Electricity market analysis

electricity market analyst and also define electricity market 2.0. this article also explain electricity market management system
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MilburnClark,United Arab Emirates,Professional
Published Date:18-07-2017
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An introduction to electricity markets and derivatives Lecture 1 Electricity markets University of Oslo - Department of Mathematics Ren e A d EDF R&D - Finance for Energy Market Research Centre Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 1 / 54Agenda 1 Electricity features Non-storability Transport 2 Electricity markets microstructure Intraday market Day-ahead market Forward market 3 Derivatives & Risk management Power plants & tolling contracts Energy storage & swing contracts Other derivatives 4 Conclusion 5 References Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 2 / 54Disclaimer Disclaimer Any views or opinions presented in this presentation are solely those of the author and do not necessarily represent those of the EDF group. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 3 / 54Electricity features Electricity features Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 4 / 54Electricity features Main electricity features A local commodity Electricity is non-storable. Electricity transport satis es speci c laws. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 5 / 54Electricity features Non-storability Storability Comments Generally, subscribed capacity consumption exceeds installed capacity. Example in France: 250 GW of subscribed consumption capacity vs 128 GW installed capacity. Present best way to store large volume of power: hydro-reservoir. Limited by pumping rate 0.74. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 6 / 54Electricity features Non-storability Consequences On short-term (next hours) A too long excess of demand compared to production may rst resolves in a decrease of frequency, ... and if not properly corrected, may lead to dramatic blackouts. July 30th, 2012: India, 670 millions people. August 13th, 2003: Ontario and North America, 50 millions people. November 4th, 2006: UCTE, 15 millions people. ) Minute by minute real-time assessment of the equilibrium between consumption and production. The Transport System Operator (TSO) is responsible for the electric system security and reliability. He manages the uncertainties on demand and production by a serie of operating reserves. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 7 / 54Electricity features Non-storability Reserves Operating reserves An operating reserve is a generation that can be mobilised with a short-term noti cation. Operating reserves vary by response time. Three kinds of reserve: primary reserve: response time 20s. Automatic devices.  500 MW in France. secondary reserve: response time 3mn. Automatic.  600 MW in France. tertiary reserve: response time 15mn. Manuel.  1,500 MW in France. The volume of each reserve may vary depending on the nature of the uncertainties on a particular electric system. p They tend to grow in T , where T is the time to mobilisation. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 8 / 54Electricity features Non-storability Consequences On mid-term basis Reliability assessment analysis: is there enough capacity to full ll demand in the next months within a certain default probability? Means: changing planned outtage schedule, buy on the market, demand-side management policy Extreme way: load shedding. On long-term basis Build new capacity to allow enough excess capacity. Demand-side management policy. Sound tari cation. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 9 / 54Electricity features Transport Transport Comments The transport of electricity satis es Kirchho 's laws. The intensity at each node should be zero and the tension in each loop should be also zero. Consequences In a meshed electricity network, power will go from one point to another using all available paths. ) Electricity ow interference. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 10 / 54Electricity features Transport Interference between commercial ows and physical ows Situation A power producer G1 has client in node C whose consumption is 180 MW, while a power producer G2 has also a client in node C whose consumption is 90 MW. Each producer holds enough generation capacity and no production cost advantage. G1 90 180 G2 C 90 Figure : Network physical capacity limits. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 11 / 54Electricity features Transport Interference between commercial ows and physical ows G1 G1 0 60 - 30 180 120 + 30 G2 C G2 C 90 60 + 60 Figure : Desired commercial ows. Figure : Physical ows. Congestion Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 12 / 54Electricity features Transport Transport consequences on trading Consequences ) Cross-border trading opportunities. Transfert capacities available for trading between countries need some generation hypothesis. In Europe, the available net transfert capacity (NTC) are managed and published by the ENTSO (European Network System Operator) Publicly available in her transparency platform (www.entso.net). Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 13 / 54Electricity markets microstructure Electricity markets microstructure Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 14 / 54Electricity markets microstructure Common market structure for a local commodity Comments Electricity is a local commodity. As many electricity market as they are states: USA: Europe: South America: Asia: Paci c: Market microstructure highly depends on national regulation. Nevertheless, common structure emerges driven by the necessary equilibrium between consumption and production. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 15 / 54Electricity markets microstructure Common market structure A sequence of markets ordered by time-horizon The intraday market and/or balancing mechanism The day-ahead market The forward market Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 16 / 54Electricity markets microstructure Intraday market Intraday Commons Ensure the security of the system Balancing Mechanism. Transparent market price for the cost of imbalance Imbalance Settlement Price. Remark May coexist at the same a market for next hours where rms exchange power. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 17 / 54Electricity markets microstructure Intraday market Balancing mechanism Example French TSO adjustment market mechanism as of April, 2013. Balance Responsible Entities (BR) submit bids and o ers to increase or decreases their production (or consumption). TSO selects o ers based on economic precedence. BR are paid as bid. Every power available plant should be declared on the adjustment market Producers declare their price to increase their production System operator uses all these o ers to insure real-time production consumption equilibrium But, some time later, each balance responsible entity receives the bill of her imbalances... Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 18 / 54Electricity markets microstructure Intraday market Balancing mechanism Example: French TSO imbalance price settlement mechanism S represents the day-ahead price settled the day before for the hour of interest. d P is the average price of the o ers used by the TSO on the balancing mechanism to decrease the production (or increase the consumption). u P is the average price of the o ers used by the TSO on the balancing mechanism to increase the production (or decrease the consumption). Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 19 / 54Electricity markets microstructure Intraday market Imbalance mechanism Network Network Adjustment Trend Adjustement Trend Positive Negative Actor Imbalance Positive   d P Actor is paid S min S; 1 +k Actor Imbalance Negative u Actor pays max (S;P  (1 +k)) S Lecture Network needs upward adjustment & Actor is producing too much Actor d P is paid but not more than S. 1+k Network needs upward adjustment & Actor is producing not enough Actor u pays P  (1 + k) and at least S. Ren e A d EDF R&D - Finance for Energy Market Research Centre Electricity Derivatives 20 / 54