Electricity market liberalization, price stability, and energy security: the case of Estonia

The efficacy of this thesis‘ hypothesis, given the competing effects of liberalization on each of the components of the energy security model proposed in the theoretical framework in Chapter 1, cannot be evaluated. Each element of the energy security model is complex and diverges empirically from the predicted theoretical outcomes. And these factors are also highly-dependent on a country‘s pre-liberalization resource profile and market structure, further confusing the net effect of liberalization from an abstract, theoretical standpoint. While the effects of increased prices and increased price volatility following a liberalization program induce negative consequences on a country‘s energy security, the diversity and stability of supply provided by liberalization buttress it. These competing effects differ in magnitude and are difficult to quantify. For this reason, the hypothesis can be neither confirmed nor denied. Estonia is likely to face increased prices and increased price volatility as a result of its liberalization program. As explored in Chapter 5, the Nord Pool Spot market exhibits volatility clustering but not mean reversion, with a high degree of volatility. This volatility, as surmised in the theoretical framework, is difficult to hedge against, leaving Estonia‘s economic infrastructure susceptible to a high degree of input price risk which could be disruptive to the continuity of operations for electricity-intensive industries. Liberalization will however inspire confidence in the Estonian electricity market by foreign investors and provide Estonia access to external sources of electricity, which it will need to utilize as it adapts to EU directives mandating its reduction of oil shale use. While these external sources of electricity will be more expensive than internally-produced electricity, they will also provide diversity and security of supply to Estonia. The net effect of these changes on Estonia‘s energy security is impossible to predict.http://www.ester.ee/record=b4541728*es

A Review of Liberalization and Modeling of Electricity Markets

This paper provides a review on the restructuring of electricity markets around the word including the UK, Norway, Continental Europe, and the US. The focus of this review lies on aspects of competitiveness and regulation in generation and transmission markets and market design, whereas distribution and retail are not pursued in detail. Furthermore, an overview about current modeling trends regarding liberalized electricity markets is provided including a classification according to mathematical principles and a taxonomy of research topics analyzed with modeling approaches

Electricity market liberalization in Estonia

The aim of the master thesis is to describe and analyze the deregulation process of the Estonian electricity sector. The analysis is based on a textbook model, which summarizes attributes that have led to successful electricity sector deregulation in other countries. According to the analysis, Estonia has followed the textbook model rather closely – it has separated competitive segments from natural monopolies, established a single system operator, created a wholesale spot market, unbundled electricity tariffs and created independent regulatory agencies. We conclude that the deregulation process has been successful. However, we identify the concentration of the generation market as a threat to an efficient market. The future challenge of Estonia is integration in the common European electricity market which is dependent on building sufficient transmission capacities and Europe-wide harmonization of regulations. Integration in the European Internal Electricity Market will contribute to improved effectiveness of the market, security of supply and increased long-term social welfare

