PLEXOS Analysis in the Spanish System. Grid Congestion and Interconnections

1. PLEXOS Analysis in the Spanish System. Grid Congestion and Interconnections Dr Christos Papadopoulos Regional Manager - Europe Energy Exemplar (Europe) Ltd 3rd Annual European Electricity Ancillary Services & Balancing Forum- Berlin 2012

2. PLEXOS and Policy Analysis PLEXOS has a proven track record in the area of policy analysis and development. Common policy analysis with PLEXOS includes: • The design, analysis, and benchmarking of electricity market rules and effect on market participants. • Assessing the effectiveness of renewable technology policies and resulting impact on carbon emissions, prices, transmission grid operations and investment incentives. • Forecasting market entry and assessing future technology and fuel mixes as well as examining the development of system adequacy. • Examining market competitiveness and market power. European Electricity Ancillary service & Balancing Forum- Berlin 2012

3. PLEXOS Long Term Planning - Goal The long term planning aims to achieve the policy makers desired goals of meeting: • Peak demand growth • Total energy demand growth • CO2 emission standards • Renewables uptake targets • Ramping requirements • System stability and reliability levels While minimising total system cost European Electricity Ancillary service & Balancing Forum- Berlin 2012

4. PLEXOS Long Term Planning - Decisions The long term planning functionality of PLEXOS can be used to optimise: • The build and retirement of generating units • The expansion of transmission lines and interconnectors • The uptake of renewable technologies • The Increasing demand side participation (DSP) In addition to the standard unit despatch and resource allocation optimisation European Electricity Ancillary service & Balancing Forum- Berlin 2012

5. PLEXOS Policy Analysis The Environmental policies that PLEXOS is commonly used to analyse include: • Green certificates • Renewable Portfolio Standards • Carbon permits or taxes • Renewable targets • Feed-in-Tariffs • Promotion of demand side participation All these policies can be easily and quickly implemented using scenarios. European Electricity Ancillary service & Balancing Forum- Berlin 2012

6. Spanish Power System OverviewGeneration & Load* 35.000 km HV lines * 45.450 MW Peak Load * >95.000 MW Power Gen (largely exceeds Peak Load) * >22.000 MW CCGT * >20.000 MW Wind * 14.960 MW Wind Peak European Electricity Ancillary service & Balancing Forum- Berlin 2012

7. Installed generation capacity in the Spanish mainland system at the end of 2010 (Source: REE) European Electricity Ancillary service & Balancing Forum- Berlin 2012

8. Spanish Power System Overview (cont) Interconnections Exchange Capacity (2010) * 1.100 MW with France * 1.400 MW with Portugal * 800 MW with Morocco Demand * Annual total demand: ~275 TWh Demand showed very high growth compared to 2009: 4.7% in Portugal (3.3% adjusted for temperature and labour days) and 3.3% in Spain (2.9% adjusted). The Portuguese system is 20% the size of the Spanish one. European Electricity Ancillary service & Balancing Forum- Berlin 2012

9. The Spanish transmission grid is well meshed, so there are no large structural constraints. Factors that can affect the power flows and produce constraints: – Wind production – Grid maintenance outages or failures – Some zone generation - demand unbalances European Electricity Ancillary service & Balancing Forum- Berlin 2012

10. Spanish Power System Analysis Benchmark Year of our PLEXOS Model 2010 We developed a PLEXOS (fundamental) Model with an associated PLEXOS Dataset of Spanish/Portuguese System that was calibrated against the 2010 hourly energy prices and generation series observed at the Spanish and Portuguese nodes of MIBEL, the Iberian electricity market. Spanish and Portuguese day-ahead and intraday electricity markets are fully integrated in the MIBEL since 2007. European Electricity Ancillary service & Balancing Forum- Berlin 2012

11. The day-ahead average price in OMEL (Spanish side) during 2010 was 37.01€/MWh. The final weighted average MIBEL market price, including capacity payments, technical restrictions and balancing was 45.13 €/MWh(about 1% higher than previous year average). PLEXOS Spanish Dataset developed for 2010 calibration included, among others, the following key items: • offers submitted to the day-ahead market, • available interconnection capacities and exchanged energies • hourly day-ahead market clearing prices European Electricity Ancillary service & Balancing Forum- Berlin 2012

