A new UNSW Research Centre for Energy and Environmental Markets - - PowerPoint PPT Presentation

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

UNSW World Energy Congress Symposium

A new UNSW Research Centre for Energy and Environmental Markets

Iain MacGill

Centre for Energy and Environmental Markets (CEEM) and School of Electrical Engineering and Telecommunications The University of New South Wales Sydney, Australia Email: i.macgill@unsw.edu.au

www.ceem.unsw.edu.au

UNSW World Energy Congress Symposium 2

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

The question… and answer up front

• Q

Why establish such a Centre?

• A

Because energy and environmental markets are important, yet challenging…

• When might market-based approaches be appropriate?
• How might such markets be designed?
• How might we try and fix markets that aren’t working?

and answering these questions seems likely to require a focussed inter-disciplinary approach

UNSW World Energy Congress Symposium 3

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Why have government?

• A possible economist’s (and Australian National Competition

Policy) perspective

– For when the market does not provide efficient outcomes for society; ie. market failures

• Monopolies: The Failure of Competition
• Public Goods
• Incomplete markets
• Information failures
• The "Business Cycle
• Externalities

UNSW World Energy Congress Symposium 4

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

A government role in energy?

• Possible energy market failures:

– Monopolies

• Generally concentrated supply-side

– Public Goods

• Essential services, contribution to growth

– Incomplete markets

• Electricity networks are shared - require high levels of coordination

– Information failures

• Under-utilised energy efficiency options

– The "Business Cycle"

• Capital intensive, long-lived investments

– Externalities

• Climate change and other environmental impacts, energy security,

social impacts

UNSW World Energy Congress Symposium 5

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Energy market restructuring

• The last two decades have seen worldwide efforts to

restructure energy markets for reasons including

– Improve economic efficiency by introducing competition & facilitating new entry – Assumes effective markets & sound legal environment

• Enhance accountability to end-users & society through

‘customer choice’:

– Assumes end-users are independent agents who make informed decisions & efficiently manage the associated risks

• Implement a market-based approach to social &

environmental externalities:

– Assumes political will to regulate non-monetary impacts

• Release government funds by asset sales:

– Creates moral hazard for politicians

UNSW World Energy Congress Symposium 6

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets Social policies & priorities

Physical electricity industry Ancillary services & Regulatory actions Engineering models Main commercial markets Economic models Externalities

The electricity industry – models to aid understanding

UNSW World Energy Congress Symposium 7

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

The Australian NEM

• Physical properties of electrical energy

– No cost-effective storage – Instantaneous transmission & distribution – Energy flows according to network laws from all generators to all consumers

=> Implications

– Supply & demand balance at all times – Electrical continuum - power station to end-use means can’t assign energy from particular power station to particular consumer

UNSW World Energy Congress Symposium 8

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Engineering models for the NEM

(Based on NEMMCO, 1997)

1,500 MW NSW Snowy Victoria 850 MW 3,000 MW 1,100 MW Queensland 750 MW 750 MW South Aust 500 MW 250 MW 300 MW Tasmania 600 MW pk Basslink proposed DC link MNSP (2005?)

thermal

• r stability

flow limits

Directlink 180 MW DC (MNSP) Murraylink 220 MW DC SANI (proposed regulated AC)

UNSW World Energy Congress Symposium 9

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Economic models for the NEM

(from Bardak, “Pool prices in the NEM”, 2003)

UNSW World Energy Congress Symposium 10

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Commercial models for the NEM

Financial instrument (derivative) trading & spot market projections ancillary service “actuation markets” for period t forward-looking ancillary service (AS) “acquisition markets” ancillary service “actuation markets” for period t+1 Spot market for period t Spot market for period t+1 time spot period t spot period t+1

uncertainty increases looking forward Physical issues Commercial issues

UNSW World Energy Congress Symposium 11

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets Projected emissions from Stationary Energy sector, 1990-2020

The NEM and environmental externalities

Source: Australian Greenhouse Office (2002)

Australia has the world’s highest per- capita greenhouse gas emissions (Aust. Institute, 2002)

UNSW World Energy Congress Symposium 12

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Enviro markets – Mandatory Renewable Energy Target

UNSW World Energy Congress Symposium 13

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

MRET – a ‘designer’ market

Liable parties

Obliged to acquit RECs as part of societal obligation

REC providers

Deliver certified new Renewables to create RECs

RE Certificate trading

To improve economic efficiency RE Certificates representing 1 MWh of new ‘renewables’ Certify Certificates Maintain register Ensure liable parties oblige

Scheme administrator

UNSW World Energy Congress Symposium 14

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Tools for assessing market design + structure

• Economics – eg. general competitive market theory
• Experience with existing, similar markets
• ‘Common-sense’ assessment
• Mathematical analysis – Cournot + Bertrand paradigms, game theory…
• Experiments

– ‘Trial + error’ simulations to explore possible market outcomes – Simulations guided by ‘intelligent’ market participants

Experimental subjects Software agents

UNSW World Energy Congress Symposium 15

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Exploring a RECs market with experimental economics

UNSW World Energy Congress Symposium 16

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Trial run for MRET experimental trading game

10 20 30 40 50 60 28-Aug-99 15-Mar-00 1-Oct-00 19-Apr-01 5-Nov-01 24-May-02 10-Dec-02 28-Jun-03 14-Jan-04 1-Aug-04 17-Feb-05 5-Sep-05 Experimental Date REC Purchase Price

UNSW World Energy Congress Symposium 17

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Using AI agents and evolutionary programming

(eg. simple power system with 2 generators)

NETWORK thermal gens SPOT MARKET OPERATOR thermal gens Constant Load bidding at $120/MWh Gen G base, shoulder + peak plant with costs of $30-125/MWh Gen BG base plant with costs of $32.50/MWh

UNSW World Energy Congress Symposium 18

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

0.0 0.5 1.0 1.5 2.0 2.5 100 200 300 400 500

dispatch ('000 MW) G BG

30 60 90 120 150 100 200 300 400 500

• Mkt. price ($/MWh)

40 80 120 160 200 100 200 300 400 tournament round

surplus ($'000/hr) G BG

EP Results

• Simple problems:

=> EP + game theory agree

• Complex problems:

=> EP shows useful insights beyond standard game theory

Eg: BG and G ‘fighting’ over dispatch for Load that either can fully meet: Go for dispatch volume

• r work together to increase price

(no Nash equilibrium)

Range of market price $/MWh and G and BG surplus (profit) outcomes if none, or

• nly one is attempting strategic behaviour

UNSW World Energy Congress Symposium 19

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

Centre for Energy + Environmental Markets (CEEM)

Established…

– to formalise growing interest + interactions between UNSW researchers in Engineering, Commerce + Economics… + more – through UNSW Centre providing Australian research leadership in interdisciplinary design, analysis + performance monitoring of energy + environmental markets, associated policy frameworks – in the areas of

• Physical energy markets (with an initial focus on ancillary services,

spot market + network services for electricity + gas)

• Energy-related derivative markets (financial + environmental

including interactions between derivative and physical markets)

• Policy frameworks and instruments in energy and environment
• Experimental market platforms and AI ‘intelligent agent’ techniques

to aid in market design

• Economic valuation methodologies

UNSW World Energy Congress Symposium 20

T H T H E U E U N N I V V E R E R S I T Y S I T Y O F O F N E W E W S O S O U T U T H H W W A A L E S E S S Y D N Y D N E E Y Y A U A U S S T T R A L R A L I A A

Centre for Energy and Environmental Markets

For more information…..

www.ceem.unsw.edu.au