Documente Academic
Documente Profesional
Documente Cultură
C. Nabe
J. van Doorn
Ecofys 2014 by order of: TenneT TSO B.V. & Eneco N.V.
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Table of contents
1
Introduction
2.1
Energy markets
2.1.1
Wholesale Market
2.1.2
AS market
2.1.3
Market Coupling
2.1.4
2.2
2.2.1
2.2.2
2.2.3
11
2.3
Summary
12
13
3.1
Frequency control
13
3.1.1
Inertial control
14
3.1.2
16
3.1.3
17
3.1.4
21
3.1.5
23
3.1.6
28
3.2
Re-Dispatch
33
3.2.1
33
3.2.2
33
3.2.3
34
3.3
34
3.3.1
34
3.3.2
34
3.3.3
35
3.4
Reactive Power
35
3.4.1
35
3.4.2
36
3.4.3
36
3.5
Summary
37
38
4.1
38
4.1.1
38
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4.2
39
4.2.1
39
4.3
Data Sources
44
4.3.1
OWF data
44
4.3.2
47
4.3.3
Market premium
47
4.4
48
4.5
51
4.5.1
51
4.5.2
Weekend Tender
55
4.5.3
57
4.5.4
62
4.5.5
64
4.6
65
67
5.1
67
5.2
Input Data
69
5.2.1
Data sources
69
5.2.2
70
5.2.3
71
5.3
73
5.3.1
Capacity Market
73
5.3.2
Energy Market
77
5.3.3
Summary
86
5.4
88
5.4.1
Model overview
88
5.4.2
89
5.4.3
91
5.4.4
94
5.5
95
5.5.1
5.5.2
104
5.6
108
95
110
113
7.1
113
7.2
114
Appendix
116
8.1
116
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8.1.1
116
8.1.2
116
8.1.3
119
8.1.4
Tendering on weekends
122
8.1.5
124
8.2
127
References
133
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List of Figures
Figure 4: Real-time feed-in and day-ahead feed-in forecast of an OWF during one week in January 2014.
Figure 6: Comparison of sources of income under the FIT and FIP scheme in Germany
11
14
21
26
Figure 11: Comparison of OWF FITs and Marginal Capacity Prices on the market for positive TCR in 2013.
28
Figure 12: System imbalance and imbalance prices in Germany for the years 2012 and 2013.
31
Figure 13: System imbalance and imbalance prices in the Netherlands for the years 2012 and 2013.
32
Figure 14: Overview of the model steps with the actions and input parameters for the respective step.
40
Figure 15: Capacity price bid merit order for negative control reserve. Note: capacity and price bids are herein defined
positively for reasons of clarity.
Figure 16: Energy price bid merit order for negative control reserve.
41
41
Figure 17: Reduced capacity offer on the control reserve market due to length of tender period. Only the minimum
forecasted capacity (dotted red line) within a tender period can be offered on the market of control reserve,
which can lead to significant income losses for the wind farm operator.
42
Figure 18: Insertion of the OWF bid into the bidding ladder (left: start of bidding ladder, right: end of ladder).
43
45
46
Figure 21: Marginal and weighted average capacity prices (procured bids) on the capacity market for negative TCR in
2013.
48
Figure 22: Marginal and weighted average called energy bid prices on the market for negative TCR in 2013.
48
Figure 23: Called control reserve and frequency of calls for specific marginal prices on the market for negative TCR
49
Figure 24: Weighted average and marginal capacity and energy prices on the negative TCR market per weekday.
50
Figure 25: Weighted average and marginal capacity and energy prices on the negative TCR market per tender period.
50
Figure 26: Cost savings for procurement and activation on the negative TCR market with the participation of OWF.
52
Figure 27: Maximum possible income normalized to nominal power for an OWF on the negative TCR market in 2013.
54
Figure 28: Minimum and maximum changes in cost for procurement and activation for high and low market premiums. 55
Figure 29: Maximum potential income under the weekday tender schedule (wd) vs. the possible submission of bids on
every day of the week (all).
56
Figure 30: Changes in costs for procurement and activation under the weekday tender schedule (wd) vs. the possible
submission of bids on all days of the week (all).
56
Figure 31: Amount of power forecast an OWF can offer to the market of negative control reserve for different standard
deviations of the wind speed forecast error.
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57
Figure 32: Maximum possible income for an OWF under the low market premium on the negative TCR market for different
standard deviations of the wind speed forecast error.
Figure 33: Procurement of OWF control reserve capacity for different forecast qualities.
58
59
Figure 34: Maximum possible income for an OWF under the high market premium on the negative TCR market for
different standard deviations.
Figure 35: Maximum cost saving potential of OWFs for the low market premium on the negative TCR market in 2013.
59
60
Figure 36: Maximum cost saving potential of OWFs for the high market premium on the negative TCR market in 2013. 61
Figure 37: Minimum cost savings potential with a profit-maximizing bidding strategy by the OWF.
61
Figure 38: Procurement per year for a product length of 4 hrs vs. 1hr for different forecasting qualities.
62
Figure 39: Maximum potential income of an OWF on the negative TCR market for product lengths of 4hrs vs. 1hr.
63
Figure 40: Maximum cost savings potential for product lengths of 4hrs vs. 1hr.
63
Figure 41: Maximum possible income for an OWF in the capacity tender on the negative SCR vs. TCR market.
64
Figure 42: Maximum possible cost savings in the capacity tender on the negative SCR vs. TCR market.
65
67
Figure 44: Assignment of OWF projects to FINO wind data sources, depicting OWFs of scenario 1 and scenario 2.
71
72
Figure 46: Day-ahead spot market prices against hourly average residual load levels.
74
Figure 47: Median capacity bids for negative TCR against hourly average day-ahead spot market prices.
75
Figure 48: Energy price bids show an increasing trend in 2012 and 2013.
77
Figure 49: Influence of the residual load level on negative TCR energy bids.
78
Figure 50: Excerpt of energy bids in September 2013 in time slices between 8:00 am and 2:00 pm.
79
Figure 51: Workdays Relative frequency of calling events in each 15min of the day in 2013.
80
Figure 52: Workdays - Average amplitude of calling events for each 15min interval of the day in 2013
81
82
Figure 54: Mean amplitudes of calling events in dependence of VRES feed-in levels.
83
Figure 55: Relative frequency of calls depending on the absolute amplitude of VRES ramps in a period two hours.
85
Figure 56: Median amplitude of energy calls in dependence of VRES ramps within periods of two hours.
86
87
89
90
91
92
Figure 62: Influence of the rating value on the relative frequency of calls.
93
97
97
98
98
99
100
100
101
Figure 71: Marginal capacity and energy prices together with accepted wind bids.
102
104
106
Figure 74: Total cost saving potentials from the participation of OWFs in the negative TCR market.
107
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Figure 75: Specific revenue potentials at a continuous feed-in tariff of 150 /MWh.
117
118
118
120
120
122
123
Figure 82: OWF operators specific revenues regarding an increase of the amplitude of calls relative to installed OWF
capacity proportionally increased bid volumes of all conventional participants.
125
Figure 83: System costs regarding an increase of the amplitude of calls relative to installed OWF capacity proportionally
increased bid volumes of all conventional participants.
126
Figure 84: Weekends Relative frequency of calling events in each 15min of the day in 2013
127
Figure 85: Workdays - Average amplitude of calling events for each 15min interval of the day in 2013
128
List of Tables
17
18
Table 3: Auction design for secondary control reserve in Germany and the Netherlands.
19
Table 4: Auction design for tertiary control reserve in Germany and the Netherlands.
22
29
Table 6: Average imbalance prices and spreads for different system states in Germany (years 2012-13).
31
Table 7: Average imbalance prices and spreads for different system states in Germany (years 2012-13).
32
33
37
Table 10: Results of the hindcast analysis for different market designs under the low market premium
66
Table 11: Results of the hindcast analysis for different market designs under the high market premium
66
71
72
95
96
110
111
Table 18: Additional capacity procurement of negative TCR at higher penetration levels of offshore wind.
124
Table 19: Categorization of OWF projects, as a foundation for the wind scenario creation.
132
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List of Acronyms
AS
Ancillary Services
BRP
Exp1
FIT
Feed-in tariff
LCC
Min.
Minimum
NRV
OTC
OWF
PCR
Poly2
Poly8
PTU
Ref.
Reference
Scn.
Scenario
SCR
TCR
TSO
(V)RES
VSC
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1 Introduction
The rapidly growing share of renewable energy sources in the power market causes new challenges
for the maintenance of system security. With conventional power plants exiting the market, the
provision of ancillary services (AS) by renewable power plants is gaining in importance. For one of
the most important AS - the stabilization of the grid frequency through the provision of control
reserve - the participation of variable renewable energy sources (VRES) has only recently started to
be considered by Dutch and German transmission system operators (TSOs) while it is already taking
place in other European countries. Offshore wind farms (OWF), having a relatively stable feed-in, are
particularly suitable for the provision of control reserve.
The report aims to outline the role offshore wind can play for the provision of AS. Exemplarily, the
frameworks of the Dutch and German markets are examined in detail. After an introductory overview
of the power markets in both countries and the significance of wind energy in these markets in
Chapter 1, the focus is drawn to the AS in the following Chapters. Within Chapter 2, the technical
requirements for the provision of AS and the market design or remuneration for the service are
presented; these framework conditions are then analysed with regard to potential barriers that are
created for the provision of the respective service by OWFs. Considering current developments, a
more detailed analysis is done for the control reserve markets.
The qualitative examination of the provision of different AS by OWFs is followed by a quantifying
approach for the control reserve market, which is currently the only AS traded within a market.
Particularly, the analysis focuses on possible cost reductions for the procurement and calling of
control reserve when wind bids enter the market as well as benefits for wind farm operators when
participating in control reserve markets. While in Chapter 4, the assessment is done based on
historical control reserve market data of the year 2013, Chapter 5 presents results for a future
market with greater shares of wind energy and adjusted external market parameters. The
quantifications are done using a model that builds the detailed bid ladders from the control reserve
markets and adapts them to the inclusion of capacity bids from OWFs. Due to limited data availability
for the Dutch market, the model is based on German market data. For both the hindcast and forecast
analysis, different case studies are examined, which represent alternative control reserve market
designs and take into account aspects such as system security requirements and wind forecast
uncertainty. It is outlined how these market designs individually affect the potential benefits of wind
farm participation.
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While trading of derivatives can take place up to 6 years in advance, the gate closure times on the
spot market are very close to delivery time. For the control reserve or balancing market, the market
design differs in Germany and the Netherlands but delivery of the AS takes place real time. Figure 2
qualitatively depicts the order of clearing.
The markets are described in detail in the following sections, with a more detailed description of the
AS markets in Chapter 3.
Intraday
Derivatives Market
Day-Ahead Market
- Hedge risks
Real Time1
(Day+1)
(t-45min)
(minutes, seconds)
Market
Balancing Market
This is not the clearing time but time of delivery. The gate closure and clearing times for the control reserve markets in Germany and the
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A liquid market is characterised by a large number of market participants (sellers and buyers), where trades can be executed quickly and
changes in supply and demand have a comparably small impact on prices. The opposite is a tight or illiquid market.
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In November 2013, physical futures for the Netherlands were introduced at EEX [8]. The Dutch Power
Futures traded cover the period of one month, quarter or year and are differentiated into base and
peak load products. Maturities of Phelix futures are day, weekend, week, month, quarter and year,
maturities of the options month, quarter and year [9]. There are base products for a 24 hours
delivery period and peak products for deliveries between 8 a.m. and 8 p.m..
While futures are binding, an option is the contractual right to buy (...) or sell (...) a specified
volume of an underlying asset at a specified price at a predetermined future date [10].
Forwards have the same characteristics as futures and are their equivalent in OTC transactions. Other
types of OTC products are caps and floors. While a cap sets a maximum price in long-term contracts,
floors protect the seller against falling prices. Against payment of a premium, buyers of caps and
floors are reimbursed with the difference between the cap/floor price and the market price if the price
on the day of delivery exceeds the cap or falls below the floor [11].
2.1.2 AS market
The trading volumes of the wholesale market are significantly greater than the volumes traded on the
balancing market. In Germany, the balancing market size is only around 2% of the wholesale market
size for electricity [2]-[12]. The market size of the other AS is even smaller. See Figure 3 for a
depiction of the costs per energy consumed in Germany in 2012. It becomes apparent, that primary,
secondary and tertiary control reserve constitute a significant share of the AS market size. Primary
control reserve is most expensive, followed by secondary reserve with a still similar price level and
tertiary control reserve, which is the cheapest type of control reserve, possibly due to the lower
technical requirements for provision. Of secondary and tertiary control reserve, approximately twice
the capacity is procured compared to primary control reserve [2].
1.20
1.00
0.80
0.60
Redispatch
Black Start
Reactive
Power
TCR
0.40
0.20
SCR
PCR
0.00
Figure 3: Costs of AS per energy consumed.
Source: Own depiction based on [2],[13]-[14]
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The AS market size in the Netherlands is hard to assess as for most AS, costs are not publicly
available. For control reserve, the energy payments are very transparent, however until 2013
capacity payments have not been published. As of 2014, an average capacity price has to be made
available to bidders as orientation for their bids (also see Chapter 3).
As mentioned before, of the AS only control reserve is traded within a market structure in Germany
and the Netherlands. Other AS, such as reactive power, re-dispatching and black start capability, are
remunerated with fees agreed upon in bilateral contracts between the plant operator and the TSO.
For inertia, there is no remuneration scheme in place.
Within Chapter 2, the remuneration/market design for the above mentioned AS is outlined in more
detail. Furthermore, as imbalance prices are directly linked to control reserve prices, the imbalance
pricing systems in Germany and the Netherlands are also presented in Chapter 3, examining the
imbalances and price level of imbalance in both countries.
2.1.3 Market Coupling
European power markets are generally not operated isolated in Europe. The German and Dutch
market are interconnected to other markets via the so called market coupling, which optimizes the
power flows between countries and minimises costs. Market coupling optimises the usage of
interconnector transmission capacity between different power markets and serves as a congestion
management tool. If interconnectors are not congested, prices in the different market regions align.
Market coupling can be done in explicit auctions, where the physical transmission capacity of an
interconnector is traded independently from electricity trades and implicit auctions, where the
transmission capacity is already included (implicit) in electricity trades. Implicit auctions ensure the
optimal allocation of electricity flows, leading to price convergence in the different market regions due
to flows from high-price to low-price regions. There are two types of market coupling: volume
coupling where the trade volumes between different market regions are determined and price
coupling, where a centralised system evaluates both trade volumes and market prices of different
regions [15].
In 2006, price coupling of the Dutch, Belgian and French day-ahead markets took place. Three years
later, volume coupling of the German and Danish market followed. In November 2010, the CWE
region (Belgium, France, Germany, Luxembourg and the Netherlands) was coupled and connected to
the Nordic market via volume coupling. In February 2014, day-ahead price coupling in North Western
Europe (NWE) was introduced, connecting Great Britain and the CWE, Nordic and Baltic region [16].
The project NWE Enduring ID aims to introduce intraday market coupling for Great Britain and the
CWE and Nordic region. Up until now, the intraday markets of the Netherlands, Belgium and the
Nordic region are already coupled. Intraday trades between Germany and the Netherlands are still
settled in explicit auctions.
Market integration of balancing and AS markets is planned by TenneT following the integration of
intraday markets [15].
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Feed-in [MW]
100
80
60
40
20
0
Feed-in Forecast
Feed-in observed
Figure 4: Real-time feed-in and day-ahead feed-in forecast of an OWF during one week in January.
Source: own depiction with data of an OWF
There is a significant decline in of the wind power forecast errors when looking at shorter prediction
horizons. As an example, Fraunhofer show that while the Normalized Root Mean Square Error
(nRMSE)3 for a day-ahead forecast of a single OWF ranges between 17 and 23% (depending on the
quality of the forecast model), it is only 10 to 12% for a forecast with a 2 hour horizon [17]. Forecast
accuracy can increase significantly for larger wind farm portfolios, especially if they are
geographically dispersed. The portfolio effect for OWF is not as significant as for onshore wind farms,
as the turbines are concentrated on a smaller area.
Because of the uncertainty of wind production, the participation of wind power plants on derivatives
markets is very limited. Most of wind power is traded on day-ahead and intraday markets. However,
big power utilities that possess large and diversified portfolio, also trade wind energy in futures and
forwards for (price) risk hedging purposes. A mismatch in production due to forecast errors will be
offset with the remainder of the portfolio or traded back on the spot market. The day-ahead market
gate closure time, which is 12 am on the day prior to delivery, results in a forecasting lead-time for
wind farm production of 12 to 36 hours a time horizon for which forecasts are still quite inaccurate.
Thus, a significant amount of wind energy is traded again on the intraday market. In the Netherlands
however, intraday trading is very limited as the market is relatively illiquid. [6]
The nRMSE is a measure often used for analysing forecast errors of the feed-in of a wind farm. It is given by the following formula:
( )2
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Looking at the future development of markets and the role of VRES in those markets, the following
can be stated:
With a rising share of VRES in the portfolio of a power utility, the volumes of wind energy
traded on the derivatives market will most likely go down, as forecast errors cannot be offset
with conventional capacities.
With a growing share of VRES in the system, the importance of AS will increase due to the
fluctuating nature of energy production. With ever more VRES plants entering the market and
substituting conventional plants, the market design of AS has to be adjusted to the
characteristics of VRES (also see Chapter 2).
The
tariffs
are
technology
specific
and
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of
energy
from
RES.
Often
green
certificates
are
issued,
which
prove
the
production/consumption of RE. Generators can choose to produce the required amount of RE or fulfil
the quota through trading of certificates [19].
Many experts believe that RES subsidies should be phased out in the future. However for now, a fully
market based approach could only partly refinance investment and maintenance costs of the RES.
This effect is further enhanced for a rising share of VRES, as the merit order effect lowers market
prices during times of high wind and solar penetration, thus decreasing the market value of RES
plants and making it even harder for them to become competitive [20].
2.2.2 Support schemes in Germany and the Netherlands
The support schemes currently in place in Germany and the Netherlands are the FIT and FIP.
German support schemes
In Germany, a power producer can chose between two support schemes the FIT and the FIP with a
sliding market premium, which has been introduced to the German market in January 2012. If they
opt for the FIP, in accordance with 33g of the law on renewable energies (EEG), plant operators
receive a premium on top of the market revenues. The premium is the difference between the
technology-specific FIT and the monthly mean market price on the spot market (weighted per
technology) plus a management premium, which operators receive for the marketing costs [7]:
=
= with =
(1)
=1(() ())
(2)
=1 ()
RMP
MV
MgmtP
DA(h)
g(h)
Mgmt Fee
Premium
Chapter 3).
Figure 6 qualitatively compares the sources of income
FIT
under the FIT and the FIP. The market premium shall
reimburse the power plant operators for potential
losses compared to the FIT, when they market the
renewable energy directly on the spot market. Due to
the alignment of the market premium with a monthly
Wholesale
Market
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revenues from the spot market and the market premium can exceed the FIT.
In addition to the income from the spot market and premium, operators receive a management fee
reimbursing them for trading efforts. Furthermore, they can generate revenues from the participation
on the control reserve market (see also Chapter 3). If remunerated by the FIT, RES plants in
Germany are not allowed to participate on the control reserve market. When remunerated with the
market premium a marketing of capacity on the control reserve market is allowed in line with 56 (1)
EEG.
In January 2013, renewable energy traded directly by operators on the German spot market
amounted to approximately 29 GW, of which almost 83% were from wind power plants [22].
The Offshore Wind FIT is a stepped tariff, which depends on the local conditions at the plant site. The
tariff rises with distance from the shore and water depth at the site (see 31 EEG). Each wind farm
operator is remunerated with the FIT for 20 years. According to EEG 2012, an initial rate of 15
ct/kWh is paid to the operator in the first 12 years of operation; in the last eight years operator
receive the basic remuneration of 3.5 ct/kWh. Another option is the participation in an acceleration
model with an elevated initial tariff of 19 ct/kWh, which is paid during the first eight years of
operation, followed by the basic remuneration for 12 years. The payment of the initial rate of 15
ct/kWh is prolonged by i) 0.5 month for each full nautical mile in excess of 12 nautical miles from the
coast line; ii) 1.7 month for each full metre in excess of 20m water depth.
According to the EEG reform published in summer 2014, the FIP scheme is obligatory for newly
installed plants with a nominal capacity greater than 500 kW and as of 2016 even for those with a
capacity greater than 100 kW (37 EEG 2014). Furthermore, costs for direct marketing will not be
reimbursed by a management premium, but rather be included in the premium. The tariffs have been
raised compared to EEG 2012: the initial tariff has been increased to 15.40 and the basic
remuneration to 3.90 ct/kWh. However in 2018, the initial tariff will be lowered to 14.9 ct/kWh and
as of 2019 will be decreased by 0.5 ct/kWh each year. The conditions for extension of the initial tariff
have not changed. The optional stepped tariff has been prolonged until 31 December 2019, however
with a decrease of tariffs by 1 ct/kWh in 2018 and 2019 due to expected technical progress and cost
reductions.
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10
As more expensive technologies such as offshore wind were not competitive in the conventional
SDE+ auction scheme, they enter separate tenders with a predefined budget. The yearly budget for
the offshore tender depends on various parameters and is adjusted over the years according to a
wind discount profile that reflects potential cost reductions and takes into account the average APX
prices and realisation rates of projects in prior years.
