The role of demand response in mitigating market power - A quantitative analysis using a stochastic market equilibrium model. ESRI WP635, August 2019

Market power is a dominant feature of many modern electricity markets with an oligopolistic structure, resulting in increased consumer cost. This work investigates how consumers, through demand response (DR), can mitigate against market power. Within DR, our analysis particularly focusses on the impacts of load shifting and self-generation. A stochastic mixed complementarity problem is presented to model an electricity market characterised by oligopoly with a competitive fringe. It incorporates both energy and capacity markets, multiple generating firms and different consumer types. The model is applied to a case study based on data for the Irish power system in 2025. The results demonstrate how DR can help consumers mitigate against the negative effects of market power and that load shifting and self-generation are competing technologies, whose effectivity against market power is similar for most consumers. We also find that DR does not necessarily reduce emissions in the presence of market power

WHO PAYS FOR RENEWABLES? THE EFFECT OF DATACENTRES ON RENEWABLE SUBSIDIES. ESRI Research Bulletin 2019/11

Ireland faces several targets for renewable energy usage, across the heating, transport and electricity sectors. These targets are set as a proportion of total energy usage. In the case of electricity, 40% of electricity must be generated from renewable sources by 2020. To meet this target, renewable electricity generation is subsidised through the Public Service Obligation levy, which appears on all consumers’ bills. The PSO is levied on residential consumers, commercial consumers and large industrial consumers according to their contribution to peak demand – the more the sector contributes to peak demand, the higher the portion of PSO that they pay

Who pays for renewables? Increasing renewable subsidisation due to increased datacentre demand in Ireland. ESRI WP566, June 2017

Demand from datacentres makes up a rapidly growing portion of electricity demand in Ireland. Increased demand in turn gives rise to increased renewable generation, mandated by government targets, and a corresponding increase in subsidisation levels. The current method of apportioning renewable subsidy costs may lead to consumers other than datacentres bearing this excess cost of subsidisation. This letter calculates the expected impact on these consumers

Blockchain electricity trading using tokenised power delivery contracts. ESRI Working Paper No. 649 December 2019

This paper proposes a new mechanism for forward selling renewable electricity generation. In this transactive framework, a wind or solar farm may directly sell to consumers a claim on their future power output in the form of nonfungible blockchain tokens. Using the flexibility of smart contract code, which executes irrevocably on a blockchain, the realised generation levels will offset the token holders’ electricity consumption in near real-time. To elucidate the flexibility offered by such smart contracts, two ways of structuring these power delivery instruments are considered: firstly, an exotic tranched system, where more senior tokens holders enjoy priority claims on power, as compared against a simpler pro-rata scheme, where the realised output of a generator is equally apportioned between token holders. A notional market simulation is provided to explore whether, for instance, consumers could exploit the flatter power delivery profiles of more senior tranches to better schedule their responsive demands

LNG and gas storage optimisation and valuation: Lessons from the integrated Irish and UK markets. ESRI WP606, December 2018

To guarantee European countries with greater access to competitive energy sources, the European Union has identified new infrastructures for the achievement of a diversified, secure and affordable European single energy market. This paper aims to evaluate the impact on consumers' energy bill of new LNG and gas storage facilities. We focus on the integrated UK-Ireland gas system, which provides an interesting framework to assess socioeconomic benefits of new energy routes. We utilise a stochastic mixed complementarity problem model, which also incorporates stochastic gas supply cost and demand scenarios. Therefore, we assess the expected benefits for consumers of a diversified gas supply, and their sensitivity to changing market conditions. Our results imply the complementary of LNG and gas storage investments to manage shortterm peak loads and long-term seasonal loads and prices in gas markets. Nonetheless, economic benefits for consumers are dependent on market conditions. Overall, our results provide some suggestions on investments in new gas facilities, which are of interest to policy-makers and market participants

Liquefied natural gas and gas storage valuation: Lessons from the integrated Irish and UK markets. ESRI Research Bulletin 2019/08

