Federatie van de Belgische Elektriciteits- en Gasbedrijven Fédération Belge des Entreprises Électriques et GazièresFederation of Belgian Electricity and Gas Companies
Rollen, taken en uitdagingen in de energiesector
Marc Van den Bosch
30/10/2015 • VEB2
Inhoud
Wie is FEBEG Rollen in de geliberaliseerde energiemarkt Waar staan we nu? Belangrijke trends Opportuniteiten 2 belangrijke uitdagingen
Korte termijn bevoorradingszekerheid: flexibiliteit Lange termijn bevoorradingszekerhied: capaciteitsmarkt
30/10/2015 • VEB3
30/10/2015 • VEB5
Pillars of a liberalized electricity marketElectricity market in Belgium
Market model
Market struc-ture
Regu-latory
frame-work
Rules andconditions
governing access to the system,
balancing, capacityallocation, …
Important factors:- Number participants- Size participants- Types of assets- Interconnections- …
Transmission System Operator and Power Exchanges
Energy regulators Competitionauthorities
Elia
Transmission grid
30/10/2015 • VEB6
Rather complex regulatory frameworkTransposition of the EU Directives in Belgium
70 KV
Electricity Law
Royal Decrees
RegionalDecrees
CREG
CWAPE
VREG
BRUGEL
Local transport and distribution
gridEandis, Ores,
Sibelga, Tecteo, Infrax, …
Legislation Regulators Grids System operators
REGI
ON
AL
FED
ERAL
Third Energy PackageDirective 2009/72/CE Common rules for the internal market in electricity
Regulation No 714/2009 Conditions for access to the network for cross-border exchanges in electricity
Regulation No 713/2009 Establishing an Agency for the Cooperation of Energy Regulators(ACER)
30/10/2015 • VEB7
Rather complex contractual frameworkWho are the stakeholders in the Belgian electricity market?
Consumer
Industrial consumer
Distribution System Operator
Market
BRPSupplier Generator
Acce
s ho
lder
Acce
s ho
lder
Transmission System Operator
Connection and access contract
Connection and access contract
Sales contracts
Collaboration agreement Sales contracts
Conn
ectio
n an
dac
cess
con
trac
t
Sales contracts
30/10/2015 • VEB8
Central role of the BRPAll BRP’s contribute to the global system balance
BRPxBRPy
BRPzElia regulating
zone
BRPx
System imbalance is translated to imbalance price
BRP is penalized or rewardedby imbalance tariffSystem (im)balance
BRP (im)balance
30/10/2015 • VEB9
BRP is responsible for balance in its own perimeterBalancing the electricity system starts long before real-time
FORWARD(Endex)
DAY-AHEAD(Belpex DAM)
INTRADAY(Belpex CIM)
BALANCING
LT forecasts DA forecasts ID forecast continous monitoring
LT-DA Programs Re-dispatching of flexibility in perimeter(centralized generation and dispatchable load) (centralized generation and flexible load)
LT purchase contracts DA and ID commercial exchanges
TSO enters in action in order toresolve observed residual
imbalances
30/10/2015 • VEB10
Residual balancing by transmission system operatorElia has several means at its disposal to resolve residual imbalances
Primaryreserves
(R1)
Secondaryreserves (R2) Free Bids
Tertiaryreserves via generationunits (R3)
Tertiaryreserves via sheddablecustomersTSO grid
(ICH)
R3 DynamicProfile via
scheddablecustomersTSO and
DSO grid (R3 DP)
Reserve contracts
with neigh-bouring TSO
Disconnect customers (forced)
Pre-contractedreserves capacities
Pre-contractedreserves capacities
All products and bids are organized in a merrit order (fromlow price to high price)
The price of the last bid that is called by Elia to resolve theresidual imbalance is determing the imbalance price
Prijs elektriciteit Vrije keuze van de klant: hoge switchng rate
Aantal producenten, ARP’s en leveranciers Nieuwe dienstverleners: aggregatoren, …
Efficiëntiewinsten: Elektriciteitsproductie is kostenefficiënter geworden Transmissienet en interconnectoren worden efficiënter benut Meer mogelijkheden om aanbod en vraag op elkaar af te stemmen
Nieuwe ‘business opportunities’: Nieuwe types contracten Leveranciers bieden nieuwe diensten aan Slimme systemen Demand Side Management Aggregatoren
MAAR TOENEMEND OVERHEIDSINGRIJPEN TE WEINIG AANDACHT VOOR BEVOORRADINGSZEKERHEID
30/10/2015 • VEB11
Liberalisering heeft positieve effecten Waar staan we?
