Market Design for an Electricity System with higher share of RE Energy Sources

158 Pages·2015·6.89 MB·English

by  Aditya Singh Baghel

Indo – German Energy Programme
Green Energy Corridors

Market Design for an Electricity
System with higher share of RE
Energy Sources

Published by
Consortium Partners

Ernst & Young LLP, India

Fraunhofer IWES, Germany

University of Oldenburg, Germany

FICHTNER GmbH & Co. KG, Germany
Contents
1 Problem Statement 1
1.1 High Delivered Cost of RE Power 1
1.2 Burden on DISCOMs on Purchase of RE power 1
1.3 Deviation from RE Schedule 2
1.4 Non Uniform Distribution of RE potential 3
2 Current Indian power market 4
2.1 Introduction 4
2.2 Structure of Indian Electricity Market 5
2.3 Transactions in the Market 6
3 German Electricity Market 14
3.1 Regulatory Framework 14
3.2 Introductive example 15
3.3 Balancing groups 17
3.4 Market based balancing 18
3.4.1 Scheduling 19
3.4.2 Spot market 20
3.5 Product specifications 21
3.5.1 Day-ahead auctions 21
3.5.2 Orders 21
3.5.3 Price determination 24
3.5.4 Post trading period 24
3.5.5 15-min. intraday auction 25
3.5.6 Intraday continuous trading 25
3.6 Control energy or reserves for imbalances 27
3.6.1 Pricing, remuneration and settlement 27
3.7 Cross-border trading 28
3.8 Market coupling 30
3.8.1 Cross border capacity allocation 31
3.9 Network tariffs 32
3.10 Renewable Energies within the set-up of regulation and mechanisms 33
3.10.1 Funding and refinancing 33
3.10.2 Marketing of RE and conformity with balancing group concept 34
3.10.3 Impact on short-term markets and consequences 35
4 Ancillary Services (AS) 40
4.1 Development of joint operational procedures 41
4.2 Organizational Implementation of the Frequency Control 42
4.2.1 Control activities 42
4.2.2 Assessment of balancing needs and level of responsibility 45
4.3 Methodology of reserve dimensioning 53
4.3.1 Primary reserve 54
4.3.2 Secondary and minute reserve 55
4.4 Specification of reserves 58
4.4.1 Prequalification 58
4.4.2 Product specifications 59
4.4.3 Recommendation for the introduction of restoration reserve as ancillary
service 61
4.4.4 Implementation of grid control cooperation 62
4.5 Voltage control 64
4.5.1 Market design for voltage support 65
4.5.2 Examples of current approaches to contract voltage support in Europe 65
4.5.3 Voltage support by RES 66
4.6 Black start 67
4.7 RES capabilities to provide ancillary services 67
4.8 German Scenario 71
4.8.1 Primary control reserve 71
4.8.2 Secondary control reserve 71
4.8.3 Tertiary control reserve 71
4.8.4 Grid control cooperation 72
4.9 Status of ancillary services in India 73
4.9.1 Definition and Scope 73
4.9.2 CERC Draft Regulation on Ancillary Services Operation, May 2015 74
4.9.3 Petition on the inadequate response of FGMO, February 2015 74
5 Market Options 75
5.1 Market Models 75
5.2 Pricing Models 77
6 Balancing Group Concept 79
6.1 Formation of balancing groups 79
6.2 Balance Responsible Party 80
6.3 Cost of Ancillary Services and Reserves 80
6.4 Timeline of rollout 80
6.5 Participants and Roles 80
6.5.1 System Operators 80
6.5.2 BRPs 82
6.6 Demand Response in Balancing Groups 83
7 Transition to Proposed Market Design 85
7.1 Phase 1 86
7.1.1 Modifications to regulations related to Power Purchase Agreements 86
7.1.2 New Products in the market 87
7.1.3 Introduction of Generator only Balancing Groups & Reserve Products 87
7.1.4 Introduction of Generator Only Balancing Groups 88
7.1.5 Congestion Management 89
7.1.6 Flexible Generation 89
90
7.2 Phase 2 90
7.3 Required Legislative and Regulatory Changes 90
7.3.1 Introduction of Consumers in Balancing Groups 91
7.3.2 Introduction of Demand Side Products 91
7.3.3 Load Forecasting 91
7.3.4 Review of Balancing Group Regional Restrictions 91
7.3.5 Migration of PPAs 91
7.4 Phase 3 93
7.4.1 Modification of Products on PXs 93
7.4.2 Migration of PPAs 93
7.4.3 Review of RPO/REC 93
7.5 Proposed Market Design for India 95
7.5.1 Market Design 95
7.6 Deviation and mechanism of settlement 98
Management of Schedule Deviations due to RE 98
Remuneration to RE Generators and Aggregators 98
7.7 Control Reserves (Ancillary Services and Balancing) 99
7.7.1 Contracting of reserves 99
7.7.2 Scheduling of reserves 99
7.7.3 Activation of Reserves 100
7.7.4 Infrastructure for Deployment of Reserves 100
7.7.5 Payment to reserve service providers 101
7.7.6 Reserve service providers 101
7.7.7 Penalty for defaulting reserve providers 102
8 Roadmap and Summary of Recommendations 103
8.1 Immediate Steps – Over the next 5 years (Phase 1 of transition) 103
8.2 Steps to be taken after 5 years up to 10 years (Phase 2 of transition) 103
8.3 Steps to be taken after 10 years up to 15 years (Phase 3 of transition) 104
9 Bibliography 105
Annexure 1 110
Annexure 2 1
Annexure 3 7
Annexure 4 11
a. Single Part Tariff 11
b. Two Part Tariff 12
c. Availability Based Tariff 13
List of Figures

Figure 1: Wind and Solar Generation Gujarat 2014 and 2022 (projected) ............................................. 2
Figure 2: Variation of Wind and Solar potential in India .......................................................................... 3
Figure 3: Segments of Indian Power Sector ........................................................................................... 4
Figure 4: Structure of Indian Power Market ............................................................................................ 5
Figure 5: Classification of Indian Power Market...................................................................................... 7
Figure 6: Transactions in Indian Power Market ...................................................................................... 8
Figure 7: Regulatory Transition of Indian Power Market ........................................................................ 9
Figure 8: Percentage Distribution of Contracts in the Market ................................................................. 9
Figure 9: Functioning of Day Ahead Markets ........................................................................................ 10
Figure 10: Timeline of trades on the IEX under 24 hour operations ..................................................... 11
Figure 11: German electricity markets. (Fraunhofer IWES based on (Judith et al. 2011)) ................... 14
Figure 12 Interaction of two BRPs and a TSO in a control zone regarding scheduling and imbalance
settlement .............................................................................................................................................. 16
Figure 13: Estimated marginal cost based merit-order for all German power plants ........................... 19
Figure 14: Share of trading volume of national EPEX SPOT market in annual national (EPEX SPOT
2014f) .................................................................................................................................................... 20
Figure 15: Example of an individual offer curve at EPEX SPOT representing the up to 256 possible
price-quantity combinations .................................................................................................................. 21
Figure 16: Possible block orders of the day-ahead auction at EPEX SPOT (EPEX SPOT 2014b) ..... 22
Figure 17: Principles of price convergence in coupled electricity markets (PCR 2014b) ..................... 30
Figure 18: Concept of direct marketing & refinancing RE ..................................................................... 33
Figure 19: Portfolio size of 30 selected direct marketing companies ................................................... 35
Figure 20: Electricity production by source and price development at EPEX spot markets ................. 37
Figure 21: Illustrative example: Marginal cost pricing mechanism and merit-order effect of RE .......... 38
Figure 22: Spot market price and total RE, wind and PV share of gross electricity consumption in
Germany................................................................................................................................................ 39
Figure 23: Survey of important system characteristics and services .................................................... 40
Figure 24: Dynamic hierarchy of Load-Frequency Control processes in Europe, Source: entso-e ..... 43
Figure 25: Types and hierarchy of geographical areas in Load-Frequency Control processes in
Europe and a possible configuration of a synchronous area, Source: entso-e .................................... 44
Figure 26: Current status of Synchronous Areas, LFC Blocks and LFC Areas in Europe, Source:
entso-e .................................................................................................................................................. 44
Figure 27: Load Frequency Control Block Diagram with Input ∆PL and Output ∆f .............................. 46
Figure 28: Steady state frequency deviation for different shares of RE - no speed regulation ............ 47
Figure 29: Steady state frequency deviation for different shares of RE – 50% conventional generation
with speed regulation R =5% ................................................................................................................ 48
Figure 30: Steady state frequency deviation for different shares of RE – 100% conventional
generation with speed regulation R=5% ............................................................................................... 49
Figure 31: Steady state frequency deviation for different shares of RE – 50% conventional and 100%
RE generation with speed regulation R=5% ......................................................................................... 49
Figure 32: Steady state frequency deviation for different shares of RE - all generation with speed
regulation R=5% .................................................................................................................................... 50
Figure 33: Influence of primary control on frequency deviation in terms of RES schedule deviation of
30% ....................................................................................................................................................... 51
Figure 34: Allowed deviation from schedule of RE indicating limits of 30% and 12% .......................... 51
Figure 35: Allowed deviation from schedule of RE indicating limits of 30% and 12% with variable
primary control provision. ...................................................................................................................... 52
Figure 36: Simplified illustration of imbalance types (source: entso-e) ................................................ 53
Figure 37: Schematic representation of the Graf-Haubrich method ..................................................... 56
Figure 38: Procured secondary reserve capacity in Germany for each quarter of the year ................. 57
Figure 39: Procured minute reserve capacity in Germany for each quarter of the year ....................... 57
Figure 40: Model protocol for the prequalification of a technical unit for positive primary control ........ 59
Figure 41: Technical implementation of Imbalance Netting in IGCC .................................................... 63
Figure 42: Example of pro-rata distribution of netting potential with congestion correction ................. 63
Figure 43: Value of netted imbalances per country .............................................................................. 64
Figure 44 - Market Options ................................................................................................................... 75
Figure 45 - Types of electricity pool options ......................................................................................... 76
Figure 51: Organization of Intra state balancing groups ....................................................................... 81
Figure 52: Organization of Inter-state Balancing Groups ..................................................................... 82
Figure 53 - Demand Response ............................................................................................................. 84
Figure 46: Current Power Market .......................................................................................................... 86
Figure 47: Market on complete implementation of phase 1 .................................................................. 90
Figure 48: Market structure after complete implementation of Phase 2 ............................................... 92
Figure 49: Market on Completion of Phase 3 ....................................................................................... 94
Figure 50 - Proposed Market Design .................................................................................................... 96
Figure 54: Block diagram of a generator-load model (Kundur, 1994) .................................................... 3
Figure 55: Governor Steady-State Speed Characteristics (Saadat) ....................................................... 4
Figure 56: Block Diagram of Governor with Frequency Control Loops for Steam Generator Unit
(Saadat)................................................................................................................................................... 5
Figure 57: Load Frequency Control Block Diagram with Input ∆PL and Output ∆f ................................ 6
Figure 58: Single Part Tariff Structure .................................................................................................. 12
Figure 59: Two Part Tariff Structure ...................................................................................................... 13
Figure 60: Components of ABT ............................................................................................................ 14
Figure 61: Gujarat Load Demand - 2014 and 2022 .............................................................................. 16
Figure 62: Gujarat Solar Generation for July 2014 and July 2022........................................................ 16
Figure 63: Gujarat Wind Generation for July 2014 and July 2022 ........................................................ 17
Figure 64: Gujarat RE Generation for July 2014 and July 2022 ........................................................... 17
Figure 65: Gujarat Load Demand v/s RE Generation & Residual Load for July 2022.......................... 18
Figure 66: Frequency Deviation for Different Shares of RE ................................................................. 19
Figure 67 - Forecasted GHI series ........................................................................................................ 28
Figure 68 - IFS gridded map of Rajasthan ............................................................................................ 29
Figure 69: Change in Forecast Error for a Regional and Single Site Forecast .................................... 30
Figure 70: Accuracy of forecast for different Prediction Horizons......................................................... 31
Figure 71: Scatter plot linking forecast error to actual generation in % of total installed capacity ........ 32
List of Tables

Table 1: Type of Contracts in Term-Ahead Market ............................................................................... 11
Table 2: Difference between Day Ahead Contingency and Day Ahead Spot Contracts ...................... 12
Table 3: Summary of Term-Ahead Market ............................................................................................ 13
Table 4: EPEX SPOT day-ahead auction contracts specifications (EPEX SPOT 2015) ..................... 23
Table 5: EPEX SPOT 15-min. intraday auction contracts specifications (EPEX SPOT 2015) ............. 25
Table 6: EPEX SPOT intraday continuous trading one hour contracts specifications (EPEX SPOT
2014e) ................................................................................................................................................... 29
Table 7: Classification of ancillary and operational services in Germany ............................................. 41
Table 8: SOC and Regional group activities ......................................................................................... 42
Table 9: Error types considered in the Graf-Haubrich method (CONSENTEC 2010) .......................... 56
Table 10: Parameterization of the Graf-Haubrich method (CONSENTEC 2010) ................................. 56
Table 11: Reserve product specifications ............................................................................................. 60
Table 12 - Factors influencing demand and supply of the control reserve market in Germany ........... 61
Table 13: Wind and Solar PV Technology Capabilities for Gas Provision ........................................... 68
Table 14: Explanations and References for Wind and Solar Technology Capabilities ........................ 70
Table 15: Requirements of the different types of control reserves ....................................................... 73
Table 16 - Comparison of Market Options ............................................................................................ 77
Table 17: Proposed Products on the Power Exchange ........................................................................ 87
Table 18: Requirement of Different types of control reserves ............................................................ 102
Table 22: Proposed Deviation Settlement for RE Generators .............................................................. 22
Table 23: Analysis of RRF and Proposed DSM for RE Generators ..................................................... 24
Table 24: Per Unit Charges for a Wind Generator as per Proposed DSM Mechanism ....................... 25
Table 25: Analysis of RRF and Proposed DSM for RE Generators for deviation within ±12% ............ 26
Table 26: Impact of Proposed DSM Mechanism due to different PPA Rates ...................................... 32