Methodology to value wind energy in a liberalised electricity market

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Methodology to value wind energy in a liberalised
electricity market

• Casus wind off-shore in the Netherlands
• 1st of April, 2008

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Content

• Features of a liberalised electricity market
• Methodology to quantify value of wind energy
• Market simulation tools Prosym, Symbad, Plexos
• Casus wind offshore value in the Netherlands
• Applications of the methodology
• Energy Island as electricity storage

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1. Features of a liberalised electricity market

• Within a country
• Regulation (imbalance costs, support)
• Power system size and composition
• Market maturity of day-ahead / intra-day market
• Within a region
• Market coupling (dayahead, intra-day)
• Cross border capacity allocation (implicit,
  explicit)

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2. Methodology to quantify value of wind energy

• Step 1. Define electricity market establish the
  market places wind energy is traded
• Step 2. Define future scenarios (production,
  load, NTC, fuel and CO2 prices)
• Step 3. Define the revenue and cost components of
  wind energy for each market place (input for
  PPA)
• Step.4 Quantify the revenue and cost components
  based on power market simulation tools

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2. Methodology Step 1 and 2

• Step 1.
• Define the composition of the national / regional
  market
• Define relevant aspects of regulation as
  support, imbalance market, gate closure, etcetera
• Establish market places (day-ahead / intra-day /
  on-line) where wind energy is traded
• Step 2.
• Define scenarios production (coal, gas,
  renewable / wind, hydro, nuclear), load
  (consumption increase), NTC (import / export
  capacities), fuel prices (gas, oil, coal, etc.)

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2. Methodology Step 3. Revenue and cost
components

• The most important components found are

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2. Methodology - Step 4. Simulation of
electricity markets

• ProSym tool simulate an electricity market based
  on least cost approach each participant makes
  hourly bids with prices equal to the short run
  marginal plant costs.
• Output system marginal price (SMP), hourly
  volumes of wind energy, hourly wind curtailment,
  etcetera
• Symbad tool simulate strategic behaviour of
  market participants based on Nash equilibrium
  (generators portfolio and demand level are main
  variables).
• Output price mark-ups due to competitive
  behaviour

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2. Methodology - Step 4. Simulation with Prosym
tool

• ProSym is probabilistic, chronologic, hourly
• Pool simulation based on optimal dispatch of
  power plants in a country (region), a dynamic
  simulation of production units based on
  efficiency curve, start up costs, start and
  ramping speed, availability, requested demand,
  etcetera
• Few variables for ProSym modelling
• Present and future power plants, wind capacity,
  plant characteristics, fuel and CO2 prices
• Hourly demand profile
• Import and export capacities

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2. Methodology - Step 4. Simulation with Symbad
tool
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3. Casus wind offshore value in the Netherlands

• Relatively small power system
• In 2007 Max value 14825 MW Min value 3097
  MW
• Wind capacity by 2007 1830 MW
• Gate closure Program responsible parties 1 hour
  ahead
• Existing markets day-ahead, intra-day, balancing
  
• Market where wind energy is traded day-ahead
  market

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3. Casus wind offshore market value and
imbalance costs-the Netherlands

• Balancing costs can be quantified as
• difference of system costs for different reserve
  capacities
• simulation of reserve markets

Assumptions Gas price 20 /MWh CO2 price 20
/ton
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4. Applications of the methodology

• Quantify the value of wind power in a given
  electricity market
• Quantify price components and price structure for
  PPAs
• Quantify wind value for a given portfolio
• Get better understanding of short-term risks of
  wind energy
• Quantify the value of wind energy (price
  components) at different regulation (gate
  closure) and import / export capacity

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5. Energy Island as electricity storage
Quantify the value of large-scale storage in
relation to large volumes of wind energy in the
electricity supply system

• decrease imbalance costs
• save 1886 TWh/a wind energy in the Netherlands
  of 2020 with 9000 MW wind, by avoiding wind
  curtailment

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5. Energy Island as electricity storage
Quantify the value of large-scale storage in
relation to large volumes of wind energy in the
electricity supply system
Electricity storage and Reserve requirements
(RR) with RR without RR
Wind Storage
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Thank you for your attention!

• Natalia Moldovan
• KEMA Consulting
• natalia.moldovan_at_kema.com

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2. Methodology value of wind energy Step 3
benefit cost components
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2. Methodology value of wind energy Step 3
benefit cost components