Forward prijzen elektriciteit
30/10/2015 • VEB12
30/10/201513
Door inspanningen van de leveranciers is de prijs voor deconsument sneller gedaald dan de groothandelsprijs
Leveranciers zijn essentiële draaischijf
NOOT: Retail prijs werd berekend als een gemiddelde van de maandelijkse retail prijzen voor de energiecomponent. 2012 prijsberekening: het gemiddelde (€/jaar) werd berekend over de maanden Mei tot December en vervolgens omgezet in €/MWh; 2013-2014 prijsberekening: het gemiddelde (€/jaar) werd berekend over de maanden Januari tot December en vervolgensomgezet in €/MWh.
BRON: CREG “de monitoring van mogelijke marktverstorende effecten in het kader van het vangnetmechanisme ingevoerd via artikel 20bis, §§1 tot 5 van de Elektriciteitswet en artikel 15/10bis, §§1 tot 5 van de Gaswet’” – 7 Mei 2015 Endex CAL Y+1, Accenture Analyse
30/10/201514
Consument kan gemakkelijk veranderen van leverancier en heeft ruime keuze
Leveranciers zijn essentiële draaischijf
Aantal klanten dat van leverancier verandertbij de hoogste van Europa (>15%)
BRON: ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2013, October 2014, Accenture analyse
Source: Accenture Belgian Market Pulse Survey 2015 (sample = 117)
30/10/201515
Dienstverlening is uiterst klantvriendelijkLeveranciers zijn essentiële draaischijf
Source: Accenture Belgian Market Pulse Survey 2015 (sample = 117)
Aantal klachten over leverancier bij Ombudsman daalt Percentage klantendiensten die 5 sterren ontvangt van de VREG stijgt jaarlijks
BRONNEN: Ombudsman Energie, Activiteitenverslag 2012, 2013, 2014 VREG service checks, 12 Januari 2015, Accenture analyseAccenture New Energy Consumer Research 2014Jaarverslag 2014, FOD Economie
73%van de klantenis tevreden
#2 Hoogst aantaltevreden klanten in vergelijking met onzebuurlanden
4%Aandeel van de klachten m.b.t. water- en energie bijde EconomischeInspectie (FOD Economie) in 2014
De klant zal tegen 2017 zijn elektriciteitsfactuur zien stijgen met 37%, terwijl het energiecomponent daalt
Iedereen zal de rekening betalenAls er niks verandert
BRON: Vijf grote energieleveranciers in België, Accenture analyse
16 30/10/2015
Energie
Hernieuwbare energiecertificatenDistributie
Gratis kWh
BTWBelastingen & heffingen
Transport
Noot- Factuursimulatie gebaseerd op beschikbare informatie op 1 September 2015- Verschillen tussen opsomming en totaal worden veroorzaakt door afrondingen
30/10/2015 • VEB17
Reserve capaciteit CWE landen (2013)En gaat verder achteruit
BELANGRIJKE TRENDS
30/10/2015 • VEB18
And now the zero marginal cost revolution is beginning to affect other commercial sectors, including renewable energy, 3D printing in manufacturing, and online higher education. There are already millions of “prosumers”—consumers who have become their own producers—Jeremy Rifkin The zero marginal cost society
30/10/2015 • VEB19
Zero marginal cost society
Alles is verbonden Netwerken convergeren
Sociale netwerken => individuen, bedrijven, organisaties, overheden
Communicatie => data, video, telefoon fysieke netwerken => gas, water, electriciteit
30/10/2015 • VEB20
The Internet of Things
Bedrijven en individuen gebruiken sociale netwerken bij aankoop
De deeleconomie
30/10/2015 • VEB21
• 276 steden
• > 4 miljoen freelancers
• 34.000 steden
Demografie
30/10/2015 • VEB22
• Bevolking blijft aangroeien• Gezinsverdunning gaat verder door
10,0
11,0
12,0
13,0
14,0
2010 2020 2030 2040 2050 2060Be
