Pricing in markets with large amounts of variable power production
Abstract:
The amount of variable power sources is continuously increasing, and the share of this type of sources can be expected to grow significantly in many systems. The balance between production and consumption has to be kept continuously in any power system. In this type of system the controllable power plants (and the controllable load) have to follow the net load, i.e. fixed load minus production in variable power plants. The variation of the net load can be significant and the forecasts can be rather bad. This has and will have a large impact on the pricing since the production in the controllable power plants depends on the prices which thereby will be more volatile. These volatile prices (changes over time, node and forecast horizon) have a significant impact on the operation and also design on the future power system. It is important that the prices in the system both leads to efficient operation and incentives for correct investments in the system. Of specific interest is the challenge to obtain enough power plants in systems with low utilization time of peak units, especially in competitive markets where investments depend on expected market prices.