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SESSION 4: Renewable producers participating in the electricity market

2008 APEX Conference Sydney, October 14 th , 2008. SESSION 4: Renewable producers participating in the electricity market. María-Luisa Huidobro President. INDEX. European Union electricity targets from renewable sources. Relevant market data.

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SESSION 4: Renewable producers participating in the electricity market

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  1. 2008 APEX Conference Sydney, October 14th, 2008 SESSION 4: Renewable producers participating in the electricity market María-Luisa Huidobro President

  2. INDEX • European Union electricity targets from renewable sources. • Relevant market data. • Spanish regulation on power production from renewable sources according to Royal Decrees 661/2007 and 1578/2008. • Wind power participating in the day ahead and intra-day market. • Conclusions.

  3. European Union electricity targets from renewable sources.

  4. PROPOSAL FOR A DIRECTIVE ON THE PROMOTION OF THE USE OF ENERGY FROM RENEWABLE SOURCES • This Directive establishes: • A common framework for the promotion of energy from renewable sources. • Sets mandatory targets for the overall share of energy from renewable sources in energy consumption. • Sets the share of energy from renewable sources in transport. • Establishes the increase interconnection among countries. • Establishes environmental sustainability criteria for biofuels and bioliquids • Lays down rules relating to: guarantees of origin, administrative procedures and TPA. • “Guarantee of origin” means an electronic document which has the function of providing proof that a given quantity of energy was produced from renewable sources. • The measures that constitute State aid in the sense of Article 87 of the Treaty have to be notified to and approved by the Commission before their implementation. • “Support scheme” includes: • Green certificates. • Investment aid. • Tax exemptions, reductions or refunds. • Renewable energy obligation support schemes. • Direct price support schemes: feed-in tariffs & premium payments.

  5. PROPOSAL FOR A DIRECTIVE ON THE PROMOTION OF THE USE OF ENERGY FROM RENEWABLE SOURCES • The Directive lays down the principles according to which Member States need to ensure that the share of renewable energy in the EU final energy consumption reaches at least 20% by 2020, and establishes national overall targets for each Member State. • 3 sectors are concerned: • Electricity • Heating and cooling • Transport • The overall approach is for Member States to retain discretion as to the mix of these sectors in reaching their national target. However, it is proposed that each Member State shall achieve at least a 10% share of renewable energy in the transport sector by 2020.

  6. MANDATORY TARGETS FOR THE SHARE OF ENERGY FROM RENEWABLE SOURCES IN FINAL CONSUMPTION OF ENERGY IN 2020 S20xx = K x (S2020 – S2005) where: K = 0.25 for the two-year period 2011 to 2012 K = 0.35 for the two-year period 2013 to 2014 K = 0.45 for the two-year period 2015 to 2016 K = 0.65 for the two-year period 2017 to 2018 S2020 = The share for the MS in 2020 S2005 = The share for the MS in 2005

  7. TOTAL INSTALLED WIND POWER Worldwide Capacity at 93,8 GW – 19,7 GW added in 2007. Wind energy is used in more than 70 countries – USA, Spain and China take the worldwide lead. Source: World Wind Energy Association

  8. ALLOCATION BY COUNTRIES. INSTALLED WIND POWER IN 2007 (MW) Source: World Wind Energy Association

  9. WIND ENERGY WORLDWIDEAVERAGE ANNUAL GROWTH RATES (%) Source: World Wind Energy Association

  10. COMPARATIVE OF REGULATORY LAW IN FORCE IN GERMANY, SPAIN, FRANCE AND PORTUGAL

  11. ACCUMULATED INSTALLED POWER IN GERMANY, SPAIN, FRANCE AND PORTUGAL • Accumulated installed power in year 2008 in each country and its ranking according to installed power in Europe.Average of solar irradiation and equivalent hours in fixed installations. Source: Eurobserv’er 2008 & European Best Practice Report

