Environmental Engineering Reference
In-Depth Information
7.7 Electricity Trading
7.7.1 Introduction
This section will provide an insight into the operation and structure of a modern electricity
market, highlighting the differences between a centrally planned and operated system through
to a fully deregulated system. This background will stress the challenges faced by renewable
energy generation when trying to compete in modern-day markets. In addition, the concept
of 'green electricity' trading will be introduced drawing on the twin strands of (a) government
legislation to promote the uptake of renewable energy and (b) industry marketing to sell green
electricity as a product in demand in the consumer marketplace.
An overview of electricity trading in several countries will be provided but the UK experi-
ence will be highlighted as an example of a system that has pioneered electricity deregulation
and has seen a market for green electricity develop through this deregulation. The UK
example also illustrates the diffi culties and evolutionary processes necessary in ensuring that
a fully deregulated system is run effi ciently and securely.
7.7.2 The UK Electricity Supply Industry (ESI)
The State-Owned Central Electricity Generating Board
Before 1990, the entire UK ESI was in the state sector and was centrally planned and oper-
ated by the Central Electricity Generating Board (CEGB). The remit of the CEGB was to
provide a secure supply of electricity to its consumers. All generating plant, transmission
lines, distribution lines, substations and metering were owned and operated by the CEGB as
a monopoly. During the days of the CEGB, electricity was supplied to consumers through
the Regional Electricity Companies, which were also responsible for the operation of the
distribution network in their area (132 kV and below).
Although this system had worked well for many years, it was a monopoly and severely
restricted opportunities for small scale privately-owned generation. During privatization,
which was intended to promote competition and drive down costs, the CEGB was broken up
into various sectors and sold off to the private sector and new market mechanisms were
brought into being.
The Electricity Pool
In 1990, the Pooling and Settlement Agreement (PSA) was introduced and the ESI privatized.
The generators were split up between two privatized companies, National Power and Pow-
ergen, but nuclear power stations remained under state control. The Regional Electricity
Companies (RECs) were individually privatized and given sole licences to supply electricity
in their areas, while still retaining responsibility for the distribution network in their areas.
The RECs jointly owned the National Grid Company (NGC), which was responsible for the
operation of the transmission network (275 and 400 kV) and the pumped-storage facilities in
Wales. The NGC also served as the network operator responsible for the scheduling and dis-
patch of the generation plant.
