PV and liberalized electricity marketsJul Aug Sep Okt Nov Dez 50 60 30 40 a d ... January 16 (ppt-file) • Bode, Sven; Groscurth, Helmuth ( 2006) The Effect of the German Renewable

2nd Solar Electric Utility Conference

PV and liberalized electricity markets

y

Munich, 6 March, 2009, ,

Dr. Sven [email protected]

Background

GHG emissions

Business as usual

emissionsadditional emissions

• Reduce emissions

80 %

UNFCCC

80 %

UNFCCC

• Increase renewables (RE)

• Efficiency etc….UNFCCC

recommendationUNFCCC

target

1990 20501990 2050

© arrhenius Institut Hamburg 2007 www.arrhenius.de

Support for power production from RE

f d f l h hAs costs of power production from RE are currently higher power prices, increase of production is generally supported through public schemes such as:

Feed-in tariffs

Quota / tradable permits (GO)

TendersTenders

Investments subsidies…

But:

How long?

What costs are we talking about?


Different kinds of costs exist

Total average costs

total costs / quantity

„variable costs“ (marginal costs) = additional costs for the production of an= total costs / quantity additional costs for the production of an

additional unit (kWh)

Kapitalkosten Wartung (fix) Wartung (variabel) Brennstoff Brennstoff-SteuerCapital costs Fuel costsMaintan. (fix) Maintan. (variable)

80

p g ( ) g ( )p ( ) ( )

(Not drawn to scale)

40Euro

/MW

h)Eu

ro /

MW

h)K

oste

n (

Cos

ts (

0Steinkohle GuD Gas Wind Steinkohle GuD Gas WindCoal Gas PV (Wind) Coal Gas PV (Wind)

Relevant für operational decisions / price formation

Relevant für Investment decisions


Microeconomic Theorie

Marginal analysisMarginal analysis

thinking in small unit / small changes

Market form: here perfect compitition p p

≠Monopol etc.

Short-term analysis

e. g. power market at EEX, tomorrow, 11-12 am

On the supply side, prices form on the basis of

marginal costs of productiong p


Price formation in competitive markets

P /

Pric

eh)

demandSupply = marginal

osts

/ W

TPur

o /

MW

h

costs of production

Co (Eu

*pprice

lignite

Energy (MWh)

coalnuclear

equilibrium

gas oil

renewable energies

equilibriumquantity



demand

Supply (w/o)P

/ Pr

ice

h) demandSupply (with)

osts

/ W

TPur

o /

MW

h

*pWholesale price decrease

Co (Eu

*_ REwithp

Wholesale price decrease

additional

Energy (MWh)equilibrium

additionalrenewable energies

quantity



Nachfrage

Angebot (ohne)os

ten

/ Pr

eis

Euro

/ M

Wh) Angebot (mit)

Cost

s/

Pric

e Eu

ro/

MW

h)Ko (E

*p Großhandelspreis sinkt

C (

*pmitp

zusätzliche erneuerbare

Energien

Arbeit (MWh)gleichgewichtige

Menge

Energy (MWH)

additional RE

Energien

Extreme: whole sale price = zero revenue with direct sale = zero

Systematic revenue problem for RE support scheme permanently necessary if


Systematic revenue problem for RE support scheme permanently necessary, if high market penetration desired

Emperical evidence EEX (wind)

Factors

d (h l )RE production in Germany (hourly, 2006)

Other factors

CO pricesCO2-prices

Fuel prices (Öl, Gas, Kohle)

Plant break downs

Im- and exports

…


Wind power and EEX prices

200 0

250,0

150,0

200,0

/ MW

h)M

Wh)

y = -0,0019x + 57,442

100,0

Prei

s (E

uro

Pric

e (E

uro/

0,0

50,0

P

0 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000

Einspeisung (MWh)Korrelationscoeffizient = -0,1222

Production (MWh)


