Market design for resource adequacy: A reliability insurance overlay on energy-only electricity markets

Billimoria, Farhad; Poudineh, Rahmatallah

doi:10.1016/j.jup.2019.100935

Cited by 29 publications

(13 citation statements)

References 14 publications

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“…Since scarcity prices are normally capped at low price by regulators, generators may not earn sufficient revenue to recover their fixed cost and invest in building new capacity. This create the 'missing money' problem [45]. The other failure mechanism is that the high inelastic nature of the demand side makes customers cannot see the real-time price of electricity nor they can respond to them [46].…”

Section: The Necessity For a Capacity Marketmentioning

confidence: 99%

Degradation Cost Analysis of Li-Ion Batteries in the Capacity Market with Different Degradation Models

et al. 2020

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Increased deployment of intermittent renewable energy plants raises concerns about energy security and energy affordability. Capacity markets (CMs) have been implemented to provide investment stability to generators and secure energy generation by reducing the number of shortage hours. The research presented in this paper contributes to answering the question of whether batteries can provide cost effective back up services for one year in this market. The analysis uses an equivalent circuit lithium ion battery model coupled with two degradation models (empirical and semi-empirical) to account for capacity fade during battery lifetime. Depending on the battery’s output power, four de-rating factors of 0.5 h, 1 h, 2 h and 4 h are considered to study which de-rating strategy can result in best economic profit. Two scenarios for the number of shortage hours per year in the CM are predicted based on the energy demand data of Great Britain and recent research. Results show that the estimated battery profit is maximum with 2 h and 1 h de-rating factors and minimum with 4 h and 0.5 h. Depending on the battery degradation model used, battery degradation cost can considerably impact the potential profit if the battery’s temperature is not controlled with adequate thermal management system. The empirical and semi-empirical models predict that the degradation cost is minimum at 5 °C and 25 °C respectively. Moreover, both models predict degradation is minimum at lower battery charge levels. While the battery’s capacity fade can be minimized to make some profits from the CM service, the increased shortage hours can make providing this service not economically viable.

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Section: The Necessity For a Capacity Marketmentioning

confidence: 99%

Degradation Cost Analysis of Li-Ion Batteries in the Capacity Market with Different Degradation Models

et al. 2020

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“…Resource Adequacy in energy-only markets is a matter of constant interest to energy economists and policymakers, marked by a growing body of literature (Keay, 2016;Bhagwat et al, 2017;Keppler, 2017;Simshauser, 2018;Billimoria and Poudineh, 2019;Bublitz et al, 2019;Milstein and Tishler, 2019). Yet even with rising VRE, provided reliability criteria has a tight nexus with the Market Price Cap 7 there should be no question that investment in energy-only markets will flow under conditions of diminishing supply-side reserves.…”

Section: Introductionmentioning

confidence: 99%

Merchant renewables and the valuation of peaking plant in energy-only markets

Simshauser

2020

Energy Economics

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Merchant renewables are a new asset class. With historically high cost structures and low wholesale prices associated with merit order effects, continuity of entry has been reliant on Renewable Portfolio Standards or other policy initiatives such as government-initiated Contracts-for-Differences. But in Australia's National Electricity Market, sharply falling costs of renewables and volatile wholesale market conditions from coal plant exits has led to a surprising number of merchant intermittent renewable investments. Adding to the merchant renewable fleet are older wind plants whose inaugural long-dated PPAs recently matured. Rolling over PPAs is possible, but not necessarily optimal. In this article, a merchant gas turbine, merchant wind, and an integrated portfolio comprising both plants are valued in the NEM's South Australian region. Asset valuations reveal surprising results. The modelling sequence shows stand-alone gas turbine valuation metrics suffer from modest levels of missing money, that merchant wind can commit to some level of forward (fixed volume) swap contracts in-spite of intermittent production, but the combined portfolio tightens overall valuation metrics significantly. Above all, the combined portfolio is financially tractable, overcoming the missing money for a gas turbine plant undertaking peaking duties. In a NEM region where intermittent renewable market share exceeds 50%, this suggests the energy-only, real-time gross pool design may yet be deemed suitable vis-à-vis meeting environmental objectives and Resource Adequacy. Cambridge Working Papers in Economics Faculty of Economics www.eprg.group.cam.ac.uk Merchant renewables and the valuation of peaking plant in energy-only markets

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“…Bublitz et al, (2019) provide an excellent summary of the rapidly growing literature in the field. Indeed, resource adequacy concerns in energy-only markets has been a matter of continual interest to energy economists and policymakers (Keay, 2016;Bhagwat et al, 2017;Keppler, 2017;Simshauser, 2018;Billimoria and Poudineh, 2019;Bublitz et al, 2019;Milstein and Tishler, 2019 amongst others). The concern with energy-only markets, which mirrors those from the original peak load pricing literature, is the stability of earnings and the flow-on effects to the plant stock.…”

Section: Energy-only Markets and Resource Adequacymentioning

confidence: 99%

Rooftop solar PV and the peak load problem in the NEM's Queensland region

Simshauser

2022

Energy Economics

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Market design for resource adequacy: A reliability insurance overlay on energy-only electricity markets

Cited by 29 publications

References 14 publications

Degradation Cost Analysis of Li-Ion Batteries in the Capacity Market with Different Degradation Models

Degradation Cost Analysis of Li-Ion Batteries in the Capacity Market with Different Degradation Models

Merchant renewables and the valuation of peaking plant in energy-only markets

Rooftop solar PV and the peak load problem in the NEM's Queensland region

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