Lennart Soder Presentation Nordic Regulators 140625

Challenges in the Nordic Power system

NordREG meeting, Arlanda, June 25, 2014

Lennart SderProfessor in Electric Power Systems, KTH

Electric Power Systems

Power System Dynamics and Control

Smart Transmission Systems

Power System Operation and Planning

Electricity Market analysis

Electric Power Systems

Power System Dynamics and Control

MehrdadRobert (pd)MohamadrezaAminMohammad Na.MarinaAfshinHaroldOmar

Smart Transmission Systems

LuigiRaphael (pd)Rujiroj (pd)AlmasTetianaYuwaWeiVedranDoan TuJan

Power System Operation and Planning

LennartLars (pd)PiaCamilleYalinAngelaGermanIlanDesta

ElectricityMarket analysis

MohammadHector (pd)EkatrinaMahirRichardYaserKristinaYelenaEzgi

MikaelEbrahimIliasRichard

Some Nordic Power System Challenges

A. Pricing challengesB. High share of

variable renewablesC. Smart-grids: Consu-

mer interactionD. Covering Peak load

Discussion:1. DSO role and responsibility2. Information exchange TSO role and

responsibility, access betweenhubs/information-exchange systems

3. Market rules for demand response4. Market rules energy services5. Market rules micro-production6. Market rules for charging electrical

vehicles7. Unbundling etc

Pricing challenges in the future Nordic Power Market with large

amounts of renewable low marginal cost units.

Nordic Power SupplyTWh 2012

Country Nuclear Hydro Fossil Wind Bio Total

Norway 0 142,9 2,4 1,6 0 147,8Finland 22,1 16,6 17,9 0,5 9,9 67,7Sweden 61,2 77,7 4,6 7,1 10,8 161,6Denmark 0 0,02 16,3 10,2 2,3 29,4

In 2012 the Nordic hydro power production was 237 TWh.

This corresponds to an inflow of around 4,5 TWh/week

A heavy rain every second week implies 9 TWh

Nordic hydro power New Nordic interconnections. ENTSO-E: Ten-Year Network Development Plan 2012

2012-2016 2017-2022

Energy is produced where the resource isThe energy has to be transported to consumption centerThe energy inflow varies, which requires storage and/or flexible system solutions

This is valid for hydro power, wind power, and solar power

Renewable energy systems Example

Nordic hydro power (inflow) can vary 86 TWh between different years (2001 to 1996)Transport from NV to SE + continent Energy balancing with thermal power in i Dk+F+Ge+Pl+NL+Ee

Wind power gives the same variations/uncertainties (and solutions) as hydro power.But: time perspective is much shorter!

Transmission capacity plansfor Sweden

Sweden-neighbours: ca 10100 MW(continuously 88 TWh/year)Nordel-neighbours: ca 5500 MW (DC!)

Plans:Jrpstrmmen-Nea, S-N, ~1000 MW(South-West link, S-N, 2x600 MW -cancelled)Nordbalt, S-L, ~600 MWNew line to GotlandStrengthening North to FinlandNew cut 2 line, ev. DC Sweden-neighbors: +~1600 MW

Pricing in power systems

Thermal power systems: Price is set by marginal costHydro power: Price is set by the water value = the expected marginal cost in the future to which the water could be stored.Wind power: Price is set by marginal cost = negative subsidy, since subsidy is only obtained at production (e.g. -2 Euro-cent if certificate price is 2 Euro-cent.)

Pricing in power systems:Norway

Nearly only hydro power (97%)Price is set by the water value = the expected marginal cost in the future to which the water could be stored. Price is not set in Norway!

Pricing in power systems:Sweden

Hydro + Nuclear + wind (90%)Large part of the rest is CHP (industrial and distr. heat) Price is set by the water value = the expected marginal cost in the future to which the water could be stored. Price is not set in Sweden!

Pricing in power systems:Denmark

2020: High wind power (50%)A part of the rest is CHP (industrial and distr. heat) When it is windy, then the prices will be low

High prices are often not set in Denmark!

Pricing in power systems:Finland

Nuclear + hydro + wind (58%-now)CHP + more nuclear in the futureAt wind and low demand, then the prices will be low

Prices are then often not set in Finland!

Pricing in future Nordic power systems:

Much more often: Prices are not set by Nordic power plants.At wind and low demand, then the prices can be really low There is then a challenge to get prices that are high enough to finance all power plant.Enough transmission to high MC areas essential

Identified wind power projects in Sweden:

Identified wind power projects: 45000 MW ( 100 TWh/year)

Today capacities: Hydro Power: 16000 MW ( 65

TWh) Nuclear power: 9000 MW ( 65

TWh) total of 25000 MW

Results from new Swedish studies on larger amounts of wind power

Lennart Sder, KTH

IEA Wind, Task 25, MeetingGolden/Denver/NREL, April 9, 2014

Swedish production: Total: 145,6 TWh(same as 2011)

Current (2011) Swedish Power System

Source TWh -2011

Energy % -2011

MW-capacity -2011

Hydro 66,0 44,9 16197Nuclear 58,0 39,5 9363Wind 6,1 4,2 2899Solar 0 0 0CHP-Ind 6,4 4,4 1240CHP-distr. 9,4 6,4 3551Condens 1,01 0,7 3197Total 146,9 100 36447

Studied Swedish Power System

Source TWh Energy % MW-max

Hydro 64,9 44,5 12951Nuclear 0 0 0Wind 46,7 32,1 15633Solar 12,6 8,6 9849CHP-Ind 6,4 4,4 1240CHP-distr. 13,9 9,5 4126Other 1,3 0,9 5081Total 139,9 100 48180

Hydro power: Duration curve

Min level: 1875 MW: Needed during 860 hoursMax level: 12951 MW: Needed during 765 hours

Deficit situation

High wind decrease in CHP

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Consumption from 14 January to 30 January

ConsumptionHydro powerWind powerSolar powerCHP

Deficit situation (yearly basis)Assumed need of OCGT

Cost for this: 2 re/kWh = 0,2 Eurocent/kWh

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Max level: 5081 MW

Number of hours with need: 765 h

Energy: 1.259 TWh

Surplus situation (August)

Not OK: 83% limit, min-hydro, min-CHP

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Consumption from 1 August to 10 August


Now OK: 83% limit, min-hydro, min-CHP

Surplus situation (August)

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Consumption from 1 August to 10 August


Surplus during a year

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Energy volume: 1.63 TWh

Max level: 9510 MWNumber of surplus hours: 860 h

General transmission challenge

A. Voltage stability limits betweenareas

B. Q-control importantC. More transmission required, but

low utilization timeD. Challenge to identify future

transmission capacity with less nuclear

E. Detailed hydro simulation takes10 minutes per week.

Surplus situation (August 1-10)

Wind Power production

Surplus situation (August 1-10) Surplus situation (August 1-10)

Transmission situation (Jan 21 Feb 1)

Wind Power production

Transmission situation (Jan 21 Feb 1)

Transmission: Yearly duration : today 7000 MW On transmission needs

A. Increase production in receivingend (= thermal, currently OCGT)

B. Capacity is available, small energy increase for first GW.

C. Since limit is voltage stability, SVC may be enough

D. Discussion on exchange of AC toDC

E. Optimization approach may be interesting

Pricing in power systems

With an assumption of perfect competition:Prices are based on production marginal costsLow costs units are used firstHigher load higher prices:

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Pricing

Pricing in presence of variable sources (e.g. wind)

Wind power has a marginal cost zeroThe production level is depending on wind speedIt is not easy to make good long term (hours) forecastsOther units have to cover the net load = demand - wind

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Weeklydemand+ wind

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W Denmark 10/1-17/1 2005

Pricing in presence of variable sources

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Thermalpricing

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Other units have to cover the net load = demand windThe other units production is controlled by price! more volatile prices

Note: This is independent of fixed price etc

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Solutions and competition

Assume a system with large pricevariation: Three types of business opportunities

More trading with neighbors Flexible plantsDemand side management

There is a competition between these methods. Much transmission reduces price changes less interest in DSM

