1,720,984 research outputs found
An incentive regulation approach for balancing stakeholder interests in transmission merchant investment
Full text linkThe merchant-regulatory mechanism represents a promising tool that combines the benefits of merchant investment and regulated investment, thereby providing efficient incentives for merchant Transmission Companies (Transcos) subject to regulatory compliance. Taking the H-R-G-V mechanism as a foundational example of this approach, it permits Transcos to receive the total surplus increase from investments, and the profit-maximizing Transco will perform social welfare maximum investment under this mechanism. However, one drawback of this mechanism is that it allows the Transco to receive the whole benefit created by the Transco, while excluding consumers and generators from the resultant economic benefits. To address this issue, we propose an incentive tuning parameter, which is incorporated into the calculation of the incentive fee for the Transco. Accordingly, the regulatory framework can effectively manage the Transco’s profit and allow market participants to access economic benefits, thus ensuring a fair distribution of economic advantages among the stakeholders, while the impact on overall social welfare remains relatively modest. The results on the case study demonstrate that this careful balancing act maintains the essence of the H-R-G-V mechanism while addressing its critical gap—the equitable sharing of economic gains
Making resource adequacy a private good: the good, the bad, and the ugly
Full text linkXiyu Ren is a DPhil candidate at the Smith School of Enterprise and the Environment, the School of Geography and the Environment, and the Institute for New Economic Thinking at the Oxford Martin School of the University of Oxford. Her research interests lie in energy and environmental economics, particularly in energy modeling, electricity market design, times-series analysis, and environmental policies.
Iacopo Savelli is a postdoctoral researcher in applied economics at the GREEN Centre, Bocconi University. He is the PI of the peer-reviewed project “Decarbonising the energy system by incentivising energy storage in the right places,” investigating the role of grid-scale energy storage in decarbonizing the energy system. Previously, he was a postdoc at the University of Edinburgh and the University of Oxford working on energy market design. He holds a PhD in engineering, an MS in finance, and a BS in economics. He taught selected energy economics topics at the University of Oxford and the University of Siena.
Thomas Morstyn is associate professor in power systems with the Department of Engineering Science of the University of Oxford, where he leads a research group focused on power system control and energy market design. He is also a tutorial fellow at Hertford College and an honorary fellow at the University of Edinburgh. He is an associate editor of IEEE Transactions on Power Systems and co-chairs the IEEE Power & Energy Society Taskforce on Quantum Computing for Power System Operations. His research focuses on the design of control systems and markets to enable the large-scale integration of distributed power system flexibility
Integrating local market operations into transmission investment: a tri-level optimization approach
Full text linkThe rise of Local Energy Markets (LEMs) and increasing local flexibility present a key research question: How do local flexibility and LEM operations impact merchant-regulated transmission investments? This paper introduces a novel tri-level framework to integrate local market dynamics into transmission investment decisions. The framework models the sequential operations of the WSM and LEMs, adhering to their respective network constraints, and includes a regulatory mechanism that incentivizes profit-driven Transmission Companies (Transcos) to make social welfare maximizing investments while accounting for local refinement costs. The tri-level optimization problem is asymptotically approximated by a mixed-integer second-order cone programming problem. Our findings from three case studies reveal that the provision of local flexibility substantially reduces reliance on conventional energy generation supplies. Additionally, transmission investment decisions are influenced by the levels of flexible generation and consumers, while adhering to network constraints. Moreover, the tri-level model enhances Transcos’ awareness of the sequential interactions between the WSM and LEMs, enabling them to make investment strategies that are responsive to the changing dynamics of local markets
Locating large-scale energy storage: spillover effects, carbon emissions, and balancing costs across Italy
No full textReaching net zero requires substantial large-scale energy storage systems (LESS) deployment. This strategy poses key challenges, including understanding how different LESS technologies compare in terms of both economic benefits and environmental impact, as well as analysing the complex interactions within and between markets when storage is deployed. To help shed light on these aspects, we investigate how LESS location, rated power, duration, and technology can affect welfare and carbon emissions in the Italian electricity system by modelling the day-ahead and the ancillary services markets. We considered lithium-ion batteries, pumped-storage hydro, and vanadium redox flow batteries. The results show that deploying LESS is always beneficial in the day-ahead market, but ancillary services costs can increase due to spillover effects because these markets run sequentially. Lithium-ion is the technology that yields the best social welfare increase. Location, rated power, and duration significantly impact carbon emissions, with changes ranging from −260 kgCO2 to 190 kgCO2 per MWh traded. These results suggest that LESS can help increase welfare and induce unintended consequences, such as spillovers across markets with a mixed effect on emissions
Ex-ante dynamic network tariffs for transmission cost recovery
Full text linkThis paper proposes a novel tariff scheme and a new optimization framework in order to address the recovery of fixed investment costs in transmission network planning, particularly against rising demand elasticity. At the moment, ex-post network tariffs are utilized in addition to congestion revenues to fully recover network costs, which often leads to over/under fixed cost recovery, thus increasing the investment risk. Furthermore, in the case of agents with elastic market curves, ex-post tariffs can cause several inefficiencies, such as mistrustful bidding to exploit ex-post schemes, imperfect information in applied costs and cleared quantities, and negative surplus for marginal generators and consumers. These problems are exacerbated by the increasing price-elasticity of demand, caused for example by the diffusion of demand response technologies. To address these issues, we design a dynamic ex-ante tariff scheme that explicitly accounts for the effect of tariffs in the long-term network planning problem and in the underlying market clearing process. Using linearization techniques and a novel reformulation of the congestion rent, the long-term network planning problem is reformulated as a single mixed-integer linear problem which returns the combined optimal values of network expansion and associated tariffs, while accounting for price-elastic agents and lumpy investments. The advantages of the proposed approach in terms of cost recovery, market equilibrium and increased social welfare are discussed qualitatively and are validated in numerical case studie