Joustotuotteet monenkeskisillä sähkömarkkinoilla

Power grids, electrical systems and liberalized zonal electricity markets are in due for major recasting as the ongoing energy transition impacts the electricity sector profoundly.This will mean new kinds of market behavior in liberalized and regulated electricity markets and increased challenges for TSOs to maintain power balance at system-level. Also, inadequacies in network capacity and flexible asset availability impact at local level. Congestions, voltage deviations and grid outages impact both TSOs and DSOs locally and the mitigation of these situations requires new types of multilateral coordination. In addition to more transmission and distribution grid capacity, future electrical systems need resilient flexible resources and intelligent control mechanisms. This thesis examines market-based control by using flexibility products. The envisioned flexibility products are expected to be implementable in the Baltic Sea area electricity markets during the regulatory period of Finnish electricity network companies beginning in 2024. Thesis includes a literature review and a qualitative empirical research consisting of industry consultation. First, the literature study examines existing products traded on future European electricity markets and other mechanisms that control networks and network connected assets. Secondly, it examines emerging flexibility products that can provide local flexibility services which the existing product structure is not covering. Industry consultation includes Finnish expert views regarding different aspects of flexibility needs,flexibility markets and opinions on the emerging flexibility products. Interviewees found the concepts of flexibility markets and products new and complex. Most of the interviewees had not experienced serious technical flexibility issues at local level in Finnish electrical networks but agreed that local flexibility challenges would be a reality in Finland within next five years. Majority of interviewees saw new enabling technologies and market-based trading of local flexibility worth considering. They had different local needs for flexibility products, if trading could be done cost-efficiently and market design would be supportive for both flexibility buyers and sellers. Outage management and voltage support with flexibility were identified as the most urgent local needs and congestion management was seen less important. According to the findings, numerous although contradictory flexibility product alternatives can solve different flexibility needs. It was concluded that market design should go forward with the development of three options: locational intraday products, locational balancing products and competitive bilateral flexibility contracts. The results show, that these recommended products are modifications of existing products. All three preferred options should be enabled due to different reasons and these options are not mutually exclusive. The compatibility of flexibility products with existing products and operational processes must be ensured, especially considering reconciliation of flexibility markets and a reactive balancing model of TSOs. Development of flexibility products should start immediately with incremental experimentation with cooperation of all network users and operators.Meneillään oleva energiamurros aiheuttaa merkittäviä muutoksia sähköverkkoihin ja-markkinoihin. Tämä johtaa uudenlaiseen käyttäytymiseen vapautetuilla ja säännellyillä sähkömarkkinoilla sekä kantaverkkoyhtiöiden lisääntyviin haasteisiin ylläpitää järjestelmätason tehotasapainoa. Myös alueelliset haasteet lisääntyvät riittämättömän verkkokapasiteetin tai joustavien resurssien puuttuessa. Paikalliset ylikuormitukset, jännite- ja loistehopoikkeamat sekä käyttökatkot voivat vaikuttaa useisiin siirto- ja jakeluverkkoyhtiöihin, jolloin ratkaisut vaativat monenkeskistä koordinointia. Tulevaisuuden sähköjärjestelmät vaativat lisää siirto- ja jakeluverkkokapasiteettia, joustavia resursseja ja älykkäitä ohjausmekanismeja. Tässä diplomityössä tutkitaan markkinaehtoisiin joustotuotteisiin perustuvia ohjausmekanismeja. Suunniteltujen joustotuotteiden on tarkoitus olla käytettävissä 2024 alkavalla suomalaisten sähköverkkoyhtiöiden sääntelykaudella Itämeren alueen sähkömarkkinoilla. Tämä diplomityö sisältää kirjallisuuskatsauksen ja empiirisen tutkimuksen, joka koostuu sähköalan asiantuntijoiden laadullisesta konsultaatiosta. Työssä tarkastellaan nykyisten sähkömarkkinoiden tuotteita, joilla verkkoja ja verkkoon kytkettyjä resursseja hallitaan. Lisäksi työ tutkii kehittyviä joustotuotteita, jotka voivat tarjota paikallisia joustopalveluita, joita nykyiset tuotteet eivät kata. Konsultaatio sisällyttää alan näkemyksiä jouston tarpeista, joustomarkkinoista ja kehittyvistä joustotuotteista tutkimukseen. Haastateltavat kokivat joustomarkkinoiden ja -tuotteiden käsitteet uusiksi ja monimutkaisiksi. Suurin osa haastatelluista ei ollut todennut suomalaisissa sähköverkoissa alueellisesti vakavia haasteita, mutta arvioivat paikallisten joustavuushaasteiden yleistyvän seuraavan viiden vuoden aikana. Merkittävä osa asiantuntijoista arvioi uudet teknologiaratkaisut ja markkinalähtöisen joustokaupankäynnin harkinnan arvoiseksi, mikäli kaupankäynti on kustannustehokasta ja kannattavaa sekä joustavuuden ostajille että myyjille. Keskeyttämätön sähkönsyöttö ja loistehon hallinta tunnistettiin kiireellisiksi paikallisiksi tarpeiksi ja siirtojenhallintaa pidettiin vähemmän kiireellisenä tarpeena. Työn mukaan lukuisat ja keskenään ristiriitaiset joustotuotevaihtoehdot voivat ratkaista erilaisia joustotarpeita. Ensisijaisesti tulisi keskittyä kolmen kategorian tuotteiden kehittämiseen: sijainnilliset päivänsisäisen markkinan tuotteet, sijainnilliset säätösähkömarkkinan tuotteet ja kilpailutetut kahdenväliset joustosopimukset. Tuloksista voidaan nähdä, että kaikki kolme vaihtoehtoa ovat olemassa olevien tuotteiden muunnoksia. Tuotteet ovat otettavissa käyttöön eri syistä, ja vaihtoehdot eivät ole toisiaan poissulkevia. Joustotuotteiden yhteensopivuus olemassa olevien tuotteiden ja toimintaprosessien kanssa on taattava, erityisesti yhteensovittaminen kantaverkkojen reaktiivisen säätötavan kanssa on varmistettava. Joustomarkkinoiden jatkokehittäminen tulisi aloittaa välittämättömästi kokeiluilla ja verkonhaltijoiden ja -käyttäjien yhteistyöllä

From state to market : essays on electricity sector reforms

The 1980s marked the beginning of market driven reforms in the electricity sector based on the standard textbook model. More than half of the economies around the world have initiated power sector reforms since late 1980s irrespective of the sector size, resource endowments, institutional capacity and economic development. Hence, this thesis qualitatively and quantitatively assesses the process and outcomes of market-based reforms evolving the electricity sector across the developing, transition and developed economies where reforms are on-going at various stages. Deriving relevant and feasible reform options and policy for the electricity sector based on the lessons learnt after considering more than two decades of reforms remains the major contribution of this thesis. Chapter one is the introductory chapter and provides an outline of the motivation and context of the thesis. Chapter two is a literature review of the experiences to date with the performance of electricity reforms across the reforming countries. The chapter identifies the knowledge gaps in the literature and sets the scene for the three substantial chapters of the thesis to follow. The third chapter assesses the issues and options in reforming small electricity sectors considering the twin complicating factors of political instability and increasing electricity demand. The reform in the small electricity sector of Nepal is cited as a specific case. Chapter four empirically investigates the often poorly explored link between power sector reforms and wider institutional reforms in the economy across different groups of transition countries. The transition countries include the countries of Central and Eastern Europe and the Former Soviet Union. Chapter five examines the degree of market integration between the relatively small all-island Irish electricity market and other wholesale electricity markets in Europe. The chapter focuses on the role of interconnections and increased cross-border trade of electricity in the creation of an integrated market for electricity in Europe. Chapter six concludes the thesis by highlighting the policy implications and areas for future research. The chapter establishes that electricity sector reform is prone to chronic political, market and regulatory failures in many reforming countries