volk
ing
(milj
oen)
Bevolkingsvooruitzichten: België
FPB_2010-2060FPB_2007-2060NIS_2000-2050
Trend: EU klimaatbeleid
30/10/2015 • VEB23
Dalend elektriciteitsverbruik
03/06/2015 • Jaarverslag FEBEG 201424
Berekend elektriciteitsverbruik daalde structureel met -2,51% ten opzichte van 2013 et met -7,1% ten opzichte van 2010
83,76 83,77
86,18 86,10 85,95
79,54
86,13
82,1783,81
82,05
79,99
74
76
78
80
82
84
86
88
90
Total calculated electricity consumption in Belgium (TWh) 2004-2014
Bron: FOD Economie, Eurostat
Trend: Hernieuwbare energie EU
30/10/2015 • VEB25
Klimaat: transport belangrijke uitdaging
30/10/2015 • VEB26
Omgaan met verandering: Veerkrachtige ondernemingen
30/10/2015 • VEB27
Primaire bronnen transport Productie Transport Distributie
Levering &
evenwichtKlanten
• Trends hebben impact op de waardeketen
Opportuniteiten
30/10/2015 • VEB28
• Optimalisatie van het systeem₋ aanmoediging verbruik in periodes van overaanbod van groene
(gedecentraliseerde) energie₋ aanpassing van het verbruik aan de beschikbaarheid van groene
energie met behulp van prijssignalen en automatisering (zonder verlies aan comfort)
• eindgebruikers/klanten actief laten deelnemen mits aantrekkelijke op maat gemaakte producten en diensten vanuit de markt⁻ met de leverancier als commerciële SPOC
29
29
PV-cellen
Windenergie
Micro WKK
EV
…..
Prijssignalen optimaal identificeren en inzetten
van energiestromen Beheer evenwicht tussen productie
en verbruik
Slimme energieconsument als antwoord op de evoluties
DSM = aansturing nieuwe
ontwikkellingen Nieuwe services Verwarming Gedrag klant Overige smart
appliances …
Storage
30/10/2015 • VEB30
Elektro en gas mobiliteit
30/10/2015 • VEB31
DAILY DRIVING DISTANCE
City car Short milk
run
Trucks long distance
Hybrid, Range extender orCNG
Milk run longer Other professional City busses
Trucks localuse
EV succes: ondersteunend beleid
30/10/2015 • VEB32
• EV succesvol in landen met voldoende gunstig wettelijk kader
• Noorwegen als voorbeeld (>15.000 EV)⁻ Geen aankooptaks⁻ Vrijstelling van BTW⁻ Gratis gebruik tolwegen en ferry⁻ Gratis gemeentelijke parking (+ opladen
indien beschikbaar)⁻ Gratis gebruik van busstroken⁻ Lage jaarlijkse taks
Short term adequacy: flexibility
30/10/2015 • VEB33
30/10/2015 • VEB34
Growing need for flexibilityNew challenges
Controlled by BRP via nominations
BalancingResponsibleParty (BRP)
Import Export
Market
ConsumptionProduction
Forecasting
Forecasting
Dispatchable
CentralizedDispatchablePredictable
PRODUCTION
More de-centralizedLess dispatchableLess predictable
BEFORE
NOW
Inelastic demand
CONSUMPTION
More elastic demand
Flow of flexibility
Flow of flexibilityFlow of flexibility
=
30/10/2015 • VEB35
Need to integrate the aggregator in the marketNew challenges
European Commission, Regulators and System Operators strongly support the development of demand response aggregation E.g. Directive 2012/27/EU: Member States shall promote demand
response participation in spot and balancing markets
Aggregators are already entering the market, but without a clear market model Different market designs in different countries in Europe
Issues arise when independent aggregators (= third parties) affect the existing business position of other market participants without proper compensation or settlement
How can the independent aggregator be integrated in the market while limiting impact on existing market parties?
