[IEEE 2012 IEEE International Conference on Power and Energy (PECon) - Kota Kinabalu, Malaysia...
Transcript of [IEEE 2012 IEEE International Conference on Power and Energy (PECon) - Kota Kinabalu, Malaysia...
Generation Revenue Assessment in Pool-Based
Electricity Markets
N. Othman1 , M. Y. Hassan
2 , and F. Hussin
3
Centre of Electrical Energy Systems (CEES),
Faculty of Electrical Engineering
Universiti Teknologi Malaysia (UTM),
Johor Bahru, Malaysia 1 Email: [email protected],
2 Email: [email protected],
3 Email: [email protected]
Abstract— The success of privatization of airline and
telecommunication industries has inspired the electricity industry
to undergo deregulation and restructuring toward becoming a
more transparent and competitive electricity market
environment. The pool market model is one of the most preferred
electricity market model implemented in many developing
countries. Despite being the reasonable and safe option for a
more competitive and transparent electricity supply industry,
there are issues on the welfare of the generators involved. This
paper addresses the pricing issue in pool market by extending the
capacity payment mechanism in the single electricity market. In
our proposed market model, clustering capacity price approach
is introduced in the capacity payment mechanism to provide
more significant generation revenue for generator. A case study
is used to illustrate the proposed model. An economic analysis is
performed to highlight the merits of the proposed model with
both pure pool and single electricity market models in terms of
generators generation revenue.
Keywords-Elecricity Supply Industry (ESI), pool market, single
electricity market (SEM), capacity payment, clustering capacity
price.
I. INTRODUCTION
The trading of electricity market grows in line with various
economic sectors development to fulfill the quality of societal
life [1]. The vertically integrated utility allows monopolized in
selling and distribution of electricity. Later, a more
competitive electricity market is being introduced which
required the utilities to unbundled the retail services into
generation, transmission, and distribution. Different electricity
market structures were introduced to meet the regulatory
policies of all countries. However, there is no single standard
market model [2]. Out of numerous market models available,
pool based electricity market is the most widely known
electricity market [3].
Under pure pool market, there are three concepts of pricing
scheme, pay as bid, uniform price and nodal pricing [4]. In
uniform pricing scheme, generators are paid based on pool
purchase price regardless their initial bid. The pool purchase
price is affected by system marginal price (SMP). On the other
hand, in pay as bid pricing scheme, all generators receive
payment based on their energy bid price regardless the pool
purchase price. The nodal pricing is derived from marginal
cost theory. It can be divided into two terms; short-run
marginal cost based and long-run marginal cost based. All
three pool pricing concepts mentioned have advantages and
disadvantages toward suppliers and customers [6, 11].
One of the main concerns in pure pool market is that
expensive generators may experience some loss when they are
not included in electricity dispatch. The single electricity
market which has been applied in Ireland’s pool market
consists of two payment, energy payment and capacity
payment. Generators will receive capacity payments which
generally cover a portion of their fixed costs [5].
After presenting electricity market models in Section II, the
paper focuses on the extension of pool market system in
Section III. Section IV will provide some representative
results of daily market for different market models. The final
section will conclude the results of this paper.
II. ELECTRICITY MARKET MODEL
A. Pool Trading
Two main participants in pool model are producer or
suppliers and customers or consumers. The pool operator who
is normally known as independent market operator (IMO) will
attain the economic dispatch by considering the electricity
bids and offers from suppliers and customers [4-6]. The
customers and supplier interact indirectly through the pool
operator [3]. The diagram of pool trading electricity market is
as illustrated in Fig.1. Pool operation can be explained in two
stages where the first stage is known as unconstrained dispatch
while the second stage is known as security constrained
dispatch.
This work was supported by the Malaysian Ministry of Higher Education (MOHE) and Universiti Teknologi Malaysia (UTM) through Research
University Grant (GUP) vot 00J63.
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
978-1-4673-5019-8/12/$31.00 ©2012 IEEE 206
Fig.1 Diagram of pool trading electricity market
The generators are placed in ascending order based on the
bidding prices they offered. The last generator being
dispatched will determine the system marginal price (SMP)
according to its bid. In uniform pricing scheme, the generator
will be paid based on the SMP regardless their initial bids. The
IMO will pay the generators for dispatching their power using
the equation below [7].
