capacity. The successful
integration of large-scale RES and overall market integration can go
hand-in-hand but this will require proper and timely actions in those areas.
Mr Lundberg expressed his belief that ideally it would have made sense to
allow free trade in RES-power, which would probably have automatically led
to harmonisation of national support schemes. In framing the new Directive,
the EU legislators did not provide for free trade but we should still
continue to argue for full use of the cross-border cooperation mechanisms in
the Directive so as to reduce inefficiencies to a minimum and foster
regional integration, he underlined.
Jukka Ruusunen agreed that grid reinforcement is one of the most
urgent TSO priorities. He revealed that work has begun within ENTSO-E
regional groups to develop the 10-year grid development plan required by the
new Electricity Directive and that this will take into account both supply
security and markets aspects. The Plan will be based on best available
information and in some cases on estimates of likely construction and
connection of wind farms since there is no complete picture available today.
He pointed out that time is short for this and that considerable delay in
issuing licensing remains the main hurdle. He underlined however that the
challenges of developing properly-functioning, integrated markets go beyond
the RES issue and relate to the more general issue of the lack of
correlation between power generation and demand. Price should always be the
main driver for electricity flows and generation dispatch by TSOs should be
limited to the needs of system security.
Leonard Birnbaum stressed that “there is no silver bullet”
to solve the RES challenge and saw the need for a combination of approaches
- grid reinforcement, demand side management, capacity payments, general
research and development, creation of storage facilities et al. He said that
policymakers should set the overall target and then leave companies free to
decide which is the most cost efficient way of attaining them. Mr Birnbaum
also stressed the need to invest in technology research to ensure that RES
can become fully competitive in the medium-term future. The current
multiplicity of national schemes and absence of any real trading in RES
under the new Renewables Directive will lead to significant economic
inefficiencies and have an extremely negative impact on the electricity
market, he warned.
David Porter was highly critical of a situation where we have
“an EU Directive and EU targets but no EU system” for trading RES-power
as the Directive perpetuates the existence of 30 separate RES support
schemes in the 27 member states and called into question the EU
policymakers’ belief in markets since they had shown a predilection for
interfering in the market. “All major changes to the system are long-term
changes. Without the deadline of 2020 for boosting RES to a 20% share of
energy consumption - equivalent to some 35% of EU electricity supply -
promising renewable energies would have evolved over time,” he argued.
Many solutions including storage technologies and smart grids will become
available only in the long-term. He was sceptical that the 2020 targets
would be met within the ten year time span and argued that this should be
stated openly and honestly by electricity management in dialogue with
politicians. The review of the Directive scheduled for 2014 would be
“very important indeed”. Mr Porter said he would be “disappointed”
if a market in capacity were needed to ensure that plant are built or
maintained. Capacity payments to keep plant available are “an insurance
policy” and it all depends what “premium” people are willing to
pay for their insurance, he underlined. Meanwhile grid problems should be
addressed through “simple solutions”, including better demand-side
management, he told the audience.