Peak capacity responsibilities

Norway: TSO-Statnet is responsible for enough capacityFinland: TSO-Fingrid is NOT

responsible for enough capacitySweden: TSO-Svenska Kraftnt is

NOT responsible for enough capacity. But: up to 2000 MWDenmark: TSO-Energinet.dk is

responsible for enough capacity

Peak capacity responsibilitiesexample 1

1. Assume that there is a capacity problem in South Sweden and Denmark exports 1000 MW to Sweden.

2. Assume that there is an outage in Denmark so they have to decrease consumption.

3. According to EU legislation non-discrimination Denmark cannot prioritize Danish consumers before Swedish ones.

4. Does this has as a consequence that Denmark is also responsible for Sweden?

Peak capacity responsibilitiesexample - 2

1. There are discussions of capacity payments to a rather large volume in UK

2. Probably this then leads to comparatively low energy prices compared to a case with no cap. payments

3. Both Norway and Denmark plan new cables to UK.

4. Does this mean that Denmark and Norway can import and only pay the energy price?

Peak loads in Sweden 1992-2011

Year 1992 - 2011

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High load reserves in SwedenSelective capacity market

TSO responsible to purchase up to 2000 MW of reserves for peak load situations.There is a bidding process where the cheapest offers are accepted.Pricing:The bids are placed on Nordpool spot. They are only used if all other bids are accepted.The Net Regulation Price should not be allowed to exceed 5,000 Euro/MWh.TSO can immediately impose a Disconnection Price in The event of Critical Power Shortage of 20 000 SEK/MWh 2300 Euro/MWhAustralia: Max price 12000 AUD 9000 Euro/MWh

Reserves in Sweden 2012-13Consumers accepted to reduce consumption

Company Area MWStora Enso AB 3-4 210Hgans Sweden AB 4 25Rottneros Bruk AB 3 27Befesa Scandust AB 4 18Vattenfall AB 3-4 92Gteborg Energi AB 3 25AV Reserveffekt 3-4 + 67TOTAL 464

Risk for prices so low so power plants cannotbe financedLarge amounts of renewables often verylow pricesBut still other units are needed need of either (very) high prices or somekind of capacity payment mechanism.Large amount of transmission is one part solution, but perhaps also large amounts ofsolar/wind power on the other end?

Summary of (some) Nordic market challenges

There should be a (renewable) unit (biogas?) with MC as

Idea to market solution to last unit

Call it a market maker unit reduced need of cap. payment. If DSM is cheaper then it will be used instead As low LOLP as requested can be obtained (= size of unit)

High operation cost (or bidprice) essential

How high costs should we allow tomake market work:Costs for market-making plantsCosts for new lines are needed toincrease the number of participants and to decrease risk of use of market powerCosts for IT solutions for consumerflexibility since this is essential to make the market work.

Comments toNordic market challenges

How high costs should we allow tomake market work:Costs for market-making plantsCosts for new lines are needed toincrease the number of participants and to decrease risk of use of market powerCosts for IT solutions for consumerflexibility since this is essential to make the market work.(But what is the alternative?)

Comments toNordic market challenges

Some Nordic Power System Challenges

A. Pricing challengesB. High share of

variable renewablesC. Smart-grids: Consu-

mer interactionD. Covering Peak load

Discussion:1. DSO role and responsibility2. Information exchange TSO role and

responsibility, access betweenhubs/information-exchange systems

3. Market rules for demand response4. Market rules energy services5. Market rules micro-production6. Market rules for charging electrical

vehicles7. Unbundling

1. DSO role and responsibility- More distributed power production,- PV voltage control (rules or market?)- Supply voltage to feeding grid- Coordination with retailer concerning DSM- Grid planning? (if DG pays connection, then why plan?)2. Information exchange TSO role and responsibility, access between hubs/information-exchange systems- DSO:s possibility to help TSO- Peak capacity: Market? Tender? Rely on neighbours?

Comments to someNordic market challenges - 1

3. Market rules for demand response- Contract with DSO and/or retailer?- React on prices and/or externally controlled?- Time frame: minutes/hours- How long time in advance are one informed?4. Market rules energy services- DSO:s possibility/responsibility to help TSO (Q-support)- DG ancillary services requires ICT technology


5. Market rules micro-production- How to handle voltage control at large scale?- React on prices and/or externally controlled?- Time frame: minutes/hours- 100% access to grid or less? (cheaper)6. Market rules for charging electrical vehicles- Possibility to have same price everywhere?- Different price/taxes special meter ?- Externally controllable? If so: How?


