MECHANISMS FOR EFFICIENT INVESTMENTS AND OPTIMAL ZONES IN REGIONAL POWER MARKET

Abstract

The paper is result of research different cross-border electricity trading mechanisms impact. Focus is on investments in generation and transmission power system facilities in regional market. Assumptions include efficient market coupling mechanism (with more bidding zones), use of additional investment indicators (like social welfare and congestion cost) and security of supply issues (capacity mechanisms). There is discussion on cost benefits analysis for particular market participants and there is possibility of risk reduction for regional power system expansion. It is shown current state-of-the-art, problems and trends in solving some aspects of market integration and investment issues. In some cases smaller and well defined bidding areas are absolutely essential in order to ensure system security and economic efficiency. There is no single criterion for power system expansion but it is possible to use combination of incentive schemes and possible through one index for cross-border trade. Risk management for cross-border electricity trading through several areas needs to be upgraded with use of financial transmission rights like weighted average area prices, respectively. Regional power system security is closely associated with timely investments in energy supply in line with economic development and environmental needs. Security of supply indicator is deriving an estimation of security of supply improvement from the market based simulation results when a generation or transmission investment project is implemented. All researched makes market integration and investments in Europe more efficient and gives more correct signals to market participants in regional market.

Keywords

Dates

  • Submission Date2013-12-18
  • Revision Date2014-02-17
  • Acceptance Date2014-04-03
  • Online Date2014-09-06

