Advertisement

Electricity Markets and Their Implications

  • Mário Gomes
  • Paulo Coelho
  • José Fernandes
Chapter

Abstract

In almost all countries, electricity reform has been a part of wider policies towards a liberal market economy. The former vertically integrated electricity utilities were restructured and unbundled by a reform process that introduced competition into generation, wholesale, and retail segments of the industry. The transmission and distribution businesses that were either regional or national monopolies have been subjected to regulation by an independent regulator. Other common elements of the reforms include the introduction of wholesale and spot power markets, the establishment of impartial market and system operators, the removal of restrictions on third party access to grids and, in some cases, privatization.

When talking about electricity markets one usually refers to active power markets paying less attention to ancillary services, namely to reactive power/voltage control. This usually leads to a chronological sequence of activities that may lead to inefficiencies because active and reactive powers are coupled given the capability diagram of synchronous generators, the AC power flow equations and the branch thermal limits.

The operational impacts of intermittent generation related to renewable resources show the multiple challenges that most power systems have to face. This is already noticeable in countries that currently have a large penetration of wind and solar production. While microgrids can be a source of renewable and reliable energy for utility distribution systems, significant challenges exist in stable operation and meeting the economic goals of the microgrid owners.

Thus, microgrids represent a new paradigm for the operation of distribution systems and there are several advantages as well as challenges regarding their development. One of the advantages is related to the participation of microgrid agents in electricity markets and in the provision of ancillary services.

In this chapter we describe an optimization model to allocate ancillary services among microgrid agents. The ancillary services are reactive power/voltage control, active loss balancing, and demand interruption. This model assumes that microgrid agents participate in the day-ahead market by sending their bids to the microgrid central controller (MGCC) that acts as an interface with the market operator. Once the market operator returns the economic dispatch of the microgrid agents, the MGCC checks its technical feasibility (namely voltage magnitude and branch flow limits) and activates an adjustment market to change the initial schedule and to allocate ancillary services. The model admits that voltage and branch flow limits are modeled in a soft way using fuzzy set concepts.

Keywords

Electricity markets Ancillary services Intermittency Microgrids Model design 

Notes

Acknowledgement

This work was partially supported by the Portuguese Foundation for Science and Technology (FCT) and by PIDDAC, under the research project INDuGRID-ERANETLAC/0006/2014.

