\newcommand{\thistitle}{Lecture 4: Electricity Markets}

\input{title.tex}


\section{Introduction to electricity markets}



\begin{frame}
  \frametitle{Electricity markets: unique features}

  Electricity markets have several important differences compared to
  other commodity markets.

  \begin{itemize}
    \item At every instant in time, consumption must be \alert{balanced} with
  generation.  E.g. if you turn on a light, somewhere a generator increases its output to compensate.  If the power is not balanced in the grid, the power supply will
  collapse and there will be blackouts.
\item Demand (load) and the availability of wind and solar \alert{change} the whole time.
  \item Finally, electricity \alert{storage is scarce} and often expensive. (If electricity were free and lossless, electricity could be traded e.g. once a month like other commodities.)
  \end{itemize}
  
  It is not possible to run an electricity market for every single
  second, for practical reasons (the network must be checked for
  stability, etc.).
  So electricity is traded in blocks of time, e.g. hourly,
  14:00-15:00, or quarter-hourly, 14:00-14:15, well in advance of the
  time when it is actually consumed (based on forecasts).
  Additional markets trade in balancing power, which step in if the
  forecasts are wrong.

  
\end{frame}

\begin{frame}
  \frametitle{What happens when things go wrong}

  In November 2006, the continental European system split into three parts. Since before the split 10~GW was being transfered from East to West, in the West there was a generation deficit, which caused a frequency drop, while in the East there was an oversupply, causing a frequency spike.

\begin{columns}[T]
  \begin{column}{7cm}

  \includegraphics[width=7cm]{grid_split}
  \end{column}

  \begin{column}{7cm}

  \includegraphics[width=7cm]{frequency_after_grid_split}

  \end{column}
\end{columns}

\source{\hrefc{https://www.entsoe.eu/fileadmin/user_upload/_library/publications/ce/otherreports/Final-Report-20070130.pdf}{UCTE 2006 Report}}

\end{frame}


\begin{frame}
  \frametitle{Electricity markets: technical overview}

%https://upload.wikimedia.org/wikipedia/commons/thumb/4/41/Electricity_grid_simple-_North_America.svg/640px-Electricity_grid_simple-_North_America.svg.png

  Grid takes electricity from generators to consumers.  Long distance
  transport: \alert{transmission network} at high voltages ($>$ 110
  kV). Shorter distance transport: \alert{distribution network} at
  lower voltages ($\leq$ 110 kV). In houses usually $230~V$.

  \centering
  \includegraphics[width=14cm]{Electricity_grid_simple-_North_America}


  \source{Wikipedia}
\end{frame}




\begin{frame}
  \frametitle{Electricity markets: technical overview}

  The European transmission network is mostly at 220~kV (green) and 380~kV (red). Purple lines are undersea high voltage direct current (HVDC) cables.

\centering
\includegraphics[width=9cm]{europe-transmission}
\source{ENTSO-E}


\end{frame}


\begin{frame}
  \frametitle{Electricity markets: economic overview}

  In parallel there is a \alert{commercial infrastructure} to take money from consumers to generators.

  \vspace{.5cm}

  \centering
  \includegraphics[width=14cm]{economic_overview.png}

\end{frame}


\begin{frame}
  \frametitle{Electricity markets: historical development}

  Historically in Europe and still in many regions of the world, a
  \alert{vertically-integrated} company (often state-owned) performed
  all the activities from generation to transmission to retail for final consumers.

  Since early 1990s in Europe: \alert{liberalisation} (deregulation/restructuring/unbundling)
  \begin{itemize}
  \item introduction of \alert{competition} to the activities where competition is considered possible (generation, retail)
  \item   state regulation in the areas of \alert{natural monopoly} (networks)
  \end{itemize}
\end{frame}


\begin{frame}
  \frametitle{German before and after liberalisation}

  \begin{columns}[T]
    \begin{column}{8.5cm}
    Vertically-integrated utilities before liberalisation:


    \vspace{.7cm}
    %https://www.udo-leuschner.de/basiswissen/SB116-04.htm
    \includegraphics[width=9cm]{SB116-verbundebene.jpg}
    \end{column}
    \begin{column}{5.5cm}

      Transmission system operators 2021:
      \includegraphics[width=5cm]{Regelzonen_mit_Übertragungsnetzbetreiber_in_Deutschland.png}
    \end{column}
  \end{columns}

  \source{Wikipedia}
\end{frame}
\begin{frame}
  \frametitle{Electricity markets: natural monopolies}

  \alert{Natural monopolies} occur in industries for which it is only
  economically efficient to have a single provider due to economies of
  scale (decreasing average costs with increasing scale of
  production).

  Electricity transmission and distribution is a decreasing cost
  industry: Duplicating the grid is economically inefficient.

  Yet, natural monopolies - like monopolies in general - tend to overcharge and underserve.

  Solution: \alert{state regulation}, e.g. by German Federal Network Agency (Bundesnetzagentur) that regulates what costs can be passed to consumers.

\end{frame}


\begin{frame}
  \frametitle{Electricity markets: competition via unbundling}

  Competitive conditions for electricity generation and retail can be created by state regulation aiming at:
  \begin{itemize}
  \item \alert{Costs transparency} $\Rightarrow$ prevent cross-subsidies (e.g. allocating costs from competitive activities to grid operation)
    \item \alert{Non-discriminatory access} to the grid (e.g. grid connection and transmission/distribution services)
  \end{itemize}

  \alert{Unbundling} is a set of organisational measures to separate transmission and distribution networks from generation and retail activities.

  It aims at ensuring independence of a grid operator from other activities in a vertically integrated company and at preventing discrimination of other market participants.

\end{frame}

\begin{frame}
  \frametitle{Electricity markets: types of unbundling}

    \begin{itemize}
    \item \alert{Ownership}: grid is operated by an entity with a separate ownership control
    \item \alert{Legal}: separate legal entity operates a regulated activity
    \item \alert{Accounting}: separate book-keeping for regulated activities
    \item \alert{Management}: personal requirements for members of management bodies of a grid operator
  \item \alert{Operational}: TSO/DSO should have sufficient resources for operations (rather than relying on other parts of the vertically integrated undertaking). Restrictions for shared services (HR, IT, legal, finance etc.)
  \item \alert{Informational}: non-disclosure of commercially sensitive information from regulated activities (grid operation) to other units; otherwise - non-discriminatory disclosure to all market participants
    \end{itemize}
\end{frame}


\begin{frame}
  \frametitle{Electricity markets: types of unbundling}

  \alert{1996}: 1st Energy Package – Directive 96/92/EC

  - accounting and informational unbundling for vertically integrated undertakings (VIU)

  \alert{2003}: 2nