Balancing markets. Bertrand Cornélusse Energy Markets ELEC / ULg / Pr. Damien Ernst - PDF

Balancing markets Bertrand Cornélusse Energy Markets ELEC / ULg / Pr. Damien Ernst 1 Introduction 2 What is balancing? Maintaining equilibrium between generation and demand, at any moment

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Balancing markets Bertrand Cornélusse Energy Markets ELEC / ULg / Pr. Damien Ernst 1 Introduction 2 What is balancing? Maintaining equilibrium between generation and demand, at any moment Excess supply has to be stored. Storage capacity is limited (mainly hydro storage, e.g. Coo, Plate Taille). An excess induces a frequency increase. A lack of supply implies energy is taken from inertia of rotating machines, which decelerate. A lack induces a frequency decrease. Some effects of imbalance: frequency deviates from 50Hz loss of synchronism blackout In case of imbalance, compensation must be fast! 3 A progressive process Planning generation investments, interconnection capacity (adequacy) Long term schedules (e.g. Nuclear maintenance/refuelling) Forward and long term energy contracts Ancillary services provision Day ahead market Intraday market Real time balancing 4 Balancing and Ancillary Services Markets According to ENTSO-E: Balancing: situation after gate closure in which a TSO acts to ensure that demand is equal to supply, in and near real time. Ancillary services: range of functions which TSOs contract so that they can perform balancing. Market: system to ease exchange of ancillary services. Remark: Distinguish energy trading from service (i.e. balancing capacity) trading! 5 Some types of services Primary aka frequency containment reserve (FCR), to maintain system frequency with automatic and very fast responses proportional to frequency drop. Secondary aka frequency restoration reserve (FRR), which can provide additional energy when needed Black start capability, to restart a grid following a blackout Provision of reactive power, for voltage regulation 6 Balancing effort in time and space Time FCR, fast, automatic (proportional to the frequency variation) and distributed FRR, slower, centralised, and contained to the area at the origin of the incident(based on ACE) Manual, economic redispatch of FRR Allows recovering FRR. The Area Control Error (ACE) is, for a considered quarter and expressed in MW, the difference between the scheduled and measured values of the interchanges of the Belgian control area, taking into account the effect of frequency bias. 7 In this lecture We focus mainly on the time period from the ancillary services provision to real time balancing FRR, unless stated otherwise Most observations are based on the Belgian case but similar observations hold for other systems 8 Trends Broaden range of services, and widen the range of providers. Do not rely only on generators (classical scheme) anymore, but also use demand response, consumers changing their operating patterns. Why? Because share of steerable generation is decreasing with the rise of the exploitation of renewable energy sources (RES). Increase of harmonisation of the rules for balancing and for using ancillary services in order to improve pan-european competition, thus costs and efficiency. Hence the Notion of coordinated Balancing Area coordinated-balancing-area 9 How it works 10 Balancing is achieved through a divide and conquer approach The synchronous system (e.g. continental Europe) is divided in balancing areas (BAs) (e.g. country). By definition, each balancing area must be in balance. In each zone the balance is imposed through balance responsible parties (BRP), which must all be in balance independently. In practice each BRP of a balancing area is never perfectly in balance. If the sum of the imbalances of all the BRPs does not cancel out, the TSO responsible of that area has to restore balance, using ancillary services. BRPs are incentivised to be in balance through an economical signal. (All these concepts will be defined in the next slides) 11 Example: 3 balancing areas Each gray ellipsis represents a BA Blue lines are intra-area HV lines Black lines interconnect BAs If interconnection lines are HVDC, then the balancing areas are not synchronous 12 Hence, who has a role in balancing? Regulator Distribution System Operator Transmission System Operator Residential Consumer Large consumer Retailer Generation Company Market Operator (Aggregator) 13 Hence, who has a role in balancing? Regulator Distribution System Operator Transmission System Operator Residential Consumer Large consumer Retailer Generation Company Market Operator (Aggregator) 14 Explanation The TSO is responsible for the balance of its BA Retailers and generation companies usually take the role of BRP Large consumers can sometimes have a BRP role, if they have no retailer Aggregators, or BSPs, are third parties who implement and sell services to BRPs or the TSO by aggregating capacity from the demand side. Historically, generation companies are (were) providing ancillary services (both upward and downward modulation) No role: DSO, end consumer (retailer takes BRP role), Market Operator (except imposing supply vs. demand equilibrium for every exchange) 15 Balance Responsible Party For instance this BA has 5 BRPS Each BRP perimeter is delimited by a dotted ellipsis A BRP is an entity responsible for the equilibrium between injection and off take at a set of points in the network Point: an electrical bus of the HV network (operated by the TSO) Imbalance is established on a 15 minutes basis as the integral of the error signal 16 Balance Responsible Party activities In order to keep his perimeter in balance, a BRP can trade electricity on the HUB/Belpex (cf. lecture on day ahead market), import/export electricity and purchase capacity rights It must send day-ahead nominations to ELIA for load, production, import/ export and hub deals on a 15 minutes basis, a day ahead. These nominations must be balanced! Example of Belgium: for this winter, if the day ahead nomination is not in balance, and other conditions are met in realtime (cf. questions-about-the-risk-of-shortage-in-belgium#1e), ELIA can ask 4500 euros per MWh of imbalance. Why 4500 euros? 17 Note on nominations in Day ahead For load and generation (independently) a BRP will nominate per access point for grid user directly connected to the HV grid and globally per distribution network. Right now neither the distribution system operator nor the TSO knows accurately the distribution of injections and off takes of a BRP within a distribution system. It makes it difficult to exploit flexibility existing in distribution systems for balancing purposes. Smart meters would help in that respect. It will also nominates cross-border exchanges, etc. 18 CIPU contracts (Belgian case) The BRP responsible for the injection of each Production Unit (PU) having a capacity greater than 25MW concludes a CIPU-contract. CIPU stands for Coordinated Injection Production Unit. Practically this means that (1) The producer makes forecasts of available power and communicates them to Elia.They cover both the long term (a year ahead) and the short term (a day ahead). There are 6 steps in the procedure. The last one corresponds to the process of nominations in D-1. (2) The producer has the right/obligation to offer ancillary services. Note: there is obviously an arbitrage between selling energy or providing ancillary services from the point of view of the producer, although he has to offer a certain proportion of his capacity. 19 Types of services, order of activation, etc. Source: slides from ELIA. 20 The imbalance measure (Belgian case) Imbalance of a BRP= (total injections - total off take) in perimeter The imbalance is then corrected based on the activation of balancing services, in one direction or the other, depending on the direction of the activation: when the TSO asks a service from a BRP in one direction, it modifies the nomination of the BRP in the opposite direction. Example: the initial position of the BRP is at equilibrium (0 MW). If the TSO asks a 50 MW upward modulation, it will correct the position of the BRP at -50 MW (instead of 0 MW). If the BRP really activates the 50 MW, he will recover the equilibrium, and thus will not have to pay an imbalance fee. If it provides more or less reserve, it will be accounted in the imbalance volume and penalised as detailed in the next slide. 21 The imbalance tariff Global system BRP BRP ARP imbalance Imbalance Net Regulation Volume (NRV) Negative (Net downward regulation) Positive (Net Upward regulation) Positive MDP - α1 MIP - β1 Negative MDP + β2 MIP + α2 Tariff MDP (resp. MIP) is the marginal price of downward (resp. upward) reserve, i.e. the cost of the most expensive downward (res. upward) reserve activated by ELIA in the quarter. The net regulation volume is the total upward volume (GUV) minus the total downward volume (GDV) activated in the quarter: NRV = GUV - GDV. Finally: 1, 2 =0 if SI 140MW : 1, 2 = else : 1, 2 =0 P 7 i=0 SI2 q 8 15 i Notes: 140 MW is the quantity of FRR contracted by ELIA every day q indexes quarters System imbalance: SI = ACE - NRV Source: ELIA, Tariff for maintaining and restoring the individual balance of access responsible parties 22 Who pays what to who? Prices for Positive Imbalance can either be positive or negative. A positive price for Positive Imbalance (injection exceeds off take) means a payment from Elia to the BRP and a negative price for Positive Imbalance means a payment from the BRP to Elia. (Similarly for negative imbalance.) Features of the mechanism are (1) it is designed to incentivise BRPs to be in balance (obviously) or to deviate in the right direction to help the system naturally; (2) designed so that BRPs provide the required services when asked by the TSO (through correction of the perimeter), (3) designed so that imbalance fees (over) compensate activation fees, and (4) the prices and volume activated are published, it is thus a transparent system. 23 Illustration of net regulation volume and imbalance price (from Elia s website) Question: What is the meaning of the columns? 24 Challenges 25 Main challenges The recourse to FRR and tertiary reserve is more and more frequent (meaning amplitude is increasing), because the share of steerable generation decreases and the share of RES increases. In the past, generation was following the load. Now more and more the load has to follow the generation. The RES are geographically dispersed and there is more wind in northern Europe, more sun in southern Europe. Local imbalances are thus naturally more likely. They can be cancelled out by integrating the balancing markets at a European scale. 26 Solution 1 Use demand flexibility for balancing. It is difficult because (1) of the stochastic nature of the load (at least from the perspective of a BRP or ELIA), causing metering and verification issues, (2) of the distributed nature of load, causing an overhead of communication, and (3) of the onesided nature of the load: it is easier to ask for a decrease of consumption than to force an increase (although theoretically possible). The use of storage for ancillary services purpose is also a topic of active discussion. The main questions there are about the economic efficiency of storage, the technology to use, etc. 27 Example of demand flexibility If you have some flexibility on the temperature of a room, You can sell your capacity to decrease or increase momentarily your consumption. 28 Using demand flexibility Source: slides from ELIA. Issue of stolen energy. 29 Source: slides from ELIA. 30 Source: slides from ELIA. 31 Source: slides from ELIA. 32 There are many ways to define ancillary services from demand side ( ) ELIA introduced services called R3 Dynamic Profiles 50 MW contracted for 2014, from large consumers in distribution networks aggregated (notion of aggregator or balance service provider). 33 There are many ways to define ancillary services from demand side Here is an example we have used in a research ULg, accounting explicitly for the rebound effect. Power Limited modulation range Planned consumption Constant Energy Period 1 Period 2 Time Pricing: Availability price Modulation price = 0 ( generation or load curtailment price) 34 Solution 2 Integrate markets, i.e. balancing, intraday and day-ahead markets, couple and harmonise them geographically. Exploit at best cross-border capacity. Do not generate redundant markets, and maybe more importantly opportunities of gaming between markets. As we learned in the last lecture, day-ahead markets are now mature and almost coupled throughout all Europe, although markets are not fully harmonised. Intraday markets are on the way, although a lot of work still needs to be done. For balancing markets, the question is yet more sensitive. 35
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