Balancing market performance in a decentralized electricity system in the Netherlands

Technology, Policy and Managemen

Diffusion of combined heat and power in Dutch greenhouses: A case study

This report presents the case study of the rapid diffusion of combined heat and power (CHP) units in the Dutch greenhouse horticulture in the period 2003-2009. The aim of the case study is to find explanations for this particular transition, and to generalize on the nature of technology diffusion processes. The study is carried out by means of a literature study, and by means of interviews with sector stakeholders, including several greenhouse growers. In the theoretical framework, technology diffusion is conceptualized as a socio-technical transition, in which the interactions between different actors and the co-evolution of different societal domains form the key characteristics. We adopt a System-Network-Agent approach, as well as the theory of Universal Darwinism, in order to identify and examine the different developments and mechanisms that played a role in the CHP transition. The case study generates three types of insights: observed phenomena, key drivers, and evolutionary mechanisms. These insights contribute to the understanding of the emergence and evolution of technology diffusion in industrial sectors, which may help the formulation of national innovation policy. The five identified key drivers for the CHP diffusion are the opening of the energy market in 2002, the high spark spread during the transition period, the compatibility of output of a CHP unit with greenhouse demand, the flexibility provided by the heat buffer, and the cooperative and competitive greenhouse sector culture. We also found that the CHP diffusion has not been specifically aimed for by the Dutch government, but rather evolved out of interplay between developments in different societal domains. A general conclusion on technology diffusion is that, given the existing variety in social-technical systems and the developments emerging in these systems, each technology diffusion case will necessitate a different degree and nature of government involvement in order for the diffusion to become a success. Therefore, innovation policy makers should consider the co-evolutionary mechanisms inherent in technology diffusion processes.Engineering Systems and ServicesTechnology, Policy and Managemen

Designing Multinational Electricity Balancing Markets

In today’s unbundled electricity markets, the balancing market is an intricate institutional arrangement that makes sure that the balance between electricity supply and demand is maintained. In the light of the development of a single electricity market in Europe, harmonization and integration of currently national balancing markets have received an increasing attention from governments, system operators, and regulators. This dissertation provides a systematic overview of the possibilities and effects of balancing market design and internationalization in a European market context. A balancing market design framework is presented, including a reference model, a design space, and a set of performance criteria. A multi-criteria analysis is carried out to estimate the effects of individual balancing market design variables. Also, a decision-making process design for decision making on balancing market internationalization is outlined. It is concluded that well-considered multinational balancing market designs have the potential to highly improve balancing market performance. For the region of Northern Europe, the introduction of a single regional balancing energy market has the potential to halve the balancing costs, due to the cross-border exchange of hydropower-based balancing services from the Nordic region.Infrastructure Systems & Services - Energy & IndustryTechnology, Policy and Managemen

The electricity balancing market: Exploring the design challenge

In the unbundled national electricity markets in Europe, the balancing market is the institutional arrangement that deals with the balancing of electricity demand and supply. This paper presents a framework for policy makers that identifies the relevant design variables and performance criteria that play a role in the design and analysis of European balancing markets. We outline the full extent of the design challenge through a discussion of trade-offs among performance criteria, uncertain effects of design variables, and the many inter-linkages between the balancing market and the electricity market at large. Policy makers can address the balancing market design challenge by adopting a structured approach in which design variables, performance criteria, market conditions, system developments, and resultant market incentives are explicitly considered.Energy & Industr

Balance Responsibility and Imbalance Settlement in Northern Europe: An Evaluation

In liberalized power markets, balance responsibility and imbalance settlement are two closely related elements that constitute the heart of a balancing market (which is actually an institutional arrangement establishing market-based balancing). This paper aims to compare balance responsibility and imbalance settlement in the Nordic region, Germany, and the Netherlands. For this purpose, an overview is given of existing design variables and variable values in Northern Europe. Furthermore, the effects of different variables and values on four identified performance indicators have been rated with the support of a causal diagram of the balancing system. We conclude that different design variables create large differences in balancing market performance in Northern Europe, with the Program Time Unit, the scope of balance responsibility and the main imbalance pricing mechanism having the largest impact.Infrastructure Systems & ServicesTechnology, Policy and Managemen

