The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling

Market coupling in Belgian and Dutch markets would permit more efficient use of intercountry transmission, 1) by counting only net flows against transmission limits, 2) by improving access to the Belgian market, and 3) by eliminating the mismatch in timing between interface auctions and the energy spot market. A Cournot market model that accounts for the region’s transmission pricing rules and limitations is used to simulate market outcomes with and without market coupling. This accounts for 1) and 2). Market coupling improves social surplus in the order of 108 €/year, unless it encourages the largest producer in the region to switch from a price-taking strategy in Belgium to a Cournot strategy due to a perceived diminishment of the threat of regulatory intervention. Benefit to Dutch consumers depends on the behavior of this company. The results illustrate how large-scale oligopoly models can be useful for assessing market integration.Electric power, Electric transmission, Liberalization, Oligopoly, Complementarity models, Computational models, Netherlands, Belgium, France, Germany, Market Coupling

Locational-based Coupling of Electricity Markets: Benefits from Coordinating Unit Commitment and Balancing Markets

We formulate a series of stochastic models for committing and dispatching electric generators subject to transmission limits. The models are used to estimate the benefits of electricity locational marginal pricing (LMP) that arise from better coordination of day-ahead commitment decisions and real-time balancing markets in adjacent power markets when there is significant uncertainty in demand and wind forecasts. The unit commitment models optimise schedules under either the full set of network constraints or a simplified net transfer capacity (NTC) constraint, considering the range of possible real-time wind and load scenarios. The NTC-constrained model represents the present approach for limiting day-ahead electricity trade in Europe. A subsequent redispatch model then creates feasible real-time schedules. Benefits of LMP arise from decreases in expected start-up and variable generation costs resulting from consistent consideration of the full set of network constraints both day-ahead and in real-time. Meanwhile, using LMP to coordinate adjacent balancing markets provides benefits because it allows intermarket flow schedules to be adjusted in real-time in response to changing conditions. These models are applied to a stylised four-node network, examining the effects of varying system characteristics on the magnitude of the locational-based unit commitment benefits and the benefits of intermarket balancing. Although previous www.eprg.group.cam.ac.uk EPRG WORKING PAPER studies have examined the benefits of LMP, these usually examine one specific system, often without a discussion of the sources of these benefits, and with simplifying assumptions about unit commitment. We conclude that both categories of benefits are situation dependent, such that small parameter changes can lead to large changes in expected benefits. Although both can amount to a significant percentage of operating costs, we find that the benefits of balancing market coordination are generally larger than the unit commitment benefits

Planning electricity transmission to accommodate renewables: Using two-stage programming to evaluate flexibility and the cost of disregarding uncertainty

We develop a stochastic two-stage optimisation model that captures the multistage nature of electricity transmission planning under uncertainty and apply it to a stylised representation of the Great Britain (GB) network. In our model, a proactive transmission planner makes investment decisions in two time periods, each time followed by a market response. This model allows us to identify robust first-stage investments and estimate the value of information in transmission planning, the costs of ignoring uncertainty, and the value of flexibility. Our results show that ignoring risk has quantifiable economic consequences, and that considering uncertainty explicitly can yield decisions that have lower expected costs than traditional deterministic planning methods. Furthermore, the best plan under a risk-neutral criterion can differ from the best under risk-aversion

Planning electricity transmission to accommodate renewables: Using two-stage programming to evaluate flexibility and the cost of disregarding uncertainty

We develop a stochastic two-stage optimisation model that captures the multistage nature of electricity transmission planning under uncertainty and apply it to a stylised representation of the Great Britain (GB) network. In our model, a proactive transmission planner makes investment decisions in two time periods, each time followed by a market response. This model allows us to identify robust first-stage investments and estimate the value of information in transmission planning, the costs of ignoring uncertainty, and the value of flexibility. Our results show that ignoring risk has quantifiable economic consequences, and that considering uncertainty explicitly can yield decisions that have lower expected costs than traditional deterministic planning methods. Furthermore, the best plan under a risk-neutral criterion can differ from the best under risk-aversion