PPP = SMP (1-LOLP) + VOLL (LOLP) (1)
Where pool purchase price (PPP) is the actual price paid to
the generator, SMP is the system marginal price, LOLP is the
loss of load probability, and VOLL is the value of loss load
that is fixed annually.
B. Single Electricity Market (SEM)
The single electricity market (SEM) is a gross mandatory
pool market model, currently being developed and
implemented in Ireland in order to create an all-island market
for electricity. This electricity market is operated and
administer by Single Electricity Market Operator (SEMO)
which is a joint-venture between the transmission system
operator in Republic of Ireland, Eirgrid and the transmission
system operator in Northern Ireland, SONI [5]. SEMO is
responsible to pay generators for their electricity generated
and SEMO will be invoices the suppliers for the electricity
they have bought. The diagram of electricity trading for single
electricity market model is represented in Fig. 2.
Figure 2. Diagram of single electricity market trading
Identical to pure pool market, single electricity market
pay the generator using the pool purchase price based on the
SMP regardless the energy bid price. The mathematical
equation can be expressed as below which PGi signifies the
output power from generator i and CPP is the power purchase
price.
Gi = (PGi × CPP) (2)
The single electricity market can be distinguished from
pure pool market as it provides the capacity payment for the
generators. The capacity payment is calculated from the
operating cost of the best new entrant (BNE) power plant.
Basically the operating cost is depending on the type of
generator, the location and fuel used to generate electricity.
The lowest operating cost among the generators will be chosen
as the capacity price. All generators will receive capacity
payment based on the same capacity price. The annually
capacity price (ACPS) for each generator is represented in
equation below.
ACPS = Price × Volume (MW) (3)
Where price element is the annualized fixed costs of a best
new entrant peaking plant and the volume element represents
the capacity required in MW.
III. PROPOSED MARKET MODEL
As mention in the previous section, pure pool does not
provide capacity payment to the generator. During low load
demand, expensive generators may expose to loss due to not
being selected to supply electricity. The proposed market
model introduces the capacity payment mechanism with
clustering system for pool market. Unlike single electricity
market, the new proposed market placed generators into
different cluster depending on the generator types. Each
cluster has its own capacity price as shown in Table I. The
capacity payment is paid for each generator even though some
of them not generating during low load demand.
Malaysia load profile curves in Fig. 3 are used to represent
the pure pool, single electricity market and new proposed pool
with clustering capacity price. Four load profile curves will be
used in this paper: i) Weekday, ii) Saturday, iii) Sunday, and
iv) Public Holiday.
2 4 6 8 10 12 14 16 18 20 22 24
0.7
0.8
0.9
1
1.1
1.2
1.3
x 104
-th hour
Lo
ad
d
em
an
d (M
W)
Weekdays
Saturday
Sunday
Public Holiday
Figure 3. Diagram of Malaysia load profile curves
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
207
TABLE I. DETAILS ON PLANT TYPES, MW INSTALLED CAPACITY, BID
PRICE AND CAPACITY PRICE OF 14 GENERATORS IN MALAYSIA
Gen Type of
Plant
Installed
Capacity
(MW)
Energy Price /
Bid Price
(RM/MW/h)
Capacity
Price
(RM/MW/
month)
1 CCGT 720 120 30,000
2 CCGT 640 130 30,000
3 CCGT 322 130 30,000
4 CCGT 650 140 30,000
5 CCGT 350 145 30,000
6 OC 2420 150 20,000
7 CCGT 1170 150 30,000
8 CCGT 740 150 30,000
9 OC 436.4 155 20,000
10 Thermal 2070 160 25,000
11 OC 434 160 20,000
12 CCGT 1303 170 30,000
13 Thermal 1400 190 25,000
14 Thermal 2100 200 25,000
Fourteen selected generators from three types: open cycle,
thermal, and combined cycle are used as the test system. The
details of the MW installed capacity, bidding prices, and
capacity prices for all three type generators are represented in
Table I. As the monetary values involved in this paper are
confidential, estimated values in used instead.