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14. PLEXOS Nodal (LM) Prices In PLEXOS the price at a node (transmission bus) is a calculated priceand depends on the optimal power flow (OPF) model selected. In the standard OPF the nodal price is a direct output of the optimizationand is equal to the shadow price (LMP)(dual variable) on the net injection constraint at the node. In the large-scale OPF nodal price is not directly available and instead is computed from the system lambda and constraint shadow prices modified by the shift factors. European Electricity Ancillary service & Balancing Forum- Berlin 2012

15. Given the right amount and quality of Data, PLEXOS is able to re-produce the real market price, generation profiles and associated power system & market mechanisms exceptionally good!! This gave us the opportunity to analyse characteristic congestion events associated with market price collapses and the respective periods of market splitting, whenever these took place in 2010, between the Spanish and Portuguese Market. PLEXOS reproduced them and subsequently the Spanish Market System in general, with very high accuracy. European Electricity Ancillary service & Balancing Forum- Berlin 2012

16. MIBEL Price Collapse & Market Splitting - 31/10/2010 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

17. “Dump” Energy in ES Region - Oct. 2010 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

18. ES Nodal (LM) Price with ES & PT Loads – Oct. 2010 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

19. PT Load and ES-FR Interconnection Flow – Oct. 2010 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

20. ES-PT and ES-FR Interconnection Flows – 31/10/2010 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

21. Exchanges between Portugal and Spain are computed in reality (and reproduced in PLEXOS model) driven by offers posted at both sides of the border and constrained by available interconnection capacity. At hours when there is excess interconnection capacity the Spanish and the Portuguese markets are coupled and both markets are cleared at the same price. When the interconnection capacity is exhausted, market splitting takes place and each node is cleared at a different price. European Electricity Ancillary service & Balancing Forum- Berlin 2012

22. In Spanish Power System, the main congestions appear in interconnections, especially in the French-Spanish border but also in the Portuguese-Spanish. • When there is congestion in the PT-ES interconnection, the MIBEL is splitted into two price areas. • Convergence in prices was quite high in 2010 (Around 80% of the hours). European Electricity Ancillary service & Balancing Forum- Berlin 2012

23. ES-FR Interconnector With Regional Initiatives, integration of day-ahead market with France (and therefore with the CWE1 region) is being pursued. The SW2 region is implementing the European Electricity Target Model aiming in an internal (European) energy market. However, due to the scarce cross-border capacity, the electricity exchanges with France (and consequently, the chances for price convergence) are rather limited. European Electricity Ancillary service & Balancing Forum- Berlin 2012

24. Spain - Price differential with France due to: • Different generation mix, • Different demand patterns and more importantly • The limited interconnection capacity between France and Spain. • Apart from the third, the first 2 might be GOOD NEWS in the end. European Electricity Ancillary service & Balancing Forum- Berlin 2012

25. ES-PT Interconnector • Revenue from congestion on interconnections between Portugal and Spain arising from the price zone difference, after the application of market splitting, rose slightly in 2010, at 11.9 million Euros compared with 10.7 million Euros in 2009. • Well below the 2008 figures (64 million Euros) as a result of the convergence of prices between Portugal and Spain and the increased use of the interconnection in the export direction (Portugal > Spain). European Electricity Ancillary service & Balancing Forum- Berlin 2012

26. Very low pool price differential between Portugal and Spain in 2010: • Increasing integration of the Iberian market (MIBEL) • Growing similarity of the marginal generation portfolio of both countries – Not necessarily GOOD!!! European Electricity Ancillary service & Balancing Forum- Berlin 2012

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28. LT Planning in PLEXOS • We run various LT planning scenarios in PLEXOS for New Generation Built considering: • Wind • Solar • GT • and particularly for the Wind-Curtailment/Over-Generation issue: • Hydro Storage • DSP European Electricity Ancillary service & Balancing Forum- Berlin 2012

29. LT Planning We created a realistic load shape forecast based on the 2010 load profile using PLEXOS Load Forecasting Feature. This extended up to 2020 with 3.5% Energy growth per annum and 2.5 % Peak load growth for both Spain and Portugal. European Electricity Ancillary service & Balancing Forum- Berlin 2012

