Logo EEM11
Session 16: Electricity Market Design
Time: Thursday, 26/May/2011: 2:00pm - 3:30pm
Session Chair: Georgios C. Christoforidis
Location: Istanbul


Mandatory Long-Term Contracts for Renewable Energy: The Best of Both Worlds?

Laurens James de Vries

Delft University of Technology, Netherlands, The

Current renewable energy support schemes in Europe either minimize investment risk, but in doing so rely on administratively determined prices, or rely on market prices, but in doing so create substantially higher investment risk. In Brazil, an alternative market design has been pioneered, in which the renewable energy policy instrument is part of a broader capacity mechanism. This market design appears to be attractive for Europe in the future, when the share of renewable energy has grown, but does not solve the problem of how to maintain efficient dispatch in case of transmission network congestion. Some possible solution pathways are presented.

The Brazilian Electricity Model: An Overview of the Current Structure and Market Design

Elbia Aparecida Silva Melo, Evelina Neves, Luiz Henrique Pazzini

CCEE, Brazil

In the Brazilian electricity supply industry, the first market-oriented reform occurred from 1995 to 2003 ran into trouble, leading to insufficient investment in generation expansion and to higher consumer tariffs. In 2004 the new government revised the institutional model of the Brazilian electricity sector. This paper presents an overview of the current model with emphases in the analysis of both free and regulated contracting environments, and in the improvement opportunities to be overcome in the next stages.

Analysis with Game Theory of the Design Options of the Real Time Electricity Market with Market Power

Haikel Khalfallah1, Vincent Rious2

1European University Institute, YEEES- Florence School of Regulation, Italy; 2Supelec, France

Some authors studied the economic consequences of different real time market designs (with or without penalties) assuming that generators are benevolent. The objective of this paper is to extend their work characterizing the benefit for the power system security and the economic distortions induced by different real time market designs with or without penalties, taking into account the opportunistic behaviors of generators. We use a non-cooperative game theory framework to analyze the design options of real time balancing market in power system with market power. Our modeling approach is a two-stage market-equilibrium, where imperfect competition takes place in both the day-ahead and real time markets. A simple example is presented to illustrate how the optimal competitor’s strategies could change according to the adoption or not of a balancing mechanism, the level of the penalty imposed on imbalances and the technology concentration. We can then recommend an alignment between the design of real time market with the generation concentration and the expected use of market power.

Possible Effects of Balancing Market Integration on Performance of the Individual Markets

Alireza Abbasy, Reinier A. C. van der Veen, Rudi Hakvoort

Delft University of Technology, Netherlands, The

Different cross-border arrangements for exchange of balancing services in electricity markets can potentially have different effects on the behavior of market parties and consequently market performance as a whole. This paper focuses on BSP-TSO trading (foreign bidding) as one of the main four arrangements proposed for exchange of balancing services across borders. We analyze the case of Norway and the Netherlands as a main balancing market integration case in Northern Europe and investigate the possible effect of enabling BSP-TSO trading (as one step towards full balancing market integration) between these countries on the performance of the two individual markets. An agent-based model is developed in MATLAB through which we study the possible change in behavior of market parties as a result of BSP-TSO trading implementation.

A Study of Electricity Market Design for Systems with High Wind Power Penetration

Richard Scharff, Mikael Amelin

KTH Royal Institute of Technology, Sweden

This literature review investigates the influence of intermittent wind power on the electricity market pointing out the importance of the market design along with presenting the Nordic, the German and the Spanish electricity wholesale market. Adaptations in the market design could improve the performance of systems with high wind power penetration levels. As a conclusion promising key-issues are listed.

Locational Signals In Electricity Market Design: Do They Really Matter?

Samson Hadush, Patrik Buijs, Ronnie Belmans

Katholieke Universiteit Leuven, Belgium

This study identifies potential electricity market design (EMD) approaches which send Locational Signals(LS) to guide the siting decision of generators. For each approach examples are provided from European electricity markets. The stability, predictability and strength each signal is evaluated. Important LS outside EMD are identified and compared against the signals from EMD. The paper concludes that LS from EMD do not always matter. Policy makers should be aware of the many factors influencing generation investments when setting up or changing an EMD and assess the potential of the envisaged incentives in relation with other incentives within and outside the EMD.

SEE Regional Wholesale Market Design: Available Options and Implementation

Kostis Sakellaris

Regulatory Authority for Energy, Greece and Athens University of Economics and Business

In 2005 the countries of South East Europe (SEE) committed themselves to develop a regional energy market in SEE. The World Bank offered to provide technical assistance and recommendations for the most effective implementation of the electricity wholesale market opening. This paper presents and discusses the main proposals of the Study for the SEE Regional Market Design. It then proceeds to the provision of recommendations on how the Study’s proposals can be enhanced and fit better to the current status of the SEE markets.