Hosted at European Utility Week 2013, a panel of industry experts explored the system of the future. The discussion, How Do We Operate the System of the Future? Q&A’s, and available to listen again has been published on Engerati. The speakers point out that cross border links between the markets must be kept in mind when capacity mechanisms are designed.
The right energy model
When it comes to capacity mechanisms and balance control, there are two solutions:
1.Feeding in electricity from storage from additional capacity
Capacity mechanisms are viewed as the old-fashioned adequacy problem- that is to have sufficient capacity in the system. Flexibility signals will still come from the energy market. As long as the energy market in today’s prices, including the balancing prices, are free to move and are not allowed to stagnate, then the signals for the right mix will be delivered by the market.
The decentralised model appears to be a very good one with many advantages. Based on a reliability certificate system, the model fully exploits demand side options. The supplier assesses how many capacity certificates are required and can look at its own potential of demand side which can be aggregated to reduce the need for capacity certificates.
European Energy Market - Cross border trading
To avoid the distortion of cross border trade, you do not have to fully harmonize the models. It is important to harmonize the dimensioning of the target capacity based on a harmonized approach. If each market or member state uses a similar approach, the actual models don’t have to be harmonized.
With regards to maintaining the economic viability of energy storage system projects, you can’t just to arbitrage. The secret is multiple benefit streams. For instance the Philadelphia metro rail system uses regenerative braking for energy storage but they also take part in the capacity market and frequency regulation. By integrating these, the storage project pays for itself and becomes economically viable.
Currently, the European energy market is struggling to finance existing storage assets. One solution is to have other sources of revenue like ancillary service markets which could come from the grid. When storage can serve transmission and distribution capacity, it will generate a great deal of money.