Upstream vs. Downstream CO2 Trading: A Comparison for the Electricity Context

In electricity, “downstream” CO2 regulation requires retail suppliers to buy energy from a mix of sources so that their weighted emissions satisfy a standard. It has been argued that such “load-based” regulation would solve emissions leakage, cost consumers less, and provide more incentive for energy efficiency than traditional source-based cap-andtrade programs. Because pure load-based trading complicates spot power markets, variants (GEAC and CO2RC) that separate emissions attributes from energy have been proposed. When all energy producers and consumers come under such a system, these load-based programs are equivalent to source-based trading in which emissions allowances are allocated by various rules, and have no necessary cost advantage. The GEAC and CO2RC systems are equivalent to giving allowances free to generators, and requiring consumers either to subsidize generation or buy back excess allowances, respectively. As avoided energy costs under source-based and pure load-based trading are equal, the latter provides no additional incentive for energy efficiency. The speculative benefits of load-based systems are unjustified in light of their additional administrative complexity and cost, the threat that they pose to the competitiveness and efficiency of electricity spot markets, and the complications that would arise when transition to a federal cap-and-trade system occurs

Opportunity Cost Bidding by Wind Generators in Forward Markets: Analytical Results

Wind generation must trade in forward electricity markets based on imperfect forecasts of its output and real-time prices. When the real-time price differs for generators that are short and long, the optimal forward strategy must be based on the opportunity costs of charges and payments in real-time rather than a central estimate of wind output. We present analytical results for wind's optimal forward strategy. In the risk-neutral case, the optimal strategy is determined by the distribution of real-time available wind capacity, and the expected real-time prices conditioned on the forward price and wind out-turn; our approach is simpler and more computationally efficient than formulations requiring specification of full joint distributions or a large set of scenarios. Informative closed-form examples are derived for particular specifications of the wind-price dependence structure. In the usual case of uncertain forward prices, the optimal bidding strategy generally consists of a bid curve for wind power, rather than a fixed quantity bid. A discussion of the risk-averse problem is also provided. An analytical result is available for aversion to production volume risk; however, we doubt whether wind owners should be risk-averse with respect to the income from a single settlement period, given the large number of such periods in a year

Network-constrained models of liberalized electricity markets: the devil is in the details

Numerical models for electricity markets are frequently used to inform and support decisions. How robust are the results? Three research groups used the same, realistic data set for generators, demand and transmission network as input for their numerical models. The results coincide when predicting competitive market results. In the strategic case in which large generators can exercise market power, the predicted prices differed significantly. The results are highly sensitive to assumptions about market design, timing of the market and assumptions about constraints on the rationality of generators. Given the same assumptions the results coincide. We provide a checklist for users to understand the implications of different modelling assumptions.Market power, Electricity, Networks, Numeric models, Model comparison

The scientific potential of space-based gravitational wave detectors

The millihertz gravitational wave band can only be accessed with a space-based interferometer, but it is one of the richest in potential sources. Observations in this band have amazing scientific potential. The mergers between massive black holes with mass in the range 10 thousand to 10 million solar masses, which are expected to occur following the mergers of their host galaxies, produce strong millihertz gravitational radiation. Observations of these systems will trace the hierarchical assembly of structure in the Universe in a mass range that is very difficult to probe electromagnetically. Stellar mass compact objects falling into such black holes in the centres of galaxies generate detectable gravitational radiation for several years prior to the final plunge and merger with the central black hole. Measurements of these systems offer an unprecedented opportunity to probe the predictions of general relativity in the strong-field and dynamical regime. Millihertz gravitational waves are also generated by millions of ultra-compact binaries in the Milky Way, providing a new way to probe galactic stellar populations. ESA has recognised this great scientific potential by selecting The Gravitational Universe as its theme for the L3 large satellite mission, scheduled for launch in ~2034. In this article we will review the likely sources for millihertz gravitational wave detectors and describe the wide applications that observations of these sources could have for astrophysics, cosmology and fundamental physics.Comment: 18 pages, 2 figures, contribution to Gravitational Wave Astrophysics, the proceedings of the 2014 Sant Cugat Forum on Astrophysics; v2 includes one additional referenc