Security of supply and investments in new power capacity
The main objective of this project was to analyse the Nordic power market, especially addressing how the spot market price would develop in situations with shortage of power production capacity and to analyse if the existing market is capable of handling new investments in power capacity in these situations.
For the last two years Danmark has participated in the Nordic power market, NordPool. Until now this collaboration has been successful, a high share of the Danish power production being supplied to the market. Nevertheless some doubt exists if the power market is capable of generating the necessary investments in needed new power capacity in the years to come. Existing marken experiences are related to a time-period with excess capacity of power and therefore mainly are achieved in the day-to-day operations of the power system. Until now no major investments in new power capacity were undertaken at market conditions. Thus the main objective of this project is to analyse the Nordic power market, especially addressing if the existing market is capable of handling new investments in power capacity or if the market design could be improved, e.g. by establishing a separate market to ensure the development of new capacity The major objectives of this project are threefold: 1) To simulate how prices are determined at the Nordic power market to show the importance of price-elasticity of electricity consumers and investor behaviour. 2) To evaluate and if possible to quantify the possibilities for expanding the Nordic power market, e.g. with a separate market for developing new capacity or a tendering procedure for investments in new power plants. 3) To analyse the relevant criteria's governing investor decisions for building new power capacity, among these the required return of investments, characteristics of potential new power producing facilities and the specific requirements to spinning reserves. Of these issues the most important to address is the simulation of price-determination at the existing power market
Thus two main issues have been addressed in the project: 1) To stimulate how prices are determined at the Nordic power market to show the importance of price-elasticity of electricity consumers and investor behaviour. THis was done by developing a new version of the Balmorel model with a time resolution of one-hour compared to the previous resolution of one-week. This task was more time demanding than expected and required many resources in the project. Nevertheless it was a necessary part that had to be undertaken to fulfil the project objectives. 2) To analyse the relevant criteria's governing investor decisions for building new power capacity in the Danish power system. To handle this part of the project a new investment module was designed and developed to be run in an iterative way with the Balmorel model. Analyses were carried through depending on the outcome of a number of events, e.g. the price of CO2-allowances, new transmission capacity and the development of wind power. The main results include: In a normal year (no weather extremes) the spot price of power will not increase significantly before after 2015 given the assumptions of new capacity development in the project; Extreme weather conditions will change the results drastically. In a very cold winter there will be a shortage of power generating capacity from 2007 in the Nordic power system, starting in Sweden and Norway. This shortage will become increasingly more severe in the next years and in 2013-14 a direct shortage will appear in Denmark as well. Of course power spot prices in the Danish area will be influenced of the shortage in other Nordic countries from 2007; Competition is extremely important at the power market, if new capacity is to come on line when needed. If the main actors at the power market have a portfolio of existing power plants this will delay the development of new power capacity, because new power plants will negatively influence the revenue of the portfolios.
Key figures
Category
Participants
| Partner | Subsidy | Auto financing |
|---|---|---|
| Danmarks Tekniske Universitet (DTU) | ||
| I/S Eltra | ||
| Ramløse- EDB |
Contact
P.O. Box 49
DK-4000 Roskilde, Denmark
www.risoe.dtu.dk
Morthorst, Poul Erik , 46775100, sys@risoe.dk
Øvr. Partnere: Danmarks Tekniske Universitet; Eltra; Elkraft System; Ramløse-edb
