Valuing inertia: market design and development | Strategy ......At Hinkley Point, EDF is constructing the first in a new generation of nuclear power stations in the UK. It will provide

1Valuing inertia: market design and development | Strategy & Corporate Affairs | NOT PROTECTIVELY MARKED | © 2020 EDF Energy Ltd. All rights

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Valuing inertia: market design and development

Valuing inertia: market design and development | Strategy & Corporate Affairs | NOT PROTECTIVELY MARKED | © 2020 EDF Energy Ltd. All rights

Reserved.2

Alastair Davies

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Valuing inertia: market design and development

Summary:

• Part I: Status Quo – Inertia is essential, and not rewarded

– All generators depend on a stable grid

– Grid stability currently depends on the electricity system operator (ESO) re-

dispatching generation, which provides no price signal

– Low-carbon nuclear generation provides inertia ‘for free’ that is essential for grid

stability

• Part II: New Technologies – EDF is investing in future grid stability

– New technologies are replacing fossil fuel-fired generators for both energy and

grid stability services

– New nuclear build programme will provide firm power and make a valuable

contribution to grid stability

• Part III: Valuing Inertia – Market design and development is underway

– Market development can ensure an efficient mix of low-carbon synchronous

generation and new technologies for stability

– Economic value of inertia is significant and can be recognised in value-for-money

assessment of low-carbon generation


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Part I: Status Quo

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Inertia is essential, and not rewarded


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All generators depend on a stable grid

• Synchronous generators are electro-mechanically coupled with the grid and completely

dependent on it. Excursions in frequency or voltage and harmonics can cause

synchronous generators to trip, risking a cascade resulting in a total network shutdown.

• Non-synchronous generators (and HVDC interconnectors) are separated from the grid

by power electronics, but still depend on its operation remaining within agreed

parameters, or risk triggering self-protection relays.

• Consumer loads are in general less sensitive to grid stability (at least, up to the point

where loss of generation triggers low-frequency demand disconnection relays) though

there are exceptions.


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Grid stability depends on the electricity system operator

(ESO) re-dispatching generation, which provides no price

signal• Electricity market trading balances supply and demand on half-hourly basis,

aggregated at national level, and without respecting system operability constraints.

• ESO will re-dispatch generators above or below their market-determined output to

ensure system stability in real-time:

– Resolve energy balance due to within half-hour profiles, forecast error or failure

to deliver

– Resolve transmission capacity constraints

– Resolve system operability constraints, including provision of headroom for

frequency response, synchronising additional generators for inertia, creation of

voltage support etc.

• Re-dispatch is partly achieved by accepting bids and offers in the Balancing

Mechanism and partly through bilateral agreements between ESO and specific assets.

Additional bilateral or industry-wide agreements cover remuneration for specific

capabilities, e.g. operation in frequency sensitive mode.

• Costs are recovered through a Balancing Services Use of System (BSUoS) levied in

each half-hour on all energy put on or taken off the transmission system.

• There is no ‘market value’ for inertia.


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Low-carbon nuclear generation provides inertia ‘for free’ that

is essential for grid stability

• The steam turbine rotor is a key component

to any synchronous power plant as it

transfers the turbine rotation to the

generator, enabling the electrical output.

• The equivalent moment of inertia of the total

rotating part is about 0.7x106 kg.m².

Rotating at 1500 revolutions per minute

(matching grid frequency of 50Hz), it

requires a decrease of kinetic energy

greater than 345 MW.s to slow it down to a

speed corresponding to 1470 revolutions per

minute (to drop the frequency to 49Hz), the

equivalent of braking 10 trucks of 3.5 tonnes

from 100km/h to 0km/h.

• Hinkley Point C's Arabelle turbines will be

the largest ever built – longer than an Airbus

380 – and capable of producing 1,770 MWe

each


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Centre Nucléaire de Production d’Electricité (CNPE) de Paluel 1,330 MWe PWR


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CNPE de Paluel, Seine-Maritime, France

Part II: New Technologies

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EDF is investing in future grid stability


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New technologies are replacing fossil fuel-fired generators

for both energy and grid stability services EDF is the UK’s largest low-carbon generator, and operates a diverse portfolio of

generation assets, as well as being the UK’s largest electricity supplier.

Amongst new technologies for grid stability, EDF has operational assets and an R&D

development portfolio that includes:

• Li-ion batteries for enhanced frequency response

• Power electronics for grid-forming converters

• Synchronous compensators

At Hinkley Point, EDF is constructing the first in a new generation of nuclear power stations

in the UK. It will provide low-carbon power for 6 million homes from the largest

synchronous turbines ever built.

EDF in the UK is agnostic as to the ‘best’ new technologies for grid stability. For instance,

we are actively looking at thermomechanical technologies that could provide flexibility in

the short-, medium- and long-terms (e.g. thermal energy storage, adiabatic CAES

technologies, power-to-gas technologies such as ammonia and hydrogen, etc.).

Our present concern is market design and development for grid stability services.


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West Burton B battery storage facility

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EDF R&D’s Concept Grid, Les Renardières, Seine-et-Marne, France

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EDF is researching provision of services for grid stability by

aggregation of a portfolio of distributed resources• Partners: EDF, ENERCON in EU-SysFlex project

• Technical aspects

– Demonstration facilities: EDF Concept Grid – a private distribution grid dedicated

to the testing and validation of smart grid equipment, systems and functions

– A 12 MW wind farm of 6 turbines, type ENERCON E82

– A full storage system including a 2.3 MW/1h lithium-ion battery as well as an

ENERCON E-Storage 2300 power conversion system

– Photovoltaic panels and a variable load test bench, combined with power

amplifiers

• Innovative aspects of the demonstration

– Development of a VPP (Virtual Power Plant) platform, integrating advanced

forecasting and scheduling

– Demonstration of the approach to multi-service provision, through optimal

management and coordinated control of multi-resources.