Electricity prices and tariffs to keep everyone happy: A framework for fixed and nodal prices coexistence in distribution grids with optimal tariffs for investment cost recovery
Full text linkSome consumers, particularly households, are unwilling to face volatile electricity prices, and they can perceive as unfair price differentiation in the same local area. For these reasons, nodal prices in distribution networks are rarely employed. However, the increasing availability of renewable resources and emerging price-elastic behaviours pave the way for the effective introduction of marginal nodal pricing schemes in distribution networks. The aim of the proposed framework is to show how traditional non-flexible consumers can coexist with flexible users in a local distribution area. Flexible users will pay nodal prices, whereas non-flexible consumers will be charged a fixed price derived from the underlying nodal prices. Moreover, the developed approach shows how a distribution system operator should manage the local grid by optimally determining the lines to be expanded, and the collected network tariff levied on grid users, while accounting for both congestion rent and investment costs. The proposed model is formulated as a non-linear integer bilevel program, which is then recast as an equivalent single optimization problem, by using integer algebra and complementarity relations. The power flows in the distribution area are modelled by resorting to a second-order cone relaxation, whose solution is exact for radial networks under mild assumptions. The final model results in a mixed-integer quadratically constrained program, which can be solved with off-the-shelf solvers. Numerical test cases based on both 5-bus and 33-bus networks are reported to show the effectiveness of the proposed method
Better together: Harnessing social relationships in smart energy communities
Full text linkSocial relationships can influence individual behaviours and personal choices, foster cooperation, and build solidarity. In this Perspective, we argue that harnessing social relationships connecting people living in the same community can help improve the functioning of smart local energy systems and facilitate cooperation towards shared objectives. These shared objectives could include reducing energy poverty, investing in clean technologies, and fostering energy justice. Therefore, we propose the new concept of smart energy neighbourhoods, which we define as a local energy system sharing (i) the same local energy infrastructure, (ii) a network of social relationships and group-focused concerns, and (iii) smart adaptive mechanisms enabling participation, coordination and cooperation. The paper discusses the beneficial role that smart energy neighbourhoods could play within future energy systems, their possible design, and key challenges for their implementation
The energy flexibility divide: An analysis of whether energy flexibility could help reduce deprivation in Great Britain
Full text linkThe provision of energy flexibility services (such as shifting consumption) to electricity systems is becoming increasingly valuable, and can offer additional income for households. Here, we show how the locational distribution of flexibility impacts its value, and whether this could help reduce deprivation in Great Britain. Geospatial analysis shows that nearly 90 % of people (1.3 million) living in the most deprived areas of Greater London can offer high-value flexibility. This could help improve their economic condition, provided that the adoption of appropriate appliances (such as demand response devices) is incentivised, e.g. through government's spatially targeted incentive schemes. The results show that the provision of flexibility could help reduce deprivation in several regions, including Scotland, Greater London, and Yorkshire. By contrast, other areas such as North and North-East England tend to offer lower-value flexibility, and therefore the benefit would be smaller. A flexibility-adjusted deprivation index is proposed to highlight regions where providing flexibility may most help reduce deprivation
A blueprint for energy systems in the era of central bank digital currencies
No full textCentral bank digital currencies (CBDC), i.e., electronic cash issued by central banks, are currently being developed and tested in several countries, including the European Union, Canada, China, India and Australia, and will likely become widely available for individuals and businesses in the coming years. In this Perspective, we argue that, if well-designed, CBDCs could provide significant opportunities for energy system innovation and net-zero transition, while addressing certain risks associated with digital cash. We propose a blueprint of a future energy system fully integrated with CBDCs, focusing on energy markets, carbon markets, and energy project financing. We show how this integration could increase transparency, reduce costs, trigger bottom-up citizen-driven energy initiatives, facilitate whole-system regulatory oversight, enhance carbon tracking and trading, and support energy project financing, creating a wealth of opportunities for innovation, financial inclusion in energy investment, and energy consumer engagement. We conclude by identifying major sources of risk and policy implications
On the Design of an Insurance Mechanism for Reliability Differentiation in Electricity Markets
Full text linkSecuring an adequate supply of dispatchable resources is critical for keeping
a power system reliable under high penetrations of variable generation.
Traditional resource adequacy mechanisms are poorly suited to exploiting the
growing flexibility and heterogeneity of load enabled by advancements in
distributed resource and control technology. To address these challenges this
paper develops a resource adequacy mechanism for the electricity sector
utilising insurance risk management frameworks that is adapted to a future with
variable generation and flexible demand. The proposed design introduces a
central insurance scheme with prudential requirements that align diverse
consumer reliability preferences with the financial objectives of an
insurer-of-last-resort. We illustrate the benefits of the scheme in (i)
differentiating load by usage to enable better management of the system during
times of extreme scarcity, (ii) incentivising incremental investment in
generation infrastructure that is aligned with consumer reliability preferences
and (iii) improving overall reliability outcomes for consumers.Comment: 11 pages, 8 figure
- …