30/10/2015 • VEB36
Balancing between principlesChallenges necessitate adjustments to the market design
Liberalizedmarket (market
basedsolutions, …)
Cost efficiency (no over-regulation,
limitedadministrative
burden, …)
Right of property Freedom of
enterprise andcontracting
Level playingfield betweenmarket parties
Market integrity
Confidentiality
Sustainability(future proof and
upscalablesolutions)
TransparencyPresumptionof innocence
Avoiding market abuse (risk of BRP
blockingflexibility)
Consumer protection
30/10/2015 • VEB37
A good market design …Robust market design with correct allocation of costs and benefits
•Coherent market design for different markets•Keep flexibility available for both market parties as well as system operators
… shall work in spot, balancing, adequacy and balancing markets
•A level playing field between demand flexibility, storage and generation is essential as they deliver the same service•No seepage of additional costs from demand flexibility aggregator presence to existing markets, e.g. activation by third parties of flexibility services shall not increase balancing settlement prices
… shall respect all parties
•Aggregator flexibility is not only sourced from the customer, but also from its BRP (balance perimeter)•The impact on the BRP is not limited to the activation window, e.g. rebound, load shifting, ramp up, …
… shall value flexibility correctly
•Changes to the consumption profile of a customer should be communicated to the supplier (impact on pricing)•The BRP needs information (e.g. underlying data behind an activation) for balancing, forecasting and monitoring purposes
… should provide the necessary information to all market parties (including the BRP and the supplier)
•Aspects down the headmeter should remain commercial•Intrusive regulation linked to transfer price will distort the level playing field•Administrative burden should be limited to a minimum, e.g. prequalification process, flexibility and activitation register, …
… shoud boost innovation and cost-efficiency in a stable framework: no over-regulation!
•Current market models are created ad-hoc and based on a limited number of customers/aggregators•Large-scale-roll-out requires operational processes and contracts that can be automated or standardized
… should be scalable
30/10/2015 • VEB38
Overview of roles in the marketRoles of FSP and BSP needs to be integrated
Regulation required
Allows FSP to enter energy market
Balancing responsibilities Responsibilities wrt impact of the activated
energy on the physical grid Responsibilities – like other market parties –
as regards market functioning, e.g. market monitoring, REMIT obligations, …
Reponsibilities to share information withother market parties (BRP’s, supplier, TSO, DSO, …)
Financial guarantees
FSP: Market participant that commercializes flexibility from a producer or consumer and provides that flexibility to a third roleBSP: Market participant providing balancing services to its connected or contracted TSO
30/10/2015 • VEB39
Impact of activation of flexibility on supply contractDifference between diverted energy and supply flexibility
RAMP UP
Pmax
Activation period
REBOUND
t
Diverted energy
Supply flexibility
How is the price in a supply contract determined? An agreed profile is used as reference in the supply contract Price is bilaterally set based on commodity and reference profile
Unilateral differentiation from this reference profile impacts pricing and should therefore be included in the supplycontract
Therefore the BRP/Supplier needs to be compensated for the different flexibility cost Irrespective of market in which aggregator is active At an agreed price between the customer and the BRP/Supplier Feasible on a large scale, without disproportionate costs for
market parties
30/10/2015 • VEB40
Supply flexibilityImpact on supply contract
FEBEG prefers ex ante inclusion of aggregator activity in supply contract (like any other change in the consumption
profile)
30/10/2015 • VEB41
Diverted energyImpact on supply contract
Buyer-BRP/TSO FSP Source-BRP
€/MWh€/MWh(€/MW/h)
Transfer PriceMarket price
(€/MW/h)
Bilateral model
•Process:•BRP (whose perimeter is impacted by activation by FSP) sells the energy to a second BRP (possibly the FSP)
•This second BRP then sells the energy to another BRP or to a system operator that wants to use the energy
•Transfer at commercially negotiated price•Can be implemented at a short term:•Putting contracts in place•Using existing tools, e.g. Elia HUB•Low implementation costs, flexible system, allows tailor-made solutions, …
Model via client
•Process:• The customers buys the energy from its supplier (whobougt it form its BRP)
•The customer sells it to the FSP (who then sells it toanother BRP or system operator)
•Transfer at price in the supply contract•Solution at longer term?•Market facilitation by system operators to provide correct allocation data to supplier
•Is this feasible (costs, complexity, e.g. taxes andcontributions, rigidity, implementation time, …?
Respect for supply contract is of utmost importancy
No regulated price for the transfer of energy!