  12. JOINT-OWNERSHIP PLANTS DEVELOPMENT IN EACH COUNTRY (QUALITY WISE) • Due not only to the market but also to other regulatory framework in each country, joint ownership plants differ a lot among each country. • In the table below, estimation about this issue is shown:

  13. IMPORTANCE OF THE DIFFERENT ASPECTS, WHICH COULD FAVOURS MARKET DEVELOPMENT

  14. Relevant market data.

  15. RENEWABLES IN THE SPANISH MARKET • Very significant grow in the last 5 years of the installed wind capacity. • Most of the wind producers are selling their electricity production in the daily market and they also bid in the intraday market. • Photovoltaic energy: • At present, installed capacity is more than 1,000 MW. • Projections: • 3,000 MW in 2010 • 10,000 MW in 2020

  16. INSTALLED POWER FROM RENEWABLE SOURCES IN SPAIN AND FORECAST UNTIL 2010 (MW) Source: REE, PER 2005-2010 & Government preview

  17. INSTALLED POWER BY TECHNOLOGIESON DECEMBER 2007 Total installed capacity: 85.7 GW 14,03 Source: REE

  18. ENERGY PRODUCED BY TECHNOLOGIESIN 2007 (%) Total production: 261,273 GWh Wind power production reached 9.5% in 2007 of the demand coverage. In 2008 a 12% is expected to be reached. Source: REE and AEE

  19. INSTALLED POWER FROM RENEWABLE SOURCES IN 2007 (%) Total installed capacity: 24.2 GW Source: REE

  20. ENERGY PRODUCED IN THE SPECIAL REGIME IN 2007 (%) Total production: 56,302 GWh Source: REE

  21. Spanish regulation on power production from renewable sources according to Royal Decrees 661/2007 and 1578/2008.

  22. KINDS OF FACILITIES • Cogeneration and waste energy. • Renewable energy: • Group b.2 Wind power. • Group b.2.1 Windmills onshore. • Group b.2.2 Windmills offshore. • Waste energy with energy value. • Installed power per unit must be < 50 MW.

  23. ADMINISTRATIVE COMPETENCES • Installation licence corresponds to regional authorities. • Nevertheless, this competence is of the State Government when: • The installed power is > 50 MW. • Its location affects more than one Region. • It is located offshore. • Regulated price corresponds to the State Government: • Fix price applied to wind energy. • Premium over the market price: • Wind power onshore: Fixed by the Government. • Wind power offshore: Established by auction.

  24. ACCESSING THE NETWORKS • Priority for accessing the transmission and distribution network: • If producer bids to the market then in the same conditions that all producers. • Mandatory guarantee to be applied when accessing the transmission and distribution network: • 20 €/kW for wind power facilities. • 500 €/kW for solar power facilities. • Once the wind power facility starts up, the guarantee is cancelled.

  25. REQUIREMENTS APPLIED TO WIND POWER FACILITIES (I) • Adscription to a generation control centre, as a dispatch centre connected to the system operator: • Producer. • Special dispatch in the system operator. • All the facilities with capacity > 10 MW should be connected to a control centre or establish by itself a control centre. • Information will be transmitted to the system operator and instructions to control centre will be executed in real time. • This obligation will be a necessary condition for the perception of the tariff or the premium.

  26. REQUIREMENTS APPLIED TO WIND POWER FACILITIES (II) • The wind facilities will have to fulfil certain response requirements when a voltage dip. • This requirement will be a necessary condition for the perception of the tariff or the premium: • A transitory period is established until the 1st of January of 2010 without penalty, for the existing facilities before the Royal Decree is in force. • A transitory period is established for the facilities previous to 1 of January of 2008, during a maximum term of 5 years, for maintaining the continuity of supply, receiving a complementary income of 0.38 c€/kWh (around 20%).

  27. SELLING THE WIND ENERGY • The wind energy producer has two options: • To sell the wind energy at a fix regulated tariff equal for all the hours (option a). • To bid in the organized market, through the system of auctions managed by the market operator, to establish a bilateral contract, or a forward contract (option b).