7. Unbundling etc- Not so rational if TSO should plan for all possible

expansion of wind power- Off-shore grids- How much should Swedish grid-users pay for power

transferred through Sweden?- More detailed DSO-regulation?- How to allow TSO:s to take risks for long-term

investments?- How to make neighbor TSO:s to think about total social

surplus

Comments to someNordic market challenges - 4 Reserve slides

Lennart Sder, KTH

Arlanda, June 25, 2014

What is a good market? - 1

Static allocation efficiency (=are available resources used as efficient as possible? E.g. in deficit situations)Management efficiency (= is the administrative organization efficient?)Plant operation efficiency (= is each plant operated in an efficient and reliable manner?)Production optimization (= correct merit order = is cheapest possible operation, including externalities, applied?)

What is a good market? - 2

Transaction cost efficiency (= the amount of transactions costs, as measurements, spread of information and contracts)Dynamic investment efficiency (= are the correct investments done at the right time?)Risk management efficiency (= are risks and uncertainties handled in an efficient way?)System reliability (= is it on a correct level?)

C2: Surplus at 55 TWh wind+solarDifferent assumptions on wind/solar 70-90% of consumption

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Exempel 2a ej fjrrvrmeExempel 2a med fjrrvrmeExempel 2b ej fjrrvrmeExempel 2b med fjrrvrmeExempel 2c ej fjrrvrmeExempel 2c med fjrrvrme

Solution:- Export- District heating- Other head- El. vehicles- Etc- Inertia?

Max ca 90 percent ofconsumption- No distr. heat.- surplus:- 0,61 TWh/year

(no nuclear)Model of CHP and district heating

a. In Part 2 there is the assumption that one canuse surplus electricity (MC=0) in the districtheating instead of spillage.

b. In Part 3 there is the assumption that one can use surplus electricity (MC=0) to replace CHP instead of spillage.

c. Reality is probably both with some limitations.

Model of district heating - 1

a. Total district heating in Stockholm during 2012 per hour (City-Sder, including Sderenergi and Nordvstra including E.ON Jrflla)

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Stockholm fjrrvremeleverens under 2012

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a. Amount of excess of wind+solar > 75% ofdeman.

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Timme p ret med niv ver 75 procent av frbrukning

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januari februari mars april maj juni juli augusti september oktober november december


Assumptions:a. Swedish yearly disstrict heating same profile as

in Stockholmb. Same level of fuel waste as today (18%) which

is not replace (negative MC)c. Heat spillage or rkgaskondensering not

replaced with electricity.


a. Result for the potential of heat replacement

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Vrmebehov under 2012

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AvfallsfrbrnningSpillvrme


a. Result for the replacement: 1.2 TWh used (out of3,0 TWh available surplus)

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Mjlig elfrbrukning (trappstegskurva) och tillgnglig elproduktion

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Model of CHP- 1

a. Yearly CHP production in 20110,00

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DataKraftvrme:1Januari 31December

Model of CHP - 2

Model:a. 50% more CHP than today (from Profu report)b. It is possible to decrease CHP down to 25% of

its original value during each hourc. But the total amount of hydro + CHP muast be

17% of production (synchronous machinerequirement)

d. Excel sheet available to change these data.

Model of CHP- 3

a. Example of resulting CHP decrease:

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Frbrukning frn 14 januari till 30 januari

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ElfrbrukningVattenkraftVindkraftSolkraftVrmekraft

Model of CHP- 4

a. Resulting CHP decrease: 0,79 TWh = 5,4%0,00

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Resultatkraftvrmeminskning:1Januari 31December

Model of CHP- 5

a. Resulting CHP decrease: 0,79 TWh = 5,4%

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Resultatkraftvrmeminskning:Varaktighetskurva;Max=2267MW;Energi=0,79TWh

Questions on CHP + District heating

a. Amount of waste etc (MC

Simulation method (Sweden isolated)2: Detailed simulation

a. Objective function:

b. where Hspill(k)= hydro spillage during hour k, Vspill(k) = Wind spillage during hour k, EXP(k) = extra export during hour k, IMP(k) = extra import during hour k, K = number of hours in the studied period (=168).

Preliminary simulation for a January week

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ElfrbrukningVattenkraftVindkraftSolkraftVrmekraft

Result after detailed simulation (normal inflow)

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Timme under studerad vecka

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FrbrukningVattenkraftVind + solvrig produktion

Result after detailed simulation (160% ofnormal inflow)

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FrbrukningVattenkraftVind + solvrig produktion

Documents

Lennart Soder Presentation Nordic Regulators 140625