FSP’s are already providingservices to BRP’s based on
bilateral contracts
Long term adequacy: capacity
30/10/2015 • VEB42
30/10/2015 • VEB43
Is scar-city anissue?
In Belgium the risks of price spikes and (controlled) black-outs doesn’t seem to be accepted: LOLE in law Price caps on the market Strategic reserves as insurance Constraints for closing power plants Safety net regulation Introduction of benchmark to limit prices towards industrial
consumers …
In Belgium electricity seems to be perceived as a ‘public good’
30/10/2015 • VEB44
Scarcity implies prices spikes and (controlled) black-outs Is continuous uncertainty about security of supply acceptable?
If uncertainty would be acceptable, all these constraints should be removed to enhance market functioning
30/10/2015 • VEB45
Is scar-city anissue?
Conti-nuewithEOM?
Remove allconstraints
Yes
No
30/10/2015 • VEB46
How the EOM works …EOM is designed to have an efficient dispatch
• The price of electricity is mainlydetermined by the short-run marginal costs (fuel, CO2, variableoperational costs)
• However, high scarcity prices nowand then are required forgenerators to recover theirinvestment costs (typically: 5 hoursper year with 3000 EUR/MWh)
• Price spikes should occur when allcapacity is used and shouldprovide incentive to build more capacity or decrease consumption
EOM is not designed to quarantee the desired quality of security of supply
Price spikes will occur when there is very low to zero safetymargin left
This implies there are continuously serious risks on (controlled) black outs
As electricity seems to be perceived as a public good: Prices are unlikely to be optimal at scarcity events (caps, constraints
for closing power plants, …) Regulators may see scarcity prices as market abuse, as prices are
then much higher (50 vs 3.000 EUR/MWh) Society may urge authorities to intervene leading to more regulatory
risks for investors
30/10/2015 • VEB47
Issue 1: Price spikes and (controlled) black-outsFunctioning of EOM has some inherent consequences
Regulators and public opinion don’t seem to accept the consequences of an EOM
Growing share of RES is accelerator of evolution towards less security of supply
Increasing share of RES will drop clearing price and reduce number of running hours:
Inframarginal rent drops and missing money increases
If inframarginal rent < fixed costs: units willleave the market
Is a future with iRES and gas realistic in EOM?
1. Inframarginal rent is 0 for iRES and back-up
2. Back-up technology has no inframarginalrent
3. Only scarcity rent can keep the back-up plants in the market
30/10/2015 • VEB48
Issue 2: Missing money problem will increaseChanging policies and objectives impact market functioning
Power plants will continue to leave the market
To ensure SoS, investments are needed, both for new assets as formodernising plants
Even an improved EOM will notdeliver long term visibility
Important variations of revenues, fromone year to another, in EOM (even without price cap)
Generators as well as DSM, need to relyon a few years with very high prices torecover costs
30/10/2015 • VEB49
Issue 3: High risk for investorsInvestors want a long-term outlook, visibility and predictibility
Annual revenues in % of annual costs
Society isn’t sure whether and when EOM will trigger sufficient investments
Will these years actually occur?Will these high prices be accepted?To what extent will investments themselvesreduce occurence of price spikes?
Belgium is a small market …… that at the same time:
is highly interconnected and thus impacted by foreignpolicies is part of a bigger market via the market coupling struggles with huge uncertainties, e.g. nuclear phase out is complex, e.g. different support schemes for RES, …
30/10/2015 • VEB50
Issue 4: Small market with a lot of uncertaintiesSmall is not always beautiful
Result is a contradiction: Belgium has low prices, but a the same time a security of supply issue
30/10/2015 • VEB51
Is scar-city anissue?
Conti-nuewithEOM?
Whichtype of CRM?
Remove allconstraints
Yes
Yes No
No
EOM
•Completing the electricity target model has considerably improved EOM
•Other enhancements are being considered: removing price caps, improving functioning balancing market, …
SR
•Power plants leaving the market are paid to remain available, but ‘out of the market’ (insurance)
•Relatively easy to implement measure with limited market distortion
30/10/2015 • VEB52
Current market design: EOM + SR Belgian market design has moved away from pure EOM
Will this new market design be sufficient to secure electricity supply?
30/10/2015 VEB53
SR already shows its limitsSR is a good transitory measure
SR buys time, but is not an enduring solution
Volume
•Strategic generation reserve (SGR):•Some generation units are not eligible for SR, e.g. small cogeneration units
•Some eligible generation units will not be able toparticipate (permits, environmental or security regulation, …)
•Plants in SR are ‘out of the market’: the full cost must bepaid, not only the ‘missing money’
•Strategic demand reserve (SDR):•Demand flexibility in SR should also be ‘out of the market’ (market distortion)
•If price is set too high, risk of cannabalisation of existingdemand flexibility in the market
Additional risks
•SR is an insurance product against physical consequencesof scarcity, not against high prices
•Impact on liquidity in Belgian market, e.g. ancillaries
•Legal basis with contraints to leave the market discourages new investors
•4.500 EUR/MWh imbalance tariff•High risk for power plant operators, especially foroperators with a single unit, and suppliers•Assymetric risk for generators in Belgium (cap DAM 3.000 EUR/MWh >< imbalance tariff of 4.500 EUR/MWh)•Entry barrier for new entrants
Required volumes will not be found Additional risks for investors
30/10/2015 • VEB54
Current market design doens’t ensure adequacyCurrent market design has three goals, but will not deliver all three
Keep existingcapacity
Trigger new investments
Trigger demand side
response
SR will only keep part of existing capacity in the market and will trigger some demand side response
30/10/2015 • VEB55
Is scar-city anissue?
Conti-nuewithEOM?
Whichtype of CRM?
Strategic reserves
Remove allconstraints
SoS not ensured
TargetedYes
Yes
No
No
30/10/2015 • VEB56
Several ways to go forward ...A capacity market will effectively secure supply in cost-efficient way
A capacity market provides a long-term solution by securing the full required volume from both existing and new-build
capacity
Current Installed Capacity
Decom/moth-balling New-build
Future Installed Capacity
Capacity demand
Current Installed Capacity
Decom/moth-balling New-build
Future Installed Capacity
Current Installed Capacity
Decom/moth-balling
New-build
Future Installed Capacity
Current Installed Capacity
Decom/moth-balling New-build
Future Installed Capacity
Non-functioning Energy-only Strategic Reserve
Capacity Payment Capacity Market
> A Strategic Reserve prevents mothballing/decommissioning of plants
> A Capacity Market secures all capacity required to fulfil demand, and can both stop mothb./decom. as well as stimulate new-build
> A Capacity payment stimulates new-build plants
> If plants suffer from missing money, over time a shortage of capacity to fulfil peak demand could occur
Market based solution where supply and demand set the capacity price, and thus no subsidy
Capacity market should be market-wide and technology neutralto ensure full competition – and thus optimal mix - between: Existing and new capacity All technologies Generation, storage and demand flexibility
As short-run marginal costs are not impacted, capacity willcontinue to be efficiently dispatched via EOM
Future proof solution that enables integration of large amountsof renewables and new technological developments
Suitable for optimisation via cross-border trading of capacity
30/10/2015 • VEB57
Capacity market is a real marketMarket functioning brings efficiency
Security of supply: security of supply is ensured as the full required volume to cover peak demand will be contracted via the capacity market
Correct price: consumers pay the correct price for the requiredcapacity: Although every capacity is remunerated, only the missing
money to secure supply is paid for If there would be oversupply of capacity, the price for
capacity will be low to zero Ideally, the consumer decides on the level of capacity he
wants to pay for
30/10/2015 • VEB58
Benefits for the consumerPrice for full costs – neither more, nore less – of desired capacity
30/10/2015 • VEB59
Benefits for the investorA capacity market will lead to different revenue streams
Investment climate will become attractive due to stable, visible and predictable prices
A capacity market willresult in smootherenergy prices, as scarcity pricing willhardly occur: there’smore capacityavailable
This leads to lowerpower prices, whichcompensatesconsumers forcapacity price
30/10/2015 • VEB60
Is scar-city anissue?
Conti-nuewithEOM?
Whichtype of CRM?
Capacity market with capacity
obligation
Strategic reserves
Centralor
decen-tral?