IV. RESULT AND DISCUSSION
A. Generator Generation Revenue
In pure pool market, the generators are placed according to
their bidding price. The cheaper generator has bigger
opportunity to be selected to meet the electricity demand.
Usually, all generators have the opportunity to supply electric
during high electricity demand. However, during low load
demand, expensive generator has less opportunity to supply
electric power. Unfortunately, in pure pool market, the
generator revenue depends on the electricity generated. As a
result, the expensive generators may receive zero revenue
during low electricity demand.
Fig. 4 shows the aggregated generation curve of the energy
bidding system. The SMP at specific hour is determined when
the load curve and supply curve intersect. For this study, the
loads are assumed to be inelastic and the LOLP is assumed as
0. Therefore, the SMP determined the payment for all in-merit
generators.
0 2000 4000 6000 8000 10000 12000 14000110
120
130
140
150
160
170
180
190
200
Energy bid (MW)
Bid
p
rice
(R
M/M
Wh
)
Figure 4. Diagram of the agreegated generation curve
Single electricity market provides pool payment as well as
capacity payments for generators. Nevertheless, one value of
capacity price will be applied for all generators regardless
their types. This is quite unfair for generators as different type
generator will be using different mechanism and approach to
produce electric power. A combined cycle plant generates
electricity using the combination of gas turbine and steam
turbine. For that reason, the capital expenditure is obviously
higher compared to simple cycle plant. Inadequate capacity
payment reduce the generator ability to cover its fixed costs
and leading to poor performance.
To represent single electricity market system, all
generators capacity price is set at RM 20,000/MW month as it
is the lowest capacity price offered. The capacity price for an
hour can be determined using equation below.
Capacity Payment = (4)
In order to solve the capacity payment issue, new
mechanism for capacity payment is proposed in this paper.
Under the same cluster, same type generator will have the
same capacity price. Basically same type generator will use
the same material to generate electricity. Therefore, the
generation cost is pretty equal to one another. All generators
submitted their capacity prices and the minimum price offered
will be chosen as the capacity price for all same type
generators. As there are three types of generators involve in
the system, three values of capacity price will be used as
indicated in Table II below.
TABLE II. CAPACITY PRICE FOR THREE TYPES OF PLANT
Type of Plant Capacity Price
(RM/MW/month)
Open Cycle (OC) 20 000
Thermal 25 000
Combined Cycle
(OCGT) 30 000
Fig. 5 (a), (b), (c), and (d) show the generation revenue of
14 generators during Weekday, Saturday, Sunday, and Public
holiday. As expected, on Weekday, all 14 generators are able
to supply electricity regardless their bid prices. Gen 1, the
cheapest generator, managed to supply to its full capacity and
received RM 3.12 million. Gen 14 only supplied 34% of its
full capacity and earned RM 144.5 thousands. However,
during Public holiday, according to pure pool market system,
the last three generators which are Gen 12, Gen 13, and Gen
14 are unable to generate electric power due to low load
demand. In fact, Gen 14 also lost the opportunity to generate
electric power on Saturday and Sunday. Therefore, based on
pure pool, Gen 14 received zero revenue on Weekday,
Weekend, and Public holiday.
Moving to single electricity market perspective, all 14
generators have the opportunity to supply electric power and
obtained their generation revenue on Weekday, Saturday,
Sunday and Public holiday. The revenue is slightly higher
compared to pure pool which is about 15% higher. However,
Capacity Price / month
(30 days × 24 hours)
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
208
one capacity price for different generators’ types may reduce
the revenue for some generators.
Similar to single electricity market, the new proposed
market assure a worth generation revenue for all generators.
Indeed, the generation revenue for most generators is 6.7%
higher compared to single electricity market system. The new
pool market with clustering capacity price ensures the welfare
of all generators regardless the variation in electricity demand.