As the budget is very limited, it is crucial for OWF developers to secure a good location so that they
can bid a low premium within the tender. Up until now, the budget for offshore wind only sufficed for
support of a single wind farm per year.
The bid is placed for a FIT. The payment is however capped once a certain amount of full load hours
per year is reached. In the SDE+ 2014, 3200 h are supported, representing only around 75% of
typical full load hours of OWFs. After this amount is reached, the remuneration is purely market
based and operators are fully exposed to market risks.
The premium paid to the operator is the difference between the operators bid and average hourly
APX day ahead spot price of the whole year. This sets an incentive for operators to sell energy at
times of high prices. There is floor limit for the subsidy payments. If the market price falls below this
limit, the premium paid is still only the difference between the bid and the floor limit. [6], [24]
2.2.3 Effect of support schemes on operation of wind farms
Several aspects are criticised about the design of the RES support schemes. The FIT scheme does not
expose generators to price signals of the market. Instead of aligning the power plant output to the
demand on the market, thus producing a lot when market prices are high and less if market prices
are low, the plants are designed in an output-maximising manner. According to the incentive scheme,
wind farm investors design the plants following a quantity instead of value-based approach.
If the support scheme is more value based (such as in a FIP or quota scheme scheme), the plants
would be designed to produce in a more demand (and price) oriented manner. For wind power plants
for instance this would implicate production already at lower cut-in speeds. Obligatory participation in
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11
the FIP scheme is already the case in both the Netherlands and since publication of the EEG 2014in Germany too.
2.3 Summary
The section gave an overview of the energy markets in Germany and the Netherlands and the
participation of offshore wind in these markets. Furthermore, the offshore wind subsidy schemes in
the countries were outlined. The key messages of Chapter 2 are:
Wind power is foremost traded in short-term energy markets. Due to significant forecast
errors for 24 hours forecasts, the intraday market will gain importance in the future. The
intraday market in the Netherlands should be strengthened.
The AS market is very small compared to the wholesale markets. The largest AS market
regarding market size is that of control reserve. Its income potentials for wind farms will be
further discussed in Chapters 3, 4 and 5.
Typical subsidy schemes in Europe are the FIT, FIP and quota system, with the FIP becoming
increasingly widespread. As of 2014, the FIT scheme has been abolished in Germany for new
RES power plants. In order to incentivize plant operators to improve forecast qualities, a
trend to ever more market integration is necessary.
The incentive scheme and the resulting design of wind power plants should be changed to a
value-based instead of output-maximizing approach.
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12
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13
i.e. primary (PCR), secondary (SCR) and tertiary control reserve (TCR), which serve to bring back the
frequency to the nominal value. Figure 8 qualitatively depicts the call sequences of inertial control
Power
Frequency
Time
30 s
Inertia
15 min
PCR
> 15 min
SCR
TCR
As stated in the Operation Handbook by the European Network of Transmission System Operators for
Electricity (ENTSO-E) [28] the maximum dynamic frequency deviation after a sudden loss of
generation or load in the Central European Synchronized Area should not exceed 0.8 Hz. The quasi
steady state deviation may not exceed 0.2 Hz. A quasi steady state security margin of 20 mHz has
been stipulated, i.e. for a frequency deviation of 0.02 Hz no controls are activated. At a frequency
deviation of more than 1 Hz ENTSO-E requests the starting disconnection of generation units from
the system or load shedding respectively [29].
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future. In [25] a market design similar to that of control reserve is suggested. Another solution for
the provision of inertia would a more flexible Primary Control Reserve with a reaction time faster than
30s.
Provision of inertia by wind farms is far away from implementation in most European countries. Other
approaches of providing the AS in future systems, i.e. in electricity systems with few conventional
capacities, discuss the operation of synchronous generators that would not generate active power,
but solely serve as providers of reactive power (see below) and inertial control. Only after exploiting
such options, the synthetic inertia solution will possibly be considered.
3.1.2 Primary Control Reserve (PCR)
PCR serves to stabilise the system frequency at a new equilibrium point following imbalances during
normal system operation or after large loss-of-supply (-load) events. The new steady state however
deviates from the nominal value of frequency [26]. Parties in the entire Continental European
synchronous control area automatically activate PCR within seconds, if frequency deviates more than
0.02 Hz from the nominal value. When the frequency reaches a value below 49.8 Hz or above
50.2 Hz respectively all primary reserves must be fully activated [28]. PCR is typically supplied by
conventional power plant generators with turbine governor controls. The governors adjust generation
based on the frequency deviation and their droop characteristics [26].
Within the synchronous area, 3000 MW of PCR have to be jointly procured by all European TSOs in
order to meet the N-1 criterion. The amount to be reserved in each country depends on the size of
the control area(s) and on the capacity of the largest generating unit. In Germany, 576 MW of PCR
were procured in 2013, accounting for 19.2% of total primary reserve procurement of Europe [25];
the procured capacity in the Netherlands amounted to 114 MW corresponding to 3.8% [37].
3.1.2.1 Technical requirements for the provision of primary control reserve
ENTSO-E has defined the technical requirements for the provision of control reserve in the LoadFrequency Control and Performance Handbook. PCR must be able to offset a reference incident, which
is defined as an instantaneous power deviation between generation and demand of 3000 MW in the
synchronous area. Its activation serves to prevent load shedding or the disconnection of generation
units. PCR is activated within a few seconds following a frequency event, the ramping speed is 15 s to
a deployment of 50% of the reserves and after 30 s it must be fully activated. PCR must stay
activated until the power deviation is completely offset by the secondary/tertiary control reserve of
the control area/block in which the power deviation has occurred. The minimum possible activation
duration is 15 min. [28]
3.1.2.2 Market design of primary control reserve
In Germany every controllable production unit with a nominal capacity higher or equal to 100 MW has
to be capable to withhold 2% of their capacity for PCR [38]. Since 2007, the four German TSOs
(TenneT, 50Hertz, TransnetBW and Amprion) jointly procure PCR through a single-buyer auction on
the platform regelleistung.net. The tender is a single-part auction where bidders submit a capacity
price bid only. Primary reserve capacities are tendered weekly and the program time unit is one
week. The minimum bid size is 1 MW and the product is symmetric, i.e. both positive and negative
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control reserve capacities have to be provided for an entire week [39]. As the energy supplied by a
certain generator is difficult to quantify, there are only capacity payments for PCR [1].
The Dutch regulator Autoriteit Consument en Markt (ACM) has decided to implement a new
mechanism for the procurement of PCR as of January 2014. While in the past the provision of PCR
was a compulsory unpaid service in the Netherlands, it is now contracted by auction. TenneT NL has
joined the German auction platform with around one third of the required PCR, i.e. 35 MW. The
remaining capacity will be procured by Dutch suppliers only, but also in the form of an auction [40].
An overview of the auction design for the procurement of PCR in Germany and the Netherlands is
given in Table 1.
Table 1: Auction design of PCR procurement in Germany and the Netherlands.
Source: own depiction based on [39]-[40]
with German TSOs, remaining 2/3 procured in tender with Dutch suppliers
only)
Trading platform
Regelleistung.net
Pricing rule
Pay-as-bid
Auction Period
Week
Product
Capacity payment
Yes
Energy payment
No
Minimum Bid
1 MW
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Purpose
Product
Activation Time
Activation
Duration
Bid
Balancing
Regulating Power
contracted
within 15 min
1 PTU
Symmetric
Regulating Power
not contracted
within 15 min
1 PTU
Reserve Power
1, 2, 3, 4 PTU
1 PTU
Reserve Power
5 PTU
4 PTU
Other
Comparing technical characteristics, the definition of SCR in the Dutch market is considerably broader
than in Germany and includes attributes of the German SCR and TCR. Reserve power other
purposes with an activation time of 5 PTU is comparable to the balancing power that has to be
supplied by balance responsible parties (BRP) if the imbalance exceeds one hour in Germany.
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Table 3: Auction design for secondary control reserve in Germany and the Netherlands.
Source: own depiction based on [30], [42], [43]
Netherlands
Procurement
Trading platform
Pricing rule
Auction Period
Product
Germany
Regelleistung.net
C: Pay-as-bid
C/E: Pay-as-bid
E: Marginal pricing
C: Year
Week
E: 1 PTU
C: symmetric base product (Year/Quarter)
E: 1 PTU (15 min), pos. & neg. decoupled
Capacity payment
i. Yes
ii. No
Yes
Energy payment
Yes
Yes
Minimum Bid
4 MW
5 MW
300 MW
C: Capacity, E: Energy
In Germany, every generating unit that meets the requirements of prequalification defined in the grid
code, has the right to participate in the auction for SCR [38]. The reserve is tendered weekly in a
multi-part auction where bidders submit both energy and capacity price bids. Gate closure is
Wednesdays at 3 pm for the following week. The bids are placed separately for positive and negative
reserves for peak periods (workdays 8 am-8 pm) and off-peak periods (workdays 8pm-8am and
weekends) of a whole week. The minimum bid size is 5 MW [2].
The clearing is done in two stages: capacity price bids are ranked in order of merit until the required
amount of control reserve is procured. The procured capacity is determined by the TSOs. It is
dimensioned in such a way that an elimination of the imbalance in each control zone is guaranteed in
99.975% of the time [45]. In 2013, the procurement for both positive and negative control reserve
amounted to approximately 2000 MW respectively [44].
If control reserve is activated, the energy price bids of the units that were contracted in the capacity
auction are again ranked and the plants are called according to their position in the merit order. As
the pricing rule of the auction is pay-as-bid, parties receive the capacity and energy payments
according to the bids they submitted.
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The market design will however undergo changes in the next few years. As for PCR, German TSOs
possibly want to change the auction design to day-ahead tenders [46]. Within the framework of the
integration of European control reserve markets, it is considered to introduce the possibility to
participate exclusively on an energy-only market with a gate closure of energy bids 1 hour before
time of delivery [47]. This is already implemented in the Netherlands (see below). If parties chose to
participate this way, they will not receive capacity payments, but energy payments only. According to
[46] an energy-only market design is planned to be introduced mid-2015.
In the Netherlands, SCR is procured in a yearly tender for 300 MW symmetric base capacity, resulting
in a total procurement of 600 MW. Every generating unit with a capacity greater than 60 MW is
obliged to place a symmetric bid for SCR in the capacity auction, specifying the price for providing a
certain amount of SCR during a whole year (the auction design for the capacity tender is pay-as-bid)
[42]. As opposed to Germany, capacity prices are not published in the Netherlands as they are
settled in bilateral contracts with the TSO. TenneT NL claims that capacity prices are similar to the
ones in Germany [43]. As of 2014, the TSO is obliged to publish an average capacity price as an
indicator. The average price for the tender period 2014 was 130 000 /MWa. So far, around four
parties are participating; negotiations with around 1-2 additional parties are on-going [48].
As outlined in Table 3, there are two alternative options for participating in the Dutch control reserve
energy tender by placing bids in the so-called bidding ladder, which is the merit order of all energy
bids (see Figure 9 below). Bids can be placed into the ladder as of 2 pm day-ahead and volumes and
prices can be altered until one hour (4 PTUs) prior to delivery time.
i)
Parties that are contracted to offer control reserve capacity are obliged to bid the at least
the contracted, symmetric capacity into the bidding ladder for each PTU of the year they
committed to provide control reserve. The energy price bids can be adjusted in each PTU.
They can be placed into the ladder If the contracted parties miss placing the energy bids,
dummy prices are put into the bidding ladder by TenneT NL: for upward regulation the
price is 0 /MWh, for downward regulation the APX day-ahead price +35 /MWh is
applied. Both numbers represent comparably low prices [48].
ii)
Parties that are not participating in the yearly capacity tender can still offer control
reserve by placing energy-only bids into the bidding ladder. These bids can be
asymmetric, i.e. units can offer negative or positive control reserve only.
In the bidding ladder, information about the bids placed into the market of control reserve is
published real-time so that bidders can use the information as a reference for their price bids
[49]. This also constitutes a signal for market participants to regulate against the market
imbalance. See the Figure 9 for a schematic depiction of the control reserve bidding ladder.
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300
E
200
Price [/MWh]
100
M
0
-Vmax
-600
-500
-400
-300
-200
-100
100
200
300
Vmax
400
500
600
-100
-200
-E
-300
Power [MW]
Figure 9: Schematic depiction of the Dutch control reserve bidding ladder.
Source: own depiction based on [49]-[50]
The energy bids are ranked in order of increasing bid price for positive control reserve and decreasing
bid price for negative control reserve. Bids by individual parties with bid size and price are not
published in the Netherlands. The data made available includes the maximum bid price for up- (E)
and downward regulating capacity (-E) with the corresponding maximum volume (Vmax) of offered
control reserve. Furthermore, the prices for the capacities of 100 MW, 300 MW and -if that much
is offered collectively by all bidders- 600 MW control reserve are published [42]. M is the so-called
mid-price relevant for imbalance pricing (see section 3.1.6).
In the case of imbalance, the TSO calls the required energy in order of merit. Bids are settled at the
highest price bid (positive control reserve) and/or the lowest price bid (negative control reserve)
deployed in the respective PTU, i.e. all providers of control reserve are paid the price of the highest
bid called (marginal cost pricing) [51].
3.1.4 Tertiary Control Reserve
As for SCR, the definitions of TCR differ in Germany and the Netherlands. While in Germany, TCR is a
bidirectional product (both positive and negative reserves are traded), there is only positive TCR in
the Dutch market up until now. The so-called emergency capacity (noodvermogen) is mainly
provided by large electricity consumers or gas turbines that reduce electricity consumption or raise
feed-in if required. The providing units are especially reserved for regulation requirements of TenneT
NL. Units with a nominal capacity 60 MW are excluded from the delivery of emergency power
because of their obligation to provide all reserves on the market of SCR [52].
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In Germany, TCR serves to replace SCR and is generally supplied by synchronized or fast-starting
power plants and large consumers [2]. As forecast deviations by VRES are usually of long-term
nature, the increasing share of the fluctuating power plants has a great impact on the need for TCR
[25]; the provision of TCR will thus gain in importance in the future.
3.1.4.1 Technical requirements for the provision of tertiary control reserve
To meet German prequalification requirements, generators of TCR must provide generation cycles to
the TSO, which prove that the plants are able to ramp up within 15 minutes, supply the control
reserve for 15 minutes and ramp down again within 15 minutes. This cycle must be undergone a
second time, following a 15 minutes pause. During operation, TCR has to be available within 7
minutes and fully activated within 15 minutes [2]. If several disturbances occur, providers have to be
able to supply TCR for several hours.
in the Netherlands, TCR must be fully activated within 15 minutes and units should be able to provide
the service to the system for at least one hour [52]. While the activation time is the same as for SCR,
the ramp rate is not specified as %/min. In the technical requirements, emergency capacity is similar
to German quickly interruptible loads, however in Germany terms for the provision duration are
different (cf. [53]).
3.1.4.2 Market design of tertiary control reserve
Table 4 gives an overview of the market design for TCR in Germany and the Netherlands.
Table 4: Auction design for tertiary control reserve in Germany and the Netherlands.
Source: own depiction based on [30] , [42], [43]
Netherlands
Germany
Procurement
(Sealed-bid) auction
Trading platform
Energieinfo.tennet.org
Regelleistung.net
C: Pay-as-bid
Pricing rule
Auction Period
Pay-as-bid
Day
Capacity payment
Yes
Yes
Energy payment
Yes
Yes
Minimum Bid
20 MW
5 MW
Product
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In Germany, TCR is tendered daily in blocks of four hours and separate bids for positive and negative
reserve. Hence, there are twelve products for TCR per auction. As for SCR, it is a two-staged multipart auction with bids for capacity and energy. More than 2400 MW TCR were procured in 2013 for
positive and negative reserves respectively, rising to more than 2700 MW for negative control reserve
in the second half of the year [44].
As mentioned above, the market design of TCR will possibly change in the future with the
introduction of an additional energy-only market (cf. market design of SCR). This type of tender
design is already implemented in the Netherlands.
In the Netherlands, TCR is procured in a yearly tender for 300 MW positive base capacity. As of
September 2014, there will also be a procurement of negative emergency power of 350 MW [30].
Energy bids are placed daily into the bidding ladder (the same as for SCR) for the respective PTU and
as for SCR, volume and price of the bid can be changed up until one hour before delivery [42].
3.1.5 Provision of Control Reserve by OWFs
In the following, the potential provision of primary, secondary and tertiary control reserve by OWFs is
analysed.
3.1.5.1 Status Quo of control reserve provision by OWFs
Up until today, renewable power plants are not obliged to reserve control capacity in the German or
Dutch market. RES plants in Germany are only allowed to participate on the control reserve market
when remunerated with the market premium (see also Chapter 2). In the Netherlands, the legislative
framework does not impose any barriers.
At the moment, there is no participation of wind farms on the control reserve markets in either
country; however negotiations with TSOs are under way. The impact of the current technical
requirements on each market and possible barriers for the participation of OWFs created by the
auction design of PCR, SCR and TCR will be examined more closely below. Furthermore, requirements
for the participation of wind farms discussed by TSOs are outlined.
3.1.5.2 Potential Provision of control reserve by OWFs
Within the section the participation of OWFs on the control reserve market is analysed with regard to
1) market design aspects
2) technical requirements
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Even if the wind farm would not receive support payments, operatorss income is reduced and no fuel
savings occur (see also section on provision of positive control reserve by OWFs below).
In a recent study by Fraunhofer IWES [46] options for the provision of PCR by wind farms are
discussed. They include inter alia the provision of only negative control reserve for only large
frequency deviations or the short-term notification of operators by TSOs if positive PCR is needed.
The notification should, however, be provided at least one hour before the time of delivery in order to
give operators enough time to balance generation schedules through trades on the intraday market.
The obligation for wind farms to provide both positive and negative TCR is considered critically by the
authors due to the high energy as well as income losses. This should thus just be considered when
the share of conventional capacities in the system has undergone a severe decline.
TenneT NL is currently considering to introduce decoupled/non-symmetric bids for the SCR contracts
and to shorten the bids to weekly products [30].In Germany, the current market design makes it
impossible for wind farms to participate in the SCR tenders. While the minimum bid size of 5 MW especially due to the comparably high and steady feed-in of OWFs - and decoupled bids do not
impose restrictions, the following aspects hinder the participation of the wind farms on the market of
SCR:
the product length of five days (HT products) or even seven days (NT products)
With the possible introduction of an energy-only control reserve market in the near future (cf. market
design SCR), these market design issues will be obsolete. Still, the price level on the energy-only
market might constitute an issue as long as OWFs have opportunity costs amounting to the market
premium (see Chapter 4).
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Technical Requirements
OWFs are all equipped with a pitch mechanism and information infrastructure allowing the wind farm
to respond within seconds to a setpoint transmitted by the TSO. After the farm controller receives a
new setpoint, it takes less than a second for the information to be distributed to the individual
turbines and they start regulating. The technical requirements of a response time of 30s for PCR and
5 min or 15 min for SCR and TCR are thus met.
However, while in the Netherlands, there are no strict prequalification requirements for the provision
of control reserves, the requirements defined in the German grid code constitute considerable
barriers for OWF participation in the control reserve markets.
One important issue regarding prequalification requirements is the reliability level of the control
reserve capacity offered to the market of control reserve. In the grid code, a reliability of 100% is
demanded, i.e. in 100% of the time the plant has to be able to deliver the offered amount of control
reserve. For a wind farm, however, the reliability is subject to the forecasting reliability, as wind farm
operators have to base the amount they offer to the control reserve market on forecasts. For the
forecasts, a confidence interval is defined (cf. Figure 10 below). The lower limit of the confidence
interval is the amount of wind energy that will at least be generated with a high degree of probability
and can be offered to the control reserve market (for the provision of positive control reserve, this
limit must of course be reduced by the amount that is supposed to be offered to the market) [55].
The reliability level for control reserve provision of a wind farm thus represents the probability with
which the real time feed-in of the power plant is equal to or higher than the capacity offered to the
market of control reserve. In [46] it was found that control reserve capacity bids presented with a
reliability level of 99.994% in the past, i.e. with a probability of 99.994% the power feed-in of
conventional power plants was higher than or equal to the offer that operators placed in the market
of control reserve. This level of reliability is recommended by German TSOs as a minimum for control
reserve offers.
The compliance with the reliability level is reinforced by very high penalty payments in the case of a
failure of control reserve delivery, which are agreed upon in contracts drawn up between the TSO and
BRP [30]. Such penalty payments are in place in the Dutch market as well.
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30
Upper Limit Confidence Interval
25
Prognosis
Lower Limit Confidence Interval
Power [MW]
20
10
Schedule (Negative Control Reserve)
5
0
9:00
10:00
11:00
12:00
Time
Figure 10: Reliability of Control Reserve Provision by Wind Power Plants.
Source: own depiction based on [49]
Another important issue regarding the participation on the control reserve market is the proof
methodology to demonstrate the actual delivery of control reserve. For conventional plants the
delivered control reserve is measured as the difference between the schedule that was provided to
the TSO at least 1 hour before delivery and the real-time feed-in. Under the conventional proof
method, the wind farm operator could only offer the lower limit of the confidence interval of the
forecast (see above) on the wholesale market in order to be definitely able to keep the schedule. This
would require the down-regulation of the wind farm below the actual possible feed-in, which in turn
leads to income losses on the wholesale market as well as energy losses. For OWFs, however, this
proof methodology would lead to both energy losses and income losses for the wind farm operators.