Remove allconstraints
SoS ensured
SoS not ensured
Targeted
Market-wide
Yes
Yes No
No
30/10/2015 • Steerco with FPS61
FEBEG favors the implementation of a ‘capacity obligation'With a ‘capacity obligation’, two types of capacity markets are possible
Obligationverification
with penaltyscheme
Auction based (central) capacity market Portfolio based (decentral) capacity market
Cap
acity
Load
Generators / aggregators
sell certificates
Central planner/buyer buys full market needs
via auction
Ex-Ante Ex-PostLo
ad
Retailers buy certificates in
marketObligation pro rata supplier
MarketMarket supervisor
Ex-Ante Ex-PostCa
paci
ty
Certificated by authority
Generators / aggregators
sell certificates
> A central authority establishes a firm capacity target and procures this from the market via centralized auction(s)
> Example: United Kingdom
> Retailers are obliged to contract a certain level of firm capacity, depending on the load of their customers, and supervised by the regulator
> Example: France
Auctions
Certificated by authority
Market supervisor
Obligationverification
with penaltyscheme
30/10/2015 • Steerco with FPS62
Auction based (central) vs portfolio based (decentral)Both types of capacity markets have pro’s and con’s
Auction based (central) capacity market Portfolio based (decentral) capacity market Limitations in product specifications Opportunities for innovation (tailor made deals, secondary
market, …)
Risk of over-estimation of needed capacity by centralauthority
Suppliers will optimize capacity in their portfolio
Straight forward preset process and thus fasterimplementation possible
Higher complexity (federal vs regional)
Incentive for demand side flexibility via aggregator to beoffered to auction platform
Incentive for demand side flexibility via retailer to reducepeak load (portfolio)
No transaction cost for supplier (no role in the system) Transaction costs for supplier, but a central role in the system (SPOC)
Stable signal for investments (in case of long term procurement)
Effectiveness subject to penalties
Problem of ‘free riders’ is by-passed Balancing obligation is re-enforced
Costs via central buyer in grid tariffs via BRP and suppliers billtowards end user
Costs become part of commodity cost for end user via supplier bill
Need to develop central auction platform Easy to implement, but need for transition period in order toadjust supply contracts
Higher regulatory risk Most market-oriented option
Auction based CO for pragmatic
reasons
Portfolio based CO from market
design perspective
30/10/2015 • VEB63
Both types of capacity obligations are acceptableSolution best suitable for Belgian situation should be chosen
30/10/2015 • VEB64
Is scar-city anissue?
Conti-nuewithEOM?
Whichtype of CRM?
Capacity market with capacity
obligation
Strategic reserves
Centralor
decen-tral?
Cross border partici-pation?
Remove allconstraints
Choose best option for
Belgian situationSoS ensured
SoS not ensured
Targeted
Market-wide
Yes
Yes No
No
Interconnections allow to optimize via cross border exchanges and thus increase social welfare
Evolutions in other countries (policy, support schemes, energy mix, transmission tariffs, adequacy situation in other countries…) impact the Belgian market
Interconnections don’t ensure that cross border generationcapacity will be availabe at all times: cross border capacity is no generation capacity
30/10/2015 • VEB65
Belgium is a highly interconnected countryInterconnections are an important factor for the Belgian market
Belgian capacitymarket
Implicit XB participation via interconnectors
Implicit XB participation
countries withEOM and explicit XB participationcountries with
capacity market provided political
agreement
Explicit XB participation with
all countriesprovided political
agreement
EU or CWE reference model
Different national initiatives are implemented at different time horizons to tackle adequacy
It is important to investigate how these initatives can coexist and gradually beharmonized and integrated
Start with Belgian capacity market and develop cross-border participation:
30/10/2015 • VEB66
Priority is securing supply in BelgiumHaving the right focus
30/10/2015 • VEB67
Is scar-city anissue?
Conti-nuewithEOM?
Whichtype of CRM?
Capacity market with capacity
obligation
Strategic reserves
Centralor
decen-tral?
Cross border partici-pation?
Remove allconstraints
Choose best option for
Belgian situation
Yes, but shouldnot delay
capacity market
SoS ensured
SoS not ensured
Targeted
Market-wide
Yes
Yes No
No
Federatie van de Belgische Elektriciteits- en Gasbedrijven Fédération Belge des Entreprises Électriques et GazièresFederation of Belgian Electricity and Gas Companies
thanks
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