moscow

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N. Keith Tovey, M.A. PhD, C.Eng MICE Energy Science Director Low Carbon Innovation Centre University of East Anglia, Norwich Second International Conference. Operational Experience and Practice of European Electricity Markets. Moscow: 4th June 2003 The changing face of the Electricity Market in the UK Изменяющееся лицо рынка электроэнергии в Британии Университета Восточной Англии

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The changing face of the Electricity Market in the UK A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС

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A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г The changing face of the Electricity Market in the UK Electricity Generation and Supply differences in approach between England / Wales and Scotland. Генерация и сбыт - раличия между регионами Fuels used for generation Топливо, используемой для генерации

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The Generation and Distribution of Electricity has always been different in Scotland compared to England and Wales

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Generating Capacity Surplus/Deficit on February 12th 18:00 +ve: generating capacity exceeding demand -ve: demand exceeding generating capacity Most Generating Capacity is in the North - most demand is in South MW

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Изменяющееся лицо рынка электроэнергии в Британии Demand has risen by 50% since 1970 Large rise in output from CCGT since 1993 Nuclear output increased steadily but is set to decline Coal [Oil] generation has fallen rapidly since Privatisation

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Decision on how electricity was to be generated was done on a generating set basis: Generating Sets to run were selected on Merit Order. Based on Marginal Costs (i.e. the fuel costs) Some generating sets were run OUT of MERIT ORDER where system constraints were an issue. Generators sold electricity to Regional Electricity Boards. Electricity Boards sold to consumers in their Area only. Prices to consumers varied between regions Electricity Generation - pre 1990

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Most Generating Capacity in North Most coal-fired stations in North Most Oil-fired stations in South Nuclear stations - distributed around coast Most Hydro stations are in Scotland Изменяющееся лицо рынка электроэнергии в Британии Significant power flows North > South

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Central Electricity Generating Board 12 Regional Electricity Companies Coal Fired Power Stations Oil Fired Power stations Gas Turbine Stations Hydro Stations Nuclear Stations Transmission National Power PowerGen Nuclear Electric National Grid Company 12 Regional Electricity Companies Privatisation of Electricity Supply Industry 1990

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The changing face of the Electricity Market in the UK A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС

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The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The changing face of the Electricity Market in the UK The bidding process - Pool Input and Pool Output Процесс подачи заявок в системе пула The Electricity Pool Электрический пул

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Scotland England and Wales

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Only the Generators (>100 MW) bid into the POOL to supply electricity e.g. National Power (now Innogy), PowerGen etc. The National Grid Company published projected demands for the following day and invited bids. The Generators supplied bids for each generating set in each station for each half-hour period of the following day. The NGC sorted bids to determine which generating sets would be used for each particular period, and which ones would have capacity made available. The Operation of The Electricity Pool: 1990 - 2001

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10000 MW 10000 MW 10000 MW System Marginal Price = £19.31 SMP Companies up to and including B successful £1 ~ 50 Roubles

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All Companies who were successful were paid the SMP for all units generated irrespective of what their bid was. The bids were for the single half-hour period and fresh bids were required for all half hour periods. It was possible for companies to bid £0 and this would guarantee that they generated and paid SMP. However, if all Companies did the same they would have to generate electricity for nothing. In addition to the SMP, there was also a capacity charge relating to the generating capacity which was requested to be available. The Operation of The Electricity Pool

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Capacity Charge paid to all Generators who had been requested to have capacity available. -based on formula: LOLP * (VOLL - SMP) Loss of Load Probability The Operation of The Electricity Pool VOLL: was set by the Regulator at around £2400 per MWH (120 Roubles per kWh) LOLP: normally a very low figure but could become significant if there was a shortfall in generating capacity Capacity Charge: signal to ensure sufficient capacity was available. Pool Input Price (PIP) = SMP + LOLP * (VOLL - SMP)

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Some Power Stations constrained “ON” to ensure security of supply even when their bid was more expensive. Some Power Stations constrained “OFF” even when their bid was cheaper (-excess of capacity in one region). Constrained Stations paid their “Bid” Price POOL Output Price: (POP) = Pool Input Price + Uplift Uplift represented the additional charges incurred to National Grid Company because of System Constraints Suppliers purchased Electricity at Pool Output Price Электрический пул System Constraints:

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Электрический пул: Supply Side Before privatisation: Regional Electricity Companies: Sole supplier in their region After privatisation Domestic Consumers did not benefit from competition until September 1998. Prices to Domestic Consumers were regulated according to the formula: RPI - X + E + F RPI is a measure of inflation X is a factor set by Regulator - initially ~ 5% but later reduced. E was an energy conservation factor whereby costs of such measures could be passed on to the consumer F was a levy designed to promote exploitation of Renewables

