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Management
on the 73
cover
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features
contents
20 European Union Electricity Markets 53 A Change Is Coming
By Tomás Gómez, Ignacio Herrero, Pablo Rodilla, By Gianluca Fulli, Marcelo Masera,
Rodrigo Escobar, Salvatore Lanza, Amanda Spisto, and Silvia Vitiello
Ignacio de la Fuente, Maria Luisa Llorens,
and Paula Junco 67 Wholesale Electricity Markets
in the United States
32 Electricity Markets in the United States By Emma Nicholson and Arnie Quinn
By Eugene Litvinov, Feng Zhao,
and Tongxin Zheng 73 Three Waves of U.S. Reforms
By Benjamin F. Hobbs and Shmuel S. Oren
43 The New Zealand Electricity Market
By Andy Philpott, Grant Read, 82 PV-Battery Systems for Critical Loads
Stephen Batstone, and Allan Miller During Emergencies
By Chanaka Keerthisinghe,
Mareldi Ahumada-Paras, Lilo D. Pozzo,
Daniel S. Kirschen, Hugo Pontes,
Wesley K. Tatum, and Marvi A. Matos
columns &
departments
4 From the Editor 94 Society News
10 Letters to the Editor 98 Calendar
14 Leader’s Corner 104 In My View
18 Guest Editorial
94
Digital Object Identifier 10.1109/MPE.2018.2879124
The IEEE Power & Energy Society is an organization of IEEE members whose principal interest is the advancement of the science and practice of electric power generation,
transmission, distribution, and utilization. All members of the IEEE are eligible for membership in the Society. Mission Statement: To be the leading provider of scientific and
engineering information on electric power and energy for the betterment of society, and the preferred professional development source for our members.
DIgSILENT announces
PowerFactory 2019
DIgSILENT has set standards and trends in power system modelling,
analysis and simulation for more than 25 years. The proven advan-
tages of the PowerFactory software are its overall functional integra-
tion, its extensive modelling and analysis capabilities for generation,
transmission, distribution and industrial networks, and its powerful
data management tools to ensure data consistency and traceability
while enhancing overall work efficiency.
The new version PowerFactory 2019 addresses two major goals for
the integrated analysis of power systems. A new Unit Commitment
and Dispatch Optimisation tool allows the network analysis to be
complemented by a market simulation, with a single entry point of
information for your simulation model, thereby maximising data
consistency and work efficiency. Secondly, the new co-simulation
for single and multiple time domains (RMS-RMS, RMS-EMT and
EMT-EMT) allows unlimited combination of RMS/EMT-type models of
different complexity requiring different integration steps. The mixed
co-simulation is particularly well suited for the analysis of systems
with high penetration of converter-based generation and power
electronics in general.
SELECTED NEW FEATURES:
G 08(1)
Type Gen 08
~
SG
2,00
Load 26(1) Load 29(1)
Trf Type 25 - 37 YNy0
1,00
Bus 25(1) Bus 26(1) Bus 28(1) Bus 29(1)
Bus 30(1)
Line Type 26 - 27
Line 25 - 26(1)
Trf 29 - 38(1)
Line Type 02 - 25
Trf Type 02 - 30 YNy0
Line 02 - 25(1)
Line Type 25 - 26
Trf 02 - 30(1)
0,00
Load 25(1) Load 28(1)
General Load Type General Load Type
Line Type 17 - 18
Line 17 - 27(1)
~
Line 01 - 02(1)
-2,00
Line 02 - 03(1)
Load 24(1)
Line Type 03 - 18
Line Type 16 - 24
Line 03 - 18(1)
Line 16 - 24(1)
Load 18(1)
General Load Type
AC voltage (EMT)
SG
Bus 09(1): Phase Voltage A in p.u. Bus 03(1)
Line Type 15 - 16
Line 15 - 16(1)
Load 03(1)
Line Type 16 - 21
Line Type 03 - 04
Line 16 - 21(1)
EMT Simulation
Bus 04(1)
Load 15(1)
Line Type 16 - 19
Line 16 - 19(1)
Load 23(1)
General Load Type
Line Type 13 - 14
Line 13 - 14(1)
1,10
Bus 19(1) Bus 23(1)
Line 06 - 07(1)
Trf 13 - 12(1)
Line Type 05 - 08
Trf 11 - 12(1)
Line Type 06 - 11
Line Type 09 - 39
Line 09 - 39(1)
Line 06 - 11(1)
Trf 23 - 36(1)
Bus 07(1)
0,90
Trf Type 06 - 31 YNy0
Trf 06 - 31(1)
Bus 13(1)
Trf 19 - 33(1)
Line Type 07 - 08
Line 07 - 08(1)
0,70
Load 07(1)
General Load Type
Line Type 10 - 13
Line 10 - 13(1)
Trf 20 - 34(1)
SG
~
0,50
Bus 08(1) G 07(1)
Type Gen 07
~
Bus 29: Line-Ground Voltage, Magnitude B in p.u.
0,00
Bus 09(1) G 02(1) Load 31(1) SG SG
Type Gen 02 General Load Type ~ ~
Bus 29: Line-Ground Voltage, Magnitude C in p.u. G 05(1) G 04(1)
Type Gen 05 Type Gen 04
Bus 32(1)
G 08
-0,40
Type Gen 08
~
SG
Line 26 - 29(2) SG
Line Type 26 - 29 ~
G 03(1)
Type Gen 03
Bus 37
-0,80
Line 26 - 29
Line Type 26 - 29
AC currents (EMT)
Line Type 26 - 27
Line 25 - 26
Line Type 02 - 25
Trf Type 02 - 30 YNy0
Trf 29 - 38
Line Type 25 - 26
Line 02 - 25
Trf 02 - 30
Load 25 Load 28
General Load Type General Load Type Line 26 - 29(2): Phase Current A/Terminal j in p.u.
Bus 27 Line 26 - 29(2): Phase Current B/Terminal j in p.u.
Line Type 17 - 18
RMS Unbalanced
Line 17 - 27
Load 27 Bus 24 SG
Line Type 01 - 02
G 09
Type Gen 09
Bus 18 Bus 17
Line Type 02 - 03
Line 02 - 03
Load 24
Line Type 03 - 18
Line Type 16 - 24
Line 16 - 24
Bus 01
Line Type 16 - 17
Line 16 - 17
Load 18
General Load Type
G 06
Type Gen 06
~
SG
Bus 03
Simulation
Bus 16
Bus 35
Line Type 01 - 39
Line Type 15 - 16
Line 01 - 39
Line 15 - 16
Trf 22 - 35
Bus 21 Bus 22
Line Type 14 - 15
Line 14 - 15
Bus 04
Load 15
Line Type 16 - 19
Bus 39
Line Type 04 - 05
Line 04 - 05
Bus 14 Load 21
General Load Type
Line Type 22 - 23
Load 39 Bus 05
General Load Type Load 12
General Load Type
0,80
Line Type 05 - 06
Line 05 - 06
Load 23
General Load Type
Line Type 13 - 14
Line 13 - 14
Bus 12
Bus 06
0,60
Line Type 06 - 07
Bus 19 Bus 23
Line 06 - 07
Line Type 05 - 08
Trf 13 - 12
Line 05 - 08
Line Type 06 - 11
Line Type 09 - 39
Trf 11 - 12
Line 06 - 11
Line 09 - 39
Load 20
General Load Type
Trf 19 - 20
Trf 23 - 36
0,40
Bus 07
Trf Type 06 - 31 YNy0
Bus 13
Trf 19 - 33
Line Type 07 - 08
Line 07 - 08
0,20
General Load Type
Line Type 10 - 13
Line 10 - 13
Trf 20 - 34
SG
~
Bus 08 G 07
Type Gen 07
0,00
Bus 31
Line Type 08 - 09
Line 08 - 09
Bus 09 G 02 Load 31 SG SG
Type Gen 02 General Load Type ~ ~
AC currents (RMS)
G 05 G 04
Type Gen 05 Type Gen 04
electric markets
effective designs & flexible responses
I
In 2017, new england experI the system by providing demand elastic
enced the secondlowest annual whole ity and flexibility.
sale electric market prices in more than How should the markets be design
a decade. welldesigned markets ed, given the increased amounts of
enhance the reliable and econom variable energy resources, energy
ic operation and planning of the efficiency, storage, and demand
system by providing incentives resources that have transform
for improved performance and ed our industry? It is our hope
efficient investments. new that the contents of this issue
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Available in accessible formats upon request. Powered by Manitoba Hydro International Ltd.
issues of this magazine. please congratu positions in 2019. Miriam p. Sanders ✔ vice president, Meetings: Thom
late the following 2018 awardees: will hold the incoming division VII as w. Mayne, Mayne Consultants,
✔ Bhuvaneswari gurumoorthy for delegateelect/directorelect position. In lacombe, louisiana
the Ieee peS wanda reder addition, the following peS board mem ✔ memberatlarge, global Outreach:
pioneer in power award, “for bers took office on 1 January 2019: C.Y. Chung, University of Sas
outstanding research in power ✔ vice president, publications: Bi katchewan, Saskatoon, Canada
quality converters and for educat kash pal, Imperial College, london ✔ memberatlarge, global work
ing new engineers” ✔ vice president, Meetings: wayne shops: luis (nando) Ochoa, Uni
✔ Marina Mondello, for the Ieee Bishop, Omicron energy, Boston versity of Melbourne, australia.
peS wanda reder pioneer in ✔ memberatlarge, global Out
power award, “for leadership and reach: Yu Jun, State grid Corp Thanks
for serving as an inspiring role of China, Beijing a special note of appreciation to Mel
model and mentor to young wom ✔ memberatlarge, global work Olken, who continues to provide guid
en in the power industry.” shops: ramakrishna Kappagan ance and tutelage, and to the Ieee pub
peS members are encouraged to submit tu, Bangalore, India. lications staff who make this publication
nominations for 2019 awards by 31 Our deepest gratitude goes to the possible. Thanks to the many contribu
January 2019 at https://www.ieeepes following outgoing peS Board Mem tors to this issue, especially our guest
.org/pescommunities/awards/pes bers for successfully completing their editors, antonio J. Conejo and ramteen
societylevelawards and https://www tenure and for their many significant Sioshansi, and our authors. a particular
.ieeepes.org/pescommunities/awards. contributions to peS: note of appreciation to associate editor
✔ vice president, p ublications: John paserba and robert C. Henderson,
Changing of the Guard Mariesa l. Crow, Missouri Uni who provides editorial assistance.
we offer congratulations and wish all versity of Science and Technol
p&e
the best to leaders assuming new Ieee ogy, rolla
letters to the editor
R
ReadeRs aRe encouRaged to universities and the entrance grades is four Highers at the a grade and in-
share their views on issues affecting the required for admission to the courses cludes math, physics, or engineering sci-
electric power engineering profession. as being different from the rest of the ence. students studying a-levels, mainly
send your letters to Michael Henderson, united Kingdom. I agree with Martin in other parts of the united Kingdom, re-
editor-in-chief: mih.psat@gmail.com. Queen’s comments and will now explain quire three a-levels at grade B, including
Letters may be edited for publication. them for our readership. math and physics. However, students with
In england, Wales, and northern Ire- very good a-levels may be allowed direct
A View into U.K. Education land, most students joining a three-year entry into the second year of a scottish
the article in the september/october B.eng. or four-year M.eng. eee degree B.eng. course if they achieved grade a in
2018 issue, “electrical Power engineer- program will have successfully passed math, physics, and computing. emphasis
ing education: cultivating the talent in three or four advanced-Level general is placed on mathematics, engineering
the united Kingdom and Italy to Build certificate of education science, circuits, basic
the Low-carbon economy of the Fu- qualifications (referred electrical engineering,
ture” (IEEE Power & Energy Magazine, to as A-levels) at an ap- In Scotland, and computing during
vol. 16, no. 5, pp. 53–63, sept.-oct. 2018), propriate grade. they the first year of an eee
overlooked something fundamental in must include mathemat-
most students B.eng. course in scot-
the description of university education in ics and usually physics, study five so- land. It is possible for
the united Kingdom, which consists of and an appropriate grade some students—those
england, Wales, northern Ireland, and is normally an a*, a, or called Highers with high a-level grades
scotland. the article states that B.eng. B for a Russell group in appropr iate sub -
degrees in the united Kingdom are three university, which repre-
at school. jects—to complete their
years long and M.eng. degrees are four sents the top universities B.eng. degrees within
years long. this is not the case in scot- in the united Kingdom. these grades are three years, i.e., similar to the rest of the
land, where B.eng. programs require four obtained from a percentage numerical united Kingdom.
years of study and M.eng. degrees take mark, where a* > 90%, a = 80–89%, B the entrance requirement for a typi-
five years. the differences result from = 70–79%, c = 60–69%, d = 50–59%, cal five-year M.eng. eee course in
the secondary school structures in scot- and e = 40–49%. F < 39% indicates an scotland is five Highers at grade a in-
land and the rest of the united Kingdom, examination failure. cluding math, physics, or engineering
which also explains the differences in en- In scotland, most students study five science or three a-levels at grade B in-
trance requirements. so-called Highers at school. these are cluding math and physics.
generally awarded in the fifth year of sec- the second year of a four-year B.eng.
—Martin Queen ondary school and considered halfway or five-year M.eng. eee course in scotland
between the general certificate of second- is similar to the first year of a three-year
Author’s Response ary education and the a-level. advanced B.eng. or four-year M.eng. eee course
the article should have described the Highers are an optional qualification, nor- in england, Wales, and northern Ireland.
structure of B.eng. and M.eng. elec- mally studied in the sixth year of second- although the term similar recognizes that
trical engineering courses in scottish ary education and generally considered the exact contents of different B.eng. or
slightly more difficult than a-levels. M.eng. eee courses in u.K. universities
Digital Object Identifier 10.1109/MPE.2018.2877898
the entrance requirement for a typical vary significantly, all accredited B.eng. or
Date of publication: 7 January 2019 four-year B.eng. eee course in scotland M.eng. eee courses have been assessed
Contact us:
dsainfo@powertechlabs.com
81022-0005
research
offshore findings andThe
interconnectors. operation experiences
objective of the related to sustainable, active and The technical programme sessions opens with Participants wishing to present and publish
symposium is to address recent technical advances
anddigital
policydevelopment of power and
that allow transmission system(From
distributionUHV to distribution), and in particular,
keynotes and welcome reception on September papers should submit synopses by the following
to address recent technical advances and policy that allow transmission
networks to enter their next era, in particular those and
Programme 23, 2019. Before Submission of synopses
that day, we will offer aSubmission of synopses
technical instructions on www.cigre2019-chengdu.org,
related to offshore generation, transmission and visit to±500kV convertor station or Zipingpu where the synopses and paper templates are also
distribution networks to enter their next era. Participants
The technical programme sessions opens with
wishing to present and publish papers should
Participants wishing to present and publish
submit synopses
papers, by
andthe
distribution. The preferential topics reflect the keynoteshydropower station.
and welcome reception Tour of Chengdu will
on September alsoshould
papers be submit synopses by available. All synopses,
the following presentations
Programme
above, and beyond, across technology, planning, 23, 2019. organized
Before that day, we following
for accompanying
will offer a
visit to±500kV convertor station or Zipingpu
instructions
persons. on www.cigre2019-chengdu.org,
technical instructions on must be in English.
www.cigre2019-chengdu.org,
where the synopses and paper templates are also
where the
Please synopses
note authors should be
operations and markets. Individual Study Committee meetings and Working available to present at the symposium.
The technical programme sessions opens with keynotes and welcome reception and paper
hydropower station. Tour of Chengdu will also templates
be are also available.
available. All synopses,
All synopses, papers, papers,
and presentations
organized Group meetings
for accompanying will take place from September
persons. 20 Please note authors should be
must be in English.
on September 23, 2019. Before that day, we will offer a technical visitIndividual
to±500kV
toStudy and presentations
21. Committee meetings and Working mustavailable
be in toEnglish.
present atPlease note authors should be available to
the symposium.
Programme Group meetings will take place from September 20
present at the symposium.
convertor station or Zipingpu hydropower station. Tour of Chengdu will
to 21.also be
organized
The for accompanying
main symposium persons.
will take place on Wednesday
Abstracts
Individual
5th June and Study Committee
Thursday meetings
6th June. Tutorials willand
takeWorking Group meetingswishing
Participants will take place papers are invited
to present
place Tuesday 4th June and a technical visit to to submit their synopsis in ENGLISH before 12th
from September
offshore wind power 20 toANHOLT
plant 21. will take place October 2018 to: https://cigreaalborg2019.dk/
More information More information
Friday 7th June. Spouses’ trip will visit Grenen, Art
Venue
Museum of Skagen and Brøndums Hotel. Study
Please visit our website for more information
Please visit our website for more information
www.cigre2019-chengdu.org
Chengduand
committee is one of the
working groupmost famousarehistorical and cultural cites of China, and it is
meetings
organized between Saturday 1st June and Tuesday
a June.
city that you will never want to leave once you come. It offers a great variety of
www.cigre2019-chengdu.org
4th
increasing engagement
an update on Chapters & councils
I
I would lIke to update you will have budgets to support travel within implemented through the Ieee Corporate
on the progress and priorities of our their country or region, as appropriate. Membership program where a company
Society. Currently, we have more than these councils will facilitate peS activi or an organization can become a corporate
38,900 members, which is over 1,000 ties in their areas, focusing on these top member by paying the peS membership
more than last year. we are truly a global ics (and others as needed): fee for their employees so they can join
organization with members located in ✔ membership peS as professional individual members
150 countries, but we also value our con ✔ conferences (minimum 50 members).
nections at the local level through our ✔ technical activities to give our members outside North
Chapters, which provide us with our grass ✔ education, including certificate america the opportunity to participate in
roots contacts. the Ieee power & energy programs technical committee activities and stan
Society (peS) now has 258 such Chap ✔ standards. dards development, we have formed vari
ters (seven more than last year) and 358 Councils will interact with their nation ous remote working groups with the help
Student Branch Chapters (60 more than al/regional electrical engineering organi of the peS technical Council. For ex
last year), in almost every country where zations to develop joint programs, build ample, the peS Smart Buildings, loads,
our members live. awareness among engineers and academ and Customer Systems (SBlC) technical
In addition to our technical, stan ics, and promote peS membership. So far, Committee has formed the asiapacific
dards, and education/training activities, I such councils have been formed in China, working Group (apwG), whose scope
am focusing on developing stronger and India, and africa. plans are afoot to create includes meeting with stakeholders for
sustaining relationships with these pro councils in latin america, North america, SBlC within the asiapacific region to
fessional Chapters and Student Branch and europe as well. regularly address issues within the scope
Chapters globally. Chapter members are another signature effort of peS to raise of the committee, generally described as
our foot soldiers, providing links to in awareness and build a stronger member electrical systems behind the meter, and
dustry engineers, government agencies, ship base is the peS Corporate engagement integration of such systems with grid ser
and academics from all over the world. program. participation in this program of vices. the peS website, http://sites.ieee
they can respond to local needs and fers corporations and other organizations .org/pessblc/, has more details about our
priorities and bring important programs an opportunity to help their employees to committees and their activities.
to meet those needs. to strengthen the stay up to date on the latest advances, in these regional working groups hold
local Chapters and help them interact cluding renewable energy system design meetings in various locations in person,
more closely within their country or re and integration, smart grid technologies, with electronic access. For example, sever
gion, we are now forming peS Chapter electric vehicles, wholesale market design, al meetings of the apwG have been held
Councils. these councils will directly and operation and asset management. By in Guangzhou, China, hosted by China
work with their respective peS Region interacting with peS through conferences, Southern Grid. the working group’s last
representatives and, therefore, have ac committee work, the distinguished lec meeting was held at the 2018 peS Gen
cess to the peS governing board. they turer program, and so on, employees of eral Meeting in portland, oregon. these
an organization can have many opportu working group meetings have resulted in
Digital Object Identifier 10.1109/MPE.2018.2872428
nities to engage professionally with their the ongoing development of three project
Date of publication: 7 January 2019 peers all over the world. this opportunity is authorization requests (paRs), with two
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electricity market
a conversation on future designs
T
The firsT efforTs To resTruc incorporates weatherdependent renew The second article, “electricity Mar
ture electricity markets in europe and the able producers and increasing demand kets in the united states,” by Litvinov,
united states were in the late 1990s. At flexibility. This issue of IEEE Power & Zhao, and Zheng, reviews the main fea
that time, electricity production based Energy Magazine is intended to promote tures of electricity markets in the united
on variable weatherdependent sources such a conversation with the ultimate states that resulted from federal energy
was virtually nonexistent. As a result, goal of achieving increasingly efficient regulatory commission (ferc) order
those early efforts did not take into ac and fair markets for electricity. 888. The focus, in particular, is on pric
count the properties of those resources. This issue contains six articles and ing and marketcoordination issues and a
Today, such generators are dominant concludes with the “in My View” column. review of dayahead and realtime energy,
in some markets, such as in california, The first three articles describe the evolu forward reserve, and forward capac
Texas, the iberian Peninsula, and Den tion of market designs and forthcoming ity markets. A description of the market
mark. The contribution of variable re challenges in europe, the united states, management system components is given,
newable resources in other countries and and New Zealand (with the latter being a which is the internal architecture of the
regions is increasing at a rapid pace. highly renewabledominated system). The system operator that allows it to effectively
on the flip side, electricity demand following two articles summarize market function. They identify the main challeng
was largely fixed and inelastic in the design challenges from the perspective of es faced by markets in the united states
1990s, with the exception of some indus regulators in the united states and europe. today, including those that pertain to the
trial and large commercial customers. The sixth article gives an indepth analysis grid, and provide ideas to tackle them.
These types of customers display more of current market designs from a historical The next article, “The New Zealand
price sensitivity in their loads, especially perspective and suggests redesign criteria. electricity Market,” by Philpott et al.
if energy constitutes a major input to their The “in My View” column, reviews and describes the historical evolution, main
production processes. even though elec clarifies the fundamental economic prin features, and governance of the New
tricity demand remains largely fixed to ciples on which markets rely. Zealand market. New Zealand pro
day, new loads, such as those pertaining in the first article, “european union vides an interesting case study, as it is a
to electromobility, and behindthemeter electricity Markets,” Gómez and his completely isolated island system with
production facilities are slowly increas coauthors provide an overview of the seasonal interannual variability in the
ing demand elasticity and flexibility. current state of electricity markets in availability of (hydroelectric) renewable
The operational and planning conse europe. They emphasize policies that energy resources. The authors survey
quences of these major changes (such have been pursued by european in the historical market and regulatory in
as the dramatic increase in weatherde stitutions to achieve greater market efficiencies, which market restructuring
pendent electricity production and the integration of member states through in New Zealand has tried to address.
incipient increase in demand flexibility) the electricity Target Model. The day “A change is coming,” the fourth
need to be reflected in the design of elec ahead, intraday, and realtime markets article, by fulli et al. provides a vision
tricity markets of the future. it is crucial are revisited, detailing what has been of how the supply and use of electricity
to spur a conversation to scrutinize to achieved in terms of integration and within europe is expected to evolve over
what extent (if any) these formative mar what lies ahead. The capacity alloca the next 30 years. They show how regu
ket designs need to be updated or sim tion and congestion management regu latory changes and research, demonstra
ply replaced by a new design that better lation is particularly important as it tion, and development projects supported
Digital Object Identifier 10.1109/MPE.2018.2871737
allows coordination between different by european institutions will change
Date of publication: 7 January 2019 national and regional markets. the nature of customer interactions with
Current
Practice and
Future View
T
The european union (eu) aims To develop an provide a marketplace where wholesale buyers and sellers can
integrated electricity market as an efficient instrument to exchange electricity in an organized way, with a set of rules,
achieve the energy policy targets of security, affordability, and at public prices.
sustainability. many milestones have already been reached, Therefore, the two basic functions necessary in a deregu-
including the implementation of a european platform for lated power system, system operation and the organization
the simultaneous clearing of day-ahead markets, the design of competitive electricity markets, are split into two separate
of several platforms for coordinating intraday and regional entities: Tsos and nemos. This institutional framework is
balancing markets, and the enforcement of guidelines for the clearly different from the most common structure found in
design of capacity mechanisms (Cms). There are still many the united states, in which independent system operators
challenges ahead for this market: the integration of large perform both market and system operation functions. on
amounts of renewable energy, the proliferation of distributed top of these foundations, additional rules must be defined to
resources, higher consumer engagement, and the sheer scale achieve the main goal of the eu electricity market, which is to
and complexity of a market serving 500 million citizens. This allow cross-border trading of electricity and optimize the use
is a fascinating task that will keep us busy in the coming years. of interconnections, while pursuing a level playing field for
The formal beginning of the european electricity mar- all market participants. rules are set by defining framework
ket took place in 1996, when the european parliament and guidelines, which are then detailed in binding regulation as
the european Council approved the first electricity direc- network codes or guidelines. These are developed by the
tive (96/92/eC) aimed at liberalizing the energy sector by european Commission (eC), the agency for the Cooperation
establishing competitive electricity markets. The subsequent of energy regulators, the national regulatory authorities
energy packages continued the development and integra- (nras), and the european network of Transmission system
tion of european electricity markets, not only with an inter- operators for electricity in a cooperative process.
est in deregulation but as part of the overall european This cooperative process has led, slowly but steadily, to
energy policy. a great degree of integration among the eu electricity mar-
one of the eu’s main objectives is to share a single market kets. however, the process is still far from being fully com-
that guarantees the free movement of goods, capital, servic - pleted. This article reviews the major milestones that have
es, and labor. in this context, a single market for electric- already been reached in the integration of the eu electricity
ity allows greater integration of the member states, which is markets as well as the major challenges ahead.
also necessary for the eu to have a common and coordinated
external energy policy. Therefore, the electricity market has EU Target Model
been designed as an instrument to achieve the goals of supply The eu Target model refers to the institutional arrangements
security, affordability, and sustainability of the eu. and conceptual market definitions that have been developed
The common electricity market has been (and is being) to ensure efficient cross-border exchanges in the european
built gradually, beginning with its institutional arrangement. electricity market. The formal definition of those arrange-
The first major transition is the unbundling of generation, ments has been established in the Capacity allocation and
transmission, distribution, and retail activities. The eu leg- Congestion management (CaCm) regulations, which cover
islation allows some freedom to the member states to imple- cross-zonal capacity allocation in the day-ahead and intraday
ment different schemes for unbundling transmission, most time frames as well as in the Forward Capacity allocation
commonly the full ownership unbundling through a transmis- (FCa) regulations for long-term capacity allocation. in addi-
sion system operator (Tso), which owns and operates the grid tion, the Guideline on electricity Balancing (GleB) regula-
and must not have any interest in generation activities. The tion complements those regulations with common principles
other basic building block in this organization is the power and methodologies for the procurement and settlement of
exchange (pX) or, more specifically, the nominated electricity operating reserves and their activation in real-time operations.
market operator (nemo) when it refers to the operation of the The overall market model uses sequential markets: day-ahead,
integrated day-ahead and intraday markets. market operators intraday, and balancing.
in day-ahead markets, the nemos match demand and spain and portugal zones; epeX spot operates in the
supply bids to set hourly energy prices in each bidding zone. Germany, austria, France, Great Britain, The netherlands,
The european day-ahead market is a zonal price market, in Belgium, and switzerland zones; and nord pool operates
contrast with nodal price markets (as in the united states). in the norway, sweden, Finland, denmark, Great Britain,
as shown in Figure 1, most member states feature a single estonia, lithuania, and latvia zones. other nemos man-
bidding zone, but some are divided into several zones to age single-country zones, such as Gestore mercati energet-
reflect structural internal congestions, i.e., italy and swe- ici (Gme) in italy.
den. in addition, the nemos may manage several bidding in the intraday time frame, the nemos are working to
zones belonging to different member states. For instance, set a european continuous implicit trading platform. in the
the operador del mercado ibérico (omie) manages the future, intraday cross-zonal capacities will be priced reflect-
ing congestion. in some peripheral
markets, such as in the iberian pen-
insula, italy, and ireland, and more
recently in the nordic region, the
continuous market could be com-
SW1 plemented with intraday auctions
that increase liquidity and price
transparency. Cross-zonal capac-
NO4 ity was previously determined
SW2 FIN by the Tsos and then implicitly
NO3
allocated in day-ahead and intra-
NO5 NO1 day markets by the corresponding
SW3 clearing algorithms.
NO2 Currently in europe, most bal-
ancing markets for the procure-
SW4
DK1
ment and settlement of reserves
NI DK2 and real-time operation are local
in scope and mainly managed
IE GB
independently by each Tso. how-
NL PL ever, several regional initiatives
GE have already started to coordinate
BE
LX CZ the activation and exchange of dif-
SK ferent types of balancing energy
AU among neighboring Tsos, in line
HU
FR SZ with the mandates of the GleB
SLO regulation. The final goal of this
IT1
regulation is to set a progressively
pan-european market with a com-
IT2 mon merit order for activation of
PR IT3 balancing energy. These main
SP IT4 regulations (FCa, CaCm, and
IT5 GleB) are complemented with a
set of other network codes on grid
IT6 connection and system operation
that complete the presented eu
figure 1. The bidding zones in European power markets. (Image courtesy of the Of- Target model to ensure an inte-
fice of Gas and Electricity Markets, “Bidding Zones Literature Review.” London, United grated, efficient, and secure euro-
Kingdom, 2014.) pean electricity market.
Day-Ahead Markets:
Markets Coupled
PCR Initiative MRC
100
90 15% 16% 14%
25% 23%
Net Transfer Capacity (%)
39% 33%
80
70
60
Available
50
40 85% 84% 86%
75% 77%
61% 67%
30
20
10
0
2010 2011 2012 2013 2014 2015 2016
Capacity Used in the Right Direction Capacity Unused in the Right Direction
figure 3. The percentage of available transfer capacity used in the “right direction” under a >1€/MWh price differential
on 37 European electricity interconnectors. (Chart courtesy of the ACER/CEER, Annual Report on the Results of Monitor-
ing the Internal Electricity and Gas Markets in 2016, October 2017.)
whereas they currently use it for free in continuous trad- the cross-border capacities available for balancing, incorpo-
ing. Therefore, shifting trading volumes from day ahead to rating nemos’ nominations for intraday schedules. Besides
intraday might be economically convenient for some mar- this, balancing gate-closure timing also relies on previous
ket participants. intraday timing.
The continuous market provides a platform where any Balancing markets have not yet reached the harmoniza-
market participant may adapt its position at any time, until tion of day-ahead and intraday markets. They differ in sev-
1 h before the time of delivery, if allowed by market condi- eral important aspects that need to be addressed before the
tions, i.e., enough availability of buy/sell orders and avail- full integration of balancing markets across europe can be
able transmission capacity. on the other hand, intraday reached. First, the definition of the balancing products, i.e.,
auctions allow participants to adjust their positions only at the operating reserve types to be used, should be established.
specific times, which is less agile but helps to pool liquid- Three categories have been defined:
ity and, most importantly, provides a single clearing price ✔ Replacement reserve (RR): manually activated bal-
for all of the associated transactions. Therefore, intraday ancing reserve characterized by the slowest activation
auctions may be preferred by smaller market participants time (up to a 30-min activation time).
who cannot operate in a continuous market as effectively as ✔ Manual frequency restoration reserve (mFRR): equiv-
larger players. alent to tertiary reserve (less than a 15-min activation
regarding the pricing of cross-zonal capacity in a con- time, mostly provided by spinning reserve).
tinuous trading framework, pursuant to the CaCm, all the ✔ Automatic frequency restoration reserve (aFRR): equiv-
Tsos proposed to organize at least an intraday auction near alent to secondary reserve (regulation reserve in unit-
the end of the day ahead of delivery that would allocate the ed states).
available capacities in an implicit way, originating conges- The definition of these balancing products is currently
tion rents. Besides, the CaCm also allows for complemen- under harmonization. modifying the definition of balancing
tary regional auctions. products requires significant changes to the Tso operating
There is a general problem with price formation mecha- procedures and their corresponding iT infrastructure. mar-
nisms in the target model: the day-ahead market is based on ket participants also need to adapt, mainly balancing service
implicit auctions (uniform clearing price for energy reflect- providers (Bsps) and balance responsible parties, as defined
ing cross-zonal congestion), whereas the intraday market is in the GleB. For this purpose, the Tsos are closely cooper-
organized in a dual manner. For example, in the continuous ating with european market stakeholders to define technical
trading mode, energy is priced pay as bid with the associ- rules and products.
ated cross-zonal capacity allocated for free until conges- settlement rules for balancing products also need to be
tion is reached, whereas, in the intraday auction, the pricing harmonized. Currently, several countries apply marginal pric-
is equivalent to the day-ahead mechanism. This dual intraday ing while others apply pay as bid, or regulated prices. Figure 4
market may produce some inconsistencies in prices since illustrates the different settlement systems for mFrr energy
the bidding behavior of market players is adapted to each in europe.
allocation mechanism. This can create confusion and be
detrimental to the less-sophisticated market players. Benefits
an integrated european balancing market should unlock
Balancing Markets synergies between Tsos, such as the netting of balancing
needs of different signs, upward and downward. netting
Status cross-border imbalances would bring important benefits by
european balancing markets put the “latest” price on energy, reducing the amount of balancing energy activated, which
reflecting real-time imbalances and the corrective actions would not only reduce balancing costs but also imply higher
of the Tsos to ensure the balance between generation and availability of reserves, which could further reduce operat-
demand at every moment. The Tsos organize and are respon- ing reserve needs.
sible for these markets that involve real-time operational higher Tso coordination would facilitate renewable
security and the deployment of reserve capacities. There- production integration, and similarly to the day-ahead and
fore, they require close coordination so the Tsos can update intraday markets, a wider balancing market is expected to
increase liquidity and improve competition. The implementa- mainly procured by european Tsos in local reserve markets of
tion of cross-border balancing energy exchanges will also different types. These markets present even more differences
help to optimize the use of interconnection capacities and from one member state to another. some Tsos organize daily
reinforce operational security in europe. Therefore, building auctions, whereas, in other cases, the Tsos rely on weekly,
the european integrated balancing market is fully aligned monthly, or even longer commitments for reserve procurement.
with the achievement of european energy policy objectives.
a cost-benefit analysis for 2013 estimated that the net ben- Future Balancing Markets
efits that would be gained if six neighboring european coun- The GleB regulation became effective in december 2017,
tries [involved in the Trans-european replacement reserves and its main goal is to create european balancing platforms at
exchange (Terre) project described later] cooperated different time scales, while harmonizing different aspects of
in the activation of replacement reserves would amount local balancing markets. Besides this, it promotes the pro-
to €150 million per year. in addition, it was shown that those vision of balancing services from renewable units, flexible
benefits would increase significantly if some of the cross- demand and energy storage units under the same conditions as
border interconnection capacities were upgraded. conventional generation units, and the application of marginal
on the other hand, the described harmonization effort pricing (rather than pay as bid) for the settlement of balancing
among european balancing markets is focused on the acti- energy. The GleB regulation also aims at an absence of price
vation of balancing energy. Currently, balancing capacity is caps and floors.
Definition of Answer
Hybrid Combination
Marginal Pricing Marginal pricing is the change in total cost arises
when the quantity produced changes by one unit.
Pay as Bid Contracted parties who provides a service are
paid based on their offer price.
Regulated Price The price for this service is based on a price that
is set by the relevant regulatory authority.
Key
Missing Data
N/A
Pay as Bid
Marginal Pricing
Regulated Price
Hybrid
figure 4. The different settlement rules of the mFRR energy in Europe. “Missing data” refers to the TSOs that did not re-
spond the questionnaire, and “N/A” refers to the TSOs that did not answer to this specific question. (Image courtesy of the
ENTSO-E, Survey on ancillary services procurement, balancing market design, March 2017.)
another relevant point is the harmonization of gate- platform. The iT platform liBra is composed of different
closure times for Bsps to submit bids to the corresponding modules: 1) an optimization algorithm for a common balanc-
balancing platforms, for which the prior harmonization of ing market merit order and 2) a settlement and capacity man-
intraday gate-closure times (as described above) is crucial. in agement module. The Tsos from France, italy, portugal,
addition, a harmonization of imbalance settlement periods to spain, switzerland, and Great Britain are actively participat-
15 min is encouraged before January 2025. The GleB also ing. in the future, additional countries may be incorporated
encourages the financial settlement of unintended deviations, into the rr platform, including romania, Czech repub-
in contrast with the current scheme in continental europe lic, poland, hungary, and Bulgaria. The energy exchanged
based on the pay-in-kind approach (which nets energy deliv- in this platform will make use of the remaining cross-border
ery at equivalent peak/off-peak periods). Finally, the GleB capacity after the last intraday market.
considers the possibility of cross-border capacity reservation
for balancing purposes when justified through a previous The mFRR Activation and Platform
cost-benefit analysis. unlike the rr activation that is only mandatory for coun-
tries using the rr, the mFrr activation, under the GleB
Implementation Steps regulation, is mandatory for all european interconnected
The gradual implementation of the GleB would be facilitated Tsos. The current reference project for the future mFrr
by regional cooperation through the development of different activation platform is the manually activated reserves ini-
platforms to allow information exchange among the Tsos tiative. This project is currently in a design phase involv-
and market participants. each balancing process will require ing 19 european Tsos, and six Tsos are in the process of
a separate platform, and each platform will involve a different becoming observers.
set of the Tsos and entail different technical complexities,
so each will face a different deadline, as shown in Figure 5. The aFRR Process and Platform
in Figure 5, two different deadlines are set for each platform. The aFrr activation will be voluntary for european inter-
The first deadline establishes when the platform should be connected Tsos. For instance, Great Britain and ireland do
implemented according the GleB requirements. The second not currently use the aFrr. The reference project is called
deadline is when all concerned Tsos should be integrated in the platform for the international Coordination of the auto-
the platform. Both deadlines are the same for the rr activa- matic Frequency restoration process and stable system
tion platform and the imbalance netting (in) platform. operation. This project is under design, and eight european
Tsos are full members of this initiative, including Tsos
RR Activation and Platform from Belgium, austria, The netherlands, and France as well
The Terre project has been launched and was designated by as the four Tsos from Germany. The remaining european
enTso-e (european network of Transmission system oper- interconnected Tsos using the aFrr are currently in the
ators for electricity) as a reference to implement the future rr process of joining this initiative.
figure 5. The road map for the implementation of European/regional balancing energy activation platforms.
Strategic Reserve
Capacity Payments (Since 2004), Gradual
(Since 2007) Considering Phase-Out Postponed
Reliability Options to 2025
january/february 2019
figure 6. The CMs in Europe. The main changes compared with 2015 are highlighted in red. (Image courtesy of the ACER/CEER, Annual Report on the Results of Moni-
toring the Internal Electricity and Gas Markets in 2016, October 2017.)
participants must bear the same responsibilities, including balanc- are caps on wholesale market prices, retail price regulation,
ing production schedules (from which renewable generation support schemes for fossil or nuclear generators that do not
has traditionally been exempt, as a way of promotion). incentivize a flexible operation, and the previously discussed
harmonized market rules across europe enable the real- poor designs of intraday and balancing markets.
ization of synergies between energy resources in different
member states, guaranteeing an efficient operation of the For Further Reading
power system. however, an integrated market also requires a european Commission. (2016, nov.). proposal for a directive
higher level of cross-border interconnections among member of the european parliament and of the Council on common
states, and the eC has identified increasing interconnection rules for the internal market in electricity november 2016.
capacity as a strategic objective. Building consensus around europa. [online] available: http://ec.europa.eu/
the development of new transmission projects, and especially Commission regulation (eu) 2015/1222 of 24 July 2015
about the cost allocation of such projects, is an ongoing pro- establishing a guideline on capacity allocation and con-
cess led by the Tsos and regulators. gestion management. entsoe. [online]. available: https://
electricity.network-codes.eu/network_codes/cacm/
New Resources, Complexity, and Scalability Commission regulation (eu) 2017/2195 of 23 november
The Clean energy package envisions a power market in which 2017 establishing a guideline on electricity balancing. entsoe.
consumers can engage in demand response, self-consump- [online]. available: https://electricity.network-codes.eu/
tion, or self-generation and participate in markets. distributed network_codes/eb/
energy resources, such as decentralized generation, storage, and nemo Committee. (2017, July 24). all nemos proposal
demand response would be allowed to participate in wholesale for the mCo plan approved by all nras of the eu on 26 June
electricity markets directly or through aggregators meeting the 2017. europex. [online]. available: http://www.europex.org/
required technical capabilities, in a level playing field with con- all-nemos/all-nemos-mco-plan/
ventional generators. That would involve changes not only in the agency for the Cooperation of energy regulators. (2017,
design of current retail and wholesale markets but also in the oct. 6). annual report on the results of monitoring the in-
interactions and coordination between the Tsos and the distri- ternal electricity and gas markets in 2016. aCer. ljublja-
bution system operators. na, slovenia. [online]. available: https://acer.europa.eu/
in general, the presence of distributed energy resources official_documents/publications/aCer%20market%20
will increase the number of market participants, challenging monitoring%20report%202016%20%20document%20
the implementation of a power market that is already under histo/aCer%20market%20monitoring%20repor t%
great strain due to its computational complexities. Future 202016%20-%20eleCTriCiTY%20-%20original.pdf
developments in day-ahead and intraday markets will be i. J. perez-arriaga, C. Knittel, a. Bharatkumar, m. Birk, s.
characterized by the unavoidable conflict between the need Burger, J. p. Chaves, p. duenas-martinez, i. herrero, s. hun-
to simplify implementation due to technical constraints and tington, J. Jenkins, m. luke, r. miller, p. rodilla, r. Tabors,
to allow for the more complex participation models required K. Tapia-ahumada, C. vergara, and n. Xu. (2016, dec.). utility
by new resources such as demand flexibility or storage. of the future: an miT energy initiative response to an industry
in transition 2016. miT energy initiative. [online]. available:
Scope of Markets http://energy.mit.edu/research/utility-future-study/
The Clean energy package makes a clear statement in favor
of markets as the best tool to enable efficiency and transpar- Biographies
ency for participants. Well-functioning “energy-only” markets, Tomás Gómez is with the universidad pontificia Comillas,
as presented in this article, have been considered the most spain.
efficient design for an integrated european electricity market. Ignacio Herrero is with the universidad pontificia
however, this paradigm has been, and is frequently, challenged Comillas, spain.
by adequacy concerns that lead to different types of Cms. Pablo Rodilla is with the universidad pontificia Comillas,
Figure 6 shows that a significant number of member states have spain.
already implemented or plan the implementation of different Rodrigo Escobar is with the operador del mercado
national Cms. ibérico, spain.
The eC has provided guidelines for member states to jus- Salvatore Lanza is with the autorità per l´energia, italy.
tify the need for Cms and, if that is the case, to implement Ignacio de la Fuente is with the red eléctrica de españa,
Cm designs that minimize distortions in the functioning of spain.
short-term markets and support neighboring areas in case of Maria Luisa Llorens is with the red eléctrica de
adequacy problems. in addition, it recommends that mem- españa, spain.
ber states identify the market flaws that may constitute an Paula Junco is with the red eléctrica de españa, spain.
obstacle to the provision of adequacy and only if these flaws
p&e
cannot be removed to resort to a Cm. among those obstacles
F
Following order 888 From the Federal regulatory energy
Commission (FerC) in 1996, the u.S. power industry began its restructuring pro-
cess. this undertaking involved a transition from a vertically integrated utility
structure where generation, transmission, and distribution are combined to serve
consumers. through advancing to a market environment, generation companies
(genCos) can compete with each other to provide energy through open transmis-
sion and distribution systems managed by transmission (transCos) and distribution
companies (disCos). the goals of the restructuring are the efficient produc-
tion of electricity and efficient generation investment through competition. under the
restructured environment shown in Figure 1, wholesale electricity markets are managed by independent system
operators (iSos) or regional transmission organizations (rtos), whose responsibility is reliable system opera-
tion, market administration, and system planning. genCos, large consumers, load aggregators, marketers, and
load serving entities (lSes) buy and sell electricity through FerC-regulated wholesale electricity markets.
Small consumers like individual households, some large consumers, lSes, marketers, and load aggregators
can transact energy either at a regulated retail rate overseen by the public utility commission (PuC) or through
retail competition. the restructuring process has been complex, especially in trying to harmonize the whole-
sale and retail sides, and involves many stakeholders from both public and private sectors (see Figure 1).
u.S. electricity markets have been considered largely successful,
and the rto footprint continues to grow. today there are seven rtos
Power Industry operating in the united States (see Figure 2), bringing substantial
benefits to end users. the benefits achieved by iSo new england’s
Restructuring (iSo-ne’s) wholesale electricity markets are summarized in table 1,
as one example.
Processes for the wholesale electricity markets evolved with changes in regulatory
policy, technological innovations, and economic conditions since the
Present and Future start of electric restructuring. during the past two decades, the u.S.
power industry has experienced a transformation with the retirement
of coal, oil, and nuclear resources; increased electricity production
and investment in natural gas facilities due to environmental and sit-
ing factors as well as relatively low gas prices; increased penetration
of renewable resources as a result of state environmental policies; and an increase in demand resources and
distributed generation technologies. these changes have created challenges to power system operation and
planning and electricity market design. we will review the main features of existing wholesale electricity
markets and several key components. as pricing is particularly important for an effective market design,
we will discuss ongoing pricing issues. Finally, we will take a brief look at the evolution of the electric grid
and future challenges and then identify and discuss several key market design initiatives stemming from
these challenges.
ISO New
England
Midcontient ISO
NYISO
PJM Interconnection
Southwest
Power Pool
CAISO
Electric Reliability
Council of Texas
Market Operation
System Planning
Market Operation Financial Settlement
and Operation
Mitigated
Outage Operations
Offer, Unit Energy
Coordination Planning
Topology, Schedule Awards
Limits LMP
DAM Energy
Load Market UC ED SFT and Uplift
Forecasting Mitigation
Awarded
Reserve
Security UC Schedule
Transmission Reservation RMR
Transaction Constraints
FTR Payment
CRF
Real-Time RTM Energy
Operation Trading
EMS System
Cost Allocation
Conditions
SCADA
Load and RUC
Renewable RTM Energy
State Estimation
and Uplift
UC
Market
Contingency Short-Term Schedule
Clearing
Analysis Outage
RTUC
Short-Term RTM Ancillary
Load Limit Service
Calculation Fast Start Payment
UC Schedule
System
Monitoring Tie-Line
Scheduling
Constraint RTM
Performance
Management AS&
AGC Units Payment
Capacity Tie-Line
AGC Analysis Schedule
Unit Dispatch
figure 5. The MMS architecture. RTUC: real-time UC; AGC: automatic generation control; SCADA: supervisory control
and data acquisition; CRF: congestion revenue fund; RMR: reliability must run units; SFT: simultaneous feasibility test.
central topics in electricity markets. a less discussed pric- mitment decisions. as a result of the fundamental mathematical
ing problem, but attracting more interest recently due to the properties of nonconvex problems, there’s no such set of per-
emerging ramping needs in several iSos, is the appropri- fectly consistent prices for the uC problem. Consequently, for
ate pricing and settlement design with multiple scheduling any given market clearing prices, some units may have incen-
intervals. this problem is further complicated by the practi- tives to deviate from their optimal schedule. recognizing this
cal implementation of multi-interval scheduling with rolling nonexistence of perfect prices, in reality, markets are designed
horizons. we will discuss the solution of a multisettlement to pursue a second-best set of prices with certain criteria.
system as an extension to the existing two-settlement system. most of the existing markets use the uplift payment as the
additional compensation alongside the market clearing prices
Nonconvexity for units to follow the iSo’s optimal commitment and dispatch
wholesale electricity prices, or lmPs, are typically produced instructions. the total uplift payments are then allocated to
from the shadow prices of the SCed problem. Because the demands in the market. different markets may have differ-
SCed problem is often convex, i.e., being a linear program or ent uplift calculation and allocation rules. most iSos pay the
a quadratic objective function with linear constraints, the con- make-whole payment for online units to cover the revenue
straint shadow prices exist and can be conveniently used to cal- shortage, although some iSos (e.g., iSo-ne) also pay the so-
culate market clearing prices. these prices are consistent with called lost opportunity cost (loC) for certain situations even
the optimal dispatch solutions in the sense that, given the prices, when the unit has no revenue shortage. nevertheless, the uplift
each unit will not have financial incentives to deviate from the payments cannot be efficiently allocated through a market
dispatch results. in reality, however, a unit’s decisions are also mechanism and are often considered nontransparent. many
based on the commitment costs in addition to the incremental iSos have explored ways to reduce the uplift payments by
costs. the clearing prices from the convex dispatch problem adopting alternative market clearing prices in place of exist-
reflect the marginal cost of dispatch but do not capture commit- ing lmPs. one approach, termed convex-hull pricing, uses the
ment costs and thus may not be consistent with the unit’s com- dual variable solutions of the nonconvex uC problem to arrive
at the minimal level of total uplift
and loC (although the uplift pay-
ment may actually increase). other
SCUC
approaches typically relax the non-
Supply Offers UC convex features of the problem, such
Demand Bids as removing the minimal genera-
tion output parameter or allowing
Commitment
Schedules
Constraints
SCED
External
Transaction Schedules of the duality gap for nonconvex
problems. the practical question
Constraints remains: what are the objectives and
Security desired properties of the pricing?
Analysis different iSos may have different
External answers. the decision on the trad-
Transactions eoff between the level of noncon-
vexity and appropriate set of prices
figure 6. The SCUC architecture. is central to a good market design.
Pricing Multi-Interval Solutions they went from a decentralized, loosely coupled grid to
given that uC and dispatch decisions are temporally coupled large, highly interconnected, and centrally controlled sys-
through ramp limits and minimum up/down time constraints, tems. the sheer size, large number of components, and pro-
the market clearing prices for different time intervals are liferation of power electronics have made the electric grid a
naturally related. although the multi-interval dispatch problem complex cyberphysical system.
can be convex, and the prices for each interval conveniently Currently, the power industry is facing yet another revo-
produced out of the dual variables, the challenge of pricing lutionary change. government directives to lower the carbon
with multiple intervals lies in its real-time applications that footprint and, as a consequence, high penetration of renewable
run on the rolling horizon. nyiSo and CaiSo, for exam- energy resources and smart grid technologies are transform-
ple, solve a multi-interval dispatch problem but only use the ing power system planning and operational paradigms. dis-
first interval prices for settlement; prices for other intervals tributed energy resources (ders) are being built deeply into
are only advisory and will be determined when the interval the distribution networks, and the boundary between transmis-
becomes first in later runs. with the rolling horizon, each sion and distribution is blurring. a significant part of ders is
multi-interval dispatch run includes new time intervals that unobservable to the transmission system operators, introduc-
are not modeled in the previous intervals. as a result, the ing an unprecedented level of uncertainty not only spatially
prices produced from different runs for the same interval but also temporally due to the intermittent nature of renewable
could be different. the iSo’s settlement typically uses the resources. even the concept of contingency is changing from
prices from the latest run where the interval being priced being binary (e.g., on and off events) to continuous, e.g., the
is the first. these prices for different intervals are from system load or generation can swing by several gigawatts in a
different runs, and so they may not be consistent with the comparatively short period of time. this behavior, previously
dispatch solutions for different intervals. this may cause the considered as abnormal or emergency, becomes part of normal
incentive compatibility problem, i.e., deviation from the iSo operation. as a result, system operators will be challenged to
instructions, as the units chase the settlement prices. deal with completely different patterns in the new grid archi-
a natural way to remedy this problem is to make all tecture, such as the one shown in Figure 7. another property
prices from different runs financially binding, i.e., one inter- of large cyberphysical systems is high interdependence with
val would be settled multiple times instead of just for the different infrastructures. not only do we have to monitor the
last time. this effectively requires a multisettlement design electric grid contingencies but also the failures in communica-
where multiple levels of markets in addition to the existing tion, information technology, and fuel delivery systems. today’s
dam and rtm are involved. iSo-ne is developing a new preventive approach to power systems planning and operation,
approach to appropriately price ramping constraints.
T
Trading in The new Zealand wholesale difference from other jurisdictions, and speculates on some
electricity market (nZeM) pool began on 1 october 1996. The possible future directions.
new Zealand pool market was the first one to use two ele new Zealand is subject to the vagaries of a south Pacific
ments of what has since become the north american standard climate, is geographically prevented from importing or ex
market design, with locational marginal pricing and ancillary porting power, and has a high penetration of renewable
service cooptimization, but it was implemented in a physical electricity. Key considerations include promoting the most
and regulatory environment that differs markedly from that in economical use of stored water and ensuring security of sup
north america. This article reflects on 20 years of experience ply. Unlike most north american markets, the new Zealand
with new Zealand’s 1996 market design, assesses its points of design currently does not include any form of capacity market
Challenges of a
Renewable Energy System
50,000 1
45,000 0.9
North Island
1,700 MW Hydro 40,000 0.8
1,000 MW Geothermal 35,000 0.7
600 MW Wind
1,700 MW Gas and Coal 30,000 0.6
(GWh)
3,500 MW Hydro
60 MW Wind
14 MW Solar
2,200 MW Maximum Demand Gas (12.8%/15.3%) Coal (2.3%/2.6%)
Oil (0%/0%) Other Renewable (1.4%/1.4%)
Solar (0.1%/0.2%) Geothermal (17.5%/17.3%)
Major Generation Center Wind (5.4%/5.1%) Hydro (60.4%/58%)
Major Load Center
% Renewable (84.8%/82%)
High-Voltage ac Lines
High-Voltage dc Lines
figure 2. The generation by type in New Zealand, with re-
newable generation. In the legend, the numbers listed beside
figure 1. A map of New Zealand showing the main genera- each generation type give the proportion of generation in
tors, largest lines in the transmission network, and maximum 2016/proportion of generation in 2017. Hydro was reduced
loads over the year ended 31 December 2017. Over this in 2017 because of low inflows up to July 2017. (Data from
period, the North Island grid consumption was 24,735 GWh New Zealand Energy Quarterly, Ministry of Business, Innova-
and the South Island grid consumption 14,557 GWh. tion, and Employment, June 2017 quarter, 5 October 2017.)
Shortage Risk
although new Zealand’s electricity system is dominated by
4,500 renewable energy, storagebased hydro can easily accom
4,000 modate shortterm variations in demand and wind. But it
3,500
remains susceptible to periods of sustained low inflows, so
the challenges for system operation are more about varia
3,000
tions in fuel over seasons rather than minutes and hours, as is
2,500
(GWh)
ch
ay
ly
y
be
be
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ar
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ar
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nu
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em
Ja
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Se
(a) hold call options with a strike price set around the marginal
600 operating cost of an opencycle gas turbine (oCgT) unit. Thus,
while the market price was to have been uncapped, consum
500
ers would effectively have been protected against exposure to
400 price spikes above the oCgT level. The scheme was rejected,
NZ$/MWh
ch
ay
ly
be
ar
ar
Ju
ar
M
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M
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Retail Market Competition Until recently, though, the tariff structure for a domestic
since its establishment in 2010, the ea has been especially electricity consumer (as well as many massmarket business
active in promoting retail competition. Possibly the most sig customers) was almost exclusively a fixedprice, variablevol
nificant development here was the establishment of an electric ume tariff. new tariffs are emerging, however, most notably a
ity futures exchange, which enabled small independent retailers spotbased tariff offered by two retailers. one of these, Flick
to hedge the significant mediumterm price volatility charac energy, acquired over 20,000 customers (~1% of the market)
teristic of new Zealand’s hydrodriven market. since 2010, the in a little more than three years. But 2017 was the first high
number of retail brands in the market has increased from ten wholesale price year since Flick’s entry, and it remains to be
to over 30, with the market share of the five largest gentailers seen how durable the company’s customer base is in the face
declining from 97% to approximately 90% at present. of temporary high prices at the meter or whether the insula
when full retail competition was introduced in 1999, tion from wholesale signals (via a fixedprice, variablevol
smart meters were required only for larger typically industrial/ ume contract) is ultimately preferred by customers, albeit at a
commercial consumers. studies suggested that the costs of higher average price.
mandatory smart meter installation exceeded the benefits for
most households. This was left up to the market, except for a Investment and Entry
regulation requiring recertification of all meters by 2015. The as discussed previously, investment in generation capacity is
smart metering rollout is relatively high now, at around 70%, at the discretion of market participants and solely incentivized
but this seems to have been driven more by the opportunity for by participants who form views on future electricity prices in
retailers to reduce meterreading costs than by a strong desire an energyonly market, with revenue partially underwritten
by consumers to actively manage their consumption patterns. by contracts with other market participants or retail custom
while recent growth has been strong, only a small proportion ers. while investment is largely price driven, price projec
of households actually face halfhourly spot prices, and, while tions depend on electricity demand growth and the investment
they receive realtime alerts of looming price spikes, they actu intentions of all market participants. new investment was low,
ally see their own data only about two days after real time. in the years immediately following deregulation, but accel
There has been some consolidation in the smart meter market erated after 2004. This investment was dominated by wind
to two main service providers and two main meter types. and geothermal but also the construction of a large combined
cycle gas turbine (CCgT) in 2006, bringing the total fleet of
CCgTs to four. although several hydro proposals have been
extensively investigated, environmental opposition has been
8,000
Change Since 2007 (GWh)
80
70
60
Installed Capacity (MW Peak)
50
40
30
20
10
0
2009-1
2009-3
2009-5
2009-7
2009-9
2009-11
2010-1
2010-3
2010-5
2010-7
2010-9
2010-11
2011-1
2011-3
2011-5
2011-7
2011-9
2011-11
2012-1
2012-3
2012-5
2012-7
2012-9
2012-11
2013-1
2013-3
2013-5
2013-7
2013-9
2014-11
2014-1
2014-3
2014-5
2014-7
2014-9
2014-11
2015-1
2015-3
2015-5
2015-7
2015-9
2015-11
2016-1
2016-3
2016-5
2016-7
2016-9
2016-11
2017-1
2017-3
2017-5
2017-7
2017-9
2017-11
2018-1
2018-3
figure 6. The PV solar installed capacity in New Zealand. The capacity reached 74 MWp (13.7 Wp per person) in April
2018. (Data through to September 2013 courtesy of the GREEN Grid project and data post-2013 courtesy of the EA.)
7,000
Number of Light Electric Vehicles
3,000
2,000
1,000
0
2014-1
2014-2
2014-3
2014-4
2014-5
2014-6
2014-7
2014-8
2014-9
2014-10
2014-11
2014-12
2015-1
2015-2
2015-3
2015-4
2015-5
2015-6
2015-7
2015-8
2015-9
2015-10
2015-11
2015-12
2016-1
2016-2
2016-3
2016-4
2016-5
2016-6
2016-7
2016-8
2016-9
2016-10
2016-11
2016-12
2017-1
2017-2
2017-3
2017-4
2017-5
2017-6
2017-7
2017-8
2017-9
2017-10
2017-11
2017-12
2018-1
figure 7. Light electric vehicles in New Zealand. Up to January 2018, the total number was 6,526 vehicles, a small
fraction of the approximately 3.6 million light vehicles in the country. (Data courtesy of the New Zealand Vehicle Fleet
Statistics, New Zealand Ministry of Transport.)
to the average cost of energy in a PV solar system. greater and operating challenge. Moreover, new Zealand has ratified
benefit can be gained by situating batteries behind the meter, the Paris agreement, with its nationally determined contribu
thereby enabling one battery to deliver a bundle of network, tion (ndC) requiring a reduction in equivalent carbon dioxide
PV solar, demand response, and ancillary service potential ben emissions by approximately 40% of current levels by 2030 and
efits. even so, studies suggest that it will be some time before net zero emissions by 2050. while new Zealand’s greenhouse
batteries become economical in new Zealand. nevertheless, gas emissions are small on a global scale (about 0.15%), its per
some edBs are experimenting with inhome and largerscale capita emissions are comparatively high, mainly due to the
batteries to manage specific constraints in their networks. as high level of methane and nitrous oxide emissions from agri
with interruptibleload systems, however, the regulators may culture. studies have shown that the electrification of private
find it difficult to ensure equal access to the many benefits that vehicle transport and most stationary heating, and converting
batteries may bring, while also allowing them to be bundled of the remainder of electricity generation to renewable sources,
effectively. household installation may be inhibited if new reg would almost reach new Zealand’s ndC. But the increase in
ulations require lithiumion batteries to be installed in separate renewable generation required to achieve this would be about
enclosures outside homes for fire safety reasons. 130%. Thus, the question is what sources could be used to
deliver that level of renewable generation.
The Future The sheer quantum leap of new generation required will
The ea’s statutory objective is “to promote competition in, inevitably imply a major conflict between global environ
reliable supply by, and the efficient operation of, the elec mental concerns and localized environmental antagonism to
tricity industry for the longterm benefit of consumers.” hydro or wind development, at least. But there are also three
Consistent with this, the agency’s current priorities include specific problems to be addressed.
encouraging more retail competition in the market, improv First, the shortterm variability of renewable generation
ing information flows, finalizing prices closer to real time, sources will be a particular problem in the new Zealand
and enabling access to retail data, such as smart metering system, because it is relatively small and unable to import or
data. it is also reviewing distribution pricing and exploring export energy or achieve the diversity typical of continental
options to encourage greater efficiency and competition by power systems. new Zealand has so far incorporated 800 Mw
opening access to distribution networks, developing alter of wind generation (about 9% of installed capacity) with no
natives to traditional electricity distribution, diversifying adverse effects on power system reliability, primarily because
supply sources, and better utilizing demand response. flexible (predominantly hydro) generation has thus far been
some electricity distribution businesses are evolving from able to manage the variations in wind generation supply. But
lowvoltage network owners into mini system operators, as significant additions of flexible hydro capacity seem unlikely,
they seek to integrate the numerous new devices connecting and the flexibility of existing operations is gradually being
to the network and make economic tradeoffs with the new ser reduced by environmental opposition to varying both flow and
vices to manage system peaks and reduce the need to continu storage levels.
ally upgrade their networks. Challenges abound for lowvolt There has also been significant pushback over the im
age networks in optimizing the use of storage batteries, smart pact of wind farms on landscape values. still, with about
electric vehicles, and increased demandresponse, especially 3,000 Mw already approved for development, wind can be
where this requires integration with price signals emanating expected to play a major role in achieving the 100% renew
from the wholesale market. Presently, the trend toward distri able target, along with geothermal, of which there is about
bution system operators is occurring within existing network 300 Mw endorsed for installation. studies by the green
owners; it remains to be seen whether the separation between grid project have investigated the technical impact on the
asset ownership and system operation, which has been largely power system of adding up to 4,000 Mw more of wind gen
adopted for the highvoltage grid market, will also eventuate eration (about 50% of 2018’s installed capacity). The results
for distributionlevel markets. show an increased need for frequency regulation, instanta
at a macro level, while the renewable generation share is neous reserves to deal with the reduction in inertia, and droop
currently around 85%, a government goal to reach 100% renew response. ancillary service prices will eventually have to
able generation in a normal hydrological year by 2035 means rise to a level at which it becomes economical for investors
that the market now faces a very significant developmental to provide these services, either from partially dispatched
©istockphoto.com/kamisoka
B
How Regulation and Based on current policy targets, projec-
tions, and expectations, electricity is set to play a cen-
Innovation Are Reshaping tral role in the european union’s (eu’s) economy. the
ambitious goals of decarbonization and energy-efficient
the European Union’s actions include decreasing greenhouse gas emissions
by 40% in 2030 and 95% in 2050 down to below 1990
Electricity Markets levels, increasing the renewable energy share to at least
27% of final energy consumption in 2030, and attain-
ing 27% energy savings by 2030 as compared to busi-
ness-as-usual rates of growth. correlated electrification,
decentralization, and digitalization trends suggest that the
By Gianluca Fulli, share of electricity in final energy consumption can grow
Marcelo Masera, from above 30% in 2030 to nearly 40% in 2050. decen-
tralized generation capacity could account for more than
Amanda Spisto, and 30% of all generation capacity in 2030 and could eas-
ily exceed half of installed generation capacity by 2050.
Silvia Vitiello intelligent inverters can double the distribution grid’s
capacity to the host photovoltaic systems. smart meters
Digital Object Identifier 10.1109/MPE.2018.2872303
are scheduled to reach nearly half of the eu’s citizens
Date of publication: 7 January 2019 by 2020, whereas internet-of-things (iot) devices (with
embedded functions that interact with the grid) could serve a full ownership-unbundled tso; 2) an independent system
the majority of the eu’s population by 2030. operator managing, but not owning, the transmission network
in such a rapidly shifting context, electricity system stake- assets; or 3) an independent tso legally separated but still
holders are striving to keep up with the pace of innovation and embedded in a larger energy company (Figure 1). in europe,
anticipate the infrastructure and market arrangements neces- 43 tsos and roughly 2,400 distribution system operators
sary for future electricity delivery and services. legislators (dsos), acting as regulated independent actors, comprise the
and regulators are confronted with the challenging task of cre- link between the system physics and the market transactions
ating the most effective actions to steer the electricity sector by interacting with several electricity system players.
transition for the customers’ benefit. the eu’s energy union another main regulatory intervention addresses electric-
strategy issued in 2015 and the ensuing clean energy package ity markets. today, electricity is traded in the eu either via
proposal (cep) put forward by the european commission in long-term bilateral contracts (which represent two-thirds of
2016 are examples of the efforts of eu institutions to under- the electricity transactions concluded in the major markets
take those policy and regulatory issues. in 2015) or via the four segments of the wholesale power
against this backdrop, we describe some of the main exchanges, i.e., the forward and derivatives markets (weeks
regulatory challenges underpinning the restructuring of elec- to years in advance), the day-ahead markets (daMs), the
tricity markets in the eu. We first analyze how policy deci- intraday markets (iMs) (operating for an hour or fractions of
sions have contributed to developing the present eu electric- an hour), and the balancing markets (operating in real time).
ity system and markets. then, we illustrate new policy and the 2015 yearly trading volumes reached a few hundred ter-
regulatory initiatives that aim to redesign the eu markets. awatthours in the major european spot markets, including
in conclusion, we share some thoughts on the interplay of the italian power market exchange (ipeX), the centre-north
regulatory and technical advances and their impact on future european power market exchange epeX, and the scandina-
power systems. vian nordpool. at the retail market level, roughly 3,100 local
suppliers offer electricity to consumers that is acquired from
Current EU Electricity either generators or the wholesale market.
Markets’ Regulations the role of wholesale, day-ahead electricity markets in
steering not only as short-term, efficient resource allocations,
Background and General Features but also medium-to-long-term investments, is currently being
the demand for electricity within europe’s internal market debated. as low-carbon technologies penetrate the system,
prompted the introduction of a radical project that triggered average spot-market energy prices tend to drop while price
significant challenges following the passage of the single volatility (if not constrained by rules) grows. the anticipated
european act of 1986, a piece of legislation that advocated an decrease in wholesale, day-ahead energy prices does not seem
eu internal electricity market by 1992. three subsequent eu consistent with guiding long-term investments in electric-
energy packages, introduced in 1996, 2003, and 2009, have ity generation and infrastructure. the widespread incentives
created a single, competitive european market. national verti- available for specific technologies triggered by supply secu-
cally integrated undertakings, which, in the past, controlled the rity, sustainability, or social inclusion policies may discourage
whole electricity value chain, are now divided into four blocks: market-driven investments in some power system areas. in
generation and retail companies that compete in their respec- particular, a large portion of public support in the electricity
tive domains and (natural) transmission and (local) distribution sector, which increased from €36 billion to €63 billion during
monopolies. at the same time, the power system has progres- the period 2008–2012, went to low-carbon solutions. the costs
sively moved from a scheme with centralized and predict- related to redispatching and balancing capacity procurement
able generation, which met a rather inelastic demand, toward and capacity mechanisms have grown in recent years. the
one with higher shares of renewable and distributed energy tendency to increase the nonenergy component of the electric-
resources that meets a more flexible expectation. ity retail prices acts to reduce the amount of competition in
the european regulatory approach concerning monopolies end-user markets. the interactions among the different poli-
was implemented by the third energy package that, among cies affecting the market price signals are being scrutinized
other things, called for the unbundling of transmission system to help understand the consequences on the level of competi-
operators (tsos) according to one of the following options: 1) tion and business opportunities for the investors. the goal of
The
Czech Republic
Luxembourg
Slovakia
Austria
Switzerland Hungary
Slovenia
Croatia Romania
France
40° Bulgaria
Italy
Portugal
Greece
Spain
Cyprus
0 250 500
km Malta 20° 20°
figure 2. The smart grid research and innovation projects—a geographical distribution of investment by domain. DG:
distributed generation. [From the Joint Research Centre (authors’ elaboration).] E-Mobility: electric mobility; DSM: demand
side management.
Percentage of
Total Consumers
0/No Data
0.1–5
5–10
10–15
15–20
20–25
> 25
The
0 250 500 km
figure 3. The percentage of final electricity consumers by EU country changing suppliers. (Data courtesy of the Agency for
the Cooperation of European Energy Regulators, 2016.)
estimated that one in five european household energy consum- as significantly as in other world economies (Figure 4). nev-
ers is classified as “vulnerable.” poorer households, as com- ertheless, current levels of electricity prices in the wholesale
pared to wealthier ones, have energy expenditures that claim markets in europe vary significantly across Mss (Figure 5),
a higher share of their income. in some Mss, suppliers of last- indicating that the goal of long-term price convergence for
resort mechanisms, who seek to replace failing suppliers and electricity remains distant.
protect inactive or poor consumers, cover more expenditures part of the difficulties with the implementation of the fully
than is necessary for consumers, thus hampering their proactive integrated european electricity market comes from the two
involvement in the retail market’s dynamics. waves of “disruptive innovations” that occurred in the power
system in the last decades, e.g., the widespread use of renew-
Electricity Wholesale Market Status able energy sources (ress) (in 2015, 27.5% of electricity in
the ultimate goals of the eu energy legislation are electricity the eu was generated from renewables, a 12.6% increase from
market integration (which features convergent prices across the 2005) as well as the use of smart energy system interactions to
eu), improved investments in low-carbon technologies and decentralize the consumption–production loop. some exam-
flexible solutions, and more focused market-based governmen- ples of the role of regulation in adaptating to unforeseen devel-
tal support. despite the progress of energy-sector regulation in opments and coordinating between european and national
the past 20 years, many improvements are necessary to address policies can be seen at both the european and national levels.
several issues. these include low liquidity and low prices for one of the main obstacles to an integrated european whole-
transmission rights that forward markets continue to offer as sale market is the lack of coordination in addressing power sys-
well as the iMs and balancing markets that are underdeveloped tem adequacy (or reliability), i.e., the ability of the power sys-
and only offer a portion of the short-term adjustments needed tem to meet electricity demand 99% of the time, as mandated
for greater penetration of variable renewable energy. by the european system operation network code. currently,
electricity wholesale prices in europe have been subject the official reports on generation adequacy assessment are pro-
to considerable volatility over the last decade, although not duced by each Ms (with complete autonomy) with respect to
200
Japan EU-Platts PEP
180
United States Australia
160
140
120
(€/MWh)
100
80
60
40
20
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7
2010 2011 2012 2013 2014 2015 2016
Source: PJM and ERCOT Markets in the United States, Platts in the EU, Japanese Power Market Exchange (Japan),
and AEMO (Australia)
figure 4. The wholesale electricity prices in Europe, United States, Japan, and Australia. [Adapted from the European
Commission staff working document “Energy Prices and Costs in Europe,” (COM 2016) 769 final.]
Euro/MWh
0/No Data
0.1–35
35–40
40–45
45–50
> 50
The
0 250 500 km
figure 5. The average annual wholesale electricity prices per country in 2017. (Data courtesy of the European Commis-
sion, “Directorate General for Energy, Data, and Methodology” adapted from the “Quarterly Report on European Electricity
Markets” report.)
(a) (b)
(c) (d)
figure 6. Maps of market coupling in European power markets for (a) 2006, (b) 2010, (c) 2014, and (d) 2015. The “Italian-
borders” coupling considers the whole energy market of bordering countries to define the actual allocation of energy and
capacity for each border. 4M: four markets (Czech, Slovak, Hungarian, and Romanian).
injections and withdrawals from the grid in real time. The ASM consists of the ex-ante ASM and the balancing market. B: balancing market; IM: intraday market; R: results of
previous ex-ante ASM sessions. In the balancing market, the TSO accepts energy demand bids and supply offers to provide secondary control services and balance energy
00:00 a.m.
term to real time) for the renewable in-
tegration and optimization of market
11:00 p.m.
figure 7. The IPEX market sessions’ 2016 scheme. In B1 (Terna), the Italian TSO takes into consideration the valid bids/asks that the participants have submitted in the
10:00 p.m.
transactions and network operations.
In the balancing market, the TSO accepts energy demand bids and supply offers to provide secondary control services and balance energy injections and withdrawals
9:45 p.m.
C*
such as distributed ledgers and artificial
R13-6
6:15 p.m.
C*
that diligently protect their rights con-
R12-5
Day of Delivery
2:15 p.m.
11:45 a.m.
In B1, the TSO takes into consideration the valid bids/asks that the participants have submitted in the previous ex-ante ASM session.
11:00 a.m.
C*
10:15 a.m.
8:15 a.m.
7:00 a.m.
6:15 a.m.
4:15 a.m.
3:00 a.m.
2:15 a.m.
1:00 a.m.
each market session. [From the GME (authors’ elaboration).] GME: Gestore dei Mercati Energetici. tions, several r&i projects have proposed
novel decision-support systems (sesaMe)
R3
00:15 a.m.
10:30 p.m.
9:45 p.m.
8:00 p.m.
ticularly tsos and dsos) and covering
different nonenergy systems and services
7:00 p.m.
5:30 p.m.
brokers might arise as independent parties
R2
5:00 p.m.
Ex-ante ASM (Six Sessions)
R1
3:30 p.m.
3:00 p.m.
12:55 p.m.
R1
5:00 a.m.
4:00 a.m.
mation model, study new digitization
3:00 a.m. solutions, including improved distribu-
2:00 a.m. tion grid observability and control solu-
1:00 a.m. tions (upgrid); a nondiscriminatory,
00:00 data-sharing platform for cross-eu data
exchange (FleXiciency); and a neutral
Nine Days
11:59 p.m.
Delivery
Note:
Before
8:00 a.m.
islanded energy management (upgrid
and netFFicient).
250
Total
200 Private
206.9
Investment (€ Million)
150
158.1
144.3
140.4
137.2
133.2
100
106.7
37.3
85
82.2
31.1
78.9
26.8
25.5
73.8
73.2
50
70.6
15.1
14.2
14.8
13.8
24
12.4
54.2
42.1
48.8
43.5
6.8
7.1
28
0
Distribution System
Operator
ICT Company and
Telecom
University
Technology
Manufacturer
Consultancy
Research Center
Retail Company
Public Institution
Utility
Emerging Stakeholder
Other
Generation Company
Industry Association
Transmission System
Operator
Engineering Services
figure 8. The demand-side management investment in smart grid projects, per organizational type. ICT: information and
communications technology. (From the European Commission Joint Research Centre.)
the cep fosters a fair and cost-reflective consumer interac- consumers) need to be carefully assessed. several r&i proj-
tion with the energy markets via improved billing information, ects address socioregulatory aspects by testing the consumer
certified price-comparison tools, an easier choice of suppliers/ response to information on renewable energy availability (e.g.,
aggregators, the possibility to self-generate, the entitlement to nicegrid) and adopt social comparison strategies for individual
a dynamic price contract, and the installation of a smart meter. user engagement (e.g., intrepid and 3e-Houses).
consumer protection also entails defining clear conditions of ter- local energy communities that manage distribution
mination, duration, price, and the conditions of switching suppli- resources, infrastructure, and services are defined by the
ers. decision makers will need to strike a balance between avoid- cep and open the door to many services and business oppor-
ing situations in which simple consumers pay for the benefits of tunities. they differ from profit-driven energy companies in
the prosumers and that of rewarding active consumers/inves- their value-creation motivation and are entitled to own, estab-
tors who deliver local/systemic benefits to the energy system lish, or lease community networks and autonomously man-
(i.e., via their flexibility potentials). age them. they are expected to access all organized markets,
social acceptance issues as well as the perception of lim- either directly or through aggregators or suppliers.
ited savings out of demand response practices may persist. the regulatory challenge is to reconcile the development of
consumers must be protected from both current actors large energy communities with the reliable and secure opera-
and emerging aggregators, and the benefits/risks linked to tion of the power system. to this end, roles and responsibilities
price volatility with dynamic pricing schemes need to of existing and emerging actors need to be clarified and recon-
be properly explained. Fair and cost-reflective network ciled in a number of areas, including micro-grid management,
charges shall also be applied to users who do not support/ service quality, and flexibility services. How does one ensure
belong to the local energy community but are connected that all of the parties will bear a proportionate cost compared
to the grid operated by such a community. aspects to be to the benefits? an issue for debate involves the payment of
clarified include the definition of cost reflectiveness as well imbalance-induced compensation by the aggregators to the
as the calculation methodologies used for consumer net- suppliers, thus balancing all responsible parties or generators.
work charges and the supplier’s economic loss caused by How small should those payments be to encourage the market
customers switching suppliers, the reward models used for participation of demand response also through the aggrega-
the active participation of citizens/communities in retail tors? How big should they be to ensure that balancing costs
markets, the consumption and generation of measurement and benefits induced by the aggregators are fairly assigned to
modalities, and the merits used for revisiting net-metering/ market participants?
billing practices. examples of r&i pilot studies include market-based energy
the cep reviews the “duly justified exceptions,” which are services and technological solutions for local energy commu-
typically linked to energy, poverty, and vulnerability, and allows nities and smart houses (eMpoWer and smartHouse/smart-
regulators to deviate from market-based retail prices. it also grid), schemes to help dsos operate their grid with higher
makes the public service obligations that Mss may impose on penetration of renewables, and interaction with commer-
energy undertakings more transparent and nondiscriminatory. cial aggregators (Wisegrid and ide4l).
during times of constrained economic development, vul-
nerable consumers—as opposed to the average household Electricity Wholesale Market Challenges
consumers—end up being the most affected by price spikes. the challenges that lie ahead for the european power sys-
consistent definitions of energy poverty and vulnerability are tem, as addressed in the cep, have the wholesale electricity
still absent. eu Mss identify vulnerable consumers by several market at the core of all the main policy objectives, such as
characteristics that may overlap or extend well beyond their decarbonizing the eu energy system, taking stock of tech-
relationships with the power system, including income, age, nology innovations, and further integrating the eu national/
health, social protection, and security. at times, this renders regional energy markets while ensuring competition and
consumer eligibility difficulty to ascertain. cooperation across borders at every relevant timescale.
solutions shall be implemented that enable consumers who While much progress has been made on power transmission
are vulnerable or experience energy poverty to participate in local and the role of the tsos courtesy of the third energy pack-
energy communities. Moreover, the effects of dynamic pricing age, completing the internal energy market remains one of
on certain household categories (i.e., large families or vulnerable the top political priorities of the ec’s current agenda.
I
In thIs artIcle, we gIve
our view of how the U.s. Federal
energy regulatory commission
(Ferc) typically approaches mar-
ket design issues in jurisdictional
wholesale electricity markets in
the United states and identify
three challenges that lie ahead for
these markets. the first challenge
is declining prices in wholesale
electric energy markets, which
can lead to revenue adequacy
issues for some resources. the
second challenge is to ensure that
wholesale electricity markets give
investors the proper incentives to
invest in resources that have the
operational flexibility needed to
©istockphoto.com/nazarkru
Electricity
Commercial Energy
Markets in the
United States
Digital Object Identifier 10.1109/MPE.2018.2872304
Date of publication: 7 January 2019
serve more variable net loads in the future. the third chal- issued a rule to more effectively integrate electric storage
lenge is the interdependence between the natural gas and elec- resources into rtO/IsO markets.
tric industries, which has implications for reliability. as former federal regulators, we are cognizant that
actions by Ferc to require market design changes will result
FERC Background in changes to rtO/IsO priorities. a Ferc-mandated change
Ferc has many responsibilities as a federal regulator, but the can crowd out or delay other market design changes. that
most pertinent to this article is its role as the regulator of the said, some market design changes require Ferc leadership
interstate transmission and sale of wholesale electricity for to be appropriately prioritized. For instance, market design
resale. this role involves reviewing and approving the market changes that have the potential to create clear winners and
rules of six jurisdictional wholesale electricity markets in the losers (e.g., cost allocation issues) may not be amenable to
United states and ensuring that the resulting wholesale rates a stakeholder-driven process typically used to advise rtO/
in those markets are just and reasonable. Many areas related IsO-sponsored market design changes. Ferc can play a role
to electricity service in the United states lie outside of Ferc’s in ensuring that such market design changes are adopted if
jurisdiction and within the purview of state public utility com- the status quo results in unjust or unreasonable rates.
missions; this includes, but is not limited to, the regulation of a variety of factors are relevant when deciding where and
retail electric and natural gas rates, the approval of the con- how to act. at the highest level, a market design ideally creates
struction of electric generation facilities, and overseeing reli- incentives for resources to meet system needs during the oper-
ability issues related to electric distribution systems. ating horizon and invest in enhanced performance during the
the six Ferc jurisdictional wholesale electricity mar- planning horizon. Furthermore, one key advantage of rtO/
kets in the United states are IsO markets is the transparency of market outcomes and the
✔ california Independent system Operator corporation operational decisions that drive those outcomes. Ideally, mar-
(caIsO) ket design changes enhance rather than introduce regulatory
✔ Midconti nent Independent system Operator, Inc. certainty and remain robust under a variety of future condi-
(MIsO) tions. this can mean initiating action when a trend is emerg-
✔ IsO new england, Inc. (IsO-ne) ing but before it has a material impact on market outcomes in
✔ new York Independent system Operator, Inc. (nYIsO) rtOs/IsOs. Finally, one needs to consider the complexity of
✔ PJM Interconnection, llc (PJM) any proposed market design. rtO/IsO markets are inherently
✔ southwest Power Pool, Inc. (sPP). complex, which has the potential to make it more difficult for
these markets are operated by regional transmission orga- market participants to understand market outcomes and asso-
nizations (rtOs) and independent system operators (IsOs). ciated value propositions. It can also make it more difficult for
Ferc approves the rules of the markets operated by the six rtOs/IsOs, regulators, and stakeholders to evaluate how well
jurisdictional rtOs/IsOs, which include markets for energy, a particular market design is functioning.
ancillary services, capacity, and financial transmission rights. On the basis of our experience, generic actions directed
all six operate energy, ancillary services, and financial trans- by Ferc are based on a methodical and evidence-based
mission rights markets, but only four (IsO-ne, MIsO, nYIsO, approach to address rtO/IsO market design issues. we view
and PJM) operate centralized capacity markets. this as a three-step approach:
Ferc has historically promoted market-based outcomes 1) define a problem
for wholesale electricity on the grounds that competition is 2) develop and analyze record evidence
a means to create just and reasonable rates. For example, in 3) identify a just and reasonable solution.
1996, Ferc issued Order 888, which promoted competition Ferc often uses this approach when it proposes new rule-
through open-access nondiscriminatory transmission ser- making, which may result in a final rule, and when it investi-
vices. In 1999, Ferc issued Order 2000, which advanced the gates market design issues in other proceedings.
formation of rtOs/IsOs and codified their minimum char- the problem definition step is critical because it lays the
acteristics and functions. Ferc is also in a unique position foundation for the inquiry that occurs in step two and the sub-
to identify market design issues across rtOs/IsOs, such as sequent solution in step three. the second step is to develop
barriers and inefficiencies that may arise with new resource a record of evidence that the commission will rely upon in
or technology types. For example, in February 2018, Ferc its decision making. rtO/IsO stakeholders (e.g., rtO/IsO
New
England
Southeast
100 10
ERCOT
80 8
figure 1. The average wholesale electric costs between 2002 and 2016. (Source: U.S. Department of Energy, “Staff
Report to the Secretary on Electricity Markets and Reliability,” Figure 6.2.)
80
Intervals on the Margin (%)
60
40
20
0
Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 2016 2017 2018
2016 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 Winter
figure 2. The SPP generation technology on the margin in the real-time electricity market. (Source: SPP Market Monitor-
ing Unit, “Winter 2018 State of the Market Report,” Figure 3-7, used with permission.)
Mid-Atlantic
≤50 MW 96 GW, 2016
>50 MW 50 GW, Planned
>100 MW
>200 MW
>400 MW
figure 4. The North American Electric Reliability Corporation-identified natural gas generation clusters of at least 2 GW
that are vulnerable to a natural gas supply disruption. (Source: North American Electric Reliability Corporation, “Special
Reliability Assessment: Potential Bulk Power System Impacts due to Severe Disruptions on the Natural Gas System,”
Figure 5.1. This information from the North American Electric Reliability Corporation’s website is the property of the
North American Electric Reliability Corporation.)
investments that match the value consumers place on avoiding energy, washington, D.c., aug. 2017. [Online]. avail-
the operational or cost concerns associated with the lack of natu- able: https://www.energy.gov/sites/prod/files/2017/08/f36/
ral gas-fired generation. resolving this issue will also require staff%20report%20on%20electricity%20Markets%20
Ferc, rtOs/IsOs, and other stakeholders to develop solutions and%20reliability_0.pdf
that both preserve reliability while at the same time minimizing energy Information administration, “2018 annual energy
the costs to consumers in rtOs/IsOs. outlook,” U.s. Department of energy, washington, D.c., Feb.
2018. [Online]. available: http://www.eia.gov/outlooks/aeo
Acknowledgments north american electric reliability corporation, “spe-
the opinions and views offered here are those of the authors, cial reliability assessment: Potential bulk power system im-
and not necessarily those of the United states, the Federal pacts due to severe disruptions on the natural gas system,”
energy regulatory commission, the individual commis- north american electric reliability corporation, atlanta,
sioners, or members of the commission staff. ga, nov. 2017. [Online]. available: httpps://www.nerc.com/
pa/raPa/ra/reliability%20assessments%20Dl/nerc_
For Further Reading sPOD_11142017_Final.pdf
Federal energy regulatory commission, “electric storage par-
ticipation in markets operated by regional transmission organiza- Biographies
tions and independent system operators,” Federal energy regu- Emma Nicholson is with the concentric energy advisors,
latory commission, washington, D.c., Order 841, Feb. 15, 2018. Inc., washington, D.c.
U.s. Department of energy, “staff report to the secretary Arnie Quinn is with vistra energy, washington, D.c.
p&e
on electricity markets and reliability,” U.s. Department of
By Benjamin F. Hobbs
and Shmuel S. Oren
©istockphoto.com/siberianart
Three Waves of
U.S. Reforms
N
New geNeratioN, storage, demaNd maNagemeNt, aNd smart
Following grid technologies have the potential to make the grid of 2050 very different from
today’s power system. Can market designers keep up, and what do they need
the Path of to pay attention to now? Before offering a few answers to these questions, we first
give some historical perspective on the creation of markets for electric power and
Wholesale how those markets have been adapted to new needs.
the power industry is now undergoing dramatic changes, following many
Electricity transitions that we have already experienced. in the 1960s, nearly all power was
provided by vertically integrated utilities. they confidently planned ever-larger
Market coal and nuclear generators (including floating nuclear plants), whose prudently
incurred costs would be guaranteed by ratepayers. at least one industry group
Restructuring concluded that its greatest environmental challenge was the ugliness of overhead
distribution lines; climate change meant global cooling and was irrelevant to plan-
ners and regulators.
all of that has now changed beyond recognition in most (but not all) of the
world. Future changes in the industry will differ in type but not in magnitude
Digital Object Identifier 10.1109/MPE.2018.2873952
from those past changes. if market designs adhere to the principles of open access,
Date of publication: 7 January 2019 technology neutrality, recognition of network realities, and financial rewards for
radical changes in the industry—but in a very different way, the states facilitated through their unbundling and divestment
as we explain later. actions. in december 1999, FerC issued order 2000, which
explicitly encourages the establishment of regional transmis-
Genesis of the Second Wave sion organizations (rtos) to facilitate markets and further the
in the 1990s, the enthusiasm of many states for restructuring goals of order 888. some of those rtos have since become
was fed by overestimated savings from competition; opti- full-fledged independent system operators (isos) that oper-
mistic projections of the competitiveness of new, cleaner ate day-ahead and real-time electricity spot markets, although
technology; and the prospect that the some of the benefits many parts of the country honor order 888 simply by com-
of competition could be tapped for popular programs sub- plying with rules requiring nondiscriminatory access to their
sidizing energy efficiency and renewable technology. the transmission facilities.
belief that restructuring was a cornucopia to benefit every-
one was epitomized by the unanimous vote of the Califor- The First Wave Disappoints:
nia assembly in favor of assembly Bill 1890 in 1996, the Genesis of the Second Wave
electricity restructuring act. other states quickly followed
suit. within the next few years, nearly half of the states had The California Crisis
passed laws or instituted regulations to restructure the power the 2000–2001 California crisis, however, stopped state
industry. many of those states intended to allow retail access restructuring efforts in their tracks. the causes of the crisis
for all customers, optimistically anticipating wide participa- have been chronicled and debated extensively in this maga-
tion and dramatic cost savings. these state actions were fol- zine. we believe that the problems arose, first, from an exer-
lowed in many cases, most notably in California, by wide- cise of market power right out of an economics 101 class—
spread voluntary or forced divestment of generation assets the withdrawal of supply to push up prices. this exercise was
by the former monopoly utilities. facilitated by supply problems, such as drought, a natural gas
Unfortunately, if such a dramatic change to an industry compressor explosion, and kelp sucked into a nuclear station’s
is favored by everyone, at least some people must be overly cooling system and was also enabled by state regulators who
optimistic about the benefits they will receive. any such actively discouraged forward contracting.
change, even if it improves efficiency and lowers prices, will second, the market design also disregarded important phys-
inevitably produce some losers as well as winners, which, in ical characteristics of electricity. these naïve designs included
fact, became apparent later. Furthermore, as many industry the definition of uniform pricing zones in the day-ahead market
writers warned at the time, the technical intricacies of power that ignored local transmission congestion. as a result, opera-
systems meant that creating a market for power would not tors had to scramble to resolve congestion in real time, endan-
be nearly as easy as for much simpler systems. the inspira- gering reliability and exacerbating local market power.
tion provided by the successful creation or restructuring of another issue was the creation of isolated day-ahead and
markets for simple commodities, such as the 1990 Clean real-time markets for energy and operating reserves that over-
air act’s continent-scale pollution-trading scheme, was, in looked their strong interconnections. enron and other mar-
part, misleading. ket parties resorted to disguising actions or outright lying to
at the same time that states were acting, the Federal arbitrage between those markets. such arbitrage is, in fact, an
energy regulatory Commission (FerC) also moved the essential function in all other markets and arguably improved
restructuring agenda forward. in april 1996, it adopted order rather than harmed power market functioning at the time.
888, which was intended to “remove impediments to competi- there was also the failure to promote forward contract-
tion in the wholesale bulk power marketplace and to bring more ing, which enabled any exercise of market power to immedi-
efficient, lower cost power to the Nation’s electricity consum- ately benefit the whole portfolio of a company’s generators.
ers.” all public utilities that owned assets transmitting electric- the consequences of poor market designs and market power
ity in interstate commerce had to allow market parties to use were unambiguous: rolling blackouts, a threefold increase in
their facilities on a nondiscriminatory basis, based on published wholesale power costs, and loss of public confidence in the
transmission tariffs. making the high-voltage grid available ability of restructuring to deliver lower costs. since the cri-
to all comers would, it was hoped, facilitate the states’ retail sis, no additional states have joined the original 23 to allow
markets and give access to the independent generators that for retail choice in their electricity markets, and, of those 23,
23,500
model energy markets (Hogan, 1992).
everyone also learned from the California debacle that 22,500
markets should not be arbitrarily isolated and that arbitrage 21,500
is important for improving efficiency, providing informa- 20,500
tion, and making it harder to exercise market power. one 19,500
response is to design markets so that energy and ancillary 18,500
service interdependencies are recognized; this is now done 17,500
by cooptimizing those markets, committing resources to
0:00
6:00
12:00
18:00
24:00
60
charges for new rooftop solar installations. Nevada went even
further along that path by retroactively changing the terms 50
originally offered to customers with rooftop solar installa- 40
tions. these moves were fought in the political arena by the 30
rooftop solar power industry. 20
while net metering may distort economic incentives in
10
favor of rooftop solar installations, it should be noted that cen-
0
tralized PV solar power is becoming increasingly competitive, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
and the U.s. department of energy has recently announced Year
that centralized PV solar installations have reached long-term
costs of Us$0.06/kwh. Consistent with that, in israel, the figure 2. The collapse of the German wholesale market.
Public Utility authority has recently signed a 20-year supply (Data from energy-charts.de.)
30
25 Distributed Solar
Utility-Scale Solar
Energy (GWh)
20
Imports
15 Other Renewables
Thermal
10
Nuclear
5 Hydroelectric
0
0 2 4 6 8 10 12 14 16 18 20 22 24
Hour of the Day
(a)
Cost of Energy ($/MWh)
60
40 Real-Time
Average
20
Hourly
0 Price
–20
0 2 4 6 8 10 12 14 16 18 20 22 24
Hour of the Day
(b)
figure 3. An illustration of (a) the California ISO net generation duck curve and (b) negative wholesale prices, both for 11
March 2017. (Note: Distributed solar generation is estimated based on December 2016 installed net-metered capacity as
reported in form EIA-826, Monthly Electric Utility Sales and Revenue Report with State Distributions, U.S. Energy Informa-
tion Administration.)
Field Results
Figure 4 outlines the time line and pur-
poses of the three field trips to Puerto rico.
figure 2. The devastation caused by Hurricane Maria in Puerto Rico. (Photos courtesy of the University of Washington,
used with permission.)
figure 3. Some of the PV-battery systems installed in Puerto Rico by researchers at the University of Washington in
Seattle. (Photos courtesy of the University of Washington, used with permission.)
because these systems were sized from inaccurate load pro- Analysis of Field Data
files based on the limited information collected during the We choose to analyze the six households that received type
first field trip, some of them were undersized. although we a PV-battery systems because they were the only systems
encouraged the users to try not to discharge the batteries below equipped with data loggers that could record all of the nec-
recommended safety limits to maximize battery life, some bat- essary data. systems in five other households recorded only
teries degraded prematurely because of excessive depth of the load profiles.
discharge (DoD).
Energy Consumption and Generation
Third Field Trip: Data Collection and Analysis Figure 6 shows the total daily energy consumption and PV
the purpose of the third trip was to obtain the data col- generation over 47 days for six households where type a PV-
lected by the data loggers in the installed PV-battery sys- battery systems were installed. the energy-use pattern for
tems. satisfaction surveys were also administered to gauge household 6 is similar to the PV generation pattern, which
user experience and perceptions of solar energy as a form shows that users managed to consume the PV generation on
of emergency energy supply. these quantitative and quali- the same day. this energy-consumption pattern contributed to
tative data are analyzed in the next section. keeping the battery in good condition. another important
2 2
1.5 1.5
1 1
0.5 0.5
0 0
5 10 15 20 25 30 35 40 45 5 10 15 20 25 30 35 40 45
Days Days Stopped Using the Load
(a) (b) Logger but Continued to
Use the System
Electrical Energy (kWh)
2 2
1.5 1.5
Got Electricity Back,
1 1 So Stopped Using the
0.5 0.5 System and Load Logger
0 0
5 10 15 20 25 30 35 40 45 5 10 15 20 25 30 35 40 45
Days Days
(c) (d)
2 2
1.5 Got Electricity Back 1.5
1 Started Using Stopped Using 1
the Load the Load Logger
0.5 Logger Late 0.5
0 0
5 10 15 20 25 30 35 40 45 5 10 15 20 25 30 35 40 45
Days Days
(e) (f)
PV Output Load
figure 6. The total daily load and PV output for six households over 47 days. Households (a) 1, (b) 2, (c) 3, (d) 4, (e) 5, and
(f) 6. The load was measured after the inverter.
finding is that households 4 and 5 stopped using the systems load measured corresponds to different devices specific to
after they regained grid power within one month after instal- each household connected at each moment. For example,
lation, whereas the other users continued to use the systems household 1 used the system to power a refrigerator (~150 W)
throughout the whole period. from 7 a.m. to 3 p.m., an entertainment system (~375 W)
for periods of an hour at a time, and a nebulizer (23–52 W)
Load Profiles a few times a day for 45 min. Households 1–6 used most of
Figure 7 illustrates the load profiles for the days with the their devices during the day when there was sun to maxi-
highest energy consumption for eight households. the mize battery life. nevertheless, they used the battery when
600 200
Entertainment System Refrigerator
150
400
TV
Refrigerator 100
Nebulizer
200 50
0 0
4 8 12 16 20 24 4 8 12 16 20 24
Time Time
(a) (b)
600 600
400 Refrigerator 400 Refrigerator
200 200
Electrical Power (W)
0 0
4 8 12 16 20 24 4 8 12 16 20 24
Time Time
(c) (d)
400 200
300 150
Nebulizer
200 Refrigerator 100
100 50
0 0
4 8 12 16 20 24 4 8 12 16 20 24
Time Time
(e) (f)
100 8
Small Refrigerator PEG Patient
6
50 4
2
Feeding Machine Electrical Bed
0 0
4 8 12 16 20 24 4 8 12 16 20 24
Time Time
(g) (h)
figure 7. The electrical load profiles of eight different households over one to three days. Households (a) 1, (b) 2, (c) 3, (d)
4, (e) 5, (f) 6, (g) 7, and (h) 8. The load profiles consist of all of the critical devices; however, we were able to identify some
of these devices through interviews, as noted in the figure.
consumption was greater than PV generation, thereby be inevitable, because critical needs might not occur during the
increasing battery degradation. the PV systems given to daylight hours when PV generation is sufficient. We were able
households 1–6 are rated at only 260 W. to confirm during the third field trip that the lead-acid battery of
the days with the highest consumption from Figure 7 household 6 was still in excellent condition, but the residents of
are used to construct the critical load percentages shown household 2 said that their battery was not performing as well as
in table 3. For households 1 and 2, the critical loads repre- it did originally.
sent 17.2 and 15.4%, respectively, of the average daily load because a battery’s temperature also affects its useful life, the
before the hurricane. this information was obtained from data loggers recorded battery temperature. as Figure 8(b) shows,
electricity bills dated before the hurricane. unfortunately, even though Puerto rico has a tropical climate, the battery
it was not possible to obtain the loads before the hurri- temperatures generally remained within the expected limit of
cane for some households. these percentages can be used 20−25 °c, with the exception of the battery of household 5, where
to create critical load profiles for other households in the the temperature increased up to 30 °c. a possible explanation
future when designing microgrid systems for resilience. is that the household 5 is at a lower elevation than the others.