References

  1. 1.
    Shen, D., & Yang, Q. (2012). Electricity market regulatory reform and competition—Case study of the New Zealand Electricity Market. In Y. Wu, X. Shi, & F. Kimura (Eds.), Energy Market Integration in East Asia: Theories, electricity sector and subsidies, ERIA Research Project Report 2011-17 (pp. 103–139). ERIA: Jakarta.Google Scholar
  2. 2.
    Bushnell, J., Mansur, E. T., & Saravia, C. (2008). Vertical arrangements, market structure, and competition: An analysis of restructured US electricity markets. American Economic Review, 98(1), 237–266.CrossRefGoogle Scholar
  3. 3.
    Meyer, R. (2012). Economies of scope in electricity supply and the costs of vertical separation for different unbundling scenarios. Journal of Regulatory Economics, 42(1), 95–114.CrossRefGoogle Scholar
  4. 4.
    Joskow, P. (2006). Introduction to electricity sector liberalization: Lessons learned from cross country studies. In F. P. Sioshansi & W. Pfaffenberger (Eds.), Electricity market reform: An international perspective. Oxford: Elsevier.Google Scholar
  5. 5.
    Hogan, S., & Meade, R. (2007). Vertical integration and market power in electricity markets. ISCR Working Paper 1 May. Wellington: ISCR.Google Scholar
  6. 6.
    Pollitt, M. (2009). Electricity liberalization in the European Union: A progress report, Electricity Policy Research Group Working Paper 0929. Cambridge: Cambridge University.Google Scholar
  7. 7.
    Long, C., Wu, J., Zhang, C., Cheng, M., & Al-Wakeel, A. (2017). Feasibility of peer-to-peer energy trading in low voltage electrical distribution networks. Elsevier, Energy Procedia, 105, 2227–2232.CrossRefGoogle Scholar
  8. 8.
    Zhang, C., Wu, J., Cheng, M., Zhou, Y., & Long, C. (2016). A bidding system for peer-to-peer energy trading in a grid-connected microgrid. Energy Procedia, 103, 147–152.CrossRefGoogle Scholar
  9. 9.
    Erdogdu, E. (2013, August). Electricity market reform: Lessons for developing countries (PhD thesis, University of Cambridge, UK).Google Scholar
  10. 10.
    Defeuilley, C. (2009). Retail competition in electricity markets. Energy Policy, 37, 377–386.CrossRefGoogle Scholar
  11. 11.
    Fiorio, C. V., Florio, M., & Doronzo, R. (2007). The Electricity Industry Reform Paradigm in the European Union: Testing the impact on consumers. In Consumers and Utility Reforms in the European Union Conference, June 8-9, Milan.Google Scholar
  12. 12.
    Joskow, P. L. (2008). Lessons learned from electricity market liberalization. Energy Journal, 29(1), 9–42 Special Issue.CrossRefGoogle Scholar
  13. 13.
    Nagayama, H. (2009). Electric power sector reform liberalization models and electric power prices in developing countries: An empirical analysis using international panel data. Energy Economics, 31, 463–472.CrossRefGoogle Scholar
  14. 14.
    Zhang, Y.-F., Parker, D., & Kirkpatrick, C. (2008). Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation. Journal of Regulatory Economics, 33, 159–178.CrossRefGoogle Scholar
  15. 15.
    Sioshansi, F. P. (2008). Electricity market reform and ‘reform of the reforms’. International Journal of Global Energy Issues, 29, 3–27.CrossRefGoogle Scholar
  16. 16.
    ERCOT. (2005). The Market Guide. An introductory guide to how the Electric Reliability Council of Texas (ERCOT) facilitates the competitive power market. ERCOT the Texas Connection.Google Scholar
  17. 17.
    Perez-Arriaga, I. J., & Batlle, C. (2012). Impacts of intermittent renewables on electricity generation system operation. Economics of Energy & Environmental Policy, 1(2), 3–17.CrossRefGoogle Scholar
  18. 18.
    Eureletric. (2010). Integrating intermittent renewables sources into the EU electricity system by 2020: challenges and solutions.Google Scholar
  19. 19.
    Xie, L., Carvalho, P., Ferreira, L., Liu, J., Krogh, B., Popli, N., & Ilic, M. D. (2011). Wind integration in power systems: Operational challenges and possible solutions. Proceedings of the IEEE, 99(1), 214–232.CrossRefGoogle Scholar
  20. 20.
    Milligan, M., Donohoo, P., Lew, D., Ela, E., Kirby, B., Holttinen, H., Lannoye, E., Flynn, D., O’Malley, M., Miller, N., Børre Eriksen, P. B., Gøttig, A., Rawn, B., Gibescu, M., Gómez Lázaro, E., Robitaille, A., & Kamwa, I. (2010). Operating reserves and wind power integration: An international comparison. Conference Paper NREL/CP-5500-49019, October.Google Scholar
  21. 21.
    NERC, North American Electric Reliability Corporation. (2009, April). Accommodating high levels of variable generation.Google Scholar
  22. 22.
    Oosterkamp, P., Koutstaal, P., Welle, A., Joode, J., Lenstra, J., Hussen, K., & Haffner, R. (2014). The role of DSOs in a Smart Grid environment. ECORYS Nederland, Final report to European Commission DG ENER.Google Scholar
  23. 23.
    Cossent, R., Gómez, T., & Frías, P. (2009). Towards a future with large penetration of distributed generation: Is the current regulation of electricity distribution ready? Regulatory recommendations under a European perspective. Energy Policy, 3, 1145–1155.CrossRefGoogle Scholar
  24. 24.
    Eurelectric. (2013, February). Active Distribution System Management—A key tool for the smooth integration of distributed generation. Full discussion paper.Google Scholar
  25. 25.
    Batlle, C., & Rivier, M. (2012, December). Redefining the new role and procedures of power network operators for an efficient exploitation of demand side response. IIT working paper, submitted to Energy Policy.Google Scholar
  26. 26.
    Hakvoort, R., Harris, D., Meeuwsen, J., & Hesmondhalgh, S. (2009, June). A system for congestion management in the Nederlands—Assessment of the options. Zwolle, prepared by D-Cision BV and The Brattle Group.Google Scholar
  27. 27.
    He, X, Hancher, L., Azevedo, I., Keyaerts, N., Meeus, L., & Glachant, J-M. (2013). Shift, not drift: Towards active demand response and beyond. Final report, Topic 11 FP7 THINK report.Google Scholar
  28. 28.
    Retrieved October 16, 2017, from https://www.entsoe.eu
  29. 29.
    Retrieved November 22, 2017, from https://www.me-solshare.com
  30. 30.
    Bonetto, R., Caldognetto, T., Buso, S., Rossi, M., Tomasin, S., & Tenti, P. (2015). Lightweight Energy Management of Islanded Operated Microgrids for Prosumer Communities. In IEEE International Conference on Industrial Technology (ICIT), Seville, Spain, 17-19 March.Google Scholar
  31. 31.
    Parhizi, S., Khodaei, A., & Shahidehpour, M. (2018). Market-based vs. price-based microgrid optimal scheduling. IEEE Transactions on Smart Grid, 9(2), 615–623.Google Scholar
  32. 32.
    Sharma, R. K. (2014, September). Sustainable design and management of microgrids details. IEEE Smart Grid. Retrieved April 28, 2017, from http://smartgrid.ieee.org/september-2014/1149-sustainable-design-and-management-of-microgrids
  33. 33.
    Peças-Lopes, J. A., Madureira, A., Bessa, R., Gomes, M. H., Saraiva, J. T., Pudjanto, D., Mancarella, P., Strbac, G., Tsikalakis, A., Assimakopoulou, G., & Hatziargyriou, N. (2009, December). Advanced architectures and control concepts for MORE MICROGRIDS, work package D, deliverable DD4, definition of ancillary services and short-term energy markets.Google Scholar
  34. 34.
    Gomes, M. H., & Saraiva, J. T. (2010). Allocation of reactive power support, active loss balancing and demand interruption ancillary services in MicroGrids. Electric Power Systems Research, 80(10), 1267–1276.CrossRefGoogle Scholar
  35. 35.
    Zimmermann, H. J. (1992). Fuzzy set theory and its applications (2nd ed.). London: Kluwer Academic Publishers.Google Scholar
  36. 36.
    Zadeh, L. A. (1978). Fuzzy sets as a basis for a theory of possibility. Fuzzy Sets and Systems, 1, 3–28.MathSciNetCrossRefGoogle Scholar
  37. 37.
    Schweppe, F. C., Caramanis, M. C., Tabors, R. D., & Bohn, R. E. (1988). Spot pricing of electricity. The Kluwer International Series in Engineering and Computer Science, Power Electronics & Power Systems. Boston: Kluwer Academic Publishers.Google Scholar
  38. 38.
    Glachant, J. M., & Henriot, A. (2013, November). Melting-pots and salad bowls: the current debate on electricity market design for RES integration. MIT Center for Energy and Environmental Policy Research (MIT CEEPR)Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Smart Cities Research Center (Cl2)—Polytechnic Institute of TomarTomarPortugal
  2. 2.Instituto Politécnico de Tomar (IPT)TomarPortugal

Personalised recommendations