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Электрический пул: Supply Side After privatisation Consumers > 1MW could purchase from ANY REC not just their own regional Company. From 1994 Consumers > 100 kW were included in Deregulation From September 1998 All consumers could select their supplier. The RPI - X + E + F formula no longer applies Prices to consumers have fallen. e.g. a Domestic Consumer in East Anglia [Восточной Англии] 7.48p (3.74 Roubles) per kWh before 1998 - now ~ 5.62p (2.81 Roubles) per kWh

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Электрический пул: A Review Need for strong Regulatory Body to ensure prices were not fixed. Evidence suggested price manipulation took place in early years. Regulator required major generators to dispose of some stations. The lack of Demand Side Bidding was a weakness Charges for Transmission (Super Grid) Losses were averaged over whole Network. Customers in North subsidised those in South Generators in South subsidised those in North Issue not resolved However, the distribution charges within each region differ.

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A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС The changing face of the Electricity Market in the UK

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The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА The changing face of the Electricity Market in the UK The basic principles Основные принципы Gate Closure and Final Physical Notification Закрытие периода и окончательная физическая нотификация The Balancing Mechanism Балансирующий механизм

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The basic principles [Основные принципы] Новая система оптовой торговли НЕТА How does it differ from the Pool? Both Generating and Demand Side Bidding Takes Place Most Electricity (>90%) is traded outside NETA Balancing Mechanism NETA favours generators and suppliers who can guarantee specific levels of generation/supply in advance. NETA favours generators and suppliers who can guarantee flexibility in output / demand at short notice.

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The basic principles [Основные принципы] Новая система оптовой торговли НЕТА How does it differ from the Pool? - continued Generators and Suppliers are penalised if they deviate from their agreed level of generation / supply. System security is maintained via the Balancing Mechanism [Балансирующий механизм] Renewable Generators e.g. Wind and small CHP (~10 MW) can be adversely affected.

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The basic principles [Основные принципы] Generation and Supply focuses on Новая система оптовой торговли НЕТА Balancing Mechanism [Балансирующий механизм] (BM) Units Generating BM Units may be a single generating set or a collection of small generating sets. Demand BM Units may be a single large demand consumer or a collection of small consumers. Trading can take place between Generating and Demand BM Units Only the volume traded ( not price) has to be notified.

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The New Electricity Trading Arrangements Each Generating or Demand BM Unit notifies System Operator of the projected Volume of Electricity to be Traded for each half hour period by 11:00 on preceding day. Initial Physical Notification (IPN) System Operator checks sufficient capacity is available. Initially 3.5 hours before REAL Time - later reduced to 1 hour. Final agreed Volumes to be traded noted before Gate Closure. Final Physical Notification (FPN) окончательная физическая нотификация Gate Closure and Final Physical Notification Закрытие периода и окончательная физическая нотификация GATE CLOSURE : Закрытие периода

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The Balancing Mechanism Балансирующий механизм 3.5 hours 1 hour Summary Changes to contract position cannot be made after Gate Closure The Balancing Mechanism is operated after Gate Closure to provide System Security

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The Balancing Mechanism Балансирующий механизм The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА To allow system to remain stable Too little electricity on the system Generators can OFFER to INCREASE output If OFFER is agreed then Generators / Suppliers are PAID for any electricity increased / reduced under the OFFER. Suppliers can OFFER to REDUCE consumption

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The Balancing Mechanism Балансирующий механизм The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Too much electricity on the system Generators can BID to REDUCE output If BID is agreed then Generators / Suppliers PAY for any reduction in generation / increase in demand under the BID. Suppliers can BID to INCREASE consumption

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The Balancing Mechanism Балансирующий механизм Generators / Suppliers may submit OFFERs or BIDs which differ for different levels of deviation from the Final Physical Notification National Grid Company normally accepts OFFERS / BIDS which are cheapest unless System Constraints prevent this.

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The Balancing Mechanism Балансирующий механизм What happens if System Operator has got it wrong? OFFERs / BIDs cannot be cancelled UNDO BID removes an OFFER and is usually less than the OFFER UNDO OFFER removes a BID and is usually more than the BID OFFERs / UNDO BIDs [ or BIDs / UNDO OFFERs] are submitted in pairs

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Новая система оптовой торговли НЕТА What happens if a Generator / Supplier is out of balance? Unexpected changes in Demand Equipment Failure Generator / Supplier has too much electricity on the system [too much generation / too little demand] * charged for imbalance at System Sell Price Generator / Supplier has too little electricity on the system [too little generation / too much demand] * charged for imbalance at System Buy Price

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Новая система оптовой торговли НЕТА How well has it performed since starting on 27th March 2001? From OFGEM: Review of First Year of NETA Wholesale prices of electricity are now 40% lower than they were 5 years ago.

