• Energy Research

An intriguing characteristic of Australian energy market policymaking is the almost exclusive focus on spot market dynamics. The policy development cycle displays a virtual disregard for, and of, power system financial markets. The irony is that forward contract prices form the defining wholesale price input to end-user consumer tariffs. In this article, the impacts of a wide-ranging program of government-initiated CfDs on power system financial markets are analysed. Government-initiated CfDs are highly effective in correcting market failures, but they need to be used judiciously because – while they add to demand-side liquidity, they simultaneously extract supply-side forward contract market liquidity. Consequently, when used en-masse in loosely interconnected energy-only markets, CfDs have pro-competitive effects in the spot market by introducing ‘quasi-market participants’ but damage power system financial markets via the loss of liquidity. Power system modelling in this article demonstrates that a wide-ranging policy of government-initiated CfDs can produce shortages of ‘primary issuance’ hedge contact supply. This is far more than theory. In the South Australian region of the NEM, shortages of primary-issuance hedge contract supply have arisen through renewable entry and coal plant exit. Hedge shortages have had the effect of raising forward contract price premiums above efficient levels, needlessly forced the most price-elastic (Industrial/Manufacturing) customers into accepting unwanted spot market exposures, and unintentionally foreclosed non-integrated (2nd tier) energy retailers, all of which ultimately harms consumer welfare. CfDs have a targeted role to play in energy markets by correcting market failure; but broad-based market mechanisms are preferred.

This repository includes raw and processed results for the following paper: Tong, F., Yuan, M., Lewis, N.S., Davis, S.J., Caldeira, K., Effects of deep reductions in energy storage costs on highly reliable wind and solar electricity systems, ISCIENCE (2020), doi: https://doi.org/10.1016/j.isci.2020.101484 There are eight compressed packages, each of which corresponds to a different technology scenario (availability and cost assumptions for wind power, solar power, or dispatchable generator; read the paper for details). Each of the compressed packages contains raw optimization results and processed results (including preliminary figures) for 6*36 optimization runs (6 energy storage costs and each year's weather data for the 36 years (1980-2015)). "Supplemental Data.xlsx" contains the underlying data for figures in the paper, and a summary of optimization results (7 technology scenarios, 6 energy storage costs, and 36 years). The code for the optimization model is available at https://github.com/carnegie/SEM_public/tree/Tong_et_al_2020. Contact information: Fan Tong, tongfanchina@gmail.com Ken Caldeira, kcaldeira@carnegiescience.edu

In theory, well designed electricity markets should deliver an efficient mix of technologies at least-cost. But energy market theories and energy market modelling are based upon equilibrium analysis and in practice electricity markets can be off-equilibrium for extended periods. Near-term spot and forward contract prices can and do fall well below, or substantially exceed, relevant entry cost benchmarks and associated long run equilibrium prices. However, given sufficient time higher prices, on average or during certain periods, create incentives for new entrant plant which in turn has the effect of capping longer-dated average spot price expectations at the estimated cost of the relevant new entrant technologies. In this article, we trace generalised new entrant benchmarks and their relationship to spot price outcomes in Australia’s National Electricity Market over the 20-year period to 2018; from coal, to gas and more recently to variable renewables plus firming, notionally provided by – or shadow priced at – the carrying cost of an Open Cycle Gas Turbine. This latest entry benchmark relies implicitly, but critically, on the gains from exchange in organised spot markets, using existing spare capacity. As aging coal plant exit, gains from exchange may gradually diminish with ‘notional firming’ increasingly and necessarily being met by physical firming. At this point, the benchmark must once again move to a new technology set.

The intended transformation of the energy supply system will completely change the rationality of the electricity system by establishing the variable renewable energies (VRE, that is wind, photovoltaic and large parts of the run-of-the-river hydroelectricity) as its formative pillar. As they are not reliant on fuels to produce electricity, they run without marginal costs and with very low emissions. However, their production can only be precisely predicted on the short term which causes the need for a high flexibility of the remaining electricity generators and other flexibility options. The fundamental characteristics of the VRE require an adjustment of the present market-based processes concerning the power plant dispatch and the allocation of the generated VRE-electricity amounts. This article presents the developed suggestions for a real time transfer of the VRE and the residual load market and discusses possible implementations of these new allocation mechanisms. Der angestrebte Umbau der Energieversorgung wird die Rationalität des Stromsystems vollständig verändern, indem die fluktuierenden erneuerbaren Energien (FEE, das heißt Wind, Photovoltaik und große Teile der Laufwasserkraft) zu den prägenden Systemsäulen werden. Die FEE sollen sukzessive die elektrische Arbeit, die heute von fossil-nuklear betriebenen Kraftwerken bereitgestellt wird, substituieren. Die FEE unterscheiden sich jedoch fundamental von steuerbaren Stromerzeugungstechnologien: Sie sind als nicht brennstoffbasierte Stromerzeugungstechnologien annähernd frei von variablen Kosten und sehr emissionsarm. Gleichzeitig sind sie nur recht kurzfristig präzise prognostizierbar und benötigen eine hohe Flexibilität der übrigen Stromerzeuger und weiterer Flexibilitätsoptionen. Diese grundlegenden Charakteristika der FEE bedingen eine Anpassung der bestehenden marktlichen Prozesse des Kraftwerksdispatches und eine Weiterentwicklung der Allokation der erzeugten FEE-Strommengen. In diesem Beitrag werden die hierfür entwickelten Vorschläge einer Echtzeitwälzung der FEE und des Residuallastmarktes vorgestellt und begründet sowie mögliche Formen ihrer Ausgestaltung diskutiert.

With an increasing share of variable renewable energies in the power production, curtailment may become relevant to better manage the power system. Here, we explore the effects of wind power curtailment on the energy system composition and operation on two levels: national (Finland) and city level (Helsinki). For each level, optimization-based models were used. The results indicate that increasing the amount of wind power and curtailment and implementing power-to-heat conversion may not automatically lead to positive effects, such as emission reductions, but may need additional measures such as higher CO2 emission pricing and more effective heat generation (heat pumps) to realize the full benefits. Peer reviewed

Working on holistic approaches that aim to capture a wide range of knowledge, researchers are usually faced with phenomena characterized by different time and geographical scales. This is the case of energy systems and Integrated Assessment Models (IAMs). More specifically, the nature of the variable renewable energy supply (VRES) has traditionally posed a barrier to accurately capturing the effects inflicted by VRES in the energy system. This research provides a soft link between an energy system model running with an hourly time step, on the one hand, and a yearly-based IAM, on the other hand, by the implementation of an emulator. The proposal here presented is a bridge, based on different types of knowledge, which successfully allows the flow of information between time scales. Results achieve a 100% renewable energy system on a case of Bulgaria. After a brief literature review on the topic, the method is explained in detail, including some results between EnergyPLAN (energy system model) and MEDEAS (Integrated Assessment Model, IAM) for Bulgaria. Results show that the ability of assessment is notably increased from the previous MEDEAS version. Finally, both results and limitations of this method are discussed. The authors hope this article captures interest in the field of IAMs, especially those which address with energy transition studies.