Wind Energy in Offshore Grids
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Wind energy in offshore grids Sascha T, Schroder January 2013 DTU Management Engineering Department of Management Engineering - PhD thesis - Wind energy in offshore grids by Sascha T. Schroder DTU Management Engineering, Ris0 Campus Energy Systems Analysis in partial fulfilment of the requirements for the PhD degree Roskilde, October 2012 © Sascha T. Schroder, 2013 Photo on the front page reprinted with friendly permission of 50Hertz Transmission GmbH, Berlin ISBN 978-87-92706-02-7 Main supervisor: Poul Erik Morthorst Temporary co-supervisors: Lise-Lotte Pade Peter Meibom Henriette Hindrichsen (Energinet.dk) Lasse Sundahl (Energinet.dk) DTU Management Engineering Technical University of Denmark Ris0 Campus Frederiksborgvej 399, P.O. Box 49, Building 110 4000 Roskilde Denmark Tel. +45 46 77 51 00 Fax +45 46 77 51 99 www.man.dtu.dk I Summary This cumulative PhD thesis deals with wind integration in offshore grids from an economic point of view. It is composed of a generic part and eight papers. As the topic has mostly been analysed with a focus on topology and technical issues until now, market-operational questions in offshore grids and investment implications under different regulatory frame works are a hitherto underrepresented research field. They are addressed by this thesis. Offshore grids between several countries combine the absorption of wind energy with international power trading. However, the inclusion into an offshore grid affects the eco nomics of an offshore wind park. It is shown that the spot market income is lower if an offshore wind farm is placed in an interconnector and subject to nodal pricing instead of having a national affiliation. Moreover, congestion in the interconnector can prevent the wind farm from correcting its wind forecast errors in a specific onshore balancing group. An analytical approach with a transmission system operator and a wind farm as stake holders illustrates resulting incentives for strategic behaviour. Depending on the regulatory regime, they may be inclined to announce more or less generation than expected at the closure of the day-ahead spot market. This can lead to a suboptimal utilisation of the infrastructure and associated socio-economic losses. These and possibly undesired reallo- cative effects between the parties can be avoided if the regulatory regime is adjusted to reflect special characteristics of offshore grids. With an operational real options approach, it is furthermore illustrated how different support schemes and connections to additional countries affect the investment case of an offshore wind farm and the income of the trans mission system operator. The investment framework has also been addressed with a policy study about possible combinations of support schemes and international cooperation mech anisms between countries to achieve their renewable electricity generation targets. In the near future, tendering of joint projects is a feasible solution. Case studies on the Kriegers Flak offshore hub in the Baltic Sea and on the question of offshore storage, applying the WILMAR Joint Market Model, complement these analyses. The study on Kriegers Flak shows that embedded wind generation approximately halves congestion rents. While building and operating an adiabatic cavern air energy storage appears technically feasible, several reasons are explained why this is inferior to an on shore solution from an electricity markets perspective. The measures addressed until now, transmission and storage, are complemented by an analysis of an alternative: curtailment of renewable generation. The acceptance of this measure will play an increasing role for a cost-efficient integration of renewables. An intuitive example is that it is not efficient to dimension offshore connections at the nameplate capacity of the wind park, but that accepting curtailment should be part of the optimisation. Combining results from the different papers leads to the conclusion that an integrated operation of meshed offshore grids and generation seems best. Strategic behaviour between actors is thus avoided, while stable investment conditions can be supported. A feed- in tariff or a combination of tendering and feed-in tariffs could be a suitable support mechanism, allowing a co-operation of generation and transmission. The regulatory and policy framework should be adapted to meet the characteristics of offshore grids. Doing so can foster the cost-efficient deployment of both transmission and generation. II Resume Denne PhD-afhandling besk$ftiger sig med integration af vindenergi i offshore grids fra et 0konomisk perspektiv. Afhandlingen bestar af en generisk del samt otte selvst$ndige publikationer. Som en af f0rste publikationer behandler