Stochastic Optimization in Electricity Market Modelling The Effects of Uncertainties in CO 2 Certificate Prices and Network Expansion Costs Lena Kittel Vienna Veronika Grimm Mirjam Ambrosius September 6, 2017 Gregor Zöttl
Research Question How do uncertainties in the regulatory framework a fg ect the investment decisions of transmission operators and private generators in the German Electricity Market? What are the welfare e fg ects of taking uncertainty into account? Lena Kittel 2
Roadmap of this talk 1. Underlying electricity market model 2. Modelling of regulatory uncertainties 3. Computational results 4. Conclusion and outlook Lena Kittel 3
1. Underlying electricity market model 1. Stage: Spot market and generation investments max firms’ profits (firms) Network expansion (social planner) s.t. Generation investment Production constraints Kirchhoff’s 1st law Flow restrictions Investment in generation facilities Trading at spot markets 2. Stage: Redispatch and grid expansion (competitive companies) max social welfare (TSO) s.t. Kirchhoff’s 1 st and 2 nd law Cost based redispatch Phase angels Power flow constraint (social planner) Generation capacities Interconnection between spot market and redispatch amounts Variable constraints Lena Kittel 4
Roadmap of this talk 1. Underlying electricity market model 2. Modelling of regulatory uncertainties 3. Computational results 4. Conclusion and outlook Lena Kittel 5
Time schedule – Uncertain CO 2 certificate prices Lena Kittel 6
Numeric implementation – Uncertain CO 2 certificate prices Spot market: Redispatch: max E[firms’ profits] max E[social welfare] Influenced parameters and variables: • Variable production costs • Variable production costs => Spot market prices => Redispatch of generation quantities => Demands and generation amounts => Load shedding quantities => Prices => Generation and demand after redispatch Uninfluenced parameters and variables: => Generation investment costs and decisions => Line investment costs and decisions => Renaturation decision => Generation investment costs and decisions => Renaturation decision All Restrictions have to be fulfilled for all scenarios! Lena Kittel 7
Time schedule – Uncertain future network expansion costs Lena Kittel 8
Numeric implementation – Uncertain future network expansion costs Spot market: Redispatch: max firms’ profits max E[social welfare] Influenced parameters and variables: => Spot market does not account for any • Future network expansion costs transmission constraints => Future line investment decision => Redispatch of generation quantities ⇒ Load shedding quantities => Generation and demand after redispatch Uninfluenced parameters and variables: => Spot market prices => variable production costs and generation decisions => Investment costs and decision of private firms => Renaturation decision => Line investment decision of today All Restrictions have to be fulfilled for all scenarios! Lena Kittel 9
Roadmap of this talk 1. Underlying electricity market model 2. Modelling of regulatory uncertainties 3. Computational results 4. Conclusion and outlook Lena Kittel 10
Scenarios: CO 2 certificate price uncertainties Test scenario Uncertain Case: Possible future CO 2 certificate prices 30 € 40 € 50 € Probability weights 1/3 1/3 1/3 Reference Case: Deterministic CO 2 certificate price: 40 € Lena Kittel 11
Results: CO 2 certificate price uncertainties Investment decisions of private Reference case firms: ∆ lignite Ø No e fg ects in expanding generation capacities ∆ hard coal ∆ gas Investment decisions of the grid operator: Ø Additional line from Mecklenburg-West Pomerania to Saxony-Anhalt Ø Redispatch costs about 3.3% lower compared to status quo Uncertain case Social Welfare: + 3.15% ∆ lignite compared to status quo Aggregated CO 2 emissions: + 43,0% compared to status quo Lena Kittel 12
Uncertain future network expansion costs Cost estimations from the german network development plan 2030: DC overhead line DC earth cable Cable per km 1.5 m. € 4.0 m. € DC converter station 0.2 m. € 0.2 m. € Lifetime 40 years 40 years Probability Weights 50 % 50 % Reference Case: Expected value => Accounting for network uncertainties had negligibly small impacts on all results! Lena Kittel 13
Roadmap of this talk 1. Underlying electricity market model 2. Modelling of regulatory uncertainties 3. Computational results 4. Conclusion and outlook Lena Kittel 14
4. Conclusion and outlook We have established an electricity market model which takes uncertainties into account. This framework allows to explicitly analyze the impact of different forms of regulatory uncertainties on general welfare and on generation and network investment decisions. First qualitative results based on test example show that taking uncertain CO 2 certificate prices into account has significant effects. Future work: analyze further scenarios, more decision stages, allow adjustments of the decisions Lena Kittel 15
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