200 32
Battery Temperature (°C)
26
100 24
22
50 Households: 1 2 3
20
4 5 6
0 18
1 2 3 4 5 6 10 20 30 40 50 60 70 80 90 100
Households Days
(a) (b)
figure 8. The battery operation for six households over 105 days: (a) the number of battery cycles above and below 50%
DoD and (b) the average daily battery temperature.
more comfortable using a PV-battery system. the household batteries are assumed to last 200 cycles when the DoD is
that answered “same” is household 4, in which electricity was above 50% and 500 cycles when the DoD is below 50%.
restored within 18 days (Figure 6). eleven households had used table 5 summarizes the operation of different combina-
a generator before, and nine of the 11 that were actively using tions of battery and PV ratings for each case. in particular, it
or had previously used a diesel/gas generator mentioned that shows how much energy would be produced and consumed
the PV-battery system improved their health. one household and how many charge/discharge cycles the battery would
was unfortunately provided with a defective commercial solar undergo in one, three, five, and ten years. the last four col-
generator system that quickly broke down. they were given a umns indicate the cost of each PV battery combination (capi-
replacement for use in future emergencies, but they gave our tal cost), including battery replacement costs (maintenance
survey a low rating based on their experience. cost), for a lifetime of one, three, five, and ten years. the cost
of a system depends more on the number of battery replace-
Simulation Results and Discussion ments needed than on duration of the system. in some cases,
a linear optimization method was used to minimize PV-bat- the cost is the same for initial installations of larger batteries
tery system costs that are able to supply critical loads for a year versus smaller ones that need replacing because of more fre-
considering PV and demand variations. battery degradation cost quent, deeper DoD operations.
over the lifetime of these systems was considered when choosing the systems designed for cases a, b, and c provide
the optimal design. We consider the following scenarios: some guidelines regarding the sizing of PV-battery sys-
✔ case a involves household 1’s critical load profile as illus- tems for emergencies. Figure 9(a) shows how the optimal
trated in Figure 7(a) and includes an efficiently managed battery capacity decreases as the PV rating increases for
refrigerator, a nebulizer, and an entertainment system. case a’s system. because we are interested only in the
✔ case b represents a household with a PeG patient and minimum battery capacity required to provide continuous
a small refrigerator. the critical load profile is a com- power to critical loads, extra PV generation is curtailed
bination of Figure 7(g) and (h). to avoid having to increase the battery size. Figure 9(b) shows
✔ case c is a household with a sleep apnea patient. the that, because the unit cost of batteries (us$192/kWh for
critical loads include the cPaP machine, a refrigera- lead-acid batteries and us$800/kWh for lithium-ion bat-
tor, and a small tV. the critical load profile for this teries) is much higher than the per-unit cost of PV gen-
scenario was created using the data in table 1. eration (us$1.5/W), the cost of the system decreases with
✔ case D has the largest critical load, which consists of decreasing battery size, even though the required PV rat-
a continuously running oxygen concentrator, a refrig- ing increases.
erator, and a large tV. using lead-acid batteries leads to the lowest cost systems for
an interesting finding was that tV was critical to most fami- cases a, b, and c for up to a three-year system life because,
lies because it was a distraction from their current difficulties, although lithium-ion batteries can be discharged completely and
was a source of entertainment, and provided information cru- therefore have a smaller rating, their cost is still much higher. in
cial to their well-being. particular, a system that lets lead-acid batteries discharge com-
PV output data for the optimizations are from the national pletely to meet critical loads is the least expensive solution
renewable energy Laboratory’s PVwatts calculator. Lead-acid for a one-year system life because such a system is effectively
sized to minimize the number of
table 4. A summary of survey results. battery cycles. When the expected
system lifetime increases, limit-
Solar Generator Same
ing the lead-acid battery to 50%
Do you prefer solar or generator? 100% (15) 0% 0% DoD is more economical because
Which are you most comfortable using? 93% (14) 0% 6.7% (one) it reduces the required number of
Yes No bat tery replacements.
on the other hand, case D re-
Did you have a generator before? 11 Four —
quires such a large system that it
If yes, did solar improve your health? 82% (nine) 9% (one) 9% (one)
would probably be economically
12 4k
Battery Capacity (kWh)
Case A
10
3k
8
Cost (US$)
6 2k
4
1k
2
0 0
0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2
PV System Size (kWp) PV System Size (kWp)
(a) (b)
Lithium Ion (100% DoD) Lead Acid (100% DoD) Lead Acid (50% DoD)
figure 9. (a) The minimum battery capacity required to power critical loads over a year for case A as a function of the PV
rating. (b) The total system cost as a function of the PV rating.
M
MeMbers of the Ieee Power the week’s events kicked off at the
& energy society (Pes) and other in- oregon Museum of science and Indus-
dustry enthusiasts came together for the try (oMsI) with a delicious cat ere d
Pes General Meeting 5–9 August 2018. welcome reception, where friends old
More than 3,200 attendees converged and new were united. the oMsI had
on Portland, oregon, for new insights, many interesting exhibits that captured
innovative ideas, and answers to some the imaginations of attendees. As luck
of the most intriguing and important would have it, the premier attraction
questions facing the power industry today. was the robot revolution, a display that
During the course of the week, members demonstrated how, in the near future,
were able to attend informational, techni- robots will become our companions and
cal, and tutorial sessions; committee and colleagues—changing the way we play,
working group meetings; poster sessions; live, and work together.
a job fair; networking events; tours of tech- the following morning, the all-im-
nical facilities; and companion activities. portant Members’ Meeting featured an
As they say, “You can, in Portland,” and update on society activities from Pes
we certainly did! whether it was enjoying President saifur rahman, including a
Portland’s eclectic visual arts scene, great new interactive portion where attend-
meals from hundreds of food carts, or fan- ees were able to respond to questions in
tastic tax-free vintage shopping, Portland real time and help drive the conversa-
provided a truly unique environment for tion toward their interests.
this year’s conference. At the Plenary session, hosted by
richard Goddard of the host utility Port- PES President Saifur Rahman explains
Digital Object Identifier 10.1109/MPE.2018.2877915
land General electric, attendees were the new interactive portion of the
Date of publication: 7 January 2019 officially welcomed to Portland and opening session.
The plenary session panel discussed shifting trends in the electric industry.
shifting trends in the electric industry ✔ Larry bekkedahl, vice president, timely and emerging topics were ex-
were discussed as well as strategy im- transmission and Distribution, plored in various session formats during
plications. six speakers from an interna- Portland General electric the week, including the highly attended
tional cross section of organizations deal- ✔ Peter Jørgensen, vice president, super sessions, where topics closely fol-
ing with diverse aspects of technology and Associated Activities, energinet lowed this year’s theme of reimagining
energy integration provided insight into ✔ Mark Ahlstrom, vice president, the electric grid:
initiatives that are currently underway renewable energy Policy, Nextera ✔ data science and data quality as
and their visions of the future. the excit- ✔ heather rosentrater, vice president, applied to power systems
ing lineup of participants included energy Delivery, Avista Corp. ✔ lower inertia and weaker grids
✔ Maria Pope, president and chief ✔ David Danner, chair, washing- ✔ new application of technology in
executive officer, Portland Gen- ton Utilities and transporta- the power industry
eral electric tion Commission. ✔ emergency response.
PES meetings
for more information, www.ieee-pes.org
T
T H E I E E E P ow E r & E n E rg y May 2019 IEEE Electric Ship Technologies
Society’s (PES’s) website (http://www IEEE International Con ference Symposium (ESTS 2019), 13–16 Au-
.ieee-pes.org) features a meetings sec- on Electrical Machines and Drives gust, washington, D.C., United States,
tion, which includes calls for papers (IEMDC 2019), 11–15 May, San Di- contact Scott Sudhoff, sudhoff@purdue
and additional information about each ego, California, United States, contact .edu, https://ests19.mit.edu/
of the PES-sponsored meetings. Avoki omekanda, avoki.omekanda@
ieee.org, http://iemdc.org/ September 2019
January 2019 IEEE PES Innovative Smart Grid
IEEE PES 201 Joint Technical Com- IEEE PES Innovative Smart Grid Technologies Latin America (ISGT LA
mittee Meeting (JTCM 2019), 13–17 Technologies Asia (ISGT Asia 2019), 2019), 15–18 September, gramado, Bra-
January, orange County, California, 21–24 May, Chengdu, China, contact zil, contact gabriel Arguello, garguello@
United States, contact Solveig ward, Qi Huang, hwong@uestc.edu.cn, http:// cenace.org.ec, http://ieee-isgt-latam.org/
sward@quanta-technology.com, www sites.ieee.org/isgt-asia-2019/
.pestechnical.org I EEE PE S Innovative Smart Grid
June 2019 Technologies Europe (ISGT Europe
February 2019 14th International Conference on 2019), 29 September–2 october, Bu-
IEEE PES Innovative Smart Grid Transmission and Distribution Con- charest, romania, contact george Cris-
Technologies (ISGT 2019), 18–21 struction, Operation and Live-Line tian Lazaroiu, cristian.lazaroiu@upb.ro,
February, washington, D.C., United Maintenance (ESMO 2019), 24–27 http://sites.ieee.org/isgt-europe-2019/
States, contact 2019ISgT@ieee.org, June, Columbus, ohio, United States,
http://ieee-isgt.org/ contact Eriks Surmanis, e.surmanis@ December 2019
pdc-cables.com, http://ieee-esmo.com/ IEEE PES Asia-Pacific Power and
March 2019 Energy Engineering Conference
IEEE PES GTD Grand Internation- IEEE PowerTech Milan (PowerTech (APPEEC 2019), 1–4 December, Macao,
al Conference and Exposition Asia 2019), 23–27 June, Milan, Italy, contact China, contact Man-Chung wong,
2019 (GTD Asia 2019), 20–23 March, Federica Foiadelli, federica.foiadelli@ cmwong@umac.mo
Bangkok, Thailand, contact nopbhorn polimi.it, http://ieee-powertech.org/
Leeprechanon, nopbhorn@engr.tu.ac
.th, http://www.ieeegt-d.org/ August 2019
IEEE PES General Meeting (GM 2019),
4–8 August, Atlanta, georgia, United States,
Digital Object Identifier 10.1109/MPE.2018.2873954
contact Matt Stryjewski, matthew.stry
p&e
Date of publication: 7 January 2019 jewski@ieee.org, http://pes-gm.org/2019/
problem and the search for alternatives, run operating costs, will be replaced by is fully utilized, the price rises to limit
usually some form of long-term capac- capital-intensive but low or zero-vari- demand. In these periods, the short-run
ity payment, to restore the economics of able-cost resources. Distributed demand price is entirely determined by the scar-
investment. These alternative approaches participation will be evermore impor- city value. But in all other respects, the
typically postulated some traditional tant in managing overall system balance analysis of basic principles is the same
generating-capacity type to serve as the and security. The result will be a much as it is for the Figure 1. The dispatch
benchmark for the cost of new entry to less important role for spot markets and quantity changes over time, but the spot
identify and pay the missing money. the associated spot locational marginal price is always equal to the short-run
The early and growing penetration prices. So the argument goes that new variable cost, including the marginal
of renewables has been driven by man- revenue models will be required, and cost of scarcity. Efficient spot prices are
dates and subsidies. At some point, the the fundamentals of the basic electricity part of the solution derived from basic
likely importance of these top-down ap- market will have to change. principles. And with greater reliance
proaches will diminish for at least one Despite the appeal of this logic, it de- on zero-variable-cost resources that can
of two reasons. The cost of the subsidies pends on implicit assumptions that are change availability over short horizons,
and mandates will be too great, and the incorrect and point in the wrong direc- the scarcity component of spot pricing
political economy will shift away from tion for market reform. One implicit as- becomes even more important. In the
this approach. Or the cost of renewables sumption is that the basic analysis cannot extreme case, scarcity pricing is the only
will decline to the point where they are accommodate a world with a large frac- short-run incentive that matters.
fully economic without the mandates and tion of energy supplied by zero-variable- Another implicit assumption of the
subsidies, which will then atrophy and cost renewable energy. The argument is flawed argument is that demand partici-
disappear. The interesting questions that zero-variable-cost supply will pro- pation can be managed without efficient
are how can economically efficient re- duce low spot prices that could never pricing mechanisms. Under the current
newables alter the fundamentals and how support efficient investment. supply configuration with large thermal
will this dictate changes in the basics of The flaw in the argument is revealed generators, it is possible to imagine cen-
efficient electricity market design? by looking again at the implied spot tralized control without the benefits of
Going forward, the increasing role market. Consider the extreme case in spot prices. But even for the present case,
of intermittent renewables and the tech- Figure 2. The short-run supply curve, it is commonplace for system operators
nological potential of distributed energy or dispatch stack, is now replaced with to observe how much better the system
resources, especially including demand a green supply that is completely zero- works when locational prices provide the
participation, might seem to turn over variable-cost renewables. In most hours, right incentives and reinforce the choic-
the assumptions of 30 years ago and the implied efficient price is zero, and es of economic dispatch. Moving to a
call for an entirely new approach. From demand participation would expand to greater reliance on distributed resources
this perspective, large-scale thermal take advantage of the free energy. In (many and small) and demand participa-
generation, with relatively high short- some hours, when the available capacity tors (many and small) leads inexorably
to a greater need to have real-time spot
prices that send the right price signals.
Short-Run Electricity Market The central control of distributed re-
with Zero Marginal Cost Renewables
sources would not be feasible, and prices
Short-Run must provide the needed incentives. Fail-
Marginal ure to provide the right price signals will
Price at Cost
lead to distributed decisions that would
Energy Price (¢/kWh)
7–7:30 p.m.
undermine efficient operations.
Hence, the increased arrival of renew-
ables and a greater reliance on distributed
Scarcity Price
10 Years of ISGT!
Innovation for a Flexible and Resilient Grid
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2019 Innovative Smart Grid Technologies (ISGT 2019)
18-21 February 2019 | Grand Hyatt Washington, Washington DC
Join experts from around the world as we gather at the ISGT North America Conference to
share experiences and lessons learned, and to raise awareness and understanding of the latest
concepts, applications, and technologies.
ISGT 2019 provides a forum to discuss the latest issues, trends, and emerging and innovative
technologies for grid modernization in the face of challenges of a rapidly changing environment
resulting from the dramatic increase in deployments of renewable and Distributed Energy
Resources (DERs) and the emergence of new business and operating concepts and services.
The topics discovered include prosumers, microgrids, aggregators, distribution markets, and
platforms for the generation, commercialization, and management of electricity.
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Digital Object Identifier 10.1109/MPE.2018.2885098
in my view
William W. Hogan
O
ORGANIzED WHOLESALE ELEC-
Short-Run Electricity Market
tricity markets in the United States fol-
low the principles of bid-based, securi- Short-Run
ty-constrained, economic dispatch with Marginal
Price at Cost
locational marginal prices. The basic
7–7:30 p.m.
Energy Price (¢/kWh)
siemens.com/electrical-digital-twin
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