The clustering system provides reasonable capacity payment
for all types of generators. Even though expensive generators
are unable to compete during low load demand, the capacity
payment they received may reduce the financial burden. For
example, Gen 14 which received zero revenue on Public
holiday based on pool market is able to earn RM 140
thousands based on single electricity market. The revenue
increased to RM 1.75 million when the proposed model is
applied.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 140
2
4
6
8
10
12
14x 10
6
Generator
We
ekd
ay G
en
era
tio
n R
eve
nu
e (
RM
)
Pool SEM
Pool Clustering CP
Pool Pure
5. (a) Diagram of generation revenue on Weekday
0 1 2 3 4 5 6 7 8 9 10 11 12 13 140
2
4
6
8
10
12x 10
6
Generator
Sa
turd
ay G
en
era
tio
n R
eve
nu
e (
RM
)
Pool Clustering CP
Pool SEM
Pool Pure
5. (b) Diagram of generation revenue on Saturday
0 1 2 3 4 5 6 7 8 9 10 11 12 13 140
2
4
6
8
10
12x 10
6
Generator
Su
nd
ay G
en
era
tio
n R
eve
nu
e (
RM
)
Pool Clustering CP
Pool SEM
Pool Pure
5. (c) Diagram of generation revenue on Sunday
1 2 3 4 5 6 7 8 9 10 11 12 13 140
2
4
6
8
10
12x 10
6
Genera tor
Pu
blic H
olid
ay
G
en
era
tio
n R
ev
en
ue
(R
M)
Pool Pure
Pool SEM
Pool Clustering CP
5. (d) Diagram of generation revenue on Public Holiday
B. Daily Generation Costs
Fig. 6 (a), (b), (c) and (d) show the generation revenue on
Weekday, Saturday, Sunday, and Public holiday for 14
generators in 24 hours. The generation revenue is the highest
on Weekday and the lowest on Public holiday. Compared to
Sunday, Saturday generation revenue is slightly higher. The
gap in total generation revenue between the three market
models gradually increasing as the load demand decreasing
from Weekday to Saturday, Sunday and Public holiday.
Pure pool market indicates the lowest generation revenue
for every hour compared to single electricity market and pool
with clustering capacity price. This is due to no capacity
payment mechanism in the pure pool model. The highest
revenue for pure pool model is on Weekday at 5.00 pm which
is RM 2.58 million. The lowest revenue is on Public holiday
with RM 1.12 million.
In single electricity market, the equivalent capacity price
for all types of generators contributes to lower hourly
generation revenue. Nevertheless, the revenue is still high
compare to pure pool market. On Weekday, the total revenue
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
209
for single electricity market is 28% higher than pure pool
market but 6.5% lower than the proposed market. The revenue
for the new pool with clustering capacity price system is the
highest as each type’s generators will receives different
capacity payment.
During the lowest load demand, the revenue for pure pool
market, single electricity market and the proposed market are
RM 1.12 million, RM 1.53 million and RM 1.65 million
respectively. In the proposed market model, one fixed capacity
price for each type of generator contributes to a more simple
and organized electricity market system. In addition, the
competition between the same type generators can be
enhanced. All generators will compete to reduce the
generation costs and at the same time increasing the market
efficiency.
2 4 6 8 10 12 14 16 18 20 22 241.4
1.6
1.8
2
2.2
2.4
2.6
2.8
3
3.2x 10
6
-th hour
We
ekd
ay G
en
era
tio
n R
eve
nu
e (R
M)
Pool Pure
Pool Clus te ring CP
Pool SEM
6. (a) Hourly generation revenue on Weekday
2 4 6 8 10 12 14 16 18 20 22 241.4
1.6
1.8
2
2.2
2.4
2.6
2.8x 10
6
-th hour
Sa
tu
rd
ay
G
en
era
tio
n R
ev
en
ue
(R
M)
Pool
Pool Clustering CP
Pool SEM
6. (b) Hourly generation revenue on Saturday
2 4 6 8 10 12 14 16 18 20 22 241.2
1.4
1.6
1.8
2
2.2
2.4x 10
6
-th hour
Su
nd
ay G
en
era
tio
n R
eve
nu
e (R
M)
Pool
Pool Clustering CP
Pool SEM
6. (c) Hourly generation revenue on Sunday
2 4 6 8 10 12 14 16 18 20 22 241.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
2.1x 10
6
-th hour
Pu
blic H
olid
ay
G
en
era
tio
n R
ev
en
ue
(R
M)
Pool
Pool Clustering CP
Pool SEM
6. (d) Hourly generation revenue on Public Holiday
V. CONCLUSION
This paper proposes a new concept of pool market model
which introduces the capacity payment mechanism. Even
though all generators could recover their operation and
maintenance costs by bidding higher during peak load
demand, having the capacity payment could smooth out
energy price and help maintain the reserve margin. The
proposed pool market with clustering capacity price ensures
the welfare of all generators in electricity supply industries.