den markeds- og driftsspr0gsmal og de deraf f0lgende investeringseffekter under forskellige reguleringsregimer. Offshore grids mellem flere lande kombinerer integration af vindenergi og international el-handel. Derudover pavirker inkluderingen i et offshore grid 0konomien af en havvin- dm0llepark. Det vises, at forbindes en havvindm0llepark til et handelskabel og dermed afregnes efter nodal pricing princippet frem for pa et nationalt marked, er der risiko for at indtjeningen til m0llen reduceres. Ydermere kan belastning af nettet forhindre vin- dm0lleparken i at rette op pa eventuelle forudsigelsesfejl gennem en balanceringsgruppe pa land. Med udgangspunkt i en netvirksomhed og en vindm0llepark analyseres incita- menterne for strategisk adferd, hvor det viste sig at afh$ngig af den g$ldende reguler- ing, vil de v$re tilb0jelige til at melde enten h0jere eller lavere produktion end forventet ud. Dette kan f0re til sub-optimal udnyttelse af infrastrukturen med socio-0konomisk tab som f0lge. Hvis den g$ldende regulering indrettes saledes, at der tages h0jde for disse specielle egenskaber ved offshore grids, kan de socio-0konomiske tab og de mulige u0nskede fordelingseffekter undgas. Ud fra et operational real options approach kan det ydermere vises hvorledes forskellige st0ttemekanismer samt eventuelle forbindelser til flere lande kan pavirke investeringsbeslutningen for en havvindm0llepark og indkomsten for netvirksomheden. Disse investeringsbeslutninger er ligeledes analyseret i et policy studie vedr0rende mulige kombinationer af st0ttemekanismer og Internationale samarbejdsmu- ligheder, hvor landene kan samarbejde om at na deres individuelle mal for vedvarende energi. Pa mellemlangt sigt er tendering i forbindelse med joint projects en mulig l0sning. Case studier vedr0rerende Kriegers Flak offshore hub i 0sters0en samt sp0rgsmalet omkring lagring af energi til havs underst0tter disse analyser. Det fremgar, at inklusion af vindproduktion omtrent halverer flaskehalsindt$gterne. Ydermere fas det, at mens det at bygge og k0re et adiabatisk trykluftlager vil v$re teknisk muligt, vil det ud fra et el- markedsperspektiv v$re en mindre attraktiv l0sning end en l0sning pa land. De hidtil gennemgaede midler, transmission og lagring, suppleres af en analyse af et alternativ: cur tailment af vedvarende energiproduktion. Hvis anvendelsen af dette instrument accepteres, vil det spille en stadig st0rre rolle for omkostningseffektiv interegration af vedvarende en- ergi. Et intuitivt eksempel er, at det ikke vil v$re efficient at dimensionere tilslutningen med en kapacitet svarende til produktionskapaciteten af havvindm0lleparken, men snarere at acceptere at curtailment er en betingelse for at opna den optimale kombination. Kom- bineres resultaterne fra de forskellige artikler fas konklusionen, at offshore transmission og energiproduktion skal k0res som integrerede systemer. Pa den made undgas strategisk adferd fra akt0rernes side, mens stabile investeringsbetingelser opretholdes. En feed-in tariff - eventuelt i kombination med tendering - er et passende styringsmiddel, der sam- tidig underst0tter samk0ring af produktion og transmission. Den g$ldende regulering skal indrettes saledes, at der tages h0jde for egenskaberne ved offshore grids. I sa fald kan man opna omkostningseffektiv transmission savel som produktion. 1 1 Thanks to Lise-Lotte Fade for assisting with the translation into Danish. III Zusammenfassung Diese kumulative Dissertation beleuchtet die Integration von Windenergie in Offshore- Netze unter okonomischen Gesichtspunkten. Sie besteht aus einer zusammenfassenden Einleitung sowie acht Veroffentlichungen. Das Zusammenspiel von Strommarkten und Offshore-Netzen und daraus folgende Anreize unter verschiedenen Rahmenbedingungen sind ein bisher wenig beachtetes Forschungsgebiet. Sie werden hier behandelt. Offshore-Netze zwischen mehreren Landern kombinieren die Ubertragung von Strom- erzeugung aus Windenergie mit internationalem Stromhandel. Die Einbeziehung in ein derartiges Offshore-Netz kann jedoch die Wirtschaftlichkeit eines Offshore-Windparks bee- influssen. Es zeigt sich, dass das Spotmarkt-Einkommen eines Offshore-Windparks unter nodal pricing geringer ist, wenn dieser in ein Seekabel zwischen zwei Landern eingebun- den ist. Daruber hinaus konnen Engpasse im Kabel verhindern, dass der Windpark auftretende Vorhersagefehler mit Hilfe eines Onshore-Bilanzkreises ausgleicht. Ein ana- lytischer Ansatz mit einem Ubertragungsnetzbetreiber sowie einem Offshore-Windpark zeigt mogliche Anreize zu strategischem Verhalten auf. Je nach Ausgestaltung des regu- latorischen Umfeldes konnten sie veranlasst sein, mehr oder weniger Windproduktion als erwartet am Day-Ahead-Spotmarkt zu verkaufen. Dies kann zu einer suboptimalen Auslas- tung der Netzinfrastruktur fuhren.