Wind energy and power prices in Denmark

500

600

120

140Denmark-west priceSystem pricewind production

400

500h

100

120

/Pow

er

on %

wind production

200

300

DKK/

MW

h

60

80

dPro

duct

ion

Con

sum

ptio

Wind production high

100

200

20

40

Win

d CWindeinspeisung hoch Preis niedrig

Price low

0123456789101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120121122123124125126127128129130131132133134135136137138139140141142143144145146147148149150151152153154155156157158159160161162163164165166167168169170171172173174175176177178179180181182183184185186187188189190191192193194195196197198199200201202203204205206207208209210211212213214215216217218219220221222223224225226227228229230231232233234235236237238239240241242243244245246247248249250251252253254255256257258259260261262263264265266267268269270271272273274275276277278279280281282283284285286287288289290291292293294295296297298299300301302303304305306307308309310311312313314315316317318319320321322323324325326327328329330331332333334335336337338339340341342343344345346347348349350351352353354355356357358359360361362363364365366367368369370371372373374375376377378379380381382383384385386387388389390391392393394395396397398399400401402403404405406407408409410411412413414415416417418419420421422423424425426427428429430431432433434435436437438439440441442443444445446447448449450451452453454455456457458459460461462463464465466467468469470471472473474475476477478479480481482483484485486487488489490491492493494495496497498499500501502503504505506507508509510511512513514515516517518519520521522523524525526527528529530531532533534535536537538539540541542543544545546547548549550551552553554555556557558559560561562563564565566567568569570571572573574575576577578579580581582583584585586587588589590591592593594595596597598599600601602603604605606607608609610611612613614615616617618619620621622623624625626627628629630631632633634635636637638639640641642643644645646647648649650651652653654655656657658659660661662663664665666667668669670671672673674675676677678679680681682683684685686687688689690691692693694695696697698699700701702703704705706707708709710711712713714715716717718719720721722723724725726727728729730731732733734735736737738739740741742743744

Hours in January '07

0

Hours in January 07

Quelle: Morthorst, Poul (2007) Impacts of Wind Power on Power Spot Prices


Price and the impact of PV

Demand(day time)

Supply

P /

Pric

eh) (day time)

osts

/ W

TPur

o /

MW

h

Demand(night)

• Slope of supplycurve generallyincreasing

*

*p

Co (Eu increasing

• PV: power production at highload / pricesDelta 1*

_ REwithpload / prices

• Price reducingeffect of PV on average higher*p

Delta 1

Delta 2g g

than for other RE (relevant for higherPV capacity)

*_ REwithp

pDelta 2

additional

Energy (MWh)

additionalrenewable energies


A broader market view

• Power production from PV wind hydro causes a decrease of power pricesPower production from PV, wind, hydro causes a decrease of power prices (whole sale market)

• Conventional plants also affected

• Fluctuating production of PV and wind causes disruptions of continuous operation of “base load plants” (as we know to day)

If plants to be operated with CCS technical problems are likely to occur• If plants to be operated with CCS – technical problems are likely to occur

Decarbonisation of a liberalised power market is a tricky issueDecarbonisation of a liberalised power market is a tricky issue



Minimum monthly remaining load (Germany 2006)(Remaining load = consumption minus power production from RE)

70

80

Jan Feb Mrz Apr Mai Jun

Jul Aug Sep Okt Nov Dez

50

60

30

40

ad [G

W]

10

20Loa

0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour



Minimum monthly remaining load (Germany, 2030)(Remaining load = consumption minus power production from RE)

70

80

Jan Feb Mrz Apr Mai Jun

50

60

70 Jul Aug Sep Okt Nov Dez

ad [G

W]

30

40

50

Loa

10

20

30

0

10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24


Hour

Conclusion

• Costs of power production from PV generally > power price i e > revenueCosts of power production from PV generally > power price, i. e. > revenue

• Support schemes have been introduced

• In competitive markets RE (PV) can still reduce the whole power price given its p ( ) p p glow marginal costs of production

• Systematic reduction of power price (e.g. „when the sun shines“) reduces the revenue stream systematically if power sold at power exchangerevenue stream systematically if power sold at power exchange

• Long-term support scheme presumably necessary (even if total cost of production of RE < TAC of fossils; lobbying necessary?)p y g y )

• To be considered during investment decision making in liberalised market, especially with high RE penetration


2nd Solar Electric Utility Conference

PV and liberalized electricity markets

y

Munich, 6 March, 2009, ,

Dr. Sven [email protected]

Further reading (selection)

• Bode, Sven; Groscurth, Helmuth (2009) Incentives to Invest in Electricity Production from Renewable Energy under Different Support Schemes, arrhenius Discussion Paper 1 E

• Bode, Sven (2008) Renewable Energie and Power Prices: Incentives to Invest under Different Support Schemes, European Wind Energy Conference 2008, Brussels, March 31 - April 3 (ppt- file)

• Bode Sven (2007) Erneuerbare Energien Preistreiber oder Preisdämpfer?• Bode, Sven (2007) Erneuerbare Energien – Preistreiber oder Preisdämpfer? Jahreskonferenz Erneuerbare Energie - ee07, Berlin, January 16 (ppt-file)

• Bode, Sven; Groscurth, Helmuth ( 2006) The Effect of the German Renewable Energy Act (EEG) on “the Electricity Price”, HWWA Discussion Paper No. 358(EEG) on the Electricity Price , HWWA Discussion Paper No. 358

• Bode, Sven (2006) On the impact of renewable energy support schemes on power prices, HWWI Research Paper 4-7

• See Bode, Sven (2006) Long-term greenhouse gas emission reductions – what’sSee Bode, Sven (2006) Long term greenhouse gas emission reductions what s possible, what’s necessary? In: Energy Policy

More available on: www.arrhenius.de


Documents

PV and liberalized electricity marketsJul Aug Sep Okt Nov Dez 50 60 30 40 a d ... January 16 (ppt-file) • Bode, Sven; Groscurth, Helmuth ( 2006) The Effect of the German Renewable