Identification of Appropriate Generation and System Adequacy Standards for the Internal Electricity

141 Pages·2016·1.99 MB·English

\

Identification of Appropriate
Generation and System
Adequacy Standards for the
Internal Electricity Market

Final Report

[AF Mercados, E-Bridge, REF-E]
[March XXth – 2016]
EUROPEAN COMMISSION
Directorate-General for Energy
Directorate B— Internal Energy Market
Unit B2 — Wholesale markets; electricity & gas
European Commission
B-1049 Brussels
2
EUROPEAN COMMISSION

Directorate-General for Energy
Internal Energy Market
2015 EUR 2015.1392EN
Europe Direct is a service to help you find answers
to your questions about the European Union.

Freephone number (*):

00 800 6 7 8 9 10 11

(*) The information given is free, as are most calls (though some operators, phone
boxes or hotels may charge you).

LEGAL NOTICE
This document has been prepared for the European Commission; however it reflects the views only of the
authors, and the Commission cannot be held responsible for any use which may be made of the information
contained therein.
More information on the European Union is available on the Internet (http://www.europa.eu).
Luxembourg: Publications Office of the European Union, 2014
ISBN978-92-79-45126-3
doi:10.2832/089498
© European Union, 2014
Reproduction is authorised provided the source is acknowledged.
Printed in [Country]

PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER (ECF)

PRINTED ON TOTALLY CHLORINE-FREE BLEACHED PAPER (TCF)

PRINTED ON RECYCLED PAPER

PRINTED ON PROCESS CHLORINE-FREE RECYCLED PAPER (PCF)

Image(s) © [artist's name + image #], Year. Source: [Fotolia.com] (unless otherwise specified)
4
Identification of appropriate generation and system adequacy standards for the
Internal Electricity Market
Table of Contents
1 EXECUTIVE SUMMARY ......................................................................................... 10
2 INTRODUCTION ................................................................................................. 16
3 THEORETICAL ANALYSIS: ALTERNATIVE METHODOLOGIES TO MEASURE
ADEQUACY AND RELATED METRICS ...................................................................... 21
3.1 Definition of adequacy ................................................................................ 21
3.2 Adequacy assessment: preliminary concepts ................................................. 26
3.3 Methodology to assess adequacy ................................................................. 27
3.3.1 Deterministic methods ................................................................... 27
3.3.2 Probabilistic methods .................................................................... 30
3.4 Adequacy metrics ...................................................................................... 32
3.4.1 Generation and system adequacy metrics ......................................... 32
3.4.2 Advantages and disadvantages of different metrics ............................ 36
3.4.3 Assessment of distribution network adequacy ................................... 38
3.5 Cost-benefit analysis for system reliability ..................................................... 43
3.5.1 Value of Lost Load ........................................................................ 44
3.5.2 Methodologies for VOLL calculations ................................................ 48
3.5.3 Empirical studies on VOLL estimation ............................................... 52
3.5.4 An applicative case: National Grid’s use of VOLL ................................ 56
3.6 Main findings of theoretical analysis ............................................................. 58
4 EMPIRICAL ANALYSIS: SURVEY ON ADEQUACY ASSESSMENTS WITHIN EU
COUNTRIES ....................................................................................................... 61
4.1 Survey and analysis design ......................................................................... 61
4.2 Main findings of empirical analysis ............................................................... 62
5 DIAGNOSIS ....................................................................................................... 65
5.1 When are Adequacy Metrics needed? ............................................................ 65
5.2 Association between objective and appropriate metrics ................................... 66
5.3 Quality of calculation of the metrics .............................................................. 72
5.3.1 Variables used to calculate the metrics ............................................. 72
5.3.2 Methodology to calculate the metrics ............................................... 77
5.3.3 Input data for calculation ............................................................... 78
5.4 Mechanisms to ensure adequacy .................................................................. 81
6 CONCLUSIONS AND RECOMMENDATIONS .............................................................. 85
6.1 Selection of appropriate metrics................................................................... 85
6.2 The Common Model ................................................................................... 87
6.2.1 ENTSO-E Target Methodology strength and weakness ........................ 88
6.3 Optimal values of the metric ....................................................................... 90
6.4 VOLL estimation ........................................................................................ 91
6.5 Integrated Generation and Transmission Planning .......................................... 92
6.6 Spillage risk .............................................................................................. 92
7 BIBLIOGRAPHY .................................................................................................. 95
8 APPENDIX A – QUESTIONNAIRE STRUCTURE .......................................................... 98
8.1 Questionnaire format ................................................................................. 98
8.1.1 114
8.2 Objectives of the questionnaire .................................................................. 115
8.3 Clarifications ........................................................................................... 117
8.4 Adequacy standards definition ................................................................... 118
9 APPENDIX B - STATE AID INQUIRY DATA AGGREGATION ....................................... 120
5
Identification of appropriate generation and system adequacy standards for the
Internal Electricity Market
10 APPENDIX C – PUBLIC DATA .............................................................................. 121
11 APPENDIX D - SUMMARY OF RESULTS FROM EMPIRICAL ANALYSIS ......................... 122
11.1 Contents 122
11.2 Aggregated answers from public sources ..................................................... 122
11.2.1 Institutional issues ...................................................................... 125
11.2.2 Reliability and Generation Adequacy Metrics ................................... 126
11.2.3 Metric Calculation Input Data ........................................................ 126
11.3 127
11.3.1 Consideration of uncertainties ....................................................... 129
11.3.2 131
11.3.3 Methodology to calculate the metric ............................................... 132
11.3.4 Consideration of Transmission ...................................................... 132
11.3.5 Availability and Use of VOLL Concept ............................................. 133
11.4 Aggregated answers from the SAI data ....................................................... 133
11.4.1 Definitions ................................................................................. 134
11.4.2 Adequacy processes .................................................................... 134
11.4.3 Methodology .............................................................................. 134
11.4.4 Metrics of adequacy .................................................................... 135
11.4.5 Adequacy targets ........................................................................ 136
11.4.6 Economic considerations .............................................................. 136
11.4.7 Transparency ............................................................................. 137