This research evaluates the potential effects for consumers in both Ireland and the UK of two new natural gas projects. The first project is an Irish Liquefied Natural Gas (LNG) facility to import gas, such as the Shannon LNG facility in Co. Kerry; the second project is an Irish natural gas facility to store gas for later consumption, such as the Islandmagee Underground Gas Storage facility in Northern Ireland. Both projects have been proposed by the EU as key European Projects of Common Interest to integrate Europe’s energy markets and diversify the supply of energy sources

Examining the benefits of demand reduction policies for electricity. ESRI Research Bulletin, 2018/03

Many governments have adopted policies that provide incentives to increase the amount of electricity generated from clean and renewable sources. However, the availability of such sources, e.g., solar or wind energy, is unpredictable and varies throughout the day and seasons. To account for this variability electricity systems need to become more flexible, i.e., there must be measures in place to ensure that demand and supply are balanced when renewable sources are not available

How Do External Costs Affect Pay-As-Bid Renewable Energy Connection Auctions?. ESRI WP517. November 2015

Renewable energy deployment costs comprise both internal generation costs and external location-related infrastructure, environmental and social costs. To minimise generation costs, competitive connection contract auctions are becoming increasingly common. Should external costs have considerable influence on site selection outside of the auction process, optimal bidding strategies may be affected by the resulting re-ranking of winning bids. This paper elicits the impact this may have on optimal bidding behaviour. Specifically, we address the impact internalisation of external costs may have on bidding strategy. With deterministic generation costs, optimal bidding strategies include a markup. The optimal markup is lower if external costs are internalised into the investment decision. If investors have the ability to appropriate rents, due to market dominance or asymmetric information, non-internalised external costs lower markup. Generation cost uncertainty may result in below-cost bidding. This is less likely when externalities are not internalised. For markets where bids are competitively priced, this paper provides evidence to suggest that methods to minimise externalities associated with renewables deployment should be integrated with competitive pay-as-bid auctions

Analysing long-term interactions between demand response and different electricity markets using a stochastic market equilibrium model. ESRI WP585, February 2018

Power systems based on renewable energy sources (RES) are characterised by increasingly distributed, volatile and uncertain supply leading to growing requirements for flexibility. In this paper, we explore the role of demand response (DR) as a source of flexibility that is considered to become increasingly important in future. The majority of research in this context has focussed on the operation of power systems in energy only markets, mostly using deterministic optimisation models. In contrast, we explore the impact of DR on generator investments and profits from different markets, on costs for different consumers from different markets, and on CO2 emissions under consideration of the uncertainties associated with the RES generation. We also analyse the effect of the presence of a feed-in premium (FIP) for RES generation on these impacts. We therefore develop a novel stochastic mixed complementarity model in this paper that considers both operational and investment decisions, that considers interactions between an energy market, a capacity market and a feed-in premium and that takes into account the stochasticity of electricity generation by RES. We use a Benders decomposition algorithm to reduce the computational expenses of the model and apply the model to a case study based on the future Irish power system. We find that DR particularly increases renewable generator profits. While DR may reduce consumer costs from the energy market, these savings may be (over)compensated by increasing costs from the capacity market and the feed-in premium. This result highlights the importance of considering such interactions between different markets

Investment vs. refurbishment: incentivising the correct quantity and quality of electricity generators. ESRI Research Bulletin 2016/2/1

Electricity markets are increasingly moving from a design wherein firms are compensated solely for the energy they provide (‘energy only’ markets) to one where firms are also compensated separately for other costs incurred. One example of a separate payment intended to compensate a firm for other costs incurred is a capacity remuneration mechanism (CRM). CRMs are designed to compensate firms for their fixed costs of capacity, or the cost of building the power plant. In this way, CRMs help to ensure that sufficient electricity generation capacity exists to provide sufficient generation during peak demand hours, ensuring reliable supply