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Increasing Time Granularity in Electricity Markets INCREASING TIME GRANULARITY IN ELECTRICITY MARKETS INNOVATION LANDSCAPE BRIEF © IRENA 2019 Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material. ISBN 978-92-9260-127-0 Citation: IRENA (2019), Innovation landscape brief: Increasing time granularity in electricity markets, International Renewable Energy Agency, Abu Dhabi. About IRENA The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that supports countries in their transition to a sustainable energy future, and serves as the principal platform for international co-operation, a centre of excellence, and a repository of policy, technology, resource and financial knowledge on renewable energy. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org Acknowledgements This report was prepared by the Innovation team at IRENA’s Innovation and Technology Centre (IITC) and was authored by Arina Anisie, Elena Ocenic and Francisco Boshell with additional contributions and support by Harsh Kanani, Rajesh Singla (KPMG India). Valuable external review was provided by Helena Gerard (VITO), Pablo Masteropietro (Comillas Pontifical University), Rafael Ferreira (former CCEE, Brazilian market operator) and Gerard Wynn (IEEFA), along with Carlos Fernández, Martina Lyons and Paul Komor (IRENA). Disclaimer This publication and the material herein are provided “as is”. All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents, data or other third-party content providers provides a warranty of any kind, either expressed or implied, and they accept no responsibility or liability for any consequence of use of the publication or material herein. The information contained herein does not necessarily represent the views of all Members of IRENA. The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries. Photographs are from Shutterstock unless otherwise indicated. This document does not represent the official position of IRENA on any particular topic. Rather, it is intended as a contribution to technical discussions on the promotion of renewable energy. www.irena.org BENEFITS 1 Short term: Improved fl exibility in operations through price signals Long term: Enable higher shares of VRE Increasing time Optimised investments in in the power system granularity in fl exible generation capacity electricity markets (through granular price signals) SNAPSHOT KEY ENABLING FACTORS 3 2 Shorter market time units are explored in Advanced computational power and California (United States), Brazil, Germany and optimisation modelling software other European markets. Effi cient price formation in well-functioning Shorter lead times are proposed in Australia, markets the Nordic power market in Europe (reduced to 15 minutes), Austria, Belgium and Germany (reduced to 5 minutes). HOW TO INCREASE TIME GRANULARITY? The value of flexibility can be internalised in the market price by reducing: • the market time units (the duration of dispatch) • the time span between trading gate closure and physical real-time delivery of power (the lead time). INCREASING TIME GRANULARITY IN ELECTRICITY MARKETS The better prices refl ect the system conditions closer to real time, the better the fl exibility incentives for the system. INNOVATION LANDSCAPE BRIEF ABOUT THIS BRIEF his brief forms part of the IRENA project to create actual flexibility solutions for power T“Innovation landscape for a renewable-powered systems. Solutions to drive the uptake of solar future”, which maps the relevant innovations, and wind power span four broad dimensions identifies the synergies and formulates solutions of innovation: enabling technologies, business for integrating high shares of variable renewable models, market design and system operation. energy (VRE) into power systems. Along with the synthesis report, the project The synthesis report, Innovation landscape for a includes a series of innovation landscape briefs, renewable-powered future: Solutions to integrate each covering one of 30 key innovations identified variable renewables (IRENA, 2019), illustrates the across those four dimensions. The 30 innovations need for synergies between different innovations are listed in the figure below. INNOVATION DIMENSIONS ENABLING TECHNOLOGIES BUSINESS MODELS MARKET DESIGN SYSTEM OPERATION 1 Utility-scale batteries 12 Aggregators 17 Increasing time 25 Future role of distribution 2 Behind-the-meter 13 Peer-to-peer electricity granularity in electricity system operators batteries trading markets 26 Co-operation between 14 Energy-as-a-service 18 Increasing space transmission and 3 Electric-vehicle granularity in electricity distribution system smart charging 15 Community-ownership markets operators 4 Renewable models 19 Innovative ancillary power-to-heat 16 Pay-as-you-go models 27 Advanced forecasting services 5 Renewable of variable renewable 20 Re-designing capacity power-to-hydrogen power generation markets 28 Innovative operation 6 Internet of things 21 Regional markets of pumped hydropower 7 Artificial intelligence 22 storage and big data 23 Market integration 8 Blockchain 29 Virtual power lines of distributed energy 30 Dynamic line rating 9 Renewable mini-grids resources 10 Supergrids 24 Net billing schemes 11 Flexibility in conventional power plants 4 INCREASING SPACE GRANULARITY IN ELECTRICITY MARKETS This innovation landscape brief applies to liberalised, open electricity markets, where vertical integrated utilities have been unbundled and there is competition in electricity generation. It The brief is structured as follows: examines increasing time granularity in electricity markets with a well-functioning spot market as a key market design innovation that addresses the I Description variability and the uncertainty of the VRE share in the grid. The brief focuses on the reduction of II Contribution to power sector transformation the duration of dispatch interval (pricing shorter market time units1, shorter clearing and financial III Key factors to enable deployment settlement periods) and the reduction of the time span between the trading gate closure IV Current status and examples of ongoing and physical, real-time delivery of power,2 etc. initiatives Increasing time granularity helps better manage the uncertainty in matching power demand and V Implementation requirements: Checklist supply in a system with a high share of VRE through electricity prices that better reflect the system conditions in real time. 1 “Market time units” are also referred to as “dispatch time interval”, “products” or “contracts”, depending on the taxonomy used (e.g., 15-minute product). 2 The time span between the market gate closure and the physical delivery is also referred to as “lead time”. 5 INNOVATION LANDSCAPE BRIEF I. DESCRIPTION ncreasing shares of wind and solar generation • Market time unit: Wholesale electricity market Iresult in growing volumes of intraday trading products – contracts or a market time unit, need, which in turn increases the need to adjust depending on the taxonomy applied – refer to production schedules and commercial positions the dispatch period for which physical delivery to the most recently updated VRE forecast and of electricity is traded on a market. For example, market conditions. This requires that market time an hourly product refers to 60 minutes of a frames – both the granularity of market time units physical electricity delivery. Similarly, a quarter- and gate closure times – and financial settlement hourly product equals 15 minutes of a physical periods are adjusted to fully exploit the flexibility delivery of electricity in a given market. Across of existing generators in the system when needed. the European spot (day-ahead and intraday) To enhance the operation of a system with high markets, the vast majority of products traded shares of VRE, the dispatch/scheduling time are hourly products, but more and more interval, the pricing of market time units, financial products with a lower time granularity are being settlement periods, and the time span between introduced, such as half-hourly products traded gate closure and real time delivery of power in continuous markets (as opposed to auctions) should be reduced. The use of shorter market in France, Germany, the United Kingdom, time units would help to internalise the value of Luxembourg and Switzerland or quarter-hourly flexibility in the market price. The more reflective products traded for continuous
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