The results have shown that the proposed market provides
adequate generation revenue to all generators compared to
both pure pool and single electricity market. With the new
proposed market, all 14 generators and consumer are able to
experience a more competitive environment with efficient
electricity supply.
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
210
ACKNOWLEDGMENT
This work was supported by the Malaysian Ministry of
Higher Education (MOHE) and Universiti Teknologi Malaysia
(UTM) through Research University Grant (GUP) vot 00J63.
REFERENCES
[1] Naidoo, P.; Musaba, L.; Balet, W.; Chikova, A.; , "Towards developing a competitive market for regional electricity cross border trading: the case of the Southern African power pool," Power Engineering Society General Meeting, 2004. IEEE , vol., no., pp.1377-1384 Vol.2, 10-10 June 2004
[2] Barroso, L.A.; Cavalcanti, T.H.; Giesbertz, P.; Purchala, K.; , "Classification of electricity market models worldwide," CIGRE/IEEE PES, 2005. International Symposium , vol., no., pp.9-16, 7-7 Oct. 2005
[3] Chaitusaney, S.; Hoonchareon, N.; , "Generation dispatch with pool and bilateral coordination," Power System Technology, 2002. Proceedings. PowerCon 2002. International Conference on , vol.3, no., pp. 1355- 1359 vol.3, 2002
[4] Hassan, M.Y.; Abdullah, M.P.; Arifin, A.S.; Hussin, F.; Majid, M.S.; , "Electricity market models in restructured electricity supply industry," Power and Energy Conference, 2008. PECon 2008. IEEE 2nd International , vol., no., pp.1038-1042, 1-3 Dec. 2008
[5] Commission for Energy Regulation; , “CER Factsheet on the Single Electricity Market,” April 2011
[6] Chaitusaney, S.; Eua-Arporn, B.; , "Actual social welfare maximization in pool market," Power Engineering Society Summer Meeting, 2002 IEEE , vol.3, no., pp.1553-1558 vol.3, 25-25 July 2002
[7] K. L. Lo, “Power system economics,” in Lecture notes, Strathclyde University, 2002.
[8] Clarke, L.R.; , "Operation of the pool [electricity market]," Electricity Privatisation - Opportunities and Constraints, IEE Colloquium on , vol., no., pp.4/1-415, 27 Apr 1993
[9] Zou Bin; Yan Maosong; Xie Xianya; , "The comparisons between pricing methods on pool-based electricity market using agent-based simulation," Electric Utility Deregulation, Restructuring and Power Technologies, 2004. (DRPT 2004). Proceedings of the 2004 IEEE International Conference on , vol.1, no., pp. 285- 289 Vol.1, 5-8 April 2004
[10] Abdullah, M.P.; Hassan, M.Y.; Hussin, F.; , "Congestion cost allocation in a pool-based electricity market," Power and Energy Conference, 2008. PECon 2008. IEEE 2nd International , vol., no., pp.1033-1037, 1-3 Dec. 2008
[11] Yongjun Ren; Galiana, F.D.; , “Pay-as-bid versus marginal pricing – Part I: strategic generator offers,” Power System IEEE Transactions on , vol.19, no.4, pp.1771-1776, Nov. 2004
2012 IEEE International Conference on Power and Energy (PECon), 2-5 December 2012, Kota Kinabalu Sabah, Malaysia
211