– Performance assessment of different services and flexibility solutions that can be

procured from the multi-resource aggregator (VPP).

• The VPP will address the capability to manage the portfolio of resources, in order to

provide efficient and optimised multi-services for the future system.


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Synchronous compensator conversion of decommissioned

generation


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Siemens project at RWE’s Biblis A, Hessen, Germany

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New nuclear build programme will provide firm power and

make a valuable contribution to grid stability• Construction of Hinkley Point C commenced in September 2016, with J-zero – the

milestone date marking the completion of the ‘common raft’ on which the power station

is built – reached in June 2019. Commissioning is scheduled for 2025.

• Sizewell C will be an almost exact replica of Hinkley Point C, meaning that the design

can be finalised before construction, making cost and schedule estimates more robust.

This opens the door to new financing options, such as the Government’s proposed

Regulatory Asset Base (RAB) model.


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Sizewell C, Suffolk


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Hinkley Point C, Somerset

Part III: Market Development

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Market design and development is underway


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ESO’s stability pathfinder was the first phase of a new

market for inertia alongside procurement of other system

services• EDF strongly supports ESO’s ambition to

operate the grid without calling on fossil

fuel-fired generation.

• Grid stability remains essential, and

therefore new markets must be

established to procure inertia and other

system services.

• ESO has created a network development

roadmap, on which the first step has

been a ‘stability pathfinder’.

• Whilst EDF has a number of concerns

relating to the design of the tender and

assessment of the offers, overall the

procurement of inertia is a welcome step

to developing a market design that places

an economic value on inertia.

ESB

Deeside Power

Deeside Power

ESB

Uniper

ESB

Deeside Power

Deeside Power

Uniper

Uniper

Uniper

ESB

Statkraft

Statkraft

Statkraft

Statkraft

Indian Queens

Uniper

Uniper

Uniper

Indian Queens

Uniper

CHSL

CHSL

Drax

CHSL

Uniper

CHSL

CHSL

CHSL

CHSL

Rassau

CHSL

Drax

Uniper

First Hydro

First Hydro

First Hydro

First Hydro

Drax

First Hydro

First Hydro

SSE

Drax

SSE

SSE

Tender results ranked by cost of inertia

Rejected

Non-compliant

Accepted

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Market development can ensure an efficient mix of low-

carbon synchronous generation and new technologies for

stability• Market design parameters:

– Market-wide, including synchronous generation

– Reasonable lead time for delivery of new build

– Scale of procurement rounds commensurate with delivery capacity

– Compatible with other markets, including energy, capacity, voltage support and

frequency response, allowing bid optimisation across multiple dimensions

– Competition with network owners, based on shared information on network

issues by location and on common regulatory basis

– Procurement on the basis of a mix of contracts that are:

• short term, arguably the better way to procure a service from existing assets;

and

• long-term, arguably the better way to encourage new investment

• Assessment based on transparent criteria, against credible and shared counterfactual

• Outcome may be:

– Life-extension for synchronous generation

– New build technology for inertia or alternatives

– Conversion of closed/mothballed generation


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Economic value of inertia is significant and can be

recognised in value-for-money assessment of low-carbon

generationWe have identified two approaches to quantifying the economic value of inertia.

Method 1:

• In a system with low inertia, the future need for 880 MW of enhanced frequency

response could be displaced by an additional 19 GW.s of inertia, according to dynamic

simulations of frequency in response to in-feed loss by EDF R&D.

• Enhanced frequency response costs £10/MW/hr.

• This equates to a value of inertia of £4 / kVA.s / year

Method 2:

• The results of ESO’s tender for inertia, in which 12.5 GVA.s was secured at a total cost

of £328 million over five years.

• This equates to a value of inertia of £6 / kVA.s / year

The twin EPRs at Hinkley Point C and Sizewell C will each provide 19 GVA.s inertia, which

at £4 /kVA.s is worth £77 million (i.e. around £3/MWh of their output).

These values are of the same order of magnitude as Capacity Market payments for most

synchronous generators. Getting the market design right is in the best interests of

consumers.


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Conclusions

Recap:

• Part I: Status Quo – Inertia is essential, and not rewarded

– All generators depend on a stable grid

– Grid stability currently depends on the electricity system operator (ESO) re-

dispatching generation, which provides no price signal

– Low-carbon nuclear generation provides inertia ‘for free’ that is essential for grid

stability

• Part II: New Technologies – EDF is investing in future grid stability

– New technologies are replacing fossil fuel-fired generators for both energy and

grid stability services

– New nuclear build programme will provide firm power and make a valuable

contribution to grid stability

• Part III: Valuing Inertia – Market design and development is underway

– Market development can ensure an efficient mix of low-carbon synchronous

generation and new technologies for stability

– Economic value of inertia is significant and can be recognised in value-for-money

assessment of low-carbon generation


Reserved.


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Documents

Valuing inertia: market design and development | Strategy ......At Hinkley Point, EDF is constructing the first in a new generation of nuclear power stations in the UK. It will provide