This issue has been analysed in [46]. The authors, together with TSOs, are trying to implement
another proof method, where the delivered control reserve would be measured as the difference
between the possible feed-in (that will be measured at a reference turbine of a wind farm) and the
real-time feed-in. While the possible feed-in method is not fully developed yet, the conventional
method does not provide strong incentives for wind farm operators to participate on the control
reserve market. The proof method is thus subject of on-going investigations.
It has however been shown that wind farms are able to follow predefined schedules, i.e. the
generation schedules that have to be provided to TSOs for prequalification for participating on the
control reserve market (see also technical requirements for SCR/TCR above) [56]. Due to the
comparably steady feed-in, this is even easier for OWF than for onshore wind farms.
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In a preliminary trial phase, German TSOs will test the participation of wind farms on the TCR
market. Due to economic and ecologic reasons, only the participation of wind farms on the negative
TCR market will be tested for now; provision of positive reserves has not yet been considered (see
section 3.1.5.3). In this trial phase operators must prove that they are able to 1) fully offset dayahead forecast errors on the intraday market and 2) assure that the 1 h forecast value does not
deviation more than 3% from real-time feed-in. Regarding the amount of capacity that is offered to
the market, they will only accept a third of the day-ahead forecasts as a maximum bid during the
trial phase [57].
When supplying PCR and SCR, power plants often ramp up or down in very small amounts, thus
allowed generation deviations are even smaller. For this reason, German TSOs only consider the
participation of OWFs on the TCR market at the moment.
3.1.5.3 Provision of positive control reserve by OWFs
Several authors have shown that the provision of positive control reserve is currently not economic
for wind farms in Germany (see e.g. [2], [58]-[59]).
In general, the price level for the provision of positive reserves has decreased significantly in the last
years - the price level on the negative control reserve markets is substantially higher. While in 2008,
the ratio of capacity costs for positive reserves compared to negative reserves was approximately
5:2, it was about 1:6 in 2012 [2]. Apart from that, opportunity costs for OWF when participating on
the market for positive control reserve are much higher than for the participation on negative control
reserve markets.
The opportunity costs for offering positive control reserve are the subsidy payments for an OWF, i.e.
the FIP and the income on the spot market (cf. Chapter 2). As wind farms would have to operate in a
down-regulated state in order to ramp up when needed, operators would lose the subsidy payments.
As outlined in Chapter 2, the market premium should as a minimum guarantee the reception of the
FIT to the plant operator, thus the FIT approximately represent the operators earnings from the spot
market and the market premium. The graph below depicts the marginal capacity prices for positive
control reserve (normalized to /MW-h) on the market for positive TCR in the year 2013 as well as
the initial FIT and the basic FIT for OWFs. At no point in time is the marginal capacity price higher
than the opportunity costs of the wind farm for operating in a down-regulated state.
Risk-affine operators might chose to bid a capacity price lower than the subsidy payments, hoping to
compensate for the losses in the capacity tender with revenues in the energy tender. However, while
energy prices for positive control reserve are comparably high, it is rarely activated. In only 4.5% of
the time an activation took place in 2013 [60]. During those hours, marginal energy prices exceeded
the basic remuneration (low FIT) at all times, and the high FIT in 62% of the time. The marginal
energy prices were in average 195 /MWh. Still, with the delimited number of market events and the
low probability of winning both the capacity and energy tender during those rare events, the
participation on the market for positive control reserve does not constitute a business case for OWF.
This might change in the future with new market designs.
Still, even if provision of positive control reserve were economic for OWFs, it would lead to overall
economic losses for the system. Wind farms can offer energy to the wholesale market at the marginal
cost of production of next to 0 /MWh. If they were down regulated in order to provide positive
reserves and less wind farm bids would enter the merit order, the prices on the wholesale market
would increase.
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Apart from the economical factors, it is not ecological to operate the wind farms in a down-regulated
state, as renewable energy is wasted. Down-regulation should only take place in emergency cases,
i.e. if it is needed for the provision of negative control reserve or due to impending grid congestions.
160
140
Price [/MW-h]
120
100
80
60
40
20
0
FIT Low
FIT High
Figure 11: Comparison of OWF FITs and Marginal Capacity Prices on the market for positive TCR in 2013.
Source: own calculations with data from [60], [61]
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[]
[]
(4)
For each quarter of an hour the ratio between the costs and revenues for the activation of SCR and
TCR in the NRV and the NRV balance, which is the net activation of positive and negative control
reserve, is determined. The balance is positive if the NRV is in average undersupplied in the
respective quarter of an hour, i.e. if more positive than negative control reserves was activated. Vice
versa, for an excess of negative control reserve activation, the NRV balance is negative.
The imbalance price represents an average of all control reserve energy price bids, in contrast to the
Netherlands, where the imbalance and control reserve have almost always the same (marginal) price.
The clearing of payments of the imbalance price is the same as in the Netherlands (see Table 5). The
imbalance price is not published real-time but only after several months, therefore parties trade
imbalances on the day after market in order to hedge risk: they are allowed to balance schedule
deviations by offsetting their imbalance position with counter positions of other market parties within
the same control zone until 4 p.m. on the following day [2].
The price is further limited by certain rules, e.g. it may not exceed the maximum energy price of control reserve activated.
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Figure 12: System imbalance and imbalance prices in Germany for the years 2012 and 2013.
Source: own depiction based on [2], [65]
Table 6 depicts the average imbalance price and imbalance spread for different system states. In
2012 and 2013 the system was in average around 55% of the time long and 45% short. When the
system was long, long BRPs made a loss of more than 47 /MWh having spent 39 /MWh one the
day-ahead market and being penalized with 8.58 /MWh for their imbalance. When the system was
short, penalties for short parties were slightly higher, leaving them to pay more than double the dayahead price for imbalances.
In average (time-weighted), the imbalance and day-ahead price were almost the same, however
slightly negative, benefiting parties that were short.
Table 6: Average imbalance prices and spreads for different system states in Germany (years 2012-13).
Source: own depiction based on [2], [65]
Very Long
System state
Average
Long
Occurrence [%]
Short
(
MW)
-2000
Very Short
( 2000 MW)
54.69
45.31
2.21
1.70
40.04
-8.58
98.72
-72.35
180.94
40.19
38.90
41.73
34.51
49.67
-0.14
-47.48
56.98
-106.85
131.27
For the Netherlands, the data is significantly more scattered, which can be explained by the fact that
imbalance prices are in general marginal prices of the control reserve market and not an average of
all activated bids. This also explains the characteristic lines in the graph, possibly representing bids of
market parties that regularly offer control reserve at the same price.
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As in Germany, the graph reveals a positive correlation between imbalance and imbalance prices.
However, in average, the prices are higher than on the German market. While in the Netherlands
there is an imbalance price of around 150 /MWh for an imbalance of 300 MW, the same price
corresponds to an imbalance of 2000 MW in Germany. Positive prices in a long system and negative
prices in a short system occurred more often than in Germany.
Figure 13: System imbalance and imbalance prices in the Netherlands for the years 2012 and 2013.
Source: own depiction based on [2], [66]
In Table 7, the average imbalance prices and spreads for the Netherlands for the years 2012 and
2013 for different system states are shown. The average level of imbalance and day-ahead prices is
higher than in Germany. In 13.3% of the time, different imbalance prices for long and short parties
occurred. Surprisingly, the average imbalance price at a long system state is positive.
Table 7: Average imbalance prices and spreads for different system states in Germany (years 2012-13).
Source: own depiction based on [2], [66]
System state
Average
Long
Occurrence [%]
Short
Very Long
Very Short
(-2000 MW)
( 2000 MW)
52.58
47.41
2.30
1.92
53.32
26.23
83.37
-32.91
191.32
50.23
48.50
52.15
47.56
60.81
3.09
-22.28
31.22
-80.48
130.51
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Cf. Table 8 for an overview of the imbalance pricing mechanism and management in Germany and
the Netherlands. Note: While according to TenneT NL the Dutch imbalance management, especially
the passive contribution, leads to reduced control reserve needs [43], there is a danger of extensive
regulation in the wrong direction in the case of a failure within the information system under this
scheme.
Table 8: Imbalance management in Germany and the Netherlands.
Source: own depiction based on [2], [43], [62]
Netherlands
Germany
Price transparency
100% BRP
100% BRP
Imbalance
system
pricing
3.2 Re-Dispatch
Re-Dispatch is the adjustment of active power production in order to address the following:
Power plants at the respective end nodes of the line up- or down-regulate their production upon
instruction by the TSO in order to avoid or counteract and remove the above-mentioned incidents.
The measure must not affect the balanced position of demand and supply [67]-[68].
3.2.1
TenneT NL has not specified technical requirements for the provision of Re-Dispatch capacity. In
Germany, in accordance with 13 (1) EnWG, power plants with a nominal capacity greater than 10
MW are obliged to provide the Re-Dispatch capacity to the system.
3.2.2
In the Netherlands, the grid capacity has been developed to such a point that congestion events are
rare. This is also due to the fact that the Dutch generation portfolio still mainly consists of
conventional energy sources, in particular gas power plants. Dutch plant operators are not obliged to
provide Re-Dispatch capacity. Contracts are only drawn up between the operators and TSO if a risk of
congestion has been identified. The remuneration for the AS can be a fixed fee aligned to the spot
price or is determined with a formula based on variables such as fuel prices. If there is not enough
time to draw up contracts, energy bids are taken from the bidding ladder [30].
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The deployment of Re-Dispatch measures in Germany has increased significantly in the last years.
While in 2011, during 5030 hours Re-Dispatch measures were taken, the deployment of the AS
occurred in over 7160 hours in 2012, representing a 42% increase [13]. Costs even rose by a factor
of four, with net costs of around 40 Mio in 2011 and more than 160 Mio in 2012.
For Re-dispatch bilateral contracts are drawn up between the plant operator and TSO [68]. Prices are
aligned to spot market prices following on ordinance by the Federal Energy Regulator. As trades are
not affected by Re-Dispatch measures, TSOs can pass on the costs for the AS to the grid fees [13].
3.2.3
According to 8 (1) EEG there is an unlimited precedence for electricity generated from renewable
sources of energy; their down-regulation can thus only be taken as a last measure. If RES plants are
down regulated due to congestion management measures, they are to be reimbursed for 95% of
their lost revenues plus additional expenses, less any expenses saved (12 (1) EEG).
In the Netherlands, there is no precedence for RES electricity and ramping down of power plants is
purely cost based [6]. As stated above, re-dispatch measures are rarely needed nowadays. However,
the expansion of both on- and offshore wind capacity is planned, which should reach 6000 MW
respectively in 2020 [57]. With only around 2700 MW of wind capacity being in operation today [71]
(of which 228 MW are offshore wind capacity), these expansion plans will impose significant
challenges to the grid infrastructure in the future, leading to a greater need for congestion
management. The provision of the redispatch capacity by OWFs will thus gain in importance.
3.3.1
Power plants providing the AS must be capable to start and ramp up without support of external
energy sources at no load conditions. They are generally equipped with batteries or emergency power
units.
3.3.2
In Germany, the provision of black start capability is no general requirement for the connection of a
plant to the grid, unless explicitly required by the network operator. The type and extent of provision
of the AS is settled in bilateral contracts between the plant operator and TSO upon connection of the
plant. The remuneration for the service, which is also settled in the contracts, covers the technical
installations necessary for the provision [38].
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In the Netherlands, there is a yearly tender for the procurement of black start capability. The AS can
be offered for one year or longer and is remunerated with a fixed fee settled bilaterally between plant
operators and the TSO. The market is small and very concentrated with only big parties participating
in the auction. Due to the characteristics of the service, units have to be geographically spread [30].
3.3.3
In general, plants providing black start capability should be connected to the transmission grid. This
is the case for OWFs, in contrast to most RES plants, which are generally connected on distribution
level (although there are also concepts with black start provision concepts on distribution level, e.g.
in Denmark). The suitability of OWFs for the provision of black start capability does however depend
on
the
interconnector
of
the
wind
farm.
Line
Commutate
Converter
(LCC)-based
HVDC
interconnectors do not have black-start capability. However, in general OWFs are equipped with the
Voltage Sourced Converters (VSC) technology that has to a great extent replaced the LCC technology
and is able to provide black-start capability [72]. As an emergency power unit, OWFs are generally
equipped with Diesel generators on the offshore substation. In case of a black out, they could supply
the energy for the technical system necessary for the starting of the wind farm. Still, the load that is
necessary for the starting process is not part of the technical system of an OWF nowadays.
Furthermore, starting up is evidently limited with regard to the availability of wind at the time of the
blackout.
From a technical point of view, black start capability could be provided by OWFs if equipped with load
supplying devices. However, wind farms cannot provide the service with certainty.
Reactive power is procured by telephone in the Netherlands and the response time may not exceed
15 min [74].
In Germany, the provision of reactive power is a prerequisite for the grid connection of a plant. The
technical requirements regarding the supply of reactive power are stipulated in the German grid code
[38]. Within bilateral contracts, the TSOs and plant operators agree on a specific form of provision
with a certain reactive power range. This range must be traversed within a few minutes and changes
in reactive power demand must be possible within the agreed range at any point in time. If required,
the TSO can furthermore change the reactive power range specified in the contract.
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3.4.2
In the Netherlands, the provision of reactive power is an obligation for all controllable units connected
to the grid, i.e. all units with the exception of production units, which are solely dependent on one or
more non-adjustable energy sources [75]. The need for reactive power is specific for different
market areas and providers are generally monopolists in an area. Right now, there are six market
participants in the Dutch market. The remuneration for the AS is settled between TenneT NL and
plant operators in bilateral contracts with a fixed yearly fee or variable hourly fee, depending on the
need the TSO expects for the respective market area [30].
In Germany, according to [38] the delivery of reactive power is an obligation for every generating
unit. Just like in the Dutch market, the financial compensation for the provision of the service is
regulated on a bilateral basis. In 2012 costs for the procurement of reactive power amounted to
almost 70 Mio and thus were 2.5 as high as in 2011 (27 Mio ).
In general, only large power plants are at the moment remunerated for the provision of reactive
power. As the provision of the AS strongly depends on local needs, the development of a market is
unlikely.
3.4.3
The Dutch grid code (see [75]) does not specify the role of wind power in providing reactive power;
according to TenneT NL the requirements that will be defined in the European Network Codes will be
applied in the future [30].
With provision of reactive power being a prerequisite for grid connection in Germany, it is already an
obligation for OWFs today. The System Service Ordinance (SDLWindV) regulates the grid connection
requirements for wind farms (see also 6(5) EEG) and acts as a supplement to the German grid code.
Section 3.3.8.1 of Annex 1 of the SDLWindV in conjunction with Annex 2 defines the technical
requirements for the reactive power supply by wind farms. Reactive power is to be supplied at the
nominal operating point of the turbine and the agreed reactive power range must be traversed within
4 minutes. Changes in reactive power demand must be possible within the agreed range at any point
in time.
In general, modern converters integrated in wind turbines are capable of providing reactive power to
the grid. Just like the active power feed-in, the reactive power provision by the voltage-source
converters is dispatchable and can thus be used for voltage support [76].
However, OWFs are generally connected to the substation on land via HVDC cables and are thus not
able to provide reactive power directly to the system; the reactive power can only be supplied to the
offshore grid. Even if the wind farm is connected with an AC cable, which is usually the case for
shorter distances to the shore, the losses of reactive power within the cable are possibly too large to
provide a significant amount to the system. Evidently, the VSC at the onshore substation can
transform active into reactive power if needed, it is however operated by the TSO.
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3.5 Summary
The provision of AS by RES plants will gain importance in the future with ever more conventional
capacities exiting the market. However, not all AS can be provided by wind farms. Table 9
summarizes the suitability of OWFs for the provision of the above-examined services and lists
possible barriers from a market design perspective and regarding technical aspects.
Ancillary
Service
Technical Aspects
Control Reserve
Energy-only
Provision
reserve
(suggested by ACER)
control
reserve
market already implemented in
NL, but capacity auctions should
of
positive
questionable
control
due
to
requirements
in
be changed
Special
rules
apply
for
can be generated
Reactive Power
Inertial Control
Remuneration
in
bilateral
market participants
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Remuneration
in
bilateral
contracts
Technically
dependency
possible,
on
provision uncertain
37
wind
but
makes
What are the additional revenue streams for an OWF operator when offering capacity on the
markets for negative control reserve?
How often is control reserve procured by the wind farm and how often is it activated?
The capacity that wind farms can offer depends greatly on the control reserve market design, e.g.
required reliability levels and gate closure time, while the wind farms opportunity costs for
participating on the market change depending on the remuneration system for renewables that is in
place. The different parameters influencing the income of the wind farm operator are examined in the
case studies presented below.
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System perspective
The main question from the system perspective is:
What are the costs of both procurement and calling of control reserve with and without the
participation of offshore wind in the market?
The additional supply of capacity to the negative TCR market will most likely lower capacity prices. 5
With respect to their energy cost the price bids of the wind farm depend on the market premium they
receive, which often exceeds the marginal price on the control reserve market. Thus, a significant
merit order effect can most likely only be observed for the procurement of control reserve, but for
energy costs, the effect is not expected to be as significant.
The hindcast analysis focuses on the analysis of the participation of one OWF in the control reserve market, answering to the question:
how could a OWF have participated in the market in that year?. The cost reductions that can be observed can thus only be seen as an
indicator of a possible merit order effect. Changes for different penetration levels of wind are further examined in the forecast analysis in
Chapter 5.
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Model historic
bidding ladders
Price bids
Reserved capacity
Procured energy
Model Feed-in
forecasts for OWF
Historic offshore
power feed-in
and wind speeds
Historic forecasts
Define offered
capacity by OWFs
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40
1400
Bidmax
1200
1000
800
600
MPCap
400
200
Capprocured
Captotal
0
0
500
1000
1500
2000
2500
3000
3500
4000
Capacity [MW]
Figure 15: Capacity price bid merit order for negative control reserve. Note: capacity and price bids are herein
defined positively for reasons of clarity.
Source: own depiction based on [77].
2500
Bidmax
2000
1500
1000
MPEnergy
500
Capprocured
Capactivated
0
0
500
1000
1500
Capacity [MW]
Figure 16: Energy price bid merit order for negative control reserve.
Source: own depiction based on [60], [77].
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41
2000
2500
Capacity [MW]
60
50
40
30
20
10
0
Capacity offer
Figure 17: Reduced capacity offer on the control reserve market due to length of tender period. Only the minimum
forecasted capacity (dotted red line) within a tender period can be offered on the market of control reserve, which
can lead to significant income losses for the wind farm operator.
Source: own depiction with OWF data.
- Respect auction design: The auction design on the control reserve market can limit the
capacity offers even further. Due to the minimum bid size of 5 MW on the SCR and TCR market,
the OWF capacity offer will be set to zero within a tender period if it is lower than 5 MW.
Furthermore, all capacity bids on Sundays and Mondays are set to zero, as bids can only be
registered during workdays until 10 am for the following day. The lead-time of approximately 48
hours or even more is too long for sufficiently reliable forecasts. The auction design is, however,
changed in the case studies examined below in order to provide an idea about the impact of the
adjustments.
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Within the minimum bid price scenario the wind farm operator bids at opportunity costs;
this will lead to the greatest possible cost reductions on the market
Within the maximum bid price scenario, the wind farm operator bids the maximum possible
prices that guarantee the full procurement and calling of the OWF in order to maximise the
income
The different bidding price strategies are presented in more detail in the case study section in chapter
4.5.
70
520
60
50
40
30
20
25 MW Wind
510
-13
530
/MW
80
500
490
480
470
460
10
450
2360
0
0
10
20
30
40
50
60
2370
2380
2390
2400
2410
2420
Figure 18: Insertion of the OWF bid into the bidding ladder (left: start of bidding ladder, right: end of ladder).
Exemplary depiction for the capacity tender on 1 January 4am-8am: an OWF capacity bid of 25 MW at opportunity
cost lowers the marginal capacity price by 13/MW. Source: own calculations
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43
The changes in costs for procurement and calling are derived from the total costs incurred within
the capacity and energy tender. Costs with and without the participation of OWFs in the control
reserve market are compared. Capacity costs have to be borne by the end consumer and their
net position is always positive. Within the energy tender, negative prices occur as well. If net
costs for activation are negative, bidders in average offer to pay for providing control reserve
and TSOs receive money for the activation; if net costs are positive, TSOs have to pay the
bidders. Energy costs are finally allocated to the BRPs via the imbalance price (cf. Chapter 3).
The results of the calculations are generally presented for a whole year, i.e. the reference year
2013. The income of OWF operators is furthermore normalized to the installed capacity of the
wind farm.
Note: In order to participate on the control reserve market, units have to be equipped with
remote control stations that are implemented into an information and communication system, so
that TSOs can deliver signals to the plant, indicating the need for regulation. The model does not
take into account costs for the communication system, as with the introduction of the market
premium, remote control stations were installed in most wind farms and OWFs were generally
already equipped with such systems during installation.
Operational costs for trading are neither incurred in the model as most of the reserve capacity
trading can be automated [6].
OWF 1: 15 min wind speed and power feed-in as well as forecasts for both wind speed and
feed-in.
OWF 2: 15 min wind speed and power feed-in data. The power curve was also available.
As due to market data availability the year under examination for the hindcast analysis was 2013, the
data of OWF 1 could not be used as input parameter for the model. Feed-in data was available for
OWF 2, but forecast data had to be generated synthetically. The forecasting method is presented in
the following section.
The generation of synthetic forecasts comprises three steps:
1. Analysis of the wind speed forecast errors of OWF 1 in order to obtain the statistical
properties of forecast errors
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44
2. Generation of synthetic wind speed forecasts for OWF 2 respecting the analysed forecast
error statistical properties
3. Generation of the respective wind power forecasts by applying a dynamic wind farm power
curve transformation based on an availability correction.
1)
2)
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3)
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46
Product description, specifying whether positive or negative control reserve is provided and
the time for which the bid is placed (for TCR this is e.g. NEG_00_04, referring to a negative
control reserve bid valid from 0am-4am)
The capacity (for PCR, SCR and TCR) and energy prices (for SCR and TCR) offered
Information whether the respective party won in the tender for control reserve capacity and
could thus participate in the tender for energy, which takes place when control reserve is
actually activated
The FIT an OWF would have received in 2013: The FIP remuneration scheme, which
constitutes a prerequisite for the participation of renewable energy plants on the market of
control reserve, was first introduced in the EEG 2012. Thus, the FITs presented in 31 EEG
2012 (both the high tariff of 150 /MWh and the basic remuneration of 35 /kWh) are used
as input parameters for the model.
The Management Premium for OWFs in 2013, which can be found in Annex 4 section 2.3.4
EEG 2012.
German offshore wind generation in 2013: In Germany, OWFs are connected to the control
zones of TenneT and 50Hz. Cumulated OWF generation data can be downloaded from the
transparency website of the German TSOs for both control zones [81].
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Figure 21: Marginal and weighted average capacity prices (procured bids) on the capacity market for negative TCR in
2013.
Source: own calculations based on [77]
It becomes apparent that prices peaked significantly at the turn of the year. Christmas and New Year
2013/2014 were characterized by relatively high temperatures, low demand and considerable wind
feed-in. Furthermore, during summer, several peaks occur, which can possibly be explained by the
reduced availability of power plants; with less units participating in the energy tender, prices rise.
Figure 22: Marginal and weighted average called energy bid prices on the market for negative TCR in 2013.
Source: own calculations based on [60], [77]
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48
For the called energy price bids for negative TCR, peaks can also be observed around the turn of the
year. Other market events lead to peaks during the year, but no significant pattern can be detected.
In general, they result from forecast errors of either VRES production or load. On 24 March, while
wind and solar generation was underestimated day-ahead, the load was overestimated, leading to an
oversupply of electricity of almost 15 GW. Another extreme occurred around noon on 29 September
2013, when nearly all of the control reserve that was procured also had to be activated. That day, the
marginal energy price rose to 10,000 /MWh (not depicted in the figure). The reason for this was a
severe load projection error; the load was approximately 8 GW lower than forecasted day-ahead
[82].
For the analysis of the potential income of an OWF on the TCR market, it is interesting to examine,
which amounts of TCR were activated at a marginal price higher than the feed-in premium. Only in
these cases, the OWF could actually generate a profit when participating on the control reserve
market. Figure 22 provides an overview of the amounts of negative TCR that were activated at or
above a certain marginal TCR energy prices and outlines the frequency of activations at those prices.
In total, more than 1830 GW of negative TCR were activated in 2013. The minimum marginal energy
price was -17.5 /MWh. 35% of the activated control reserve was sold at a marginal price higher
than 250 /MWh, 14% at a price higher than 400 /MWh. However, the frequency of calls in relation
to the activated amount decreases for higher marginal prices, indicating extreme events.
Approximately 12% of activations were undertaken at a marginal price higher than 250 /MWh, only
5% at a marginal price higher than 400 /MWh.
3000
1800
2500
1600
1400
2000
1200
1000
1500
800
1000
600
400
Frequency of calls
2000
500
200
1525
1475
1425
1375
1325
1275
1225
1175
1125
1075
975
1025
925
875
825
775
725
675
625
575
525
475
425
375
325
275
225
175
75
125
25
-25
Frequency of calls
Figure 23: Called control reserve and frequency of calls for specific marginal prices on the market for negative TCR
Source: own calculations based on [60], [77]
When analysing each quarter of an hour individually, the marginal energy price exceeded the high
OWF market premium, which operators receive in the first years of operation, in 23% of the time.
The lower market premium paid in the last years of operation was exceeded in 77% of the time.
The average and marginal bid prices differ per day of the week. Figure 24 shows the weighted
average as well as marginal capacity and energy prices per weekday for the year 2013. The average
prices were 5.99 /MW-h for the weighted average capacity price, around 9 /MW-h for the weighted
average marginal capacity price, 86 /MWh for the weighted average energy price and 231 /MWh
for the weighted average marginal energy price.
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49
Prices on Sundays were significantly higher than prices during the rest of the week. However, when
analysing the energy price levels, it has to be taken into account that Wednesdays and Sundays were
the days with the greatest number of extreme events.
Bids can only be placed during weekdays on the TCR market, which significantly limits the income
potential for power plants that have to base their bids on forecasts, such as OWFs. This is analysed
20
18
16
14
12
10
8
6
4
2
0
500
450
Price [/MWh]
Price [/MW-h]
400
350
300
250
200
150
100
50
0
Figure 24: Weighted average and marginal capacity and energy prices on the negative TCR market per weekday.
Source: own calculations based on [60], [77]
Not only do the prices differ per day of the week, but also per tender period. Figure 25 shows the
weighted average capacity and energy prices per tender period for the year 2013. From midnight to 8
am, i.e. in off peak periods, capacity prices are markedly higher than during the rest of the day. This
was the same in the capacity tenders in recent years [59]. Energy prices are especially high during
the day. In approximately 5.8% of the time, market events with a marginal energy price greater than
14
400
12
350
Price [/MWh]
Price [/MW-h]
400/MWh occurred. Of those market events, over 93% took place in tender periods 2, 3 and 4.
10
8
6
4
2
300
250
200
150
100
50
0
1
Avrg
Avrg
Figure 25: Weighted average and marginal capacity and energy prices on the negative TCR market per tender period.
Source: own calculations based on [60] , [77]
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The costs for the procurement of negative TCR rose considerably in 2013 compared to 2012, after a
declination of prices in the years before [2]. While in 2012, capacity costs amounted to approximately
70 Mio [13], they almost doubled in 2013 and rose to over 157 Mio . Compared to the cost of
positive control reserve the share of costs for negative control reserve has increased significantly in
the last years. With more than 136 Mio , it represents about 87% of the total TCR capacity
payments in 2013. The costs for activation of negative TCR amounted to over 39 Mio representing
around 22% of total costs of positive and negative TCR.
4.5.1
Within this case study, the market design examined is that of the German TCR market with a 4 h
product length and 24 h lead-time for bid placement. Effects of a change of these external
parameters are examined in the case studies further down below.
The bids an OWF operator places on the market of control reserve, directly correspond to the
earnings he can generate due to the pay-as-bid principle. Different bidding strategies will lead to
different earnings for the wind farm operator and different cost reduction for procurement and
activation. For each scenario that is investigated, the bidding curve is affected in a different way by
the introduction of wind to the market. In this case study, we compare two scenarios: a) maximum
possible cost savings for the system and b) maximum potential earnings for the OWF operator:
This is only true if the wind farm does not have to operate in a down-regulated state when participating on the market of control reserve.
TSOs and wind farm operators are still discussing the subject at the time of publication of this report. Cf. Chapter 3 for a more detailed
description of the issue.
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51
Furthermore, even if wind farms would have to operate fully market based in the future, providing
negative control reserve would only be disadvantageous if negative spot prices arise, due to the
marginal cost of production of 0 /MWh.
The energy price is defined by the opportunity costs when being activated by the TSO, i.e. the lost
market premium (ramping costs are not significant for wind farms). As mentioned above, the market
premium depends on the tariff the plant would receive under the FIT scheme, which changes over the
lifetime of the OWF. While the initial tariff for OWFs and consequently the market premium are very
high during the first 12 years of operation (or possibly longer, depending on the wind farm site), it is
significantly lower in the last 8 years. In the model, calculations are done for both cases.
Summarizing, the following cases are examined within the cost saving scenario:
1. Capacity price bid of 0 /MW, energy price bid high market premium (representing first years
of production)
2. Capacity price bid of 0 /MW, energy price bid low market premium (representing last years
of production)
Note: The maximum cost savings for procurement favour the end consumer as capacity payments
are allocated to the grid fees. Energy payments on the other hand are borne by the balancing
responsible parties as they are directly factored into the imbalance price by TSOs (see chapter 3).
The extent to which the price level of activation of negative TCR decreases due to the participation of
offshore wind in the market is outlined in the following case studies.
Figure 26 depicts the difference in costs for the procurement and activation of negative TCR with the
minimum offshore wind bids entering the market.
300,000
Cost delta []
250,000
90,003
200,000
150,000
100,000
170,753
170,753
50,000
-
-10,706
High MP
Low MP
-50,000
Cost delta procurement
Figure 26: Cost savings for procurement and activation on the negative TCR market with the participation of OWF.
Source: own calculations
Under the current market design of a 4 h tender period, the OWF can bid successfully 112 times in
the capacity tender if bidding at its opportunity costs, which corresponds to 5% of all tender periods.
The replacement of conventional power plants in the capacity tender leads to cost reductions of
approximately 170,750 (1423 /MW installed), which compared to total costs of procurement is a
little over 0.1%. These are the cost savings favouring the end consumer, as the costs of the capacity
tender are part of the grid fee.
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Within the energy tender, the OWF is activated 29 times when bidding the high market premium.
With the total number of activations being approximately 2700 in the year 2013, this corresponds to
only about 1% of all activations of negative control reserve. In this scenario, the costs of the energy
tender increase slightly with the participation of OWF in the market. Evidently, conventional
capacities that were replaced in the capacity tender could have offered energy at lower prices than
the OWF bidding the high market premium as energy price. In almost 80% of the time the OWF
capacity was called, the wind farm bid raised the marginal price of the energy tender. In total
however, when netting capacity and energy payments, the participation of offshore wind leads to cost
reductions of more than 160,000 .
For the low market premium, cost savings are reached in both the capacity and energy tender. With
200 activations the OWF wins the energy tender 7.4% of the time and is activated almost seven
times more often than under the high market premium. This way, more than 90,000 can be saved
in the energy tender. Together with the savings from the capacity tender total costs for procurement
and activation could be reduced by more than 260,700 . Note that this is true for a conservative
day-ahead forecast. The influence of the bidding strategies under the minimum cost scenario will be
further analysed in the case studies below.
Marginal capacity price (/MW) that guarantees full procurement of offered capacity
Marginal energy price (/MWh) that guarantees full activation of offered capacity within the
tender period (at least high/low market premium)
At this point, the assumption of complete information is made. This idealization is used to indicate
maximum possible values.
Making the same external assumptions as for the minimum cost scenario, i.e. analysing the current
market design with a product length of 4 hours and a day-ahead gate closure, the maximum possible
income of an OWF operator, normalized to the installed capacity of the investigated wind farm, is as
depicted below:
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2000
1800
Income [/MW]
1600
312
1400
1200
1000
800
600
1409
1409
High MP
Low MP
400
200
0
Max Income Capacity Tender
Figure 27: Maximum possible income normalized to nominal power for an OWF on the negative TCR market in 2013.
Source: own calculations
Within the capacity tender, the OWF operator could have earned a little over 1,400 /MW on the
negative TCR market in 2013. For the energy tender, the income of the OWF depends on its
opportunity costs. As mentioned above, the wind farm is activated only 29 times when having high
opportunity costs, i.e. when receiving the high market premium. Of those 29 times, the operator
must bid the market premium in order to avoid losses from the participation on the control reserve
market compared to the sole participation on the spot market. Thus, no extra earnings within the
energy tender can be made. Under the basic remuneration, with the opportunity costs being the low
market premium, the OWF is activated almost seven times more often. During the times of
activation, the operator is able to bid at prices higher than the market premium in 75% of the time,
leaving the wind farm operator with a profit of more than 300 /MW in that year.
Resulting from a profit-maximising bidding strategy, the net changes in cost for procurement and
activation are evidently smaller than for the maximum cost savings scenario examined above. See
Figure 28 for a comparison of the cost changes for the respective bidding strategies.
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300,000
260,756
250,000
Cost delta []
200,000
160,046
150,000
100,000
54,216
50,000
0
-9,030
-50,000
High MP
Minimum net cost savings
Low MP
Maximum net cost savings
Figure 28: Minimum and maximum changes in cost for procurement and activation for high and low market
premiums.
Source: own calculations
For the low market premium, 54,216 of total cost savings can still be realized for the profitmaximizing bidding strategy. This number is considerably lower than the savings in the costminimizing bidding scenario (260,756 ). For the high market premium the savings decrease in both
cases. This is mainly due to the fact that the OWFs replace conventional plants in the capacity tender
and then place higher price bids in the energy tender in order to offset the opportunity costs of the
high market premium (or even higher price bids).
4.5.2 Weekend Tender
The TCR tender takes place during weekdays so that bids for control reserve provision on Sundays
and Mondays have to be placed on Friday. For OWFs, such a lead-time is too long with respect to the
forecast accuracy, thus no bids can be placed for those days. This case study serves to give an
indication of the possible additional earnings/cost savings on the TCR market if bid submission was
extended to weekends. Figure 29 indicates the differences in specific income for the wind farm
operator when being able to make offers to the control reserve market each day of the week vs. the
income under the conventional weekday tender design.
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Income [/MW]
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
818
28
3776
3776
312
1409
1409
High MP wd
High MP all
Low MP wd
Low MP all
Figure 29: Maximum potential income under the weekday tender schedule (wd) vs. the possible submission of bids
on every day of the week (all).
Source: own calculations
The analysis of the control reserve market data of 2013 showed, that capacity prices are especially
high on Sundays. Consequently, the possible maximum income of the OWF within the capacity tender
increases significantly - by a factor of almost 2.7 - when being able to place bids for Sundays and
Mondays too. When remunerated with the high market premium, the wind farm operator can bid
energy into the market at a price higher than the market premium 15% of the time, leading to an
additional income of 28 /MW. For the low market premium, the income from activations rises by a
factor of 2.6 for an everyday compared to a weekday tender design.
664,470
700,000
Cost delta []
600,000
500,000
436,168
400,000
260,756
300,000
160,046
200,000
113,079
100,000
0
-100,000
54,216
-9,030
-20,339
High MP wd
High MP all
Low MP wd
Low MP all
Figure 30: Changes in costs for procurement and activation under the weekday tender schedule (wd) vs. the possible
submission of bids on all days of the week (all).
Source: own calculations
Figure 30 depicts the range of cost savings under the profit-maximizing bidding strategy or the
bidding at opportunity costs respectively. If bid submission is possible every day of the week instead
of only on weekdays, cost for procurement and activation rise by approximately 20,000 with the
participation of OWFs. With procurement rising from 112 times to almost 200 times, offshore wind is
activated almost 4 times as often as under the weekday tender design. As more wind farm bids are
successful in the capacity tender, conventional power plants with lower energy prices are excluded
from the energy tender and costs rise.
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However, when bidding at opportunity costs, i.e. for the maximum cost savings scenario, cost
decrease with the participation of offshore wind in the market and savings almost triple for the high
market premium for an everyday compared to weekday tender. For the low market premium, cost
savings are achieved for both bidding strategies and savings more than double if bids can be placed
by OWFs every day of the week.
4.5.3
This analysis shows the impact of improved forecast quality on the costs and benefits of the market
participants. In particular, we examine the effects of forecast quality on the OWF income and the
costs for procurement and calling. Due to a rising share of wind bids in the control reserve market,
higher income and lower costs are expected for better forecast accuracies.
A key approach for improving forecast accuracy is reducing gate closure times. If the bids for control
reserve do not have to be submitted day-ahead, but can rather be placed closer to real-time, the
quality of wind forecasts and therefore the offered capacity by the wind farm rises. Our analysis will
help quantify the benefits of changing these market arrangements. The OWF data analysis showed
standard deviation of 2.5 and 1.7 for day-ahead forecasts and 0.35 for 1-hour forecast (cf. data
section and data analysis in WP3). Thus, these standard deviations were chosen for the case study
and complemented by reasonable interim values. A shortened lead-time of the auction will possibly
be applied soon in the German market, with the introduction of an energy-only control reserve
market with a gate closure time of 1 hour before delivery (also see Chapter 3). In the Netherlands,
bids can already now be placed up until 60 min before time of delivery.
70%
60%
50%
40%
30%
20%
10%
0%
0
0.5
1.5
2.5
Figure 31 shows the average amount of capacity that could have been offered to the market of
control reserve for different standard deviations of the wind speed forecast error, when respecting a
reliability of the offer of at least 99.994% (cf. Chapter 3 for a detailed explanation of the reliability
level).
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For standard deviations typical for day-ahead forecasts, the share that can be offered is in average
approximately 20%. For forecasts closer to real-time, this share rises significantly. For a typical 1hour forecast for instance, the average amount of capacity that can be marketed reaches
approximately 65%7.
The results are in line with values found in related literature. In [59] the share of capacities that can
be marketed on the control reserve market are estimated for an onshore wind farm portfolio of 2.5
GW. For a market design where bids are based on day-ahead forecasts, a share of around 31% is
estimated. For the examination of only one OWF implemented in the hindcast analysis, a share of
around 20% for the same forecast horizon is thus reasonable. For an offshore portfolio of the same
size, the share will most likely be higher than for the onshore portfolio due to the steadier as well as
Income [/MW]
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
6,233
5,179
2,793
688
838
10,420
1,347
312
1,409
2,820
3,604
4,509
2.5
1.7
1.5
11,576
6,764
0.5
0.35
Standard deviation
Max Income Capacity Tender
Figure 32: Maximum possible income for an OWF under the low market premium on the negative TCR market for
different standard deviations of the wind speed forecast error.
Source: own calculations
Figure 32 shows the maximum potential income that an OWF operator receiving the low market
premium could have earned on the market for negative TCR in the year 2013. The income is
normalized to the installed capacity. It rises significantly with smaller standard deviations, i.e. shorter
lead-times of the tender or improved forecast quality. For a 1-hour forecast the maximum potential
income is around 5 times higher than for a day-ahead forecast.
Furthermore, the share of income from the energy tender rises. For better forecasting qualities, a
significantly greater share of capacity can be offered to the control reserve market. Thus, the
minimum bid size of 5 MW can be reached more often, raising the participation of the OWF in the
capacity tender and the probability of activation.
Note that the offers have been analysed for a single OWF. The numbers will increase for several wind farms in a portfolio.
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For a standard deviation of the wind speed forecast error of 2.5, the OWF won the capacity tender
112 times, which corresponds to a success rate of only 5%. For a standard deviation of 0.35 the OWF
capacity was, with 944 times, procured more than eight times as much, in approximately 43% of the
% Procurement
1.7
1.5
0.5
0.35
Standard deviation
Figure 33: Procurement of OWF control reserve capacity for different forecast qualities.
Source: own calculations
Activation rises from 200 times for offers based on day-ahead forecasts to over 1000 times for offers
based on 1-hour forecasts, which as percentage of all activations is around 7% or 37% respectively.
The share of income from the energy tender compared to total income rises from 18% to
approximately 35%.
Figure 34 depicts the maximum income for the OWF on the negative TCR market for different
standard deviations for the high market premium. It becomes apparent that the income from
activation is significantly lower than with the low market premium. In relative terms, however, the
income grows more strongly than under the low market premium. While for the day-ahead forecast
with standard deviation of the wind speed forecast error of 2.5 no earnings can be made on the
control reserve market, the income on the energy market is approximately 2500 /MW when basing
the amount of control reserve that is offered to the market on 1 hour forecasts. Activation rises from
29 times to 376 times.
16,000
Income [/MW]
14,000
2,482
12,000
2,030
10,000
8,000
864
6,000
4,000
2,000
1,409
2.5
83
10,420
257
71
2,820
3,604
4,509
1.7
1.5
11,576
6,764
0.5
0.35
Standard deviation
Max Income Capacity Tender
Figure 34: Maximum possible income for an OWF under the high market premium on the negative TCR market for
different standard deviations.
Source: own calculations
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When looking at the maximum cost saving potential of procurement and activation of control reserve
under the low market premium (cf. figure 35), significant cost reductions can be observed for smaller
standard deviations. For procurement, savings for a day-ahead forecast are only approximately
170,750, while for a one-hour forecast they amount to more than 1.4 Mio . The total cost saving
potential in the reference year 2013 rises from approximately 260,000 to 2.5 Mio . Note that this is
only true if the wind farm operator bids at opportunity costs in the tenders. Of total costs, this would
mean a maximum decrease of approximately 0.2-0.5% under the current market design, i.e. dayahead gate closure, and a little over 1.8% if the auction gate closure time was 1 hour before delivery.
3.0
2.5
2.0
1.12
0.94
1.5
0.59
1.0
0.5
0.0
0.17
0.20
0.34
2.5
0.09
0.24
0.32
0.44
0.55
1.7
1.5
0.82
1.27
1.41
0.5
0.35
Standard deviation
Cost delta procurement
Figure 35: Maximum cost saving potential of OWFs for the low market premium on the negative TCR market in 2013.
Source: own calculations
The maximum cost saving potential under the high market premium is again considerably lower than
for the low market premium (cf. figure 33). While the total savings potential is positive at all times,
the prices in the energy tender rise compared to a system without participation of offshore wind if
bids are based on day-ahead forecasts. There is however a turning point with a growing market share
of OWF capacity: at a standard deviation of 1, the activation of wind rises significantly. For this
standard deviation, around one third of all offers are close to the minimum bid size of 5 MW. For
worse forecasting qualities the wind farm could not have participated during those tender periods, as
the minimum bid size could not have been reached with sufficient reliability. With a rising share of
wind winning the capacity tender, it is ever more activated during quarters of an hour with high
energy price bids that can be undercut when bidding the high market premium. While for a standard
deviation of wind forecast error of 1.7, the marginal energy price is lowered in 0.7% of the time, it is
lowered in 2.2% of the time for a standard deviation of 1; hence the positive trend for cost savings.
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2.0
0.29
1.5
0.21
1.0
0.07
1.41
1.27
0.5
0.0
0.17
-0.01
0.34
-0.02
0.44
0.55
-0.04
-0.02
2.5
1.7
1.5
-0.5
0.82
0.5
0.35
Standard deviation
Cost delta procurement
Figure 36: Maximum cost saving potential of OWFs for the high market premium on the negative TCR market in 2013.
Source: own calculations
When analysing the net minimum cost saving potentials, i.e. if the wind farm operator bids in a
profit-maximising manner, the potential cost savings for the low market premium is only around 16%
of the maximum cost savings for an economically optimal bidding strategy (cf. figure 37).
For the high market premium, costs first increase slightly, and then decrease again for shorter
auction lead-times. This can be explained by the fact that the cost savings in the capacity tender are
in relative terms bigger compared to the losses created by the high OWF energy price bids, when the
wind farm is procured more often. It becomes apparent that a profit-maximizing bidding strategy by
wind farms remunerated with the high market premium have in average a negative impact on system
costs.
450,000
396,285
400,000
336,724
350,000
Cost delta []
300,000
265,099
250,000
200,000
145,583
150,000
100,000
167,037
119,039
54,216
50,000
14,493
0
-50,000
-100,000
-9,030
2.5
-28,081
-44,997
-43,158
1.7
1.5
-20,336
-17,152
0.5
0.35
Figure 37: Minimum cost savings potential with a profit-maximizing bidding strategy by the OWF.
Source: own calculations
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4.5.4
What can the wind farm owner earn on the market of control reserve if he can place offers for a
tender period of 1 hour instead of 4 hours? Can costs for procurement be lowered significantly if the
product length is shortened? Earnings are expected to rise as the operator can now offer the
minimum forecasted capacity of a 1 hour block instead of a 4 hours block. Costs in turn are likely
decreasing because the wind farm can participate more often. The analysis is exemplary done for the
low market premium.
Figure 38 shows the percentage of procurement of the wind farm of the tender periods of the whole
year. For a 4 h product length there are 2190 tender periods, for a 1hr period 8760. When basing
capacity bids on day-ahead forecasts the OWF can participate considerably more often in the capacity
tender if a product length of one hour is applied. While for the conventional 4hrs block, the wind farm
capacity is procured during 5% of all tender periods, the share rises to approximately 12.5% for a
1 h product length. For all standard deviations of the wind speed forecast error, the procurement per
year as percentage of all tender periods rises by approximately 6.5-8.5% when bidding the minimum
capacity of a 1hr instead of 4hr block. For shorter auction lead-times, the percentage growth
decreases slightly.
60%
50%
40%
30%
20%
10%
0%
2.50
2.00
1.70
1.50
Procurement 4hrs
1.00
0.50
0.35
Procurement 1hr
Figure 38: Procurement per year for a product length of 4 hrs vs. 1hr for different forecasting qualities.
Source: own calculations
In line with the numbers of procurement of the wind farm capacity, the maximum potential income
rises, in particular for lower forecasting quality (see figure 39). For day-ahead forecasts the smaller
tender period of only 1hr leads to an increase of potential income by a factor of 2.5 to 3.5. For
intraday auctions it rises by approximately 60%, i.e. by a factor of 1.6.
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30,000
Income [/MW]
25,000
12,426
20,000
11,026
15,000
7,243
10,000
4,846
4,054
5,000
2,793
2,990
2,529
688
312 4,070
1,409
2,820
2.50
2.00
838
5,085
3,604
6,233
5,179
1,347
6,684
4,509
1.70
7,557
6,764
1.50
10,124
1.00
13,899
10,420
15,100
11,576
0.50
0.35
Standard deviation
Max Income Capacity Tender 4hrs/1hr
Figure 39: Maximum potential income of an OWF on the negative TCR market for product lengths of 4hrs vs. 1hr.
Source: own calculations
Under the current market design with day-ahead gate closure, the maximum cost saving potential is
more than three times higher when shortening the product length from four hours to one hour. For
shorter forecasting periods the difference in cost saving potential is less significant, as even for a
4hour product length, the share of offshore wind winning the capacity tender is considerably bigger
than for longer lead-times. For a 1-hour forecast, the maximum cost savings potential reaches values
of up 3.5 Mio for a product length of 1 hour, compared to 2.5 Mio for a product length of 4 hrs.
3.5
3.0
1.47
2.5
1.30
2.0
1.12
1.5
0.38
0.34
0.5
0.0
0.64
0.54
1.0
0.09
0.17
0.20
0.49
0.34
2.5
0.24
0.62
0.44
0.55
1.7
0.94
1.23
1.27
1.41
0.5
0.35
0.59
1.70
0.32
0.82
0.91
0.92
1.5
0.82
Standard deviations
Cost savings procurement 4hrs/1hr
Figure 40: Maximum cost savings potential for product lengths of 4hrs vs. 1hr.
Source: own calculations
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1.84
33,641
Income [/MW]
35,000
30,000
25,000
18,748
20,000
15,000
5,000
11,576
9,805
10,000
1,409
4,226
6,764
3,604
0
2.5
1.7
0.35
Standard deviation
Maximum potential income TCR Cap
Figure 41: Maximum possible income for an OWF in the capacity tender on the negative SCR vs. TCR market.
Source: own calculations
The price level is such that the income approximately triples. This is depicted for different standard
deviations in Figure 41. The maximum potential income for an OWF on the market of negative SCR
would have amounted to more than 4200 /MW based when basing capacity bids on day-ahead
forecasts and 33600 /MW for gate closure around 1 hour before delivery time. Note that the amount
of capacity procured is very similar on the TCR and SCR market (around 2000 MW per tender period).
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The maximum cost savings potential shows a similar trend (cf. Figure 42). In 2013, costs for the
procurement of SCR amounted to approximately Mio 216.32. The entering of wind capacity into the
market and thus displacement of more expensive conventional technologies will lower prices in the
capacity tender approximately three times as much as on the TCR market, when operators bid at
opportunity costs. This would result in savings of more than 567,000 in the capacity tender for a
day-ahead bidding and almost 4.27 Mio for a gate-closure time one hour before delivery.
4.27
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.40
1.41
1.27
0.57
0.17
2.5
0.82
0.44
1.7
0.35
Standard deviation
Maximum cost savings TCR Cap
Figure 42: Maximum possible cost savings in the capacity tender on the negative SCR vs. TCR market.
Source: own calculations
It should be noted, however, that an analysis of the energy prices on the SCR market reveals rather
low prices compared to the TCR market, with an increased occurrence of negative price bids. This
might impose problems regarding the high opportunity costs of offshore wind for the energy tender.
Furthermore, activation often only occurs for a few minutes in very small amounts. The average
activated amount of negative control reserve was approximately 678 MW/15 min on the TCR market
and 275 MW/15 min on the SCR market in 2013, with only three activations smaller than 100 MW on
the TCR market and over 6150 smaller than 100 MW on the SCR market. OWFs with comparably high
opportunity costs for control reserve activation will be rather located at the rear end of the merit
order and will thus possibly not be able to win the energy tender very often.
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0.35 Standard
Deviation
1.0 Standard
Deviation
1.7 Standard
Deviation
2.5 Standard
Deviation
Sp.Rev. in
/MW
Cost
reduction8
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Basic
Scenario
17,809
0.23%
9,557
0.15%
4,442
0.08%
1,721
0.03%
1 Hour
product
27,526
0.01%
17,367
0.03%
10,738
0.04%
6,599
0.02%
4,594
0.06%
33,641
1.97%
18,748
1.1%
9,805
0.59%
4,226
0.46%
Weekend
tenders
SCR
market9
Cost
reduction
Cost
reduction
Table 10: Results of the hindcast analysis for different market designs under the low market premium
0.35 Standard
Deviation
Sp.Rev. in
/MW
Cost
reduction
10
1.0 Standard
Deviation
1.7 Standard
Deviation
2.5 Standard
Deviation
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Sp.Rev. in
/MW
Cost
reduction
Cost
reduction
Basic
Scenario
14,057
0.01%
7,627
-0.01%
3,687
-0.03%
1,409
-0.01%
1 Hour
product
21,122
-0.14%
13,169
-0.08%
8,017
-0.05%
4,914
-0.03%
3,804
0.25%
Weekend
tenders
Table 11: Results of the hindcast analysis for different market designs under the high market premium
The colours indicate the potential increase in income/cost savings potential (from green for very
significant to red for marginal). In general, the following can be concluded:
-
For shorter lead-times the maximum potential income and cost savings are
significantly higher. At the same time the capacity that can be offered to the market
rises (from 20% for a day-ahead forecast to 65% for a 1-hr forecast).
Great cost saving potentials and a considerable increase of income can be achieved when
shortening the product length of the auction, a slightly smaller effect can be observed
when wind farms can participate in tenders on the weekend.
The greater the auction lead-time, the greater the effect of shortening the product length, as
forecasts vary more widely.
Cost saving potentials under the support mechanism with the high market premium are
significantly lower (often even negative); this effect increases for lower standard
deviations of the wind speed forecast error/gate closure times closer to delivery time. Thus, a
participation of OWFs in the first years of operation is not as beneficial as under the basic
remuneration scheme.
Percentage of cost reductions through the participation of OWFs in the control reserve market (revenue maximizing bidding).
10
Percentage of cost reductions through the participation of OWFs in the control reserve market (revenue maximizing bidding).
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Price level on the SCR market is much higher for the capacity tender; both the specific
income and maximum potential cost savings are three times higher than on the TCR market.
However, current market design makes the participation of wind farms impossible (cf.
Chapter 3).
In order to provide insights to the listed issues, a forecasting and assessment of future market
conditions will be conducted comprising the following four steps:
A. The components of the negative tertiary control reserve market are depicted in Figure 43.
The dependence of each individual component on parameters related to the penetration
levels of OWFs is investigated as a first step of the analysis (section 5.2). Such parameters
are e.g. VRES power feed-in levels, residual load levels or spot market prices.
Capacity Market
Capacity Price
Bids
Procured
Amount of
Capacity
Energy Market
Energy Price
Bids
Frequency of
calling Events
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Amplitude of
Calls
B. Three wind scenarios are created (section 5.2) referring to German OWF capacity which is:
1. Installed today (0.6 GW)11
2. Already approved (11 GW)
3. Still in the authorization process (30 GW) [1]
The available power in each scenario is modelled using realistic wind data sets, measured by
the FINO research platforms, corresponding to a granularity of 15 min from multiple
measuring points in the North Sea area [3]. Within the model, these capacities respectively
increase the VRES feed-in level, which is used to model market changes for each OWF
capacity scenario.
C. Each market component is modelled according to the interdependencies found in the first
step (section 5.4). As the installed OWF capacity of 385 MW in 2013, in Germany, [4] is not
sufficient to already show significant market impacts, representative VRES feed-in levels are
used for modelling external market effects caused by higher amounts of installed OWF
capacity. Such external effects are e.g. increasing frequencies of calls and changing bid prices
of conventional TCR market participants.
D. The market model from the hindcast analysis, presented in chapter 4, will be adapted to the
changed market conditions, which were remodelled in the third step. For each of the three
OWF capacity scenarios, wind bids are respectively included to the bidding ladders within the
market model.
Finally, key case studies are investigated for different penetration levels OWFs and assessed
focusing on the estimation of the potential revenues for OWF operators and potential cost
savings on the energy or capacity market. As a result, potential impacts of different
framework conditions are quantified (section 0).
11
June 2014
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Power curves
Power curve data of the represetative wind turbine models were reconstructed from fact-sheets
provided by the producers. The following turbines were modelled:
-
12
Details regarding technical aspects of the measuring process can be found at:
http://www.bsh.de/de/Meeresdaten/Beobachtungen/MARNET-Messnetz/FINO_1/index.jsp
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Power system
Solar, onshore and offshore wind feed-in data of the year 2013, in Germany, has been received from
the EEX Transparency Site. Feed-in values are determined by transmission system operators
respectively for their control area by an extrapolation based on measured online reference sites. It is
available in a granularity of 15 min intervals. [9]
German system load data for the year 2013 has been received from the ENTSO-E website. It consists
of hourly averaged values. [10] The problematic of the data was inter alia addressed in an Agora
study on negative energy prices. The attention is called to the fact, that the data set does not
represent 100 % of the actual electricity consumption. This is why a base load band of 8.3 GW is
added to data set within that study.[88] As ENTSO-E mentions in a documentation, it is primarily the
data values of industry's own production for own consumption and some parts of German railways
that are not included in the data set. [11]
Data on power import- and export flows could be obtained from the Fraunhofer ISE website. Similar
to system load data, they are available in an hourly granularity. Import and export data is used to
determine the residual load level from available load and VRES feed-in data. [12]
5.2.2 Allocation of wind capacity
Three wind scenarios are created referring to 1) German OWF capacity installed today, 2) OWF
capacity approved and 3) OWF capacity still in the authorization process. Related information is
obtained from offshore-windenergie.net, a website hosted by the International Economic Forum for
Renewable Energies (IWR). The website does a categorization of OWF project as mentioned above
and provides information about the project characteristics like total capacity, capacity of individual
wind farms and their geographic position.
OWFs are assigned to wind data sources based on their geographic coordinates, as shown exemplary
in Figure 60 for OWFs installed and OWFs approved. For simplicitys sake the distinction between
OWFs assigned to FINO 1 and OWFs assigned to FINO 3 is made in compliance with the following
principle. A line is drawn perpendicularly to the dominant wind direction and shifted to the east until
the most north-east OWFs belonging to the cluster around FINO 1. That line distinguishes wind farms
contained in each of the three scenarios. A detailed listing of the OWF project details and assignment
to wind sources is attached to the appendix.
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Figure 44: Assignment of OWF projects to FINO wind data sources, depicting OWFs of scenario 1 and scenario 2.
Source: own depiction based on map material from Google Maps
Scenario 1
Scenario 2
Scenario 3
FINO 1
577.5 MW
7,754.8 MW
17,957.8 MW
FINO 2
50.8 MW
1,163.8 MW
1,586.8 MW
FINO 3
2,175.5 MW
10,727.5 MW
628.3 MW
11,094.1 MW
30,272.1 MW
Total
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Turbine class
Low
Medium
High
Rated power
< 4.5 MW
Siemens S120
3.6 MW
4.5 to 5 MW
REPower RE5M
5 MW
> 5 MW
REPower RE6M
6.15 MW
The conversion of wind speed data to power feed-in values is achieved with the help of power curve
functions, which were provided by the producers of the class representing models. However, as
function values were provided in intervals of 1 m/s wind speeds, values in between are linearly
extrapolated.
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Residual load levels below 20 GW result into negative day-ahead prices and increasing spreads. In
2013, the occurrence of negative day-ahead prices is rare and can be explained with short term
events marked by low load levels and an oversupply of energy. As conventional power plant
operators face ramping costs for turning on and off and ramping their power plants, they are willing
to accept negative prices in order to keep the plants running until the market situation improves. This
operational strategy can be reasonable if the period stays short, but can as well result in losses in
case of longer periods. A crucial factor for the occurrence of negative prices is also the current mustrun level of about 20 to 25 GW, which consists of power plants that have to stay online to provide
other services as e.g. heat or reserves. [88]
Concluding, the data analysis confirms the assumption of a linear correlation between day-ahead
spot-market prices and the residual load level.
Figure 46: Day-ahead spot market prices against hourly average residual load levels.
Source: own depiction based on [80], [7]
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Figure 47: Median capacity bids for negative TCR against hourly average day-ahead spot market prices.
Source: own depiction based on [80], [60], [77]
Figure 47 shows a tendency of increasing capacity bids with decreasing day-ahead prices, which is
especially visible at day-ahead prices below 37 /MWh. Furthermore, it is visible that the effect on
prices at the 5% quantile is lower than the effect on the 95% quantile, which leads to a wider spread
of capacity bids.
The wide spread and the different sensitivities of high and low price level bidding periods indicate the
influence of additional factors. A comparison of the four seasons revealed that the interrelation is
more pronounced during winter time and rather undefined during summer time. Three explanation
seem reasonable. First, the availability of certain power plant types can be systematically lower
during summer times due to an accumulation of planned outages. Summer times are marked by load
residual load values and consequently lower profitability levels, which can incentivize planned
outages. This could result divergent bid structures. Second, higher must-run levels caused by a
higher demand in heat during winter times can influence the opportunity costs of negative TCR
market participants. Third, technical aspects, as depleted water storages, could additionally influence
the bid structures.
Concluding, capacity price bids are indeed affected by the day-ahead spot market prices and,
consequently, also by the residual load level, which is strongly correlated to the day-ahead spotmarket price. However, data values show an increasing spread at low residual load values and not all
bid ranges seem to be equally affected. This indicates the significant influence of additional factors,
which could be a subject for further analysis.
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scheduled ramps
4.
forecast errors
Data of the past four quarters are used for the dimensioning of the following quarter. [16]
A modelling of the impact of higher penetration levels of offshore wind would require a reproduction
of the Graf-Haubrich-Methodology, which lies outside the scope of this work. Alternatively, a review
of literature on that topic will be used to determine the expected range of values of procured capacity
amounts examined within the model
The now outdated first part of the dena grid study from 2005 assumes that the demand in control
reserve capacity will rise over-proportionally to the installed wind capacity. It is stated that about
32 % of underestimations in wind forecasts are to be balanced by negative TCR. This would lead to
capacity provision requirements amounting to 6500 MW for negative control reserve in 2015. This
would constitute an increase of about 8.3 % p.a. starting with a level of about 2900 MW in 2003.
[17].
However, the latest part of the dena grid study predicts a constant demand in control reserve
capacity till 2020. It argues that the quality of wind forecasting will improve by 45% through higher
resolved weather models as well as through the further development of new and existing weather
models. [18] The current dena study on ancillary services in 2030 comes to the conclusion that an
increasing effect of forecast errors, caused by renewable energies, will have a significant influence on
reserve capacity requirements. An increase in capacity requirement for negative TCR of 70 % is
expected amounting to a procured capacity of about 4100 MW in 2033. [19]
Holttinen et al. (2010) are summarizing and comparing studies on reserve requirements caused by
wind integration from several European countries. They show an increase of reserve requirements
between 0.1% and 18.2% of installed wind capacity, depending on country and wind penetration
levels, as share [20]
Summarizing, literature does not indicate a clear relationship between wind capacity and reserve
requirements. For Germany, the most recent and reliable source is the dena grid study II, which
shows a moderate increase of reserve requirements.
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Monthly averaage
energy price bids
[/MWh]
gradually increased by about 9 TWh or 6 %, consequently resulting in lower residual load levels. [21]
500
400
300
200
100
0
Figure 48: Energy price bids show an increasing trend in 2012 and 2013.
Source: own depiction based on [60],[77]
Thus, a similar interdependence as the one related to capacity bids is observed regarding energy
bids. Likewise, the data is segmented into 1 /MWh intervals of day-ahead market prices, which
contain all bids placed in a time slice with an average day-ahead price in the specified interval.
Figure 49 depicts this relationship between energy price bids and residual load levels.
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Figure 49: Influence of the residual load level on negative TCR energy bids.
Source: own depiction based on [10], [11], [60], [77]
The data points are widely spread and seem not to be systematically affected by residual load levels.
In the centre of the data, a nearly straight edge is recognisable that is seemingly dividing high bid
level time slices from low bid level time slices. While upper bids seem to be nearly equally distributed
at all residual load levels, lower bids show a wedge-shaped form, indicating a continuous increase of
energy bid price levels at lower residual load values.
Exemplary energy bids from September 2013, shown in Figure 50, can partially explain that
phenomenon. Some bids, especially in upper price levels, are placed continuously and often at round
values as 1500 /MWh or 2500 /MWh. However, there are also bids, which are changing day by
day. Slight shifts of the mass centres of low price level bids are visible regarding the upper and lower
quantiles. Nevertheless, a clear distinction between constant and adaptive bidders could not be
reached in further analysis, as it showed that even lower price level bids are marked by both type of
bidding behaviours.
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Constant bids
Adaptive bids?
Figure 50: Excerpt of energy bids in September 2013 in time slices between 8:00 am and 2:00 pm.
Singular values at 10,000 /MWh and 5,000 /MWh are not depicted for a better visibility.
Source: own depiction based on [60],[77]
Concluding, no clear interrelation of energy bid price levels and residual load levels is determinable. A
high share of bids is placed at continuous prices, whereas some bidders seem indeed to adjust their
bids on daily basis. Nevertheless, it can be stated that at decreasing residual load levels, low energy
bid levels become increasingly unlikely.
5.3.2.2 Energy calling events
Negative TCR energy is called if energy demand and supply are not balanced for a period of time
longer than 15 min, as these shorter periods are handled by SCR. That imbalance can either be a
result of an unexpected decrease of energy demand or an unexpected increase of energy supply,
which is in many cases caused by VRES prediction errors. [22], [23]. This chapter aims at revealing
influences of both VRES related and load level related factors on the frequency and amplitude of
energy calling events.
Influence of load related imbalances on the frequency and amplitude of calls
Electricity consumption depends significantly on the time of day. While the demand in electricity is
low in during late night hours and the early morning, it ramps up abruptly when people wake up and
prepare for work altogether. Although the load patterns have been studied in detail and can be
predicted to a far extend, it is expectable that fast changing load levels are nevertheless challenging,
if it comes to detailed predictions. [23]
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In order to verify that effect, the relative frequency of calling events is plotted for each 15 min
interval of the day, as presented in Figure 51. The relative frequency is calculated by dividing the
number of all calling events during a specified time interval of the day, throughout the year, by the
total number of data values in that interval. As load ramping patterns are different on workdays and
weekends, they are examined separately. However, for the sake of a better readability, only the
results for workdays are presented in this chapter.
Workdays
75
0.35
70
65
0.3
60
0.25
55
0.2
50
0.15
0.1
45
0.05
40
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average day in 15min intervals
0.4
35
Figure 51: Workdays Relative frequency of calling events in each 15min of the day in 2013.
Source: own depiction and calculation based on [60], [77], [10]
Three aspects can be observed from Figure 51. First, energy is called more frequently during daytimes between 8 a.m. and 7 p.m., which are marked by high load levels, in comparison to morning
hours. Following the explanation presented in a recent study of the Wuppertal Institute, this is
reasonable, as relative load forecast errors amount to higher absolute errors in case of higher load
levels. [24]
Second, the relative frequency of calls has a global peak at 6 a.m. and a local peak at 7 a.m. Both
hours are marked by the highest average load gradient. In order to avoid imbalance charges,
suppliers oversupply their balancing areas during load ramps. This is a consequence of missing 15min products in the examined year. The oversupply required the TSO to activate negative reserves.
Third, during hours with negative load gradients, as between 7 p.m. and 2 a.m., calling frequencies
gradually increase in each quarter of the hour, but fall back to a lower level at the beginning of an
hour. That recently occurring phenomenon is also described by Consentec (2010) adressing it as
scheduled ramp (Stundensprung). The reason is seen in the hourly control of the accounting grid,
which is practiced instead of a quarter-hourly control, as it is prescribed in the StromNZV13 [25]. That
13
Stromnetzzugangsverordnung (StromNZV) - regulation on electricity feed-in to and consumption from electricity supply grids
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practice can be explained with an increasing share of load, which is covered by hourly products
procured at the exchange markets.
During decreasing load gradients this would imply an underspupply in the first half-an-hour and an
oversupply in the last half-an-hour. Consequently, calling events should be more frequent and have a
higher amplitude during the last half of each hour. Given the opposite case of an increasing load, that
effect should be reversed leading to more calls of negative control reserve during the first half of an
hour. [26]
A similar approch is followed in order to depict the distribution of amplitudes of calls. Figure 52 shows
the mean amplitudes of calls during a specified 15 min interval on an average workday in 2013.
Comparing the data formation to the values of calling frequencies from Figure 51 it can be stated that
accumulations of maximum values do not overlap, but seem to be rather shifted in time. Especially
the peak values at 6 a.m. are not as distinctive for mean calling amplitudes, as they were for relative
frequency calls. Instead, two peaks at around 8 a.m. and 12 a.m. can be determined.
Workdays
75
Average aplitude of calling events (first quater of an hour)
Average aplitude of calling events
Average hourly load [GW]
1500
1400
70
65
1300
60
1200
1100
55
1000
50
900
800
45
700
40
1600
600
35
500
400
30
300
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average day in 15min intervals
25
Figure 52: Workdays - Average amplitude of calling events for each 15min interval of the day in 2013
Source: own depiction and calculation based on [60], [77], [10]
All in all, the data indicates that the frequency and amplitude of calling events is strongly determined
by load ramps.
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In order to verify that assumption, rounded amounts of VRES feed-ins are plotted against the relative
number of calling events, as illustrated in Figure 53. The relative frequency of calls is calculated in
three steps:
1. Each 15-min interval of the year 2013 gets the respective VRES feed-in level assigned.
2. The data is segmented into 1 GW intervals of VRES feed-in levels. For example, 15-min
intervals with VRES feed-in values between 9.5 GW and 10.5 GW would constitute one
cluster.
3. The frequency of calling events within each cluster is calculated as the number of 15-min
intervals, where a call occurred, divided by the overall number of 15 min data samples in that
cluster.
As expected, a positive interrelation is visible. Considering that the mean overall relative frequency of
calling events is about 7.7 %, the frequency of calling events at VRES feed-in levels of 6 GW or less
can be certainly seen as below average. This changes at feed-in levels of above 6 GW, when the
curve adapts a steeper, seemingly linearly increasing, trend. The trend adapts an even quadratic
polynomial course at values above 20 GW. This is when the calling frequency is already more than
twice as high as the overall average.
The same approach is followed in order to verify, whether the depicted interrelation is also true for
the amplitudes of energy calls. Median as well as lower and upper quantile amplitudes of calling
events are calculated for each 1 GW VRES feed-in interval, as depicted in Figure 54.
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No certain trend is determinable from the data. Both median and lower quantile values are staying at
nearly constant levels. Upper quantile values show an undefined course with a global maximum at
values above 27 GW. In general, data values show line shaped formations at round numbers as at
500 MW or 1000 MW. This leads to the assumption that TSOs are, in many cases, determining the
needed amplitudes of calls only roughly. A reason for this could be proactive calls, which are done on
the basis of assumptions regarding the future energy supply and demand situation. This can be
necessary and reasonable at points of time due to the relatively long reaction time of TCR calls. [26]
Figure 54: Mean amplitudes of calling events in dependence of VRES feed-in levels14.
Source: own depiction based on [60], [77], [12]
Concluding, the interrelation, visible between VRES feed-in levels and frequencies of calls, is not
applicable to the amplitudes of calls. The amplitudes of calls show no impact of high VRES feed-ins,
but rather seem to be roughly calculated, and respectively called proactively.
14
The smoothing was done with the Matlab smooth(data,35,rloess) function. For more details see:
http://www.mathworks.de/de/help/curvefit/smooth.html.
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In order to assess that hypothesis, the relative frequency of calling events is examined in relation to
the
amplitude
of
VRES
ramps,
as
depicted
in
Figure
55
.
VRES ramps are determined as the difference of a VRES value at a given point in time to the mean of
VRES values in an interval of 1.75 to 2.25 hours before. The mean is applied in order to reduce the
effect of short term fluctuations on the resulting ramp value. An interval of roughly 2 hours is chosen,
as short term prediction errors can usually be managed with the use of PCR and SCR. TCR would be
called if a VRES forecast error persisted during a longer period of time. [23] Concretely, an interval of
roughly 2 hours was chosen empirically as it resulted the least noise within the curve, in comparison
to slightly smaller and larger intervals. The relative frequency of calls is determined by clustering the
data in VRES ramp intervals with the size of 0.1 GW. For each interval, the occurred number of called
15-minute intervals is divided by the total amount of 15-minute intervals with VRES values lying in
the observed interval. The noisy curve shape has been smoothed for a better visibility of the
underlying trend.
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Figure 55: Relative frequency of calls depending on the absolute amplitude of VRES ramps in a period two hours 15.
Source: own depiction based on [60], [77], [12]
The plot depicts both positive as well as negative ramp values. Relative frequencies at negative VRES
ramps stay at roughly constant levels around less than 7.7%, which is the overall mean frequency.
Thus, negative ramps do not seem to have an effect on the calling frequencies of negative TCR,
which is reasonable, as they would usually lead to an undersupply requiring positive control reserves.
Frequencies at positive ramps rise to a value of 10% at ramps of 1 GW and remain constant until
ramp values of above 5 GW. At ramp values above 5 GW, the relative frequencies increase
dramatically. Concluding, VRES ramps have an influence on the relative frequency of calling events.
The frequencies are above average at positive ramp values above 1 GW and increase drastically at
ramp values above 5 GW.
A similar relation could be also applicable to the amplitude of energy calls. As VRES ramps are not
only difficult to predict in time, but also in amplitude, the amplitude of energy calls should increase
with the amplitude of the VRES ramps in case of actual forecast errors. In order to verify that
hypothesis, VRES ramp values have been determined likewise as described above and plotted against
the median amplitudes of energy calls, which is shown in Figure 56. The noisy curve shape upper and
lower quantiles has been smoothed for a better overview.
15
The smoothing was done with the Matlab smooth(data,35,rloess) function. For more details see:
http://www.mathworks.de/de/help/curvefit/smooth.html.
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Figure 56: Median amplitude of energy calls in dependence of VRES ramps within periods of two hours 16.
Source: own depiction based on [60], [77], [12]
Though median values indicate a slight increase of amplitude of calls at ramp values above 2 GW, the
values are strongly deviating and remaining at an approximately constant level. Thus, similar to the
former section on the influence of VRES levels, no clear impact of VRES ramps on the amplitude of
calling events is ascertainable.
5.3.3 Summary
This section analysed the market mechanisms on the market for negative TCR. The influence of
OWFVRES feed-ins and residual load levels, on the energy- and capacity market was examined.
Figure 57 provides an overview of relationships found. Grey components show no direct impact of
higher installed capacities of OWFs, while green components are directly influenced towards the
direction that is indicated by the red arrows. Components depicted in blue seem rather dependent on
load forecast errors, than on VRES forecast errors. Thus blue components are assumed to remain
unaffected by higher installed capacities of OWFs. However, the information on the distribution of
load forecast errors throughout the day will be used for a more realistic remodelling of calling event
frequencies and amplitudes. The modelling methodology is described in more detail in chapter 0,
while the key conclusions are presented below.
16
The smoothing was done with the Matlab smooth(data,35,rloess) function. For more details see:
http://www.mathworks.de/de/help/curvefit/smooth.html.
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Load forecast
errors
Effects on the
power system
Frequency of
calling events
Calling events
Amplitude of
calling events
Energy bids
VRES ramps
VRES feed-in
Energy
Market
Indirect price
effects
Residual load/
Spot prices
Capacity bids
Procured
capacity
Capacity
Market
Energy Market
Both frequencies and amplitudes of calls showed a considerable dependence on the time of
the day. The effect of morning ramps as well as schedule ramps was determinable.
Higher power feed-in levels from VRES seem to foster the occurrence of calling events, but do
not have an identifiable influence on amplitudes of calls.
Ramp values above 1-2 GW lead to increasing frequencies of calls. The amplitude of calling
events, however, seems not affected by VRES ramps.
Capacity Market
Day-ahead spot-market prices are strongly correlated to the residual load level and decrease
at higher levels of installed OWF capacity.
Day-ahead prices show a significant influence on capacity price bids, which are increasing at
lower spot-market prices.
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b.
c.
The model uses the installed OWF capacity for each scenario as a major input for the definition of two
further parameters: first, the available OWF capacity to be offered as a control reserve, and second,
the amount of VRES feed-in power at each bidding period.
The VRES feed-in power is used to determine the residual load level, which builds as the difference of
load and VRES feed-in, reduced by import-export residuals (see Figure 58). Furthermore, the VRES
data set is reduced by the historical OWF feed-in from 2013, as it shall be represented by the feed-in
of the OWF scenarios from section 5.2. As concluded in section 5.2, day-ahead spot market prices are
strongly correlated to the residual load level. Thus, the residual load is used as representative
modelling parameter for the spot-market dependent capacity bids. Future bidding ladders are
generated by adjusting historical bidding ladders with a factor determined according to the
interrelations found in chapter 5.2.
Historical load data from 2013 is used together with the adjusted VRES feed-in in order to set up a
Monte-Carlo process to artificially generate calling events, specifying the time of their occurrence and
their amplitude. This is done with the help of a simplified scoring system following two steps. In a
first step, the occurrence of special events is determined. This is done by rating every 15 min interval
of the year 2013 according the individual situation regarding time of day, VRES in the system and
eventual VRES ramps. Each rating is related to a certain probability for the occurrence of calling
events and is used as a basis for a random generation of calls. In a second step, the amplitude of the
calls is determined randomly depending on the time of the day.
Finally, these three components are used as input parameters for the German negative TCR market
model, which assesses revenue potentials and costs for the end consumer. Distinct additional
variations are applied for specific study cases.
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Residual Load
Load Data
Frequency of Calls
Volume of Calls
Capacity Bids
Assessing revenue potentials for OWF operators with a model of the german control reserve
market (see hindcast analysis in chapter 4)
Figure 58: Simplified flow diagram of the forecast model mechanisms.
Source: own depiction
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The determined function is used in order to adjust capacity bids at decreasing residual load levels
caused by higher penetration levels of wind. The adjustment is made in the following four steps:
1. The average historical residual load level is calculated for each 4 hour time slice of 2013,
representing the period of time for which bids are placed.
2. The average forecasted residual load level is calculated for each time slice according to the
respective installed OWF capacity scenario.
3. The assumed capacity price level is calculated for both historical as well as forecasted residual
load values by the application of the function from Figure 59. The difference factor between
the assumed historical and forecasted capacity price level is determined.
4. All capacity bids within each time slice are multiplied by the determined difference factor.
This approach allows to leave the bidding structure unchanged, meaning that the bidding ladders will
retain their shape, but will be adjusted in their absolute level. Furthermore, the spread between low
level and high level time slices will increase with declining residual load values, similar to the
formation in Figure 59.
5.4.2.2 Energy bids
As section 5.2 revealed no significant interdependencies between the penetration level of offshore
wind and energy bid prices, energy bids will remain unchanged. Bid values from 2013 are taken for
all future scenarios.
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Influence of VRES-ramps
The influence of VRES-ramps on the frequency of calling events is discussed in section 5.3.2.2. As the
shape of the frequency curve is rather undefined, it is refrained from dividing it up into multiple
segments. Like it is depicted in Figure 61, the interrelation is interpolated with a single polynomial
function of the 8th degree, which showed the best fit.
Scoring approach
Finally, each 15-min interval of the year 2013 gets assigned three probability values derived from the
interpolation and extrapolation functions constructed above. Naturally, the values should differ
depending on the chosen wind capacity scenario, as it influences VRES feed-in amounts and ramps.
Probability values depending on the load pattern will, however, stay constant, because they are
assumed not to be supply dependent. A rating score of each 15-min interval is formed by adding the
three probability values together. Next, the frequencies are plotted in dependence of the rating score
based on historical VRES data, as depicted in Figure 62. Ideally, the rating should have a strong
linear correlation with the actual frequencies of calls, as it consists of equally scaled probability values
just regarding the probability of calls from different perspectives.
Although marked by increasing oscillations at higher values, a linear trend is indeed determinable.
The resulting curve is interpolated with a linear function in order to build a link between the ranking
and actual calling frequencies. This curve is used in order to assign one single probability value to
each 15-min interval. Based on that probability, the decision, whether or not a call takes place in that
interval, is done randomly, using a Monte-Carlo process.
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Figure 62: Influence of the rating value on the relative frequency of calls.
Source: own depiction
5.4.3.2 Amplitude
As pointed out in section 5.2, there is no identified interrelation of the amplitudes of calls with neither
the VRES feed-in level, nor the VRES ramping behaviour. Thus, time intervals that were marked as
calling events during the process described in the former section, get assigned their amplitude in
dependence of the time of the day. The amplitude value is generated randomly from the distribution
of the occurred values during a specified 15 min interval of a day. Additionally, a distinction between
workdays and weekends is made. Because the amplitude of calls are modelled independently from
VRES values, they are remaining a constant level throughout all three OWF capacity scenarios.
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17
Netzregelverbund (NRV)
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Weekend
tenders
Higher
procured
capacity
volumes
Reference
Scenario A
Reference
Scenario B
High
market
premium
Product
length
of
one Hour
Feed-in
tariff
35 /MWh
35 /MWh
150 /MWh
35 /MWh
35 /MWh
35 /MWh
Product
length
4 hours
4 hours
4 hours
1 hour
4 hours
4 hours
Weekend
tenders
No
No
No
No
Yes
No
Procured
2597 MW
2597 MW
2597 MW
2597 MW
2597 MW
Variable18
As
in
reference
scenario B
As
in
reference
scenario B
As
in
reference
scenario B
volume
Other
No
modelling
of
market
reactions
As
reference
scenario B
in
18
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For the reference scenarios, a set of conservative market design features and optimistic bidding
scenarios is chosen. A summary of market design features is listed in
Table 15.
Table 15: Feature summary of the reference scenarios.
Bidding scenario
1.
35 /MWh is anticipated.
procured completely.
2.
OWFs
do
not
participate
on
Sundays
level,
as
well
as
the
amount
of
procured capacity.
19
20
This reference value has been proposed by a representative of 50Hertz Transmission GmbH
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Total revenues [m ]
35
2.99
30
3.14
25
20
15
10
25
26
2.46
Specific revenues
[/MW]
12,000
10,000
8,000
3,913.72
6,000
4,000
2,000
269.79
5,928
2,295
0
Scenario 1 (0.6 GW)
103.85
871
Scenario 3 (30 GW)
Effects on Costs
Though unfavourable regarding the achieved revenues of OWF operators, that saturating mechanism
has a positive effect on the overall system costs for capacity and energy provision. High conventional
capacity bids are increasingly replaced by lower bids of OWFs, lowering the mean marginal price level
of capacity provision by 26% in scenario 2 and 34% in scenario 3. The result is a significant decrease
of costs for capacity provision in scenario 2 and scenario 3, which is depicted in Figure 65.
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160
136
140
136
136
136
115
120
102
100
80
60
40
20
0
Scenario 1 (0.6 GW)
A slightly different picture unfolds regarding the costs from energy calling events, which are shown in
Figure 66. A radical reduction of energy costs by 21 m (54%) takes place from scenario 1 to
scenario 2. However, nearly no further costs are saved in scenario 3. Obviously the control energy
market is already saturated at a participating OWF capacity of 11 GW, represented by scenario 2.
Indeed OWFs have increased their sold volume in the energy market only by 5% in scenario 3 in
relative to scenario 2, though the available capacity has nearly tripled.
The reason for the market saturation stepping in earlier on the energy market than on the capacity
market, is the downside capacity bid limit of OWFs, which orientates on the market premium. The
market premium values calculated on the basis of a feed-in tariff of 35 /MWh range between about
3 to 19 /MWh. That downside limit is a noticeable restriction to OWFs, as conventional players are
often able to bid energy prices near to or below zero. For the reason of eventual fuel cost savings
coming with turning down the energy production at negative TCR calls, even such prices can be
attractive to conventional participants. Consequently, this constitutes a barrier for a further market
penetration of OWFs and explains the lack of further cost reductions in scenario 3. Indeed, the OWFs
had increased their volume market share in the energy market from 54 % in scenario 2 only by 5 %
in scenario 3.
45
40
35
30
25
20
15
10
5
0
38
39
39
17
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39
98
This section illustrates that under the assumption of no market reactions to higher penetration levels
of offshore wind, a market saturation steps in already in scenario 2 representing an installed OWF
capacity of 11 GW. The market saturation effect is especially pronounced in the energy market,
where that effect is undermining further significant revenues or cost savings at increasing OWF
capacities.
Total revenues [m ]
200
3.87
150
100
3.18
164
50
2.57
0
57
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12,000
10,000
8,000
4,085
6,000
4,000
287
128
5,110
5,420
5,814
2,000
0
Effects on Costs
Figure 69 and Figure 70 depict total costs for capacity and energy provision that occurred in
reference scenario B. System costs diverge from the former reference scenario, which was not
considering market effects, in mainly two aspects. First, system costs increase with or without the
participation of OWFs in the control reserve market. Second, the extent to which OWFs are able to
reduce capacity costs for negative TCR provision as well as energy costs is relatively lower, than in
reference Scenario A.
Ultimately, without the participation of OWFs, the system costs for control capacity provision would
increase by 46 % in scenario 2, and by 147 % in scenario 3, in comparison to capacity costs
amounting to 149 m in scenario 1. With the participation of OWFs cost savings in the amount of 9 %
can be realized in scenario 2 and 3. Wind scenario 1 has nearly no cost reduction effect due to the
low available capacity.
400
335
350
368
300
250
200
150
199
149
218
149
100
50
0
Scenario 1 (0.6 GW)
Costs for energy provision are even more affected, increasing by 20 % in scenario 2 and 73 % in
scenario 3. While the available capacity in wind scenario 1 is again too low to achieve a significant
cost saving effect, costs in scenario 2 could be potentially reduced with the participation of OWFs by
53 %, respectively 51 % in scenario 3.
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69
75
60
45
48
40
39
34
30
23
15
0
Scenario 1 (0.6 GW)
Explanation of outcomes
The outcomes are determined by the superposition of the following three mechanisms: a) the impacts
on the power system b) indirect price effects and c) direct price effects. Impacts on the power system
refer to increasing requirements in negative TCR, which come with higher levels of installed OWF
capacity, as e.g. an increasing frequency of calls. Indirect price effects refer to the influence that an
OWF-caused reduction of residual load levels has on the bid price levels on the negative TCR market.
Direct price effects are addressing the influence, which additional OWF capacity, entering the TCR
market, has on marginal prices in the TCR market.
Impacts on the power system: Higher OWF feed-in capacities increase the amount of VRES in the
system. As shown in section 5.2, this leads to an increasing frequency of calls. In fact the number of
calls rises by 43 % in scenario 2 and even 208 % in scenario 3, if relating to a number of 2776 calls
in scenario 1. At the same time the mean amplitude of calls stays roughly constant at a value of
700 MW. This leads to an expansion of the overall market for energy provision and, with that, to
increased revenue potentials.
Indirect price effects: Feed-ins from OWFs are influencing the price levels on the market for negative
TCR indirectly by reducing residual load levels and, with that, lowering prices on the spot market. The
interdependence of day-ahead spot market prices, respectively residual load levels, with the height of
capacity price bids was shown in section 5.2. As depicted in Figure 71 mean capacity price bids
increased by 13 % in scenario 2 and 76 % in scenario 3, in comparison to an average price level of
37 /MW in scenario 1.
Direct price effects: With higher available amounts of OWF capacity, also the OWF bidding capacity
on the TCR market increases. Within the model, OWFs try to bid the highest capacity and energy
price, which, at the same time, allows them to be procured and called at their full bid capacity. In
order to ensure this, OWFs are able to lower capacity prices until 0 /MW and control energy prices
until the height of the market premium. By doing so, they reduce marginal prices, which can lead to
system cost savings, but also to losses of OWF revenues.
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Figure 71 illustrates the marginal prices on the capacity- and energy market and compares them with
mean accepted bid prices. It indicates that mean marginal prices for capacity provision gradually
increase, while wind bids initially stagnate and only increase in scenario 3. This is caused by an
overlay of two effects. First, overall capacity bids increase due to indirect price effects described
above. Second, this effects are partially compensated by market saturation, which is a result of
increased OWF bid volumes. Basically, OWF bid volumes expanded over-proportionally to the increase
of the overall capacity bid level, meaning that OWFs had to reduce capacity bids in order to be
procured completely.
In case of marginal energy prices, the picture is even more drastic. The accepted price of OWF bids
declines by 75 % in scenario 2 and by 82 % in scenario 3, if comparing the level in scenario 1. As the
price levels of energy bids did not go up, like it was the case with capacity bids, the market
saturation effect is much more pronounced on the energy market. OWFs have to radically reduce
their energy bids in order ensure to be called at full capacity. Effectively, this diminishes their specific
revenues, but also leads to substantial savings of system costs. Potential additional revenues from an
increased number of calls are negatively overcompensated by the reduced bids of OWFs, which
65
70
60
50
40
30
51
37
41
31
30
20
10
0
Scenario 1 Scenario 2 Scenario 3
(0.6 GW)
(11 GW)
(30 GW)
ultimately lead to lower control energy cost at higher installed capacity of offshore wind.
120
100
80
106
79
53
60
40
19
20
33
14
0
Scenario 1 Scenario 2 Scenario 3
(0.6 GW)
(11 GW)
(30 GW)
Mean marginal energy prices
Mean energy prices of accepted wind bids
Figure 71: Marginal capacity and energy prices together with accepted wind bids.
Conclusion
This section showed that a consideration of market effects coming with higher penetration levels of
offshore wind can radically change the cost and revenue situation. The influence of three modelled
mechanisms, namely, the impact on the power system as well as indirect- and direct price effects
was described. The following conclusions are drawn from the model results.
Total system costs will increase with higher penetration levels of wind due to increasing capacity bid
levels. The increase in costs can be partially, but not completely counteracted by the participation of
OWFs in the TCR market. The largest absolute and relative cost saving potentials occur in the energy
market. Absolute cost saving potentials in the capacity market have a similar extent, but are
relatively much smaller to total capacity costs.
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The energy market will lose attractiveness for OWFs at higher penetration levels of offshore wind, as
the bid prices have to be drastically reduced in order to be called at full capacity. A downside price
limit, set by the market premium, is furthermore reducing the utilization of OWFs. The capacity
market, however, retains its profitability for OWFs allowing roughly constant specific revenues, even
at higher penetration levels of OWFs. The market is effectively expanding due to increasing capacity
price bids.
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Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
3,914
5,928
270
2,295
104
871
Ref. Scn. B
4,085
5,814
287
5,110
128
5,420
Higher FIT
1,588
5,814
13
5,110
5,420
1 Hour product
6,788
6,828
1,897
5,544
292
5,634
Weekend tenders
4,796
10,124
402
8,813
175
8,314
4,167
5,813
477
6,523
267
10,059
First, though revenues from energy provision are a major revenue potential source for OWFs at
scenarios with low installed OWFs capacity, at higher penetration levels of offshore wind, this market
21
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will become of minor relevance to OWF operators. As visible from Figure 72, revenues from energy
provision strongly decline at scenarios with high levels of installed OWF capacity. While revenues
from energy provision reach a share of up to 50% in scenario 1, they diminish to a negligible level in
scenario 2 and 3. This effect can only be marginally compensated in scenario 2 by an implementation
of a one hour product length.
Second, a high FIT tariff reduced OWF revenue potentials from energy provision by roughly 75% at
low levels of installed OWF capacity, but does not play a significant role at higher penetration levels
of offshore wind due to energy market saturation, which steps in anyway.
Third, at low penetration levels of offshore wind, measures, as the change of the product length to
one hour periods and the enabling of weekend tenders have the most positive impact on OWF
revenues. Each measure can increase specific revenues by roughly 40%.
Fourth, at high penetration levels of offshore wind, weekend tenders are most effective, whereas the
positive effect of one hour product lengths is diminished. Weekend tenders increase the overall
available market size for OWFs and, with that, the available capacity market for OWFs. A shift to one
hour product lengths, on the other hand, primarily impacts revenues on the energy market. As
revenues from capacity provision remain on a high level due to increasing capacity bid prices, while
revenues from energy provision reduce due to a market saturation, weekend tenders are a the most
suitable measure for market settings at high levels of installed OWF capacity.
Fifth, increasing capacity procurements can sustain the profitability of OWFs at high penetration
levels of wind. Rising amounts of procured capacity increase the specific revenues from capacity
provision. This effect is especially pronounced in scenario 3, where specific revenue potentials regain
a value of roughly 10,000 /MW.
5.5.2.2 System costs
Total system costs occurring at distinct framework settings are summarized in Figure 73. A
comparison of costs leads to the following conclusions.
First, the costs for capacity provision gradually expand with increasing levels of installed OWF
capacity due to rising capacity bid prices. This effect is multiplied under assumption of expanding
capacity procurements volumes and raises costs by up to factor 5, as in case of scenario 3.
Second, costs from energy provision increase only marginally for most framework settings.
Exceptions constitute the costs under the assumption of higher capacity procurements and under the
assumption of a high FIT. In the former case, energy costs are heightened because of increasing
amplitudes of calls, which were assumed to be resulting the expanded amounts of capacity
procurements, in the first place. In case of the high FIT assumption, the increasing control energy
costs are caused by higher OWF bids. The effect is especially distinctive in scenario 3, when OWFs are
able to gain a significant share in the energy market and thereby replace cheaper participants.
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All values in m
Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
136
38
115
17
102
16
Ref. Scn. B
149
39
199
23
335
34
Higher FIT
149
39
199
52
335
126
1 Hour product
149
42
196
40
333
38
Weekend tenders
149
38
184
17
307
21
151
39
296
36
746
75
22
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Figure 74 depicts cost saving potential, which can be achieved through the participation of OWFs in
the negative TCR market. They are calculated as the difference of cost with and without the inclusion
of OWF bids to the market. Obviously the installed OWF capacity in scenario 1 is not big enough to
significantly influence system costs. However, the cost reduction potential increases with higher
penetration levels of offshore wind. System costs can be reduced by up to approximately 50 m in
scenario 2 and up to 125 m in scenario 3. In nearly all cases, OWFs are able to reduce system costs
in total. One exception is the case study scenario assuming a high FIT. A high FIT increases energy
costs due to a heightening of the downside bid limit for OWFs, which is even overcompensating cost
reduction potentials on the capacity market in case of scenarios with high penetration levels of
offshore wind, as in scenario 3.
150
100
50
0
-50
All values in m
Capacity
Energy
Capacity
Energy
Capacity
Energy
Ref. Scn. A
21
22
35
23
Ref. Scn. B
19
25
33
35
Higher FIT
19
-4
33
-57
1 Hour product
-2
22
35
31
Weekend tenders
34
31
61
48
13
32
52
74
Figure 74: Total cost saving potentials from the participation of OWFs in the negative TCR market.
23
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1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
Weekend tenders
1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
Weekend tenders
1 Hour product
Higher FIT
Ref. Scn. B
Ref. Scn. A
-100
107
Day-ahead spot market prices are linearly correlated to the residual load level.
b.
Capacity price bids show a noticeable increase at decreasing spot-market prices. The effect is
especially strong, if the day-ahead spot market price falls beyond 37 /MWh.
c.
The amounts of capacity procurements is set by TSOs following the Graf-HaubrichMethodology. Opinions of the future development of capacity procurements diverge heavily.
An increase of 0 70 % of the current volume seems possible until 2033.
Energy Market
a.
Energy price bids are not significantly affected by residual load levels. A high share of bids
seems to be placed at constant prices over a period of a month or longer.
b.
Both frequencies and amplitudes of calls show a considerable dependence on the time of the
day, representative for typical load pattern and load forecast errors. The effect of morning
ramps as well as schedule ramps is determinable.
c.
d.
e.
The amplitude of calls seems independent from VRES and VRES-ramps. Calls are often placed
in the height of round numbers as 500 MW or 1000 MW.
In a final step, the consideration of distinct framework conditions led to following conclusions:
1. Assuming continuous market conditions at increasing penetration levels of OWFs, the TCR
market is rapidly saturated. Specific revenues are strongly diminished. Costs can be reduced
substantially from scenario 1 to scenario 2. However, only minor savings can be realized by
further increasing OWF capacity levels.
2. If market reactions are modelled, specific revenues decline at medium and high levels of
installed OWF capacity. This decline is mainly caused by vanishing revenues from energy
provision, which are declining due to a saturation on the energy market. Nevertheless,
specific revenues of capacity provision rise again at high levels of installed OWF capacity. A
minimum profit of 5,000 - 6,000 /MW is sustained in all cases.
3. The paid feed-in tariff has a tremendous influence on net revenues from energy provision. A
high FIT makes a participation less attractive for OWFs, as it increases opportunity costs. Also
costs for energy provision increase with the participation of offshore wind farms, if the FIT is
high.
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4. A reduction of the product length from four hours to one hour increases both revenues from
capacity as well as energy provision in each OWF capacity scenario. However, the effect
diminishes at scenarios with higher installed OWF capacity. Costs for energy provision are
higher than in reference scenario B. This is due to increased marginal energy prices resulting
from a better adjustment of OWF bid prices to individual calling events. This effect is probably
overrated by the model.
5. Tenders on weekends can increase specific revenues of OWF operators by up to 40 %.
Furthermore, the by far largest cost saving potentials are enabled. This is especially true at
scenarios with higher installed capacities of OWFs. Thus, responsible authorities should
consider rearranging the tendering habits in order to make the whole TCR market accessible
to OWFs.
6. Higher capacity procurement volumes gradually increase specific capacity revenues due to an
expansion of the overall market volume. Though disadvantageous for the system costs
situation, a development towards this direction would assure high revenues for OWF
operators.
All-in-all, a profitable participation of OWFs seems possible under each examined framework
condition. If market reactions follow the forecasted scheme, specific annual revenues can be retained
at a roughly constant level of 5,000 - 6,000 /MW, even at high maximum expectable penetration
levels of offshore wind. Revenues will further increase at higher penetration levels of OWFs, if they
initiate an increase of procured capacity volumes. The maximum welfare is added, if OWFs were
enabled to place bids on weekends, which roughly increases their specific revenues by 30-50%, while
further reducing system costs at the same time.
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Cost
reductions24
Basic Scenario
17,809
0.23%
Higher FIT
14,058
1 Hour product
27,526
Weekend tenders
SCR market
25
Cost
reductions
Spec.Rev. in
/MW
Cost
reductions
4,442
0.08%
1,721
0.03%
0.01%
3,687
-0.03%
1,409
-0.01%
0.01%
10,738
0.04%
6,599
0.02%
4,594
0.06%
33,641
1.97%
9,805
0.59%
4,226
0.46%
Improving forecast quality can increase specific revenues of OWFs by up to factor 10. Cost
savings from the participation of OWFs increase likewise with better forecast quality. Thus, the
gate closure time of the auction should be moved closer to time of delivery.
24
Percentage of cost reductions through the participation of OWFs in the control reserve market (revenue maximizing bidding).
25
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A higher FIT leads to a market distortion and losses of welfare on the negative TCR market.
Revenues of OWFs are diminished by about 20%, while system costs even slightly increase
through the participation of OWFs.
The reduction of contract duration to hourly products instead of blocks of four hours leads to an
increase of income by factor 1.5 to 3.8. The greater the auction lead-time, the greater the effect
of shortening the product length, as forecasts deviate stronger during different hours.
Tenders on weekends allow the participation of OWFs during times of elevated prices (especially
Sundays), which leads to higher specific revenue potentials by more than factor 2.5. System
costs decrease slightly.
Specific revenue potentials on the SCR market could be more than twice as high as on the TCR
market. However, a participation of OWFs is not possible under current market conditions.
From systems perspective, a high market premium paid to OWF operators combined with the twostaged tender in the German control reserve market leads to higher system costs. OWF can provide
negative TCR capacity at zero cost and are successful in the procurement auction which is entirely
based on capacity bids. Their activation costs are defined by the support scheme, i.e. the market
premium, and often exceed historic average or marginal energy prices for negative TCR. If OWF
follow a profit maximising strategy this will lead to higher total costs as the capacity cost savings
cannot compensate higher activation costs. This situation changes when the market premium in the
support scheme is reduced. In this case, the OWF participation leads to overall costs reductions.
Spec.Rev.
in /MW
Spec.Rev.
in /MW
Spec.Rev.
in /MW
Cost
reductions26
Cost
reductions
Cost
reductions
10k
0.9%
3k
33%
1k
49%
10k
0.7%
5k
20%
6k
18%
7k
0.4%
5k
6%
5k
-5%
1 Hour product
14k
-0.8%
7k
13%
6k
18%
Weekend tenders
15k
0.9%
9k
32%
8k
33%
10k
0.7%
7k
12%
10k
13%
Higher FIT
26
Percentage of cost reductions through the participation of OWFs in the control reserve market.
27
28
29
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Not considering market reactions to higher installed capacities of OWFs, a market saturation
steps in very quickly. Specific revenues decline by factor 4 to 10, but cost reduction
potentials gradually increase to nearly 50%.
Considering market reactions, specific revenues drop by 55%, but then remain at nearly the
same level at higher penetration levels of OWFs. The market saturation effect is reduced due
to increasing capacity bids of conventional participants and higher frequencies of energy calls.
Cost reduction potentials amount to 20% at higher penetration levels of wind.
A high FIT especially diminishes specific revenues of OWFs at low penetration levels of
offshore wind. The revenue diminishing effect is less pronounced at higher penetration levels
of offshore wind, as it is superimposed by market saturation effects. Nevertheless, cost
reduction potentials are strongly reduced, which can lead to absolutely rising system costs.
The implementation of hourly products increases specific revenue potentials by roughly 40%.
Additional revenue potentials decline to 7% at maximum penetration levels of OWFs due to
market saturation effects. Cost reduction potential are slightly diminished.
Increasing capacity procurements provide OWFs with higher revenue potentials due to an
increasing demand in control reserve. Consequently, absolute system costs increase, but can
be reduced through the participation of OWFs by 12-18% at higher penetration levels.
Recommendations
OWF operators should consider the participation in the negative TCR market, as it holds
additional revenue potentials.
If the market design of the negative SCR market was adjusted, a participation could even
provide greater income potentials. The participation on the positive control reserve market is
not economic under current market conditions.
OWF should attempt to improve forecasting quality, as this can substantially increase revenue
potentials. Shorter lead times of the control reserve auction has the same effect.
A different bid evaluation system needs to be established in order to avoid the adverse
incentives resulting from the two-staged auction. This bid evaluation system would need to
incorporate the impact of the energy bids and the support scheme.
A reduction of the product length from four hours to one hour or even 15 minutes should be
considered to increase the effectively available OWF capacity for control reserve provision.
This is especially effective at low penetration levels of OWFs.
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Option 1
Long term contracts
Option 2
Energy-Only
Primary Control
Reserve
No energy payment/
No energy-only market
Negative
Secondary
Control Reserve
Symmetric bids
Lead time of one year
Product length from 1/4 to 1 year
Min bid size: 4 MW
Negative
Tertiary Control
Reserve
Symmetric bids
Lead time of one year
Product length from 1/4 to 1 year
Min bid size: 20 MW
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First, a participation within a long term contract. The auction for this type of participation takes place
with a lead time of one year and obliges the contractor to place corresponding symmetric energy bids
in a time frame from a quarter year to up to a whole year. This commitment for capacity provision is
remunerated. However, this option is not suitable for OWFs due to extremely long forecast horizons
and the obligation to symmetric bids. At the moment, market parties are investigating pooling of
assets to enable this option.
Second, a participation in the Energy-Only market. Market participants, who are not willing to
engage in long term contracts are able to place energy bids spontaneously. However, they do not
receive a remuneration for capacity provision, as in the first option. Bids can be placed with a lead
time of one hour, a product length of 15 min and a minimum bid size of 4 MW. These characteristics
substantially improve the flexibility of the market participants and thus constitute an especially good
fit for OWFs.
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differences between the markets, e.g. contracting levels, reason for contracting, impact to
socialised costs, etc.
2. The effects of a reduction of the minimum bid size could be quantified. Realistic wind speed
and forecast error data would be used to determine the marginal effects of minimum bid size
reductions and the expansion of OWF portfolio size.
3. Impacts of a consolidation of the German and Dutch market for SCR and TCR could be
examined. The implementation of this case study is facilitated through the existence of the
German market model. With a cross-border reserve provision, system costs are expected
to decrease due to a prevention of opposed energy calls. However, OWF revenue potentials
are expected to decrease due to an increasing market saturation.
Off course, the market model should be adjusted according to the specific details of the market
design in the Netherlands and some effort is needed on this direction. However, the key bottleneck
identified is the availability of respective market data. Below we present an overview of the data
needed for such analysis.
Missing Data
Data for the Dutch market is not as openly accessible as in case of Germany. Thus, the possibility of
a market modelling is depending on the provision of the following data sets:
1. Bids by individual parties in MW with prices (at least marginal bid)
2. Called balancing energy with corresponding energy price
3. Contracted balancing power with corresponding capacity price
4. [If positive control reserve should be examined as well, Dutch spot market data would be
necessary]
5. Forecast and realisation data for OWF
The long term capacity bids for secondary and tertiary reserves are placed in a sealed auction and
can only be provided by the TSO. However, following the statement of TenneT NL, capacity bids in
the Netherlands are assumed to have similar price levels as in the German control reserve market.
Thus, in case no data sets can be provided, they could be approximated built on the knowledge
gained from the analysis of the German market. The other needed data sets are less restricted and
could be researched as part of a follow-up project.
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8 Appendix
8.1 Documentation of forecast case study results
This chapter provides detailed results of the individual case studies and explanations concerning their
formation. For this, first specific revenue potentials and occurring system costs are quantified.
Afterwards, outcomes are explained by means of quantified changes on the negative TCR market.
8.1.1 Minimum scenario bidding strategy
The minimum scenario shall allow the assessment of maximum cost saving potentials. Independent
of the framework scenario, most cost reductions can be realized, if OWFs follow a bidding strategy,
which provides them with exactly zero net revenues. This assures the lowest possible bid prices and
an implicit passing over of OWFs gains to the market in the form of cost savings.
Distinct to conventional power plants, OWFs do not have to anticipate any cost from providing
negative TCR. As they are, to a far extent, compensated by subsidies and do not face significant
variable cost, they do not face the risk of being forced to produce energy at unprofitable prices. Thus,
zero capacity price bids would imply a non-profit operation and could, hypothetically, be enforced by
regulatory authorities.
The situation is slightly different in case of energy price bids. If OWFs reduce their power feed-in for
the provision of negative control reserve, they face opportunity costs amounting to the market
premium. The market premium is lost, as it is a subsidy connected to the actual feed-in and does not
expand to ancillary services. Thus, the minimum energy bid, which is not involving an unprofitable
operation, cannot be lower than the market premium.
Summarizing, it was argued that an OWF bidding strategy consisting of the placement of zero
capacity bids and the market premium as energy bid will lead to zero OWF revenues on the TCR
market and enable the highest cost saving potentials. This bidding scenario will be included in the
following study cases as indicator for maximum possible cost savings.
8.1.2 Height of the market premium
As described in section 0, the market premium constitutes a downside price limit for OWF energy
bids. In case of a call, the subsidy amounting to the market premium is lost and cannot be
compensated by the revenues from energy provision, if the energy bid was set below the market
premium price. The market premium within the reference scenarios and the other scenarios in this
section is calculated on the basis of a feed-in tariff of 35 /MWh constituting the basic remuneration,
which is paid after a decrease of the feed-in tariff after 12 years of operation, according to 31 EEG
2012. [27] This section aims at assessing potential OFW operators revenues and system costs under
the condition of the feed-in remaining at a high initial remuneration level 150 /MWh. A high market
premium could provide solid revenues from OWFs power feed-in, but would also increase the
downside limit for OWF energy bids and ultimately diminish net gains from energy provision as well
as cost saving effects. The actual effect shall be quantified in the following.
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12,000
10,000
8,000
6,000
4,085
1,588
13
4
287
128
4,000
5,814
5,814
2,000
5,110
5,110
5,420
5,420
0
incl. ref. Scn.
OWFs
B
Scenario 1 (0.6 GW)
Figure 75: Specific revenue potentials at a continuous feed-in tariff of 150 /MWh.
Effects on costs
Looking at costs presented in Figure 76, it is apparent that a higher market premium diminishes most
energy cost saving effects. Moverover, it even leads to an increase of the energy costs for negative
TCR calls. While in scenario 1 energy cost can be slighlty redcued by 1 m, the cost go up by 4 m in
scenario 2 and by 57 m in scenario 3. As in scenario 3 energy costs increases are compensating
cost reductions on the capacity market, this even leads to an inrease of overall cost through the
participation of OWFs.
revenues. Hereby, cost reductions are nearly exclusivley achieved on the capacity market.
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Energy Costs
69
126
34
149
149
149
142
excl. OWFs
min. Scenario
199
199
218
335
368
excl. OWFs
145
335
171
incl. OWFs
52
126
min. Scenario
40
excl. OWFs
39
ref. Scn. B
39
incl. OWFs
38
48
23
ref. Scn. B
52
ref. Scn. B
System costs [m ]
Capacity Costs
incl. OWFs
min. Scenario
500
450
400
350
300
250
200
150
100
50
0
Explanation of outcomes
Shrinking specific revenues of OWF operators and cost saving potentials on the energy market can be
explained with two factors.
First, the higher market premium increases opportunity costs, decreasing therewith the profit margin
of energy provision. Moreover, a higher market premium effectively increases the downside bid limit
of OWFs, as already decribed above. In the modelled cases that market premium is ranging between
118 /MWh and 135 /MWh, depending on the month and the respective price level on the spot
market. As evident from Figure 77, paid marginal prices for energy provision are usually ranging
below that minimum possible bid prices of OWFs. This constitutes a foreclosing of the OWFs from the
participation in the energy market, during many calls. While the mean prices of accepted wind bids
are at a high level in scenario 1, they fall to almost minimum values in scenario 2 and 3. Obviously,
higher available capacities of OWFs forced OWFs to reduce their energy bids to a baraly profitable
level, which explaines their diminishing profitability on the control energy market. Moreover, also cost
saving potentials are negatively effected, as wind control energy is getting more expensive and the
Energy prices
[/MWh]
202
200
109
101
100
126
100
125
0
Scenario 1 (0.6 GW)
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118
Second, when OWFs penetrate the capacity market with possible zero capacity bids, they partially
oust participants, which could potentially provide a cheaper control energy price. Consequently, in
case of calls with higher amplitudes, more expensive OWF bids are requested. Additionally, to a
reduction of cost saving potentials that were described above, this effect leads to even increasing
costs. The effect becomes more pronounced in scenario 3, where OWFs are able to reach a 57 %
volume market share in the energy market, although by bidding mostly non-profitable energy prices
to be called completely.
Conclusion
The effect of a high feed-in tariff of 150 /MWh on OWFs revenues and system cost was examined. It
was shown that the specific revenues on the energy market are diminished to a negligible level at
higher penetration levels of offshore wind. At low penetration levels, as in scenario 1, net revenues
are also strongly reduced by a high feed-in tariff. Nevertheless, specific net revenues of roughly
1600 /MWh are possible in scenario 1. Control energy cost reductions through the participation of
OWFs seem impossible at higher penetration levels of OWFs. Energy costs are rather increasing and
even overcompensating the reductions on the capacity market, which is leading to higher overall
cost, caused by the participation of wind. Thus, a reduction of the feed-in tariff or a change of the
subsidy conditions for OWFs seems reasonable in long term.
8.1.3 Comparison of a product length of 1 hour to 4 hours
In the current market for TCR, bids are placed for each of the altogether six time slices of four hours
in each day. Accepted bidders are responsible for providing the bid control reserve volume
throughout the complete time slice at a reliability level of about 99.994 % [28]. This means that the
bid volume can be only as high as it were possible for an OWF portfolio to provide the volume even
during the point of time in the time slice with the minimum wind capacity. Consequently, OWFs shall
refer the bids to minimum forecasted wind conditions during that time frame. Thus, a finer clustering
of the time frame of four hours could enable OWFs to bid higher volumes and with that reduce
system cost and increase revenue potentials. This section aims at quantifying the effect of a finer
clustering of the bidding intervals into one hour time slices.
Effects on OWF operators revenues
As visible from Figure 78, reducing the product length of TCR capacity provision has a positive effect
on both specific revenues from capacity as well as control energy provision. Surprisingly, the effect is
even stronger pronounced in case of revenues from control energy provision. While specific capacity
revenues show an increase of between 4 % and 17 %, specific revenues from energy provision are
nearly 6-times higher in scenario 2. However, revenues from energy provision are almost aligned
again in scenario 3.
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119
16,000
14,000
12,000
6,788
10,000
8,000
4,085
1,897
6,000
287
4,000
6,828
2,000
5,814
5,544
5,110
292
128
5,634
5,420
0
incl. ref. Scn.
OWFs
B
Effects on costs
Despite increased revenues of OWFs, cost reduction potentials still exist, as visible from Figure 79.
Except of the energy costs in scenario 1, all other costs have reduced through the participation of
OWFs. While the OWF capacity seems to be too low to reduce capacity costs significantly, cost can be
reduced by 10 % in scenario 2 and 3. Cost reduction potentials on the energy market are even more
pronounced in scenario 2 and 3, where control energy costs can be reduced by 15 %, respectively 44
%. In scenario 1, high specific OWF revenues show their impact on energy cost, even leading to an
increase of energy costs by 4 %. Generally speaking, cost reduction potentials for called control
Capacity Costs
Energy Costs
69
40
145
149
149
149
134
excl. OWFs
min. Scenario
196
199
218
ref. Scn. B
excl. OWFs
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29
incl. OWFs
18
120
333
335
368
excl. OWFs
39
ref. Scn. B
42
34
48
162
min. Scenario
35
23
38
incl. OWFs
40
ref. Scn. B
incl. OWFs
500
450
400
350
300
250
200
150
100
50
0
min. Scenario
System costs [m ]
Explanation of outcomes
The positive effect on revenues from capacity provision can be explained with a higher share of
capacity, which OWFs are able to bid on the negative TCR market. Effectively, this leads to a higher
overall capacity, which is able to generate revenues for OWFs. This is because only speed variations
and forecast errors for a time frame of one hour, instead of four hours, have to be taken into
account. Consequently, while OWFs were orientating on the available minimum power capacity in a
time frame of four hours, this period has reduced to a one hour time frame.
The especially pronounced increase of revenues from energy provision is explainable with the
modeled OWF bidding behavior. In order to provide a measurement for the maximum achievable
OWF revenues, it was assumed that OWFs were able to anticipate the maximum energy bid price for
each time slice, so that they were able to provide all of their available capacity for calls. As in some
cases the amplitudes of calls are quite small, OWFs have to decrease their bids immensely in order to
oust cheaper participants to ensure a demand in their own capacity. Because bids are placed for the
duration of a whole time slice, the lowered bid reduces also the profitability of all other calling events
in that time frame, which had possibly allowed also higher bids. Thus, a clustering of time slices into
one hour intervals allows OWFs a better adjustment of their bids to low and high amplitude calls
explaining the strongly increased specific revenues from control energy provision. Here, it should be
kept in mind that these revenues are most likely overrated, because of the simplified bidding model
that was primarily designed to show maximum revenue potentials. The model assumes OWFs
anticipation of calling amplitudes, which is not to that extent realizable in reality.
Costs are in this case directly interrelated with the additional revenues of OWFs. Declined cost
reduction potentials can be mainly led back to two former mentioned mechanisms, which allowed
OWFs to increase their revenues.
Conclusion
All-in-all, an hourly tendering of negative TCR seems especially attractive for OWF operators, which
can are able increase revenues. This can be explained by higher possible capacity bid volumes of
OWFs and a better adjustment of energy bids to individual call situations. The effect is especially
pronounced at low penetration levels of offshore wind, but is diminished with increasing installed
capacity. Cost reduction potentials are still achievable through the participation of OWFs. However,
they range at a lower level than in reference scenario B.
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121
scenario 2 and 3, which are at an initially lower level, show an increase of even 40 %.
16,000
14,000
12,000
4,796
402
10,000
8,000
6,000
4,000
2,000
175
4,085
10,124
8,813
5,814
8,314
5,110
5,420
0
incl. ref. Scn.
OWFs
B
Scenario 1 (0.6 GW)
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128
287
122
Effects on costs
As illustrated in Figure 81 tenders on weekends can reduce cost in all wind penetration scenarios
even below the level of reference scenario B. Absolute and relative cost saving potentials increase
with higher penetration levels of offshore wind, for both energy- as well as capacity costs. While cost
savings are negligible in scenario 1, in scenario 2 and 3, about 20 % of capacity costs and about
65 % of energy costs can be saved. An interesting additional aspect is that if OWFs place bids with
zero profitability, as done in the minimum scenario, they are able reduce costs in scenario 2 and 3 to
levels, which are even below the level of scenario 1. This indicates that higher capacities of installed
OFWs, can reduce current system costs, even despite increasing bid levels and increasing frequencies
Capacity Costs
Energy Costs
69
21
excl. OWFs
13
87
184
199
218
368
excl. OWFs
149
335
ref. Scn. B
149
307
incl. OWFs
149
16
55
min. Scenario
142
17
excl. OWFs
40
ref. Scn. B
39
34
48
23
incl. OWFs
38
min. Scenario
35
ref. Scn. B
incl. OWFs
500
450
400
350
300
250
200
150
100
50
0
min. Scenario
System costs [m ]
Explanation of Outcomes
The effect on specific capacity revenues is primarily explainable with an extraordinary high overall
bidding level on the capacity market on Sundays and a high amplitude of calls on this day. As already
depicted in chapter 4, marginal capacity price bids are nearly twice as high on Sundays comparing to
the rest of the week. Though weighted average energy prices are not above average on Sundays,
marginal prices are. This indicates abnormally high amplitudes of calls on Sundays that could be
caused by generally low and harder predictable load levels.
The reason for the cost saving effect is the omitted restriction of OWFs to bid for Sundays and
Mondays, which constitutes a significant increase of the available overall market volume for OWFs.
Potential cost reductions are especially high on Sundays, as they are usually marked by an
abnormally high level of marginal capacity and energy prices. With access to the whole negative TCR
market, OWFs are able increase the volume of their provided control reserve on the capacity and
energy market by 40-50%. This is a tremendous amount considering that only two of seven days of
the week were added for OWFs.
WIENL14568
123
Conclusion
Enabling OWFs to participate each day on the control reserve market by setting up tenders on
weekends, would enormously increase system cost saving potentials and make the participation in
the negative TCR market more attractive to OWFs. This is true for each installed OWF capacity
scenario. The opening of the market for Sundays has an especially high effect due to usually very
high marginal price levels. In the minimum scenario at higher penetration levels of offshore wind,
costs can be even reduced under the current level. All-in-all, weekend tenders seem to be highly
reasonable regarding incentives for OWF operators and system cost, especially at higher penetration
levels of wind.
8.1.5 Higher volumes of procured capacity
As portrayed in section 5.2, opinions on future requirements of reserve capacity are quite divergent.
Furthermore, the analysed data did not show a clear influence of higher VRES feed-in levels on the
amplitude of calls, which are a decisive for the extent of capacity procurement requirements.
Nevertheless, it is thinkable that influence becomes more pronounced, when a certain capacity of
OWFs is exceeded. This section will examine the influence, which higher amplitudes of calls and, with
that, higher amounts of procured capacity have on OWFs operators revenues and system costs.
Three factors are taken into account for modelling higher procured capacities.
First, obviously, the procured capacity volume has to be scaled up. The amount of how much
additional capacity procurements are needed is set to a value of 10 % of the installed OWF capacity.
The resulting values from that assumption, listed in Table 19, are in line with the ranges supported in
the literature, which has been reviewed in section 5.2.
Table 19: Additional capacity procurement of negative TCR at higher penetration levels of offshore wind.
Mean 2013
Scenario 1
Scenario 2
Scenario 3
Additional procurement
62 MW
1.109 MW
3.027 MW
Relative
+2%
+ 43 %
+ 117 %
2659 MW
3706 MW
5624 MW
Total
2597 MW
Second, the amplitudes of calls have to be scaled up, as in praxis they should be a main reason for
higher capacity procurements, in the first place. This is done by scaling up the calling amplitudes
from the reference scenario with the relative factor by which the capacity procurement amount has
increased.
Third, higher capacity procurement volumes will require additional bidding volumes in order to be
covered. The up scaling of bidding volumes is done by increasing the volumes of all bids
proportionally to the increase of the procurement volumes. This way the effect of bid volume
shortages is detached.
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124
20,000
15,000
10,000
5,000
270
4,130
4,085
5,819
5,814
476
6,562
287
5,110
10,089
128
5,420
0
incl.
ref.
OWFs Scenario
B
Scenario 1 (0.6 GW)
incl.
ref.
OWFs Scenario
B
Scenario 2 (11 GW)
incl.
ref.
OWFs Scenario
B
Scenario 3 (30 GW)
Figure 82: OWF operators specific revenues regarding an increase of the amplitude of calls relative to installed OWF
capacity proportionally increased bid volumes of all conventional participants.
It is visible that both specific revenues for capacity provision as well as control energy provision have
increased in comparison to reference scenario B in each of the OWF capacity scenarios. While specific
capacity revenues in scenario 1 are nearly equal to the reference scenario B, capacity revenues in
scenario 2 and 3 are gadually increasing by 28 %, respectivley 86 %. Being at initially very low
levels, specific net energy revenues show an even higher relative increase of 66 % in scenario 2 and
109 % in scenario 3. Secific net revenues in scenario 1 are only minorly affected.
Effects on costs
Costs arising with additional capacity procurements and higher amplitudes of calls are depicted in
Figure 83. A huge increase of the cost levels is recognizable in scenarios with high penetration levels
of offshore wind. In fact total costs have increased by 33 % in scenario 2 and by 55 % in scenario 3,
if comparing to the respective reference scenario B. Even costs in the minimum scenario, depicting
cost at OWF bids with zero profitability, are 15 %, respectively 38 %, higher than in reference
scenario B. Costs in scenario 1 are only marginally affected.
WIENL14568
125
Energy Costs
150
76
68
226
299
23
199
312
441
799
excl. OWFs
ref. Scenario B
34
335
incl. OWFs
min. Scenario
excl. OWFs
31
excl. OWFs
41
152
ref. Scenario B
39
149
746
68
36
incl. OWFs
39
152
min. Scenario
37
148
ref. Scenario B
System costs [m ]
Capacity Costs
incl. OWFs
min. Scenario
1,000
900
800
700
600
500
400
300
200
100
0
Figure 83: System costs regarding an increase of the amplitude of calls relative to installed OWF capacity
proportionally increased bid volumes of all conventional participants.
Explanation of outcomes
The increase of specific revenues from capacity provision is directly explainable with additional
revenues from an expanded capacity procurement. Obviously that additional procured volumes allow
the OWFs to place higher capacity price bids, but still be procured completely. In the same time, the
overall size of the capacity market increases through the higer demand in reserve capacity.
Higher specific net revenues from energy provision are resulting from higher amplitudes of calls,
which allow OWFs to place bids at higher levels. As assumed in the case study construction, they are
causing higher demands in reserve capacity or at least going with higher capacity procurements. Also
the size of the energy market increases, as higher amplitudes of calls require higher capacities of
provided control energy.
The reason for additional costs from capacity and energy provision is directly linked to the increasing
demand in negative TCR due to higher capacity procurements and higher amplitudes of calls.
Consequently, as totally more capacity is procured and more energy called, the costs of both energy
and capacity provision is equally increasing. Also the participation of OWFs cannot fully compensate
the heightened cost through a cheaper provision of control reserves.
Conclusion
An increase of the amplitude of calls and, with that, the height of capacity procurements will lead to
significantly higher system costs. This effect is only marginally compensated through the participation
of OWFs in the control reserve market, as the increasing demand in capacity and energy allows
higher bid prices. However, OWF operators revenues are substantially increased by effectively
expanding sizes of the capacity and energy market. Nevertheless, rising specific revenues from
capacity provision cannot compensate the decline of specific net energy revenues, caused by market
saturation effects at scenarios with high penetration levels of offshore wind.
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126
Weekends
65
0.35
60
55
0.3
50
0.25
45
0.2
40
0.15
0.1
35
0.05
30
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average day in 15min intervals
Figure 84: Weekends Relative frequency of calling events in each 15min of the day in 2013
Source: own depiction and calculation based on [60], [77], [10]
WIENL14568
127
25
0.4
Weekends
1500
1400
75
Average amplitude of calling events (first quater of an hour)
Average amplitude of calling events
Average hourly load [GW]
70
65
1300
60
1200
1100
55
1000
50
900
800
45
700
40
600
35
500
400
30
300
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Average day in 15min intervals
Figure 85: Workdays - Average amplitude of calling events for each 15min interval of the day in 2013
Source: own depiction and calculation based on [60], [77], [98]
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128
25
1600
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Rostock
2.5
2.5
3.6
FINO 2
4.5
4.5
FINO 1
Hooksiel
FINO 1
Wikinger-Nord
3.6
FINO 2
Wikinger-Sd
18
6.15
FINO 2
Adlergrund 500
20
FINO 2
GEOFReE
25
FINO 2
Adlergrund Nordkap
31
FINO 2
Ostseeperle
35
FINO 2
Adlergrund GAP
39
FINO 2
Strom-Nord
39
FINO 2
Ostseeschatz
45
FINO 2
48.3
13
2.3
3.6
FINO 2
Beta Baltic
50
10
FINO 2
Arcadis Ost 1
58
348
6.15
FINO 2
60
12
FINO 1
BalticEagle
80
16
FINO 2
Riffgat
108
30
3.6
3.6
FINO 1
Nordergrnde
110
18
6.15
FINO 3
SeaWind I
Kaskasi II (Hochsee Testfeld
Helgoland)
125
25
FINO 1
170
34
FINO 1
GAIA II
195
39
FINO 3
Sandbank Ext.
200
40
FINO 3
Deutsche Bucht
210
42
FINO 1
215
43
FINO 1
Baltic 1
30
Turbine models were categorized into three distinct turbine types (cf. section 5.2)
31
WIENL14568
129
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Horizont IV
222
36
6.15
FINO 3
Gode Wind II
252
41
6.15
FINO 1
Borkum Riffgrund I
277
77
3.6
3.6
FINO 1
SeaWind III
285
57
FINO 1
OWP West
EnBW Windpark Baltic 2 (Kriegers
Flak)
288
58
FINO 1
288
80
3.6
3.6
FINO 2
Amrumbank West
288
80
3.6
3.6
FINO 3
Butendiek
288
80
3.6
3.6
FINO 3
DanTysk
288
80
3.6
3.6
FINO 3
Meerwind Sd / Ost
288
80
3.6
3.6
FINO 3
Sandbank 24
288
80
3.6
FINO 3
295.2
48
6.15
6.15
FINO 1
Nordsee Ost
295.5
48
6.15
6.15
FINO 3
SeaStorm II
300
60
FINO 1
Horizont I
306
50
6.15
FINO 3
Notos
318
52
6.15
FINO 1
Borkum Riffgrund II
330
66
FINO 1
330
66
FINO 1
Gode Wind I
330
54
6.15
FINO 1
Nrdlicher Grund
330
54
6.15
FINO 3
GAIA IV
330
66
FINO 3
GAIA V
330
66
FINO 3
332.1
54
6.15
6.15
FINO 1
SeaWind IV
350
70
FINO 1
369
60
6.15
6.15
FINO 1
Global Tech I
400
80
FINO 1
MEG Offshore I
Trianel Windpark Borkum
(Borkum West II)
400
80
FINO 1
400
80
FINO 1
Veja Mate
400
80
FINO 1
BARD Offshore 1
400
80
FINO 1
SeaStorm I
400
80
FINO 1
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130
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Aquamarin
400
80
FINO 1
Austerngrund
400
80
FINO 1
Bernstein
400
80
FINO 1
Citrin
400
80
FINO 1
Gannet
400
80
FINO 1
GlobalTech II
400
80
FINO 1
Nautilus II
400
80
FINO 1
Skua
400
80
FINO 1
400
80
FINO 2
400
80
FINO 2
GAIA I Nord
400
80
FINO 3
GAIA III
400
80
FINO 3
H2-20
400
80
FINO 3
Nordpassage
400
80
FINO 3
402
65
6.15
FINO 1
Horizont III
444
72
6.15
FINO 3
Horizont II
450
73
6.15
FINO 3
Albatros
475
95
FINO 1
486
79
6.15
FINO 3
492
80
6.15
6.15
FINO 1
504
82
6.15
FINO 3
510
83
6.15
FINO 3
570
93
6.15
FINO 3
EnBW He Dreiht
595
119
FINO 1
Kaikas
600
98
6.15
FINO 1
Aiolos
600
98
6.15
FINO 3
Nautilus
675
135
FINO 3
Diamant
800
160
FINO 1
Euklas
800
160
FINO 1
Jules Verne
800
160
FINO 3
Seagull
330
66
FINO 1
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131
Name
OWF
capacity
in MW
Number of
turbines
Turbine
capacity
in MW
Simplified
turbine
capacity30
Wind
Source
Status31
Atlantis I
330
66
FINO 1
Atlantis II
330
66
FINO 1
Atlantis III
330
66
FINO 1
330
66
FINO 1
Heron
330
66
FINO 1
Petrel
330
66
FINO 1
Witte Bank
330
66
FINO 1
Nemo
330
66
FINO 3
Apollon
600
98
6.15
FINO 1
Table 20: Categorization of OWF projects, as a foundation for the wind scenario creation.
Source: own depiction based on [83]
WIENL14568
132
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