Publication Date:
2015-04-22
Description:
The integration of large share intermittent renewable resources into countries’ energy mixes necessitates more operational flexibility in their power systems. By increasing flexibility, power systems become more resilient to the inherent uncertainty of renewable energy, thus becoming capable of operating at different generation levels and smoothly shifting among them. (IEA, 2014). Although flexibility has been typically associated with rapidly dispatchable power plants, alternative resources, such as grid interconnections, storage capacity and demand-side integration are also relevant to facilitating flexibility. The future degree of flexibility required and the need to diversify the flexibility resource portfolio (in order to reduce costs and improve reliability), will shape the future role of demand side programmes. It is envisaged that in the case of Great Britain, demand side participation along with pumped storage and gas turbine plants will constitute the main sources of operational flexibility for its power system (Pöyry, 2014). In fact with ICT advancement, regulation services and contingency reserves, through automated dispatchable demand side resources, are no longer a dream. There is also the possibility of integrating slower responding demand control programmes to provide longer load following services. From an economic perspective, providing substantial amounts of flexibility to the system is costly as it increases the cost of wear and tear, fuel and the operation of flexible generation units. Additionally, it exposes the consumers to significant disutility when it is provided through demand response. Therefore electricity markets need to incentivise the resource owners to offer flexibility services. This research answers the fundamental economic question of what incentives are needed to enable flexibility in electricity markets especially in the context of demand side resources. Our contribution is: i) to explicitly model contractual relationships arising in different forms of flexibility trading, under the presence of multi-dimensional asymmetric information, ii) to model flexibility as a related but distinct commodity with three features of start-up time, capacity and duration and iii) to take a microeconomic approach by modelling individual decisions by agents involved in the exchange of flexibility. The post Flexibility-Enabling Contracts in Electricity Market appeared first on Oxford Institute for Energy Studies .
Print ISSN:
0959-7727
Topics:
Electrical Engineering, Measurement and Control Technology
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Energy, Environment Protection, Nuclear Power Engineering
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Mechanical Engineering, Materials Science, Production Engineering, Mining and Metallurgy, Traffic Engineering, Precision Mechanics
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Sociology
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Economics
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