30. ES and PT Forecasted Loads up to 2020 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

31. We verified in all our scenarios runs that: The Continuous drop of operating hours of Iberian thermal plants in 2010, since the demandincreasewas not sufficientto compensate high renewable production (+69% hydro generation and +17% wind generation, compared to 2009) will continue to be a major issue. The Iberian market presents comfortable reserve margins, so in the coming years new thermal additions are not expected, given the strong investments in renewable capacity in order to achieve the 2020 targets. European Electricity Ancillary service & Balancing Forum- Berlin 2012

32. Renewable Generators Curtailment Factor– 2011-20- PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

33. Interconnections & New Built - 2011-20- PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

34. Planned Renewable additions We verified also our thoughts, in all our scenarios runs, that the planned expansions (mainly of Wind Onshore/Offshore, PV but also Thermo solar and Biomass), under the circumstances and scenarios of load growth and existing interconnection capacity, are expected to lead tomore undispached energy (available on-line but not utilised given the unit commitment solution) and wind curtailment. European Electricity Ancillary service & Balancing Forum- Berlin 2012

35. Undispached Energy for Planned Renewables up to 2020 - PLEXOS European Electricity Ancillary service & Balancing Forum- Berlin 2012

36. Renewables’sIntregration poses significant: • Operational Challenges • but mainly • Policy Planning Challenges • Large RES production reduces dramatically day-ahead market prices, but also increases the cost of the ancillary services. • When/if the system runs out of downward reserve, the TSO instructs some thermal units to shut down (usually, CCGTs). • When/if this is not enough, wind output is limited (WindGeneration Curtailed). European Electricity Ancillary service & Balancing Forum- Berlin 2012

37. In the first half of 2010, wind production curtailed 22 times, losing about 171 GWh. • In the same period, the TSO ordered 60 CCGTs to shut down to minimize wind losses... • In 2011 the loss accounts for just 0,2 % of wind production - Wind Curtailment. European Electricity Ancillary service & Balancing Forum- Berlin 2012

38. Wind power generation e.g. in Portugal presented a very significant growth, representing more than half of special regime generation in 2010, and increased its contribution to the total value of generation from approximately 1.2% in 2003 to 16.4% in 2009 and 18.2% in 2010. • Lack of downward reserve in real time can currently be solved by shutting down thermal power plants, that may lead to grids instability • Renewables priority access tend to be formulated as universal, but in real time other factors should be taken into consideration European Electricity Ancillary service & Balancing Forum- Berlin 2012

39. Considering Ancillary Services market there are several questions associated: • How it is best to cope with Over - Renewables intermittent generation? • How is best to cope with negative prices? • Have the feed-in tariff to be paid when prices are zero or negative? • Have the rump/shutting down costs of generators to be charged on the imbalance price or to be paid by the wind producers? • Have preventive measures to be charged on demand and/or on the wind producers? European Electricity Ancillary service & Balancing Forum- Berlin 2012

40. System Reserves in PLEXOS Uptake of renewable energy such as wind can result in larger requirements for system reserves. Using the ancillary services features of PLEXOS the policy maker can: • Optimise the uptake of renewables given this additional burden • Ensure provision of reserves in dispatch and expansion planning • Calculate the cost to the system and effect on energy prices of the additional reserve requirements • Calculate expected ancillary service prices. This analysis takes advantage of PLEXOS’s ability to set dynamic reserve requirements based on generator, load or line contingencies. European Electricity Ancillary service & Balancing Forum- Berlin 2012

41. Conclusions • Planning and operational procedures will have to adapt on Renewables penetration. • Cross-border opening of power and ancillary services markets is a necessity. • Generators need to take into account Grid Constraints, Reserves Management and Ancillary Services all integrated with the day-ahead energy market. • Smart Grid must also come into the scene. European Electricity Ancillary service & Balancing Forum- Berlin 2012

42. Operating in the Ancillary Services Markets As network needs grow due to both demand and renewables penetration, an integrated approach to manage both the energy and the ancillary services markets is going to be a MUST DO FOR ALL GENERATORS European Electricity Ancillary service & Balancing Forum- Berlin 2012

43. Thank you for your time, attention and the opportunity. European Electricity Ancillary service & Balancing Forum- Berlin 2012