Capacity Market and (the Lack of) New Investments: Evidence from Poland

Capacity remuneration mechanisms operate in many European countries. In 2018, Poland implemented a centralized capacity market to ensure appropriate funding for the existing and new power generation units to improve long-term energy security. One of the declarations made while the mechanism was deployed was its beneficial influence on incentives for investments in new units. In this context, this paper aims to analyze the effects of the capacity mechanism adopted for investments in new power generation units that may be financed under the capacity market mechanism in Poland. The analysis is conducted for four types of capacity market units, the existing, refurbishing, planned, and demand-side response types, and includes the final results of capacity auctions. The results prove that the primary beneficiaries of the capacity market in Poland have been the existing units (including the refurbishing ones) responsible for more than 80% of capacity obligation volumes contracted for 2021–2025. Moreover, during the implementation of the capacity market in Poland, the planned units that signed long-term capacity contracts with a total share of 12% of the whole market were already at the advanced phases of construction, and the investment decisions were made long before the implementation of the capacity market mechanism. Therefore, they were not associated with the financial support from the capacity market. The study indicates that the capacity market did not bring incentives for investments in new power generation units in the investigated period.

Aggregate Electric Vehicles in Demand Side for Ancillary Service

This paper investigates the win-win commercialization mode of aggregating electric vehicles (EVs) in demand side for ancillary service. We have conducted a half-year-long incentive verification experiment covering 10,066 electric vehicle owners in Beijing. Based on the experimental results, we develop an incentive-based mechanism that enables electric vehicles to participate the wholesale capacity market through an aggregator. The aggregator, which is held by charging service operators can make a profit by designing a smart pricing policy. In this process, not only the electric vehicle owners but also the utility can gain benefits.

PGU-450 network heaters modes modelling with CCGT participation in regulating the electrical load in the heating mode

The features of a mathematical model for optimizing the distribution of heat and electricity at a large thermal power plant with a complex composition of equipment as part of traditional heating units and a heating CCGT are considered. The selection and justification of optimization criteria at different stages of preparation and entry of the station to the electricity and capacity market is given. The disadvantages of the previously proposed optimal distribution algorithms are analyzed in relation to thermal power plants with a complex composition of equipment and with a complex scheme for the supply of electricity and heat. A method and algorithm for solving the problem are proposed based on the equivalence of the CHP equipment and the decomposition of the problem taking into account the schemes of electricity and heat output. The description of mathematical optimization methods is given, taking into account the peculiarities of the CCGT operating modes at reduced loads. The requirements for information support when integrating the developed algorithm into the application software of the automated process control system based on the PTC are given.

A Capacity Market for the Transition towards Renewable-Based Electricity Generation with Enhanced Political Feasibility

There is a debate if electricity markets on the basis of energy-only markets ensure a sufficient generation capacity. Various capacity mechanisms are discussed to tackle this potential problem. Capacity auctions with reliability options are seen as one market-based solution. Assuming a perfect energy-only market, this mechanism leads to an equilibrium with an optimal capacity mix. This optimum is missed if there are distorted price signals at the electricity market. This is a serious problem since, despite substantial cost reductions, renewable-based electricity generation still depends on subsidies, which are not internalized at electricity markets. We develop a capacity market that internalizes subsidies for RES without direct intervention in the electricity market. The result is an endogenous discrimination of capacity prices, which enhances acceptance for a capacity market. Arising incentives direct the capacity mix to an equilibrium where discriminated prices converge to one uniform capacity price. The equilibrium is the optimal answer of fossil capacity to RES-based electricity generation.

