Integrating independent power producers into emerging wholesale power markets

Many developing and industrial countries have sought to open their electricity industries to competition. In both contexts, policymakers and investors have to deal with the consequences of earlier, more partial sector liberalization measures. Foremost among these is the existence of long-term contracts with independent power producers (IPPs). The long-term nature of these contracts has complicated the introduction of more far-reaching sectoral reform designed to harness competitive market forces for the benefit of consumers. In developing countries, introducing competition is often coupled with breaking up and privatizing state-owned electricity monopolies. In this context, discussion of renegotiation of power purchase agreements has tended toward the polemical. At one end are those who resist any change, arguing that the"sanctity of contracts"precludes modification of contract terms. At the other end are those who favor governments taking coercive measures to modify existing contracts in the name of maximizing economic welfare and minimizing the burden of sector reform on consumers and on the state. Drawing on recent country experiences, the authors analyze alternative approaches to restructuring contracts and designing power markets to reduce rigidities and incentivize IPPs to participate more fully in wholesale power markets and to take on greater market risk. The authors conclude that forced market integration or forced contract negotiation have failed and are counterproductive. Conversely, in countries where IPPs provide a sizable proportion of generation capacity, ignoring market integration may result in insufficient market liquidity and discourage new entry, attenuating the scope for market forces to act for the benefit of consumers. Failure to adapt power purchase contracts and market rules imposes huge resource costs on the economy beyond the financial obligations consumers and taxpayers must bear. Based on recent experience, a combination of measures, including adaptation of specific market rules, contractual alternatives for enhancing market liquidity, contract buyout provisions, transitional financing mechanisms, and characteristics of the successor entity to the power purchaser, offer promising approaches for reconciling preexisting IPP contracts with new market structures and reducing the magnitude of above-market costs associated with such contracts.Markets and Market Access,Payment Systems&Infrastructure,General Technology,Labor Policies,Banks&Banking Reform,Markets and Market Access,Access to Markets,Banks&Banking Reform,Economic Theory&Research,General Technology

Market design

Europe is liberalising electricity in accordance with the European Commission’s Electricity Directives. Different countries have responded differently, notably in the extent of restructuring, treatment of mergers, market power, and vertical unbundling. While Britain and Norway have achieved effective competition, others like Germany, Spain and France are still struggling to deal with dominant and sometimes vertically integrated companies. The Netherlands offers an interesting intermediate case, where good economic analysis has sometimes been thwarted by legalistic interpretations. Investment under the new Emissions Trading system could further transform the electricity industry but may be hampered by slow progress in liberalising European gas markets

A review of microgrid development in the United States – A decade of progress on policies, demonstrations, controls, and software tools

Microgrids have become increasingly popular in the United States. Supported by favorable federal and local policies, microgrid projects can provide greater energy stability and resilience within a project site or community. This paper reviews major federal, state, and utility-level policies driving microgrid development in the United States. Representative U.S. demonstration projects are selected and their technical characteristics and non-technical features are introduced. The paper discusses trends in the technology development of microgrid systems as well as microgrid control methods and interactions within the electricity market. Software tools for microgrid design, planning, and performance analysis are illustrated with each tool's core capability. Finally, the paper summarizes the successes and lessons learned during the recent expansion of the U.S. microgrid industry that may serve as a reference for other countries developing their own microgrid industries

Managing for change: October 11, 1989

Bi-weekly newsletter of University Hospital's Change Project, provided to managers at the hospital

Impact at Scale: Policy Innovation for Institutional Investment With Social and Environmental Benefit

Explores policy options to maximize impact investing opportunities for institutional investors and accelerate the development of impact investing practices and products. Presents case studies of and insights from investors and service providers

The Role of the ISO in U.S. Electricity Markets: A Review of Restructuring in California and PJM

Despite their design differences, both the California and the Pennsylvania-New Jersey-Maryland markets provide explicit roles for competition in the scheduling functions while allowing the ISO to manage the spot market. Experience has shown that both can work.Auctions; Electicity Restructuring

Balancing and Intraday Market Design: Options for Wind Integration

EU Member States increase deployment of intermittent renewable energy sources to deliver the 20% renewable target formulated in the European Renewables Directive of 2008. To incorporate these intermittent sources, a power market needs to be flexible enough to accommodate short-term forecasts and quick turn transactions. This flexibility is particularly valuable with respect to wind energy, where wind forecast uncertainty decreases significantly in the final 24 hours before actual generation. Therefore, current designs of intraday and balancing markets need to be altered to make full use of the flexibility of the transmission system and the different generation technologies to effectively respond to increased uncertainty. This paper explores the current power market designs in European countries and North America and assesses these designs against criteria that evaluate whether they are able to adequately handle wind intermittency.Power market design, integrating renewables, wind energy, balancing, intraday

Microgrids & District Energy: Pathways To Sustainable Urban Development

A microgrid is an energy system specifically designed to meet some of the energy needs of a group of buildings, a campus, or an entire community. It can include local facilities that generate electricity, heating, and/or cooling; store energy; distribute the energy generated; and manage energy consumption intelligently and in real time. Microgrids enable economies of scale that facilitate local production of energy in ways that can advance cost reduction, sustainability, economic development, and resilience goals. As they often involve multiple stakeholders, and may encompass numerous distinct property boundaries, municipal involvement is often a key factor for successful implementation. This report provides an introduction to microgrid concepts, identifies the benefits and most common road blocks to implementation, and discusses proactive steps municipalities can take to advance economically viable and environmentally superior microgrids. It also offers advocacy suggestions for municipal leaders and officials to pursue at the state and regional level. The contents are targeted to municipal government staff but anyone looking for introductory material on microgrids should find it useful

Energy storage in the UK electrical network : estimation of the scale and review of technology options

This paper aims to clarify the difference between stores of energy in the form of non-rechargeable stores of energy such as fossil-fuels, and the storage of electricity by devices that are rechargeable. The existing scale of these two distinct types of storage is considered in the UK context, followed by a review of rechargeable technology options. The storage is found to be overwhelmingly contained within the fossil-fuel stores of conventional generators, but their scale is thought to be determined by the risks associated with long supply chains and price variability. The paper also aims to add to the debate regarding the need to have more flexible supply and demand available within the UK electrical network in order to balance the expected increase of wind derived generation. We conclude that the decarbonisation challenge facing the UK electricity sector should be seen not only as a supply and demand challenge but also as a storage challenge. (c) 2010 Elsevier Ltd. All rights reserved