The impact of microgeneration upon the Dutch balancing market

The share of microgeneration (power generation at the level of households and small businesses) in the Dutch electricity system continues to grow. Over time, this development may pose a threat to the reliability and efficiency of the Dutch electricity balancing market. We investigated possible changes to the design of the Dutch balancing market that can maintain or even improve upon its current operational performance level. The first step of the research was an analysis of the existing Dutch balancing market. It consists of three main instruments: programme responsibility, the single buyer market for regulating and reserve power (RRP), and imbalance settlement. The balancing market currently functions satisfactorily. Subsequently, the effects of large-scale development of microgeneration in the Netherlands were evaluated with a qualitative scenario analysis. Four microgeneration scenarios and two methods for allocating the household electricity consumption and generation were considered. The four scenarios concerned large-scale penetration of PV, heat-led micro CHP, electricity-led micro CHP operated by the household consumer, and electricity-led micro CHP operated by the supply company. The last scenario was found to have the strongest positive net effect. Finally, six design options were identified for improving the Dutch balancing market design in case the share of microgeneration would increase substantially. Of these six options, adjusting the profile methodology and the regulation of smart meters are no-regret options that can be implemented immediately. The attractiveness of the other options depends upon the microgeneration portfolio that emerges, the manageability of large metering data flows, and the nature of the technical effects of large-scale microgeneration penetration.Technology, Policy and Managemen

Analysis of the impact of imbalance settlement design on market behaviour in electricity balancing markets

The imbalance settlement design is the part of an electricity balancing market design that stimulates so-called Balance Responsible Parties (BRPs) to balance their electricity production and consumption portfolio and to stick to their energy schedules by penalizing any deviations from these schedules with an imbalance price. There are numerous imbalance settlement design options, each of which gives different incentives to BRPs. The aim of this work is to analyze the impact of the imbalance settlement design on BRP behaviour, and thereby on balancing market performance. For this purpose an agent based model has been built, in which the BRPs are the agents that decide autonomously in each round on their balancing strategy based on results in past rounds. Six alternative imbalance settlement designs are analyzed. We conclude from the analysis results that it is generally a better strategy for BRPs to opt for a long position rather than a short position, and to opt for a small imbalance rather than a large one. Furthermore, different imbalance settlement designs will lead to different but still similar results, because of the balancing market equilibrium that emerges as a result of the dynamic feedback loop between BRP behaviour and balancing market outcomes. An exception is formed by two-price settlement, which leads to much higher imbalance costs. Finally, it was found that the imbalance costs for large BRPs are relatively higher, and that the choice of imbalance settlement design has a greater impact on the behaviour of small BRPs.Infrastructure Systems & ServicesTechnology, Policy and Managemen

Exploring policy impacts for servicising in product-based markets: A generic agent-based model

The shift to markets based on servicising, i.e. market-level transitions from product-based to service-based production and consumption patterns, may contribute to achieve absolute decoupling, i.e. the combined development of economic growth and environmental impact reduction. However, the potential of this contribution is largely unknown. In this paper a generic agent-based model of servicising is presented with which this potential can be explored further, taking into account decision making procedures of business and consumer agents, including market research, preferences, and willingness to pay. The details of the servicising model are presented, and the model's abilities are demonstrated through three case studies from different sectors: car and bike sharing, crop protection, and domestic water-saving systems. Absolute decoupling was found to occur in some of the policy scenarios, but results vary widely between cases. It is concluded that the model can be used to explore the impact of public policy on the uptake of servicising and on absolute decoupling in various sectors, and is therefore a useful support tool for policy makers who aim to promote servicising, as well as for researchers studying potential servicising impacts.Energy & Industr

A qualitative analysis of main cross-border balancing arrangements

The integration of balancing markets, i.e. market-based balance management arrangements, is regarded as an important next step in the development towards an Internal Electricity Market for Europe, and is expected to largely reduce the costs of real-time balancing by enhancing competition in balancing service markets. However, there is still a large knowledge gap on the possibilities and effects of balancing market integration. This paper contributes to filling up that gap by means of a qualitative assessment of the main alternative market arrangements for cross-border balancing. We evaluate the impact of seven main cross-border balancing arrangements on the basis of a set of ten high-level performance criteria. The analysis shows that although the net impact of the arrangements of ACE netting and a common merit order list can be expected to be positive, there are major uncertainties in impact related to the dependency on detailed balancing market design choices and power system and market conditions. The uncertainties and dependencies regarding the impact of balancing market integration call for a detailed analysis in each individual integration case.Technology, Policy and Managemen

A comparison of imbalance settlement designs and results of Germany and the Netherlands

Imbalance settlement is a vital part of the balancing market, i.e. the institutional arrangement that establishes market-based balance management in liberalized electricity markets. We investigate the impact of the imbalance settlement design on the behaviour of Balance Responsible Parties and thereby on balancing market performance by means of a comparison of the German and Dutch imbalance settlement designs and balancing market results for the period May-December 2009. It is found that Germany has much higher activated balancing energy volumes, imbalance prices and actual BRP cost levels than the Netherlands, but these differences are perhaps rather caused by balancing energy market design differences and differences in intermittent generation shares than by imbalance settlement design differences. The real-time publication of balance regulation in the Netherlands enables internal balancing by BRPs, which may reduce the size of system imbalances. Generally, BRPs will over-contract a little, because of the lower risk of having a negative individual imbalance and because of the evening out of imbalance costs over a longer time period.Infrastructure Systems & ServicesTechnology, Policy and Managemen