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CenSES annual report 2013
18
RA3 consists of three work packages:
•
WP1 Electricity market design and economic
incentives
•
WP2 National policy: Regulation, incentives and
efficiency
•
WP3 Regional economic implications of energy
policies
More intermittent Renewables in our
power markets (WP1)
A number of publications contribute to an issue
emerging as important in Europe, and in Norway’s
relation to Europe, namely the growing share of inter-
mittent renewables in our power systems.
Intermittency and storage
In any power system, price variations deal with and
reflect the difficult issues of making demand meet
supply. In Norway, due to storage in reservoirs and
capacity in generation, the most important variations
have been seasonal and even annual. In most other
country settings, price variations are to a greater
extent throughout the day, with low demand at night
giving low prices.
Johannes Mauritzen has studied whether Norwegian
hydropower acts as a battery interacting with wind
power. He finds that higher wind power in Denmark
raises exports to Norway. Higher wind in Denmark
reduces power prices in southern Norway, and a
significant share of Danish wind power is stored in
Norwegian hydropower magazines.
An important point is that the value of intermittent
power – such as wind farms – depends on how you
use storage and fossil generation. Tunc Durmaz devel-
ops a methodology for how to use the three optimally.
Stochastic renewable energy capacity then attains
a higher value when storage technology is actively
used.
Intermittency and trading of electricity
Several European electricity spot markets use simpli-
fied clearing methods, rather than nodal pricing. Bjo-
erndal, Bjoerndal and Rud analyze congestion man-
agement in a market design such as ours, with spot
market and redispach. They find that this system can
be inefficient compared to nodal pricing, and that the
consequences of market power can be more severe
than under nodal pricing.
RA3 Economic Analysis
There are advantages of trading electricity close to the
time of delivery, and Mauritzen studies how surprises
influence trade. He finds Danish wind power policies
that unintentionally discourage trading on short term
markets result in unnecessary balancing costs.
Investing in renewables
In
Time to rethink how to support intermittent renewable
energy?
, Narbel defines a valuable energy source by
its ability to produce electricity when power prices
are high, so that the system’s cost of intermittency are
limited. A deficiency of existing support instruments,
such as certificates and feed-in tariffs, is that they
do not reflect the value of energy. A proposed new
policy instrument would incentivize investors to select
power sources which deliver power at times of high
prices. Getting intermittent energy during important
hours would allow for a reduction in the quantity of
dispatchable capacity needed for security of supply.
Frode Skjeret discusses how to analyse deployment of
non-predictable electricity production capacities, with
Danish wind power as the case study. A tool inherited
from finance, focuses on mean and variance, should
be used with caution, and alternative measures are
relevant to system operators. Skjeret finds that the
relevant risks for system operators relate to excess
demand, and suggests using measures such as ‘Value
at Risk’ and ‘Expected Shortfall’. In contrast to mean-
variance analysis (correlation, covariation, β-risk), the
conseqeunces of rare and extreme events.
In
The value of better wind information in the wind farm
investment decision
, Chronopolous and Eskeland de-
part from the usual ‘risk premium’ idea, and ties more
accurate wind information to improved wind farm
selection. Thus, the value of improved information
(from waiting, testing) is due to the likelihood that it
changes your prior, tentative investment decision.
National policies, incentives, and efficiency
(WP2)
In
Evaluating Carbon Capture and Storage
, Tunç
Durmaz and Fred Schroyen assess whether CCS tech-
nology is indeed part of a socially efficient solution
to the problem of climate change. With an intertem-
poral model of climate and directed technical change,
they find that even an optimistic cost estimate does
not render a role for CCS technology. Other model-
ing features, or a very low CCS cost estimate
(say $12/ton) may give CCS such a role, though not in
the near future.