Long-term assessment of power capacity incentives by modeling generation investment dynamics under irreversibility and uncertainty

In actual energy-only markets, the high volatility of power prices affects the expected returns of generators. When dealing with irreversibility under uncertainty, deferring decisions to commit in new power plants, waiting for better information, is therefore a rational approach. Theoretical and empirical evidence suggests that such investment pattern determines the occurrence of construction cycles, which strongly compromise supply security. In order to supplement generators´ revenues, several remuneration mechanisms have been devised over past years. Along this line, this work addresses the long-run dynamics of capacity adequacy and market efficiency with both a price-based and a quantity-based capacity remuneration policy. For that purpose, a recently-developed, stochastic simulation model is used as a benchmark. Hence, the optimal postponement of generation investment decisions is integrated into a long-run power market model by formulating the decision-making problem in the framework of Real Options Analysis. Results suggest that policymakers may exchange supply security (effectiveness) for energy prices to be paid by consumers (efficiency) when designing and implementing capacity remuneration mechanisms. By doing so, this article contributes to the ongoing debate regarding the design of incentive policies and efficient power markets by considering the microeconomics of investors? decision-making under irreversibility and uncertainty.Fil: Rios Festner, Daniel. Universidad Nacional de Asunción; ParaguayFil: Blanco, Gerardo. Universidad Nacional de Asunción; ParaguayFil: Olsina, Fernando Gabriel. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - San Juan. Instituto de Energía Eléctrica. Universidad Nacional de San Juan. Facultad de Ingeniería. Instituto de Energía Eléctrica; Argentin

Investment Valuation in Liberalized Power Markets: Integrating Real Options with System Dynamics

"The proposal is elaborated under a long run market framework, based on System Dynamics simulative approach, and considers for the investment rates to be a function of the value of flexibility of the deferral option, obtained by means of Real Options analysis."CONACYT - Consejo Nacional de Ciencias y TecnologíaPROCIENCI

Analysis of Power Systems Expansion Processes based on System Dynamics - State-of-the-Art

"La evolucion hacia la liberalización de los mercados electricos ha supuesto un cambio de paradigma en el ambito de la toma de decisiones inherente a la expansión de los sistemas de potencia. Esto se debe principalmente a la participacion en dichos procesos de diversos agentes autonomos que no siempre actúan de manera coordinada. Atendiendo a esto, el uso de enfoques de simulacion resulta de gran utilidad para analizar el comportamiento e interaccion de los participantes dentro del mercado. Este trabajo se encuentra enfocado en realizar una revision del estado del arte sobre la aplicacion de la teorıa de Dinamica de Sistemas (DS) para replicar la dinamica a largo plazo de inversiones en infraestructura electrica en sistemas de potencia. En este sentido, se ha encontrado que DS ha sido empleado extensamente tanto para evaluar la expansion del parque generador, así como el impacto de inversiones en la red de transmision, requeridas para interconectar distintos mercados electricos. Sin embargo, no se han encontrado antecedentes de la aplicacion de DS para evaluar la dinamica de la interacción entre decisiones de inversion en generación y transmision. En este contexto, el principal aporte del trabajo consiste en proponer delineamientos basicos para analizar la interacción de inversiones emprendidas por agentes de generacion y transmision de un mercado el eléctrico competitivo mediante el enfoque de DS. Finalmente, dicho modelo buscara ser una herramienta para delinear políticas que incentiven la coordinacion y cooperación entre los agentes autónomos del mercado electrico."CONACYT - Consejo Nacional de Ciencias y TecnologíaPROCIENCI

Experimental verification of smart grid control functions on international grids using a real-time simulator

The drastic increase in distributed energy resources (DERs) leads to challenges in the operation of distribution systems worldwide. While several solutions for grid monitoring and control are available on the market and in literature, this research is the first of its kind aiming to supervise the grid by providing a modular configurable unified hardware and software architecture. The control algorithms are configured using data models according to IEC 61850-7-3 and IEC 61850-7-4. The novel system architecture is a portable, modular and flexible architecture that aggregates smart grid control functions onto a standardised hardware platform, emphasising the need for hardware independence. The central controller contains several smart grid control functions and the various field devices are distributed across the distribution grid. This paper deals with the simulation of different real-world distribution grids on the Real-Time Simulator (RTS) and experimental verification of the control algorithms. Smart grid control functions such as Coordinated Voltage Control (CVC) and Optimal Power Flow (OPF) are experimentally verified on a German grid. The grid dynamics are compared when the central controller executes the CVC against the OPF implementations. The experimental results, advantages and challenges of each control are presented here. The results also showed the variation in grid behaviour when the control parameters were varied. The paper also shows that the algorithm and the choice of the control parameters depend upon the distribution grid's complexity and the system operator's individual needs. The results illustrate the potential of such a universal distribution automation solution for system operators worldwide