  28. OPTION A: TO SELL AT A REGULATED TARIFF • The wind power producer communicates the day ahead schedule to the distributor: • The auction system managed by the market operator considers this schedule as a bid at null price. • The schedule can be communicated directly or through a representative. • Producers can send bids also to the intra-day market • The wind power producer is paid by: • The market operator for the amount that corresponds to daily and intra-day market. • The system operator by the amount that corresponds to the ancillary services and deviations. • The Energy Regulatory Commission for the rest of the fix price of the tariff. This part of the retribution is paid until 2009 by the distributors.

  29. OPTION B: TO SELL IN THE MARKET (I) • The wind power producer send the bids for the day ahead market to the market operator: • The bid can be sent directly or through a representative. • Producers can also send bids to the intra-day market. • The price is paid to the wind power producer by: • The market operator for the amount that corresponds to daily and intra-day market. • The system operator by the amount that corresponds to the ancillary services and the deviations. • The Energy Regulatory Commission for the premium. This part of the retribution is paid until 2009 by the distributors. • Alternatively the power producer can sign a bilateral contract or operate through the forwards market.

  30. OPTION B: TO SELL IN THE MARKET (II) • Negotiated price • + • Premium • + • Reactive energy complement • - • Deviations • + • Complement to help voltage dip problems • (applicable to wind facilities previous to 1/1/2008 and maximum 31/12/2013, that support voltage dip)

  31. REQUIREMENTS THAT THE WIND PRODUCERS SHOULD COMPLY • In case the entity accessing the market on behalf of the wind producer is not a market agent, then the wind producer should be a market agent. • The entity accessing the market on behalf of the wind producer can send several bids for the set of facilities of the wind producer. • The dominant operators will only be able to act as representatives of their own facilities when their participation is greater than 50%. • The non dominant operators, will be able to act as representatives, until they reach a maximum of 5% of all the suppliers.

  32. REGULATED TARIFF AND PREMIUM

  33. LOWER AND UPPER PRICE LIMITS TO BE PERCEIVED BY WIND FACILITIES Upper limit = 8.7790 Price to receive Lower limit = 7.3663 Premium = 3.0272 Market price If the price of the market plus the premium is below the lower limit, this limit will be received

  34. THE REGULATED TARIFF AND THE PREMIUMS FOR WIND POWER FACILITIES (I) • Parameters for establishing: • Regulated tariff option: IRR of 7% • Market option: • Lower and upper limits IRR of 7%, with a minimum of 5% and a maximum of 9% are the limits of the band.

  35. THE REGULATED TARIFF AND THE PREMIUMS FOR WIND POWER FACILITIES (II) • Updates: • Renewable: annual based on the RPI – 0.25 up to 31/12/2012 and from then RPI – 0.50. • Revisions. Every 4-years period: • Costs associated to each of the technologies. • Degree of participation from renewable sources in the demand coverage. • Incidence in the technical and economic management of the system.

  36. RETRIBUTION OF PHOTOVOLTAIC ENERGY (I) • The present regulated tariffs fix the following values: • Royal Decree 661/2007 and ITC 3860/2007 • Installed Capacity ≤ 100 kW: 455.134 €/MWh • Installed Capacity > 100 kW and ≤ 10 MW: 431.486 c€/MWh • Installed Capacity > 10 MW : 237.461 €/MWh • Royal Decree 1578/2008, first quarter call in January 2009: • On the building roof or in the wall, installed capacity ≤ 20 kW: 340 €/MWh • On the building roof or in the wall, installed capacity > 20kW: 320 €/MWh • Based on ground: 320 €/MWh