DOI Reference

10.2298/TSCI1403755A

References

  1. ***, The Electricity Regulatory Forum (Florence Forum), 2013 ec.europa.eu/energy/gas_electricity/electricity/forum_electricity_florence_en.htm
  2. ***, Green Paper: A 2030 Framework for Climate and Energy Policies, Brussels, 27.3.2013, COM(2013) 169 final, European Commission
  3. Androcec, I., Impact of Cross Border Electricity Trading on Regional Market Participants, Ph. D. thesis, Faculty of Electrical Engineering and Computing, University of Zagreb, Zagreb, 2012
  4. Saguan, M., Investment in Electricity Infrastructure, Focus on EU Cross-Border Interconnections, www.microeconomix.fr/sites/default/files/import2/110520%20Saguan%20-%20Investment%20in %20electricity%20infrastructure.pdf
  5. Weigt, H., Modeling Competition and Investment in Liberalized Electricity Markets, Ph. D. thesis, Technical University Dresden, Dresden, Germany, 2009
  6. ***, ERGEG, Incentive Schemes to Promote Cross-Border Trade in Electricity, Bruxelles, 2009
  7. ***, KEMA, Analysis of the Network Capacities and Possible Congestion of the Electricity Transmission Networks within the Accession Countries, Bonn, Germany, 2005
  8. Rious, V., The Efficiency of Short Run and Long Run Locational Signals to Coordinate Generation Location with Lumpy Transmission Investments, www.iern.net/portal/page/portal/ ICER_HOME/ IERN_ARCHIV/Publications/Access%20Investment%20Tariffs/57B63A251F481CA7E040A8C03C2F 55BD
  9. ***, EU Involvement in Electricity and Natural Gas Grid Tarification, THINK Report, 2012
  10. Jong, H., Towards a Single European Electricity Market, a Structured Approach to Regulatory Mode Decision-Making, Ph. D. thesis, Delft University of Technology, The Netherlands, 2009
  11. ***, Relevance of Established National Bidding Areas for European Power Market Integration - an Approach to Welfare Oriented Evaluation, Report, Consentec, Frontier Economic, 2011
  12. Turvey, R., Interconnector Economics, Energy Policy, 34 (2006), 13, pp. 1457-1472
  13. ***, ECON Report 2004-10, Discount Rates for Transmission Investments, 2004
  14. Onofri, L., Contracts, Investment Incentives and Efficiency in the Restructured Electricity Market, European Journal of Law and Economics, 16 (2003), 1, pp. 23-28
  15. Patel, I., Building Stronger Links, Report, Redpoint Energy, London, 2011
  16. Wangensteen, I., Power System Economics - the Nordic Electricity Market, Tapir Academic Press, Trondheim, Norway, 2007
  17. ***, Energy Community, Energy Strategy of the Energy Community, 2012
  18. ***, Directive 2005/89/EC of the European Parliament and of the Council of 18 January 2006 Concerning Measures to Safeguard Security of Electricity Supply and Infrastructure Investment
  19. ***, MODVESS, Monitoring Dependence and Vulnerability of Energy Supply System with the Scope on Security of Supply, IPA2008 twinning project, modvess.mingo.hr/default.aspx?id=14
  20. Praktiknjo, A., The Price of Supply Security of Electrical Energy Against Terrorism, 10th IAEE European Conference, www.aaee.at/2009-IAEE/uploads/presentations_iaee09//Pr_22_Praktiknjo mm _Aaron.pdf
  21. Kristiansen, T., Risk Management in Electricity Markets, Ph. D. thesis, Norwegian University of Science and Technology, Trondheim, Norway, 2004
  22. Reinhard, H., et.al., The Relevance of Crossborder Transmission Capacities for Competition in the Continental European Electricity Market, Global Energy Issues, 29 (2008), 1/2, pp. 28-54
  23. Bjorndal, M., Jornsten, K., Benefits from Coordinating Congestion Management - the Nordic Power Market, Energy Policy, 35 (2007), 3, pp. 1978-1991
  24. Richard, G., Electricity Liberalisation in Europe - How Competitive Will It Be?, Energy Policy, 34 (2006), 16, pp. 2532-2541
  25. Daxhelet, O., Smeers, Y., The EU Regulation on Cross-Border Trade of Electricity: a Two-Stage Equilibrium Model, European Journal of Operational Research, 181 (2007), 3, pp. 1396-1412
  26. Pe´rez-Arriaga, I. J., Olmos, L., A Plausible Congestion Management Scheme for the Internal Electricity Market of the European Union, Utilities Policy, 13 (2005), 2, pp. 117-134
  27. Creti, A., et.al., Integration of Electricity Markets in Europe: Relevant Issues for Italy, Energy Policy, 38 (2010), 11, pp. 6966-6976
  28. Foley, A. M., et.al., A Strategic Review of Electricity Systems Models, Energy, 35 (2010), 12, pp. 4522- 4530
  29. Oggionia, G., Smeers, Y., Market Failures of Market Coupling and Counter-Trading in Europe: an Illustrative Model Based Discussion, Energy Economics, 35 (2013), Jan., pp. 74-87
  30. Wang, H., On Computational Issues of Market-Based Optimal Power Flow, IEEE Transactions on Power Systems, 22 (2007), 3, pp. 1185-1193
  31. ***, Position of CEPS, PSE Operator and SEPS Regarding the Issue of Bidding Zones Definition, MAVIR
  32. ***, Improving Incentives for Investment in Electricity Transmission Infrastructure, Report, Frontier Economics, Consentec, Budapest, 2008
  33. Zachmann, G., How Integrated Are European Electricity Markets?, www.scribd.com/doc/ 32886770/1006-Electricity-Single-Market-PB
  34. ***, Relevance of Established National Bidding Areas for European Power Market Integration - an Approach to Welfare Oriented Evaluation, Report, Consentec: Frontier Economics, 2011
  35. Newbery, D., Strbac, G., Physical and Financial Capacity Rights For Cross-Border Trade, Report, Booz & Company, London, 2011
  36. Glachant J. M., Khalfallah, H., Identifying Benefits and Allocating Costs for European Cross-Border Infrastructure Projects, Review of Economics and Institutions, 3 (2012), 1, pp. 1-27
Volume 18, Issue 3, Pages755 -770