How to Promote Energy Transition With Market Design: A Review on China’s Electric Power Sector

Energy transition, especially in the power industry, will lead to a significant promotion in energy sustainable development. Lots of emphases have been focused on the impact of policy on the energy transition; however, there were little studies on the role of the market. This paper will be devoted to the theoretical basis of market design comprehensively and discusses the obstacles restricting China’s energy transition by using an Institution-Economics-Technology-Behavior (IETB) analysis framework (four dimensions including Institution, Economics, Technology, and Behavior). In addition, the paper provides an overview of research findings on some available market designs related to the energy transition. Of note, power spot market, power capacity market, power futures market, carbon emission market, and Tradable Green Certificate (TGC) market are highlighted and discussed with emphasis. And the effects of implementing each market on overcoming those obstacles in the energy transition process are analyzed. The review results show that the market design is as important as the policy-making; hence, it is unwise for energy transition to focus on policies and ignore markets, and the market design should be pertinent and objective. Finally, some policy recommendations and market design suggestions are put forward.

Can Decarbonisation and Capacity Market Go Together? The Case Study of Poland

In recent years, numerous countries have introduced or considered capacity markets as remuneration mechanisms for long-term capacity adequacy. Since adequacy is frequently linked with thermal power generation, there is an ongoing debate as to whether this instrument could impact decarbonisation. In this context, the paper presents a quantitative assessment of the consequences of introducing a capacity market on decarbonisation pathways. The Polish power system is taken as an example due to its heavy dependence on fossil fuels. To this end, a computable model of the Polish power system is developed and applied to the study of two research scenarios. The first scenario presents the power system without introducing a capacity market, while the latter considers the system with a capacity market in place. The analysis shows that the introduction of a capacity market delays the decarbonisation of the power system and has a negative impact on carbon neutrality. Even though coal-fired units are phased out, they are mainly replaced by natural gas. The method and model developed within this study can be applied to countries where a capacity market is being discussed, and fossil fuels continue to play a dominant role.

Options for Modernization of Heat Supply to Consumers of Condensing Power Plant

High competition and strict requirements of the wholesale electricity and capacity market make optimization of heat supply schemes an urgent issue for generating companies. Replacement of life-expired generation equipment with new capacities based on advanced technologies is a priority goal for the energy industry development. This work focuses on condensing power plant (CPP), which is the only source in the city that supplies heat to all consumer categories. The plant carries out quantitative and qualitative heat supply regulation according to the temperature profile of 135/70°C with a cutoff of 110/70°C. The study examines the possibility of CPP modernization based on three options: building a pressure-reducing cooling unit 140/12, commissioning an auxiliary boiler house, and building a 110 MW combined-cycle gas plant. This paper presents technical solutions for the considered options and preliminary technical and economic calculations of their efficiency.

The Effectiveness of Energy Cooperatives Operating on the Capacity Market

The European Green Deal aims to make Europe the world’s first climate-neutral continent by 2050 by shifting to a clean circular economy, combating biodiversity loss and reducing pollution levels. In Poland, whose economy invariably remains one of the most dependent on coal consumption in Europe, institutional responses to the above EU objectives have taken the shape of energy cooperatives aimed at filling the gaps in the development of the civic dimension of energy on a local scale and the use of potential renewable energy sources in rural areas, including in relation to the agricultural sector. This article is a continuation of the authors’ previous research work, which has so far focused on the analysis of the development of profitability of Polish institutions that fit into the European idea of a “local energy community”, which includes energy cooperatives. In this research paper, they present the results of subsequent research work and analyses performed on the basis of it which, on the one hand, complement the previously developed optimization model with variables concerning actual energy storage and, on the other hand, analyze the profitability of the operation of energy cooperatives in the conditions of the “capacity market”. The latter was actually introduced in Poland at the beginning of 2021. The research took account of the characteristics of energy producers and consumers in rural areas of Poland, the legally defined rules for the operation of the capacity market and the institutional conditions for the operation of energy cooperatives that can use the potential of energy storage. A dedicated mathematical model in mixed integer programming technology was used, enriched with respect to previous research, making it possible to optimize the operation of energy cooperative with the use of actual energy storage (batteries). Conclusions from the research and simulation show that the installation of energy storage only partially minimizes the volume of energy drawn from the grid in periods when fees related to the capacity market are in force (which should be avoided due to higher costs for consumers). The analysis also indicates that a key challenge is the proper parameterization of energy storage.