6
Identification of appropriate generation and system adequacy standards for the
Internal Electricity Market
List of Acronyms

ACER: Agency for the Cooperation of Energy Regulators
AIT: Average Interruption Time
AS: Ancillary Services
ASIDI: Average System Interruption Duration Index
ATC: Available Transmission Capacity
CAIDI: Customer Average Interruption Duration Index
CBA: Cost-Benefit Analysis
CEER: Council of European Energy Regulators
CELID-X: Customers Experiencing Longest Interruption Durations
CEMI-X: Customers Experiencing Multiple Interruptions
CEMMI-X: Customers Experiencing Multiple Momentary Interruptions
CIGRE: International Council on Large Electric Systems
CM: Capacity Mechanism
CONE: Cost of New Entry
CVM: Contingent Valuation Method
DSM: Demand Side Management
DSOs: Distribution System Operators
EC: European Commission
EENS: Expected Energy Not Supplied
EEU: Expected Energy Unserved
EFC: Equivalent Firm Capacity
EFDO: Expected Frequency and Duration of Outages
EIR: Energy Index of Reliability
EIU: Energy Index of Unreliability
ENS: Energy Not Supplied
ENTSO-E: European Network of Transmission System Operators
EU: European Union
EUE: Expected Unserved Energy
7
Identification of appropriate generation and system adequacy standards for the
Internal Electricity Market
FACTS: Flexible AC Transmission Systems
GA: Generation Adequacy
GAM: Generation Adequacy Metric
GDP: Gross Domestic Product
GT: Gas Turbine
GVA: Gross Value Added
HVDC: High Voltage Direct Current
IEAR: Interruption Energy Assessment Rate
IEM: Internal Electricity Market
LO: Line Overload
LOEE: Loss of Energy Expectation
LOI: Lack of Interconnection
LOLE: Loss of Load Expectancy
LOLP: Loss of Load Probability
LOP: Lack of Power
MAIFI: Momentary Average Interruption Frequency Index
MS: Member States
NRA: National Regulatory Authority
NTC: Net Transfer Capacity
P95: 95th Percentile
RES: Renewable Energy Resources
SAI: State Aid Inquiry
SAIDI: System Average Interruption Duration Index
SAIFI: System Average Interruption Frequency Index
SM: System Minutes
SoS: Security of Supply
SO&AF: Scenario Outlook & Adequacy Forecast
TSOs: Transmission System Operators
TYNDP: Ten-Year Network Development Plan
UCTE: Union for the Coordination of the Transmission of Electricity
8
Identification of appropriate generation and system adequacy standards for the
Internal Electricity Market
VBRP: Value Based Reliability Planning
VOLL: Value of Lost Load
WTA: Willingness to Accept
WTP: Willingness to Pay

9
1 EXECUTIVE SUMMARY

“Security of Electricity Supply” is one of the three pillars of European Union (EU) climate
and energy policy1 in relation to the power sector. This concept has several dimensions,
one of which is system adequacy, referring to the existence within a system of sufficient
generation and transmission capacity to meet the load, whether under normal or unusual
conditions, such as unavailability of facilities, unexpected high demand, low availability of
renewable resources, etc.
The project presents the definition of adequacy and its current application in EU
countries, with the aim of identifying a methodology and a shared model for adequacy
evaluation, and with metrics to measure the adequacy level for the EU in its entirety
The project includes a theoretical analysis aimed at clarifying the principles of adequacy
(Chapter 3), an empirical analysis for identifying current practices in the EU (Chapter 4),
and a final diagnosis summarising the main topics considered in the conclusions (Chapter
5). Finally, the study’s recommendations (Chapter 6) focus on the possibility of ensuring
the electricity system’s long-term adequacy whilst avoiding possible distortions in the
operation of the Internal Energy Market.
The objective of the present study is to provide key inputs for the definition of a common
methodology and a set of acceptable standards for the evaluation of national electricity
system adequacy. Greater transparency and coordination among Member States (MS)
and national policies in terms of the security of electricity supply could be highly
beneficial to:
 assessing national preferences with respect to the trade-off between the social
value of adequacy and the cost of providing such adequacy;
 assessing national preferences for available alternative measures to achieve the
desired adequacy level (e.g. transmission vs. generation investments);
 assessing the effects of the policies of each Member State on internal security of
supply (SoS), on neighbouring countries’ security levels and supply costs, and on
the dynamics of the wholesale electricity market;
 Minimising the cost of ensuring adequacy in Europe by exploiting the
interdependencies among interconnected national systems.
Theoretical analysis introduces main adequacy concepts
As far as Security of Electricity Supply (or its synonym, “system reliability”) is concerned,
there is no common terminology adopted in the relevant literature, nor in the security of
electricity supply regulation.
In order to avoid confusion, the first objective of this study is to introduce the adequacy
concept and its related definition as the ability of the system to deliver electrical energy
to all points of utilisation within acceptable standards, and in the amounts desired
(section 3.1). Chapter 3 presents the methodologies in use for assessing adequacy and

1 The main pillars of EU energy policy are competitiveness, sustainability and security of supply
(http://ec.europa.eu/research/energy/eu/index_en.cfm?pg=policy-energy-and-climate-policy)
10