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Новая система оптовой торговли НЕТА How well has it performed since starting on 27th March 2001? Average Prices From OFGEM: Review of First Year of NETA

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Новая система оптовой торговли НЕТА How well has it performed since starting on 27th March 2001? Average Sell and BuyPrices From OFGEM: Review of First Year of NETA

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Новая система оптовой торговли НЕТА How well has it performed since starting on 27th March 2001? Average OFFER and BID Prices for different Generators From OFGEM: Review of First Year of NETA

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Conclusions (1) Key Changes in Electricity Market in UK April 1st 1990: Privatisation: Electricity POOL Established Large Consumers benefit from Deregulation 1994: Intermediate Consumers benefit from Deregulation 1998 + All Consumers benefit from Deregulation 27th March 2001: NETA replaced POOL 1st April 2002: Renewable Obligation comes into force The POOL and NETA were not used in Scotland The Future BETTA (British Electricity Transmission and Trading Arrangements). It is planned to extend NETA to include Scotland in October 2004

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Conclusions (2) Key Changes in Electricity Market in UK Prices to consumers have fallen as a result of Deregulation (up to 20% in some cases) Wholesale prices of Electricity have fallen by 40% over last 4 years, and 20% since introduction of NETA Prices to consumers have changed little since introduction of NETA - to early to see full effect as prices by Suppliers only tend to change once a year or so. Most electricity >> 90% is traded outside Balancing Mechanism Trading NETA favours Generators / Suppliers who can guarantee output / supply in advance NETA favours Generators / Suppliers who can be flexible to make adjustments during Balancing Mechanism Trading.

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The changing face of the Electricity Market in the UK Изменяющееся лицо рынка электроэнергии в Британии Some Useful WEB Sites www.bmreports.com/ : Up to date information of NETA Market www.ofgem.gov.uk/ : The UK Regulator www.elexon.co.uk/ : Documents and Modifications to NETA www.nationalgrid.com/uk/ : The System Operator www2.env.uea.ac.uk/gmmc/energy/enpoint.htm the Energy Web Page at UEA giving links to many Energy Web Sites in UK and overseas. This presentation is available over Internet at www2.env.uea.ac.uk/gmmc/energy/env2e02/Moscow.ppt

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N. Keith Tovey, M.A. PhD, C.Eng MICE k.tovey@uea.ac.uk Н.К.Тови М.А., д-р технических наук Факультет экологических исследований Университета Восточной Англии School of Environmental Sciences University of East Anglia Norwich NR4 7TJ

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The changing face of the Electricity Market in the UK A brief review of the UK Electricity Industry prior to 1990. Краткий обзор состояния британской электроэнергетики перед приватизацией в 1990 г The Electricity Markets in the 1990s after Privatisation Рынки электроэнергии в 1990 г после приватизации The New Electricity Trading Arrangements Новая система оптовой торговли НЕТА Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС

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Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС Most CHP Schemes in UK are small average size for those under 10 MW is 650 kW

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Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС Small CHP Generators Often do not have resources to compete in Trading Rely on Suppliers who are not so keen to take electricity as their Imbalance position might be affected Since 2000 61% reduction in output from small CHP Generators after NETA At same time have seen prices for fuel for generators increase by around 14% The few Trading in NETA saw reduction of 17% in income

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Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС Wind Generation has been affected - cannot predict wind so cannot guarantee output cannot trade in Balancing Mechanism. In 2002 the Renewables Obligation will assist Wind but there was one year before this was introduced Consolidation of groups of small CHP units together has been shown to reduce risk of NETA trading. However, only marginally improvements are possible from consolidation of several Wind Farms.

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Some Implications for Renewable Generation and Combined Heat and Power. Последствия для генерации на возобновляемых источниках и для ГРЭС CHP units using Pass Out Turbines should be suited to NETA because of flexibility In UK there are very few schemes like this ~10 MW District Heating

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N. Keith Tovey, M.A. PhD, C.Eng MICE Energy Sciences Director Low Carbon Innovation Centre University of East Anglia Norwich NR4 7TJ k.tovey@uea.ac.uk Will be aiming to reduce Carbon Dioxide Emissions by 60% by 2025 Will be launched on 21st May 2003