Environmental Engineering Reference
In-Depth Information
positions to the ISO through scheduling coordinators (SCs). Revised schedules can be submit-
ted up to an hour ahead of real time. Balancing is carried out by the ISO via a balancing
market based on hour-ahead adjustment bids. An ex post balancing price is then set to settle
participants ' imbalances.
Deregulating Electricity Markets in Europe
Within the EU, initially Norway, Sweden, Finland and the UK liberalized their electricity
markets to promote competition and lower prices. In 1996, the European Commission issued
a directive for other EU countries gradually to liberalize their electricity markets. As a result,
other EU countries have started a programme of liberalization, though some are more advanced
than others.
A couple of European Union countries are adopting the so-called
single - buyer
model
(SBM). Under this market mechanism, all power producers sell their output to a
single buyer (SB). The SB is also the sole authority allowed to sell electricity to consumers.
Producers tender for long term Power Purchase Agreements (PPAs) with the SB. This mecha-
nism is favoured by France and Greece. Other EU countries are introducing market systems
with a combination of power pools, power exchanges, bilateral trading and balancing
markets.
7.7.4 The Value of Renewable Energy in a Competitive Wholesale Market
Introduction
This section deals with the valuing of renewable energy generation when competing against
other forms of generation in an electricity market. The following section deals with the issue
of the 'green value' of the electricity. There are two basic differences between renewable
energy generation and 'conventional' generation with regard to trading in an electricity
market. These are:
•
the relatively small size of renewable energy generation units;
•
the variability or lack of controllability for most renewable energy generation units.
The fi rst issue indicates that such generators tend to have less
leverage
in a competitive
market. In order to make a reasonable profi t, electricity suppliers have relatively large cus-
tomer bases and may demand thousands of MW. Renewable energy generators may only
produce tens of MW (though some of the proposed offshore wind farms may produce sig-
nifi cantly more than this). Many of the power exchanges, for example, do not accept bids or
offers of less than 1 MW and even if a renewable energy generator is able to trade in 1 MW
blocks, this market is likely to be relatively
illiquid
, that is to say, trading blocks of this size
are not easily sold in the market. These drawbacks will tend to restrict the value of the renew-
ably generated electricity.
The second issue is particularly important in a market that sets ex ante prices and has a
balancing market for top-up and spill. Wind power generation is variable, relying on changes
in the wind, which can be forecast to a degree but with diminishing accuracy the further
ahead one looks. Hydro generation, without storage, is dependent on river fl ow rate, which