  37. RETRIBUTION OF PHOTOVOLTAIC ENERGY (II) • The regulated tariff • Evolution of the regulated tariff in each quarter call depends on the capacity grow of the previous quarter: • If call was fully covered then regulated tariff diminish with the following formula: 100 * (1 – 0.91/4) = 2.6% • If call covered more than 75% and less than full, new tariff will be obtained multiplying previous tariff value by the following factor: [(1 – 0.91/4) * (P0 – P) / (0.25 * P0] + 0,91/4 Being: P0 the power quota of the previous call and P the assigned power in the previous call. • If previous call covered ≤ 75% then regulated tariff remains invariable. • If during two consecutive calls, power contracted cover was < 50%, then regulated tariff increases by 100 * (1 – 0.91/4) = 2.6% • Updating yearly regulated tariff from the second January 1st after the date of the corresponding call: • Regulated tariff increases in RPI – 0.25 until 2012. • Regulated tariff increases in RPI – 0.5 after 2012. • The market price

  38. ROYAL DECREE 1028/2007WIND FACILITIES OFFSHORE • The construction or extension of the electrical systems for wind generation offshore requires: • The production licence given by the Ministry of Industry regulated in the Royal Decree 1955/2000. • The licence to set the installation on the sea as public dominion by the Ministry of Environment (Law 22/1988, of 28 of July, relative to coasts). • The auction result licence that grants the applicant the zone reserve, regulated in the Royal Decree 1028/2007.

  39. Wind power participating in the day ahead and intra-day market.

  40. INSTALLED CAPACITY IN CCGT,COGENERATION AND WINDMILLS Installed capacity in CCGT, cogeneration and windmills Current (MW) In the market (%) CCGT 21,439 100.0 Cogeneration 6,497 37.3 Windmills 15,527 92.0 Source: OMEL. Sept. ‘08

  41. WIND POWER OTHER RENEWABLE NUCLEAR IMPORT HYDRO COAL COMBINED CYCLE FUEL-GAS DAILY ENERGY BY PRODUCTION TECHNOLOGIES SEPTEMBER 99 – AUGUST 00 SEPTEMBER 07 – AUGUST 08

  42. DAILY ENERGY BY PRODUCTION TECHNOLOGYAugust 2008 - 28 September 08 WIND POWER OTHER RENEWABLE NUCLEAR IMPORT HYDRO COAL COMBINED CYCLE FUEL-GAS

  43. Bid at 0 €/MWh to be matched. Bid at a price different from 0 €/MWh with risk of none being matched TYPICAL BID OF A WIND POWER PRODUCER

  44. NUMBER OF MARKET PARTICIPANTS • Power producers in the Spanish power production market: • On September, 671 power producers are participating in the daily and intraday markets. • Number of wind power producer facility owners that are selling directly in the daily market: 46 • Number of wind power producer facility owners that are selling in the daily market through units managed by other kind of agents (representative or seller agent): 563 • Number of power producer agents without wind power facilities: 62

  45. PRICES AND ENERGY IN THE DAILY MARKETOctober 2005 – 28th September 2008 MWh c€/kWh

  46. PRICES IN THE SPANISH SYSTEM IN THE DAILY MARKETAugust 2008 – 28th September 2008 c€/kWh MWh

  47. European day-ahead prices

  48. THE WIND ENERGY PRICE IN 2007 • This participation of the wind energy in the electric market diminishes the price of the electricity due to: • The incorporation of the wind energy moves the market supply curve causing a lower price. • In addition, the wind production is greater in periods of low/medium prices, because the local winds take place in the periods of diurnal transition that in many cases does not correspond with the highest demand. • Wind price in the daily market: 37.96 €/MWh, is lower 3.53% to the arithmetic average price of the daily market (39.35 €/MWh) • Wind Price in regulated tariff: 72.73 €/MWh

  49. AVERAGE PRICE OF WIND ENERGY INTHE DAILY MARKET (2005 – 21 Sep 2008) Source: OMEL

  50. WIND ENERGY MATCHED IN THE DAILY MARKET AND MARGINAL PRICE IN 2007 Source: OMEL

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