Beyond the 'Grid-Lock' in Electricity Interconnectors: The Case of Germany and Poland

The common European electricity market requires both market integration and transmission grid expansion, including trans-border interconnectors. Although the benefits of increased interconnectivity are widely acknowledged, expansion of interconnectors is often very slow. This paper gathers insights on the reasons behind this grid-lock drawing on the study of the German-Polish border. Although two interconnectors already exist, the trade is blocked by unplanned electricity loop flows. A third interconnector has been discussed for years, but saw little progress in spite of declarations of support on both sides. Drawing on the existing literature on the topic of grid expansion we identify four hypotheses for the grid-lock: inadequate financing; diverging interests; governance and administration problems; and different actors' motivations, trust and security perceptions. We evaluate them using the empirical material gathered through document analysis and stakeholder interviews conducted in Germany and Poland. None of the hypotheses on its own can explain the gridlock. However, while financing has not been a major obstacle, divergent interests had an impact on the project delay, administrative and governance problems are a great hindrance on the technical level, while motivations influence interstate political relations and policy shaping. EU support and closer bilateral cooperation provide opportunities to address these challenges

Mean-Variance Optimization of Power Generation Portfolios Under Uncertainty in the Merit Order

In this article we discuss welfare-optimal capacity allocation of different electricity generation technologies available for serving system demand. While the classical peak load pricing theory derives the efficient portfolio structure from a deterministic marginal production cost curve ("merit order"), we investigate in particular the implications of possible reversals in the merit order âsometimes also referred to as fuel switch risks- induced by uncertain operating costs. We propose a static, non-convex optimization model combining the classic peak load pricing model with elements of mean-variance portfolio (MVP) theory and analytically discuss possible solution cases and important optimality properties. We examine the approach in a case study on the efficient structure of generation portfolios consisting of CCGT and hard coal technologies in Germany. With special emphasis, we study the emergence of overcapacities (exceeding maximal demand) in efficient portfolios and show that diversification is not beneficial per-se. The results show that the efficient technology mix may be significantly impacted by a risk for reversals in the merit order. Therefore, our findings support the importance of considering this risk factor especially with long-term investment horizons. The model is applicable to various investment problems related to production of nonstorable goods under price uncertainty of input factors. Similar problems can e.g. be found in transportation systems or in the process industry

Wind Providing Balancing Reserves: An Application to the German Electricity System of 2025

This paper analyzes the influence of wind turbines as new participants on prices and allocation within balancing markets. We introduce the cost-minimizing electricity sector model ELMOD-MIP, that includes detailed unit-commitment constraints, complex combined heat and power constraints, and minimum bid sizes for balancing capacity reservation. The model also features a novel approach of modeling balancing reservation by considering possible activation costs already during the reservation phase, mimicking the activation anticipation of market participants. The model includes the spot and balancing market of Germany and is applied to scenarios for 2013 and 2025. The results for 2025 show, in comparison to 2013, a price increase for positive and negative reserves, in case no new participants enter the market. With the participation of wind turbines the cost for balancing provision is reduced by 40%, but above 2013 values. The relative cost savings from wind participation are higher for negative reserve provision than positive reserve provision, as wind turbines can use their full capacity if not activated and do not have to be curtailed ex ante. The participation of wind turbines especially reduces the occurrence of peak prices for positive and negative reserves in 2025. This reduction effect occurs even with a relatively low share where wind turbines participate with only five percent of their capacity. Therefore, further fostering the process of allowing wind turbines to participate in the German reserve market seems favorable

Wide-area oscillation damping in low-inertia grids under time-varying communication delays

Wide-Area Control (WAC) can be efficiently used for oscillation damping in power systems. However, to implement a WAC, a communication network is required to transmit signals between the generation units and the control center. In turn, this makes WAC vulnerable to time-varying communication delays that, if not appropriately considered in the control design, can destabilize the system. Moreover, with the increasing integration of renewable energy resources into the grid, usually interfaced via power electronics, power system dynamics are becoming drastically faster and making WAC more vulnerable to communication delays. In this paper, we propose a design procedure for a delay-robust wide-area oscillation damping controller for low-inertia systems. Its performance is illustrated on the well-known Kundur two-area system. The results indicate that the obtained WAC successfully improves the oscillation damping while ensuring robustness against time-varying communication delays

Certification prerequisites for activities related to the trading of demand response resources

Certification according to international standards brings many benefits to the society, including technical, economic and environmental aspects. In this context, this paper highlights the benefits of certification of Demand Response, including the additional credibility which provides to the trading of flexibility and higher confidence between different players. The consequence is a dynamic environment which facilitates the market acceptance of Demand Response services and products, providing significant benefits to providers and users of such services. A methodology for the systematic certification of different activities related to the transaction of Demand Response resources has been developed and it is presented here. In particular, three types of certificate have been specified, considering the certification of the entity providing the resource (Demand Response Provider), the contractual framework between the provider and the requester (Demand Response Product) and the physical platform to enable and guarantee such transaction (Demand Response Energy Service Trader). The results of this paper may help regulators and standardization bodies in the design and specification of a future norm to allow the certification of the above-mentioned activities, or a further development of existing regulation for certification of energy efficiency systems (like ISO 50001), where certification of Demand Response activities could be complementary.This work was completed in the framework of the DRIP project (11ENV/DE/340) co-funded by the European Commission through the LIFE Environment Programme. The authors deeply thank all the participants in the project for their help and support that made possible this work.Alcázar-Ortega, M.; Calpe Esteve, CM.; Theisen, T.; Rodríguez-García, J. (2015). Certification prerequisites for activities related to the trading of demand response resources. Energy. 93:705-715. doi:10.1016/j.energy.2015.09.082S7057159

Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation

We study the performance of different regulatory approaches for the expansion of electricity transmission networks in the light of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory mechanism compared to a cost-based and a merchant-like approach. In contrast to earlier research, we explicitly include both an hourly time resolution and fluctuating wind power, which allows representing demand in a very realistic way. This substantially increases the real-world applicability of results compared to previous analyses, which were based on simplifying assumptions. We show that a combined merchant-regulatory regulation, which draws on a cap over the two-part tariff of the Transco, leads to welfare outcomes far superior to the modeled alternatives. This result proves to be robust over a range of different cases and sensitivity analyses. We also find that the intertemporal rebalancing of the two-part tariff carried out by the Transco so as to expand the network is such that the fixed tariff part turns out to be relatively large compared to extension costs

Sowing the Wind and Reaping the Whirlwind? The Effect of Wind Turbines on Residential Well-Being

This paper investigates the effect of wind turbines on residential well-being in Germany, using panel data from the German Socio-Economic Panel (SOEP) and a unique, novel data set on wind turbines for the time period between 2000 and 2012. Using a Geographical Information System (GIS), it calculates the distance from households to the nearest wind turbines to determine whether an individual is affected by disamenities, e.g. through visual pollution. The depth of our unique, novel data set on wind turbines, which has been collected at the regional level and which includes, besides their exact geographical coordinates, their construction dates, allows estimating the causal effect of wind turbines on residential well-being, using difference-in-difference propensity-score and spatial matching techniques. We demonstrate that the construction of a new wind turbine in a treatment area of 4000 metres around households has a significantly negative impact on life satisfaction. Moreover, this effect is found to be of transitory nature. Contrasting the implicit monetary valuation with the damage through CO2 emissions avoided by wind turbines, wind power turns out to be a favorable technology despite robust evidence for negative externalities