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Supporting RES and DG in Competitive Markets

Explore socio-economic and infrastructure considerations for promoting electricity production from Renewable Energy Sources (RES) in competitive markets. Delve into regulatory frameworks, market entry, grid access, incentives, and more.

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Supporting RES and DG in Competitive Markets

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  1. This presentation will probably involve audience discussion, which will create action items. Use PowerPoint to keep track of these action items during your presentation • In Slide Show, click on the right mouse button • Select “Meeting Minder” • Select the “Action Items” tab • Type in action items as they come up • Click OK to dismiss this box • This will automatically create an Action Item slide at the end of your presentation with your points entered. Supporting RES and DG in a competitive marketSocio-economic and infrastructure issues Prof. Michael P. Papadopoulos RAE-GREECE

  2. Objective: • Promotion of electricity production from RES within the context of the regulatory framework of the competitive electricity market • Issues • How RES energy enters in the electricity market • Adapting third party access to the grid to accommodate RES • Incentives for grid infrastructure expansion to support RES

  3. RES Energy in the Market (1) • Old promotion practices seem to be incompatible with the competitive market structures • If we seek for large-scale RES penetrations, then: • Direct subsidisation of RES investment may violate state-aid rules • Mandatory absorption of any RES energy production and fixed price payment may distort market competition • Consideration of RES payment as public service obligation may generate excessive charges on consumers

  4. RES Energy in the Market (2) • Public policy about RES penetration targets has to be imposed as global constraint on the market, so as to let the electricity market to find the cost-efficient market equilibrium • Methods after imposing a global RES penetration target: • Impose a quota obligation to all electricity suppliers and let them acquire RES energy after free negotiations • Impose a quota obligation to the pool or TSO and let the power exchange market to determine the origin of RES energy

  5. RES Energy in the Market (3) • Public policy incentives, apart the imposition of a global constraint, may also include: • Tax rebates • Lending rate subsidisation • Minimum and/or maximum regulated bounds on prices for RES energy purchases by supplier or by the TSO

  6. RES Energy in the Market (4) • Regimes with extreme competitions among the RES producers are suitable for countries that already have developed RES plants at a sufficient scale, because otherwise they may lead to non-bancability of RES projects Intermediate solution: the pool or the TSO define a global Power Purchase Agreement for RES and create a second-order competition among RES

  7. RES Energy in the Market (5) • Regimes based on quota obligations of electricity suppliers need ex-post supervision of competitions to avoid the case of suppliers eventually abusing their dominant position. In such cases the weakening of RES economics may lead to a future reduction of their potential development

  8. RES Energy in the Market (6) • Whatever competitive market regime for RES is selected, the internal or regional electricity market needs harmonisation on: • The level and timing of global constraint for RES energy by country or region (optimum allocation among countries leads to equality of marginal costs of RES potential) • The method and procedures for RES energy entering in the electricity market • The additional incentives to promote RES projects • The legislation to grant production licenses to RES projects

  9. ACCESS TO THE GRID: The main principles: • Open non-discriminatory access to the network for RES producers as for all generators • Development of cost and service reflective tariffs for RES power injected to the network according to the methodology used for embedded generation • Standardisation of technical connection terms for different types of DG and loads

  10. GRID INFRASTRUCTURE: Planning and design principles: • Development of planning methods, taking into account the location specific and varying in time behavior of RES and normal loads • Development of cost allocation methods and tariffs, taking into account real conditions • Economical design for networks dedicated for RES (e.g. with reduced reliability) • Support initiatives for the development of networks in isolated regions, taking into account their contribution to the environment

  11. PROCEDURE FOR TAKE-OFF: The main steps: • The state fixes targets of RES development taking into account: • Existing RES potential by region of a country • Classification of the RES according to their total cost (investments, connection to the grid etc.) • Decision concerning the policy of RES entry in the market • Planning of the required grid infrastructure and estimation of the cost for different RES penetration levels, taking into account the local environmental impact • Tariff development, taking into account the total real cost (RES investments, use of transmission, and distribution network etc. )

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