analysis of pricing and volumes in selective capacity

8/7/2019 Analysis of Pricing and Volumes in Selective Capacity

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Analysis of Pricing and Volumes in

selective Capacity Markets:

MOHAMMED AFZAL BIYABANI

G200904750


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CONTENTS:-

Introduction

Capacity Payments and Capacity Markets

Selective Capacitive Market

Peak Power Requirements

On Bid Price for Reserve Power

Benefits and Drawbacks

Peak Power Requirement using Wind PowerSystem

Conclusion


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Introduction:- We need to have reliable Power system.

Requirements of reliability in P.S. are high.

The challenge is the utilization of rarely used peakunits which is low but require high prices in order

to be profitable. There are several drawbacks ofa system which

involves SO in financing ofpeak power plants.

What happens with the prices of imbalances

when there is a LOLO. So lets analyze the relation between peak prices,

system reliability, required amount of subsidizedcapacity.


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Capacity Payments:-

For a time interval, when demand exceeds generation,there occurs price spikes and we need to have newgeneration in order to avoid supply-load imbalance.

In order to have new generation rather than payingoccasionally generators large amount of money it ispreferable to pay smaller amount on a regular basiscalled capacity payments.

This payments should cover at least part of the capitalcost for new generating units and encouragegenerating companies to increase generation.

These payments reduce, but do not eliminate,shortages. Also encourages competition and moderateprices in the market for electrical energy.


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Capacity Markets:-

Rather than fixing the total amount of the rate ofcapacity payments, some regulatory authoritiesset a generation adequacy target and determinethe amount of generation capacity required toachieve this target called Capacity Markets.

Then all the retailers and large consumers areobligated to buy their share, while amount ofcapacity to be purchased is determined

administratively. Implementing a capacity market to achieve itspurpose is not simple.


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Capacity Markets:-

Types ofCapacity Markets:

(i) Long Term Contracts or Options for Energy:

Those who sell power to consumer should hold long term contracts of optionsfor energy

(ii) Payment Mechanism for Capacity:SO provides a fixed or variable payment per MW of capacity.

(iii) Quantity Requirements for Capacity:

Includes ICAP which implies a target level of system generating reserves andmeeting the target.

(iv) Demand Curves for Capacity:

SO creates a downward sloping demand curve that pays more for capacity ifreserves are short and provides some payment even when there is morecapacity than needed.

(v) Selective Capacity Market :

Only the units accepted after the tender process will receive payment


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Peak Power Requirements:


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On Bid Price for Reserve Power:-


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Contd..


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Comments of Selective Capacity

Markets:-Benefits: The plants that do not receive the capacity payments are

financed by the market price.

Can promote voluntary demand curtailment by usingspecification in the tender process.

It is possible to obtain low impact on the willingness forproducers to invest in purely energy-market financedgenerators.

Drawbacks:

Risk for the investors

Uncertainty of future volume which makes investment risky

If subsidized reserve power is of low price then it competeswith market financed power

Ifprice cap is high then it may reduce consumers interest to

decrease their consumption during peak load.


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Peak Power Requirement using Wind Power

System


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Contd..


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Comments on Results:

When Data -2 was used, the amount of subsidizedpower was decreased with the same amount as thecapacity credit of wind power. Thus, it reduces thecosts for the SO since the reserve power receives

capacity payments. Data -3 can be interpreted as a futuristic system, where

the amount ofpurely market financed power isreduced with 810 MW because of the installed amountof wind power. Here, the amount of reserve power,

subsidized by the SO, is increased by 70 MW comparedto the case without wind power. It increases the costsin selective capacity markets since reserve capacityreceives the capacity payments.


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Conclusion:

it is shown that the volume at the capacitymarket is strongly connected to the required

reliability level and accepted maximal price.

In a system where wind power is added asextrapower to an existing power system the

required volume of reserve power decreases.However in a system where the market installsless power when wind power is expanded, the

required volume of reserve power increases.

analysis of pricing and volumes in selective capacity

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