EURELECTRIC Conference
RENEWABLE ENERGY 2020: Opportunities and Challenges
7-8 May 2009, Hotel
Radisson Royal SAS, Brussels
Session V – MARKET DEVELOPMENT AND RENEWABLE ENERGY:
Challenges and solutions to integrate RES into the Internal Energy Market
Marco Nicolosi- Videoclip
Marco Nicolosi, Research Associate for Energy and
Environmental Policy at the Institute of Energy Economics, University of
Cologne, explained to conference participants the effects on wholesale
electricity markets of an increasing proportion of infeed from windpower:
increasing price volatility and a new, steeper merit-order curve. In 2008
infeed of wind power varied as much as from zero to 19GW in Germany,
triggering price volatility, sometimes resulting in effectively free power
as variable costs reach close to zero and Mr Nicolosi saw this problem
becoming more acute with the expected increase in wind power infeed needed
to meet the 2020 RES target. The increasing proportion of renewable energy
potentially reduces the need for baseload plants, while greatly increasing
the need for peakload plants.
More peakload plants will be needed and the
grids and interconnectors should be extended to enable greater trade to
dampen extreme price reactions. However, “the market demands more
flexibility”, underlined Mr Nicolosi, listing power storage technology,
capacity markets and demand-side management measures as likely options for
the future.
Susanne Dornick- Videoclip
Renewable energy is currently “not really part of the European electricity
market, in some countries not even part of the national market”, Susanne Dornick of E.ON Energy Trading, speaking on behalf of the European Federation
of Energy Traders (EFET), told the audience. The various national solutions to
promoting renewables, such as purely national issuance and trading of RES
certificates, feed-in tariffs and other subsidy systems, distort the market by
evading price signals, reduce overall liquidity and hinder integration towards
a single European power market, Ms Dornick underlined. As price volatility
increases and peak power becomes more expensive, capacity payments may be seen
to be needed, to which traders are opposed, and the danger arises of
politicians imposing a return to price control mechanisms, she warned.
As regards grid capacity, the trend is going “in the wrong direction”, TSOs
increasingly shifting cross-border allocation from the long to the shorter
time-frame. Large load-flows due to unrestricted (priority) windpower infeed in
Germany, where RES-generators have no duty to balance and costs are spread
across all system users (‘socialised’), are also causing serious loop flows
affecting neighbouring transmission systems. Negative prices are becoming more
common and it can cost tens of millions of euro to dispose of power at a peak.
She contrasted the German system with Denmark, where power generators are fully
responsible for marketing, scheduling and balancing. Ms Dornick wanted to see
“an end to artificial barriers” in the European market, and full integration of
RES-power into the electricity market, to allow “efficient price signals for
demand-oriented generation” and promote technology competition. Liquid
intra-day markets and regional integration of the balancing markets are
especially essential, she argued.
Dirk Biermann- Videoclip
“We are now at the limit. Grids will have to be extended or else we will
have to start switching off RES-power infeeds,” Dirk Biermann, Head of Energy
Management at Vattenfall Europe Transmission, one of Germany’s four TSOs, told
the conference, illustrating the extent of the challenge by revealing that the
vertical load in his control area is just over 10,000MW and the installed
windpower capacity now stands at just under 10,000MW, having more than doubled
since 2001. And RES-infeed is set to increase, with a total 3,500 MW of
windpower offshore in the Baltic Sea expected by 2012. Fluctuations can be
“dramatic” and the costs of managing this are rising. Moreover, under German
law, the TSO has to buy all the RES-power injected, and undertake the balancing
exercise – a “costly refining process” – adding those costs to the grid fees.
Mr Biermann explained the new double role that the TSO now finds itself playing -
balancing energy for a renewable energy balancing group in addition to its
normal TSO tasks. However, the three national and EU policy planks – fostering
market integration and integrating ever-more RES-power, while at the same time
incentive regulation seeks to drive down costs – are virtually contradictory.
Moreover, restrictive regulation on setting grid tariffs, coupled with
“uncontrollable” energy-related costs in the absence of a mechanism for
cost-recovery, now means that German TSOs are becoming loss-making businesses,
he warned. Mr Biermann expressed his belief that the new European TSO body ENTSO-E
would have a big role to play in promoting much-needed regional integration but
he called for a new regulatory framework that would provide for full cost
recovery and enhance investment security.
Marcel Cailliau- Videoclip
“We are now roughly halfway to reaching the EU 2020 RES target”, Marcel Cailliau,
Head of the Market Framework TPM of GDF Suez and Chairman of the EURELECTRIC Task Force
on Integration of RES, told the audience, pointing out however that while so far the growth in RES-power
has been absorbed by existing spare grid capacity, “the limits have now been reached and the second half of
the race will be an uphill one”. Mr Caillau believes it is still possible to reach the target, but there will be
a shift from baseload to peaking plants, short-term volatility is likely to increase and prices – given the cost
of the commodity, plus grids, plus bi-directional distribution and cost of RES-support schemes on top - will
certainly be higher, he predicted. Meanwhile loop flows are likely to decrease available cross-border capacity,
reducing price-convergence between markets.
Another unintended consequence of higher RES-power energy penetration
may be that Carbon Capture and Storage (CCS) will become less economic and thus jeopardise attainment of the EU 2020
CO2-reduction target. Investment in the grids is now urgent - the current financial crisis “should not be used as an
excuse to delay investment, but rather as an opportunity to catch up”, and we also need a regional system operator to
cope with all the various challenges, he stressed. Other crucial factors will be properly-functioning cross-border
intraday markets, and a level playing-field in terms of balancing arrangements between RES and conventional technologies.
Mr Caillau also called for EU-wide harmonisation of the various national RES-support schemes.
|
