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Wind Energy, Support Schemes and Deregulated Electrical Market

Wind Energy, Support Schemes and Deregulated Electrical Market. Energy Economics. European Union Policy Background. Community strategy & Action Plan Community overall RE target of 12% by 2010. 1997 White Paper. Community RE target of 22.1% by 2010 National indicative RE targets

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Wind Energy, Support Schemes and Deregulated Electrical Market

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  1. Wind Energy, Support Schemes and Deregulated Electrical Market Energy Economics

  2. European Union Policy Background • Community strategy & Action Plan • Community overall RE target of 12% by 2010 1997 White Paper • Community RE target of 22.1% by 2010 • National indicative RE targets • EC evaluate (in 2005) the application of direct and indirect support schemes Directive 2001/77/EC • Proposal for a new legislative framework for RE • Proposal for mandatory overall RE target of 20% gross consumption by 2020 2007 Renewable Energy Road Map • 20% from RES by 2020 and a 10% share of RES in the transport sector • Mandatory national targets (e.g. 31% Portugal) • National Action Plans before March 2010 Directive 2009/28/EC Wind Energy, Support Schemes and Deregulated Electrical Market

  3. Support Schemes for RES • Market Price + FI premium • Market Price + TGC revenues • Market Price + bounded FI premium • Fixed Feed-in Tariff • Price based • Quantity based • Tendering Wind Energy, Support Schemes and Deregulated Electrical Market Established to correct market’s failure for account the full cost to society of electricity generation (externalities) Two groups: investment support; operating support

  4. Support Schemes Comparison (1/2) Wind Energy, Support Schemes and Deregulated Electrical Market

  5. Support Schemes Comparison (2/2) Wind Energy, Support Schemes and Deregulated Electrical Market

  6. Effectiveness Against Expected Profit • Source: OPTRES, 2007 Wind Energy, Support Schemes and Deregulated Electrical Market

  7. Portuguese Support Scheme for Wind Energy • Fixed feed-in tariff Wind Energy, Support Schemes and Deregulated Electrical Market The new regulation is less rewarding Prices are not subject to market volatility (only to nature volatility) Future: green certificates + market prices Installed capacity increased 41.2% from 2005 to 2006

  8. Spanish Support Scheme for Wind Energy Wind Energy, Support Schemes and Deregulated Electrical Market • The new regulation is less rewarding, due to price cap • many producers will only change after 2012 • The former regulation has an higher risk (no price floor) • 2007 was a special year with a growth of 3515 MW

  9. Why the wind farms started to sell in the market? • Source: OMEL&AEE, 2009 • Source: CNE&AEE, 2008 • Source: AEE, 2007 Wind Energy, Support Schemes and Deregulated Electrical Market

  10. Wind Power and Electricity Prices Wind Energy, Support Schemes and Deregulated Electrical Market Price reduction of 2 €/MWh for each additional 1000 MW in 2007 (AEE, 2008) The reduction in the market price (2005-2007) subtracted from the wind energy support scheme does not entail an additional cost for consumers (Miera, 2008) The correlation between the market prices and the wind generation is negative (maximum in 2008 with -0.24) (Bludszuweit, 2009) The 64% increase in the market price from 2007 to 2008 was due to natural gas and CO2 allowances prices (AEE, 2009)

  11. Wind Power Bidding Periods • WPF 36 hrs ahead are required • Total Income: • Premium [€/MWh] E*: produced energy Eb: energy of the bid Wind Energy, Support Schemes and Deregulated Electrical Market They make a bid for the DM and update it in the ID markets

  12. The Economic Value of Wind Power Forecast Wind Energy, Support Schemes and Deregulated Electrical Market • Three months participation of a wind farm in MIBEL (Angarita, 2007) • A) Daily Market • B) Daily Market + Intraday • Small producers need to invest in forecasting (or buy forecasting services) and IT tools • For smaller wind farms (<30 MW) the benefits depend on the cost of purchasing forecasts and accuracy of the forecast (Barthelmiea, 2008)

  13. Is Spain a Good Example? • 8 of November of 2009 Wind Energy, Support Schemes and Deregulated Electrical Market 4h-7h wind generation covered 53% of the load (max of 10300 MW) The average over the whole day was 45 % of the load (max of 11500 MW) 1000 MW were disconnected due to a short-circuit and no consequences were verified for the consumers

  14. Conclusions Wind Energy, Support Schemes and Deregulated Electrical Market • There is no perfect support schemes (each country is a special case) • Lower risk and stability (associated to the feed-in tariffs) is the main criterion for investors • Maybe the green certificates + market price will appear more early in Portugal to achieve EU targets • Spain offers an attractive remuneration and with low risk • Wind power in the market removes market power, smooth the price peaks during peak hours, gives transparency and decreases financial burden • Market rules should be adapted to include wind power • the decrease of gate closures will decrease system deviations and increase wind power income and the system security • As more wind power is installed, wind power forecast will become more and more important for both sides

  15. Some references… Wind Energy, Support Schemes and Deregulated Electrical Market P.E. Morthorst et al., “Support schemes for renewable energy. A comparative analysis of payment mechanisms in the EU,” Technical Report, May 2005 Council of European Energy Regulators, “Status review of renewable and energy efficiency support schemes in EU,” Technical Report, Dec. 2008 M. Ragwitz et al., “Assessment and optimization of renewable energy support schemes in the European electricity market,” Technical Report, Karlsruhe, Feb. 2007 G.S. de Miera, P.R. González, and I. Vizcaíno, “Analysing the impact of renewable electricity support schemes on power prices: The case of wind electricity in Spain,” Energy Policy, vol. 36(9), pp. 3345-3359, Sept. 2008 J. Usaola, J. Angarita, “Benefits of short term wind power prediction programs for the integration of wind energy in electricity markets,” In Proc. of the European Wind Energy Conference, Athens, Greece, 2006 R. J. Barthelmiea, F. Murraya, and S.C. Pryor, “The economic benefit of short-term forecasting for wind energy in the UK electricity market,” Energy Policy, vol. 36, pp. 1687-1696, 2008 AEE Wind Power Anuario, Madrid, 2007 AEE Wind Power Anuario, Madrid, 2008 AEE Wind Power Anuario, Madrid, 2009

  16. State-of-the-art WPF Errors • Source: Pinson, 2006 • Important for intraday market (~7-12% of rated power) • Important for daily market (~11-15% of rated power) Wind Energy, Support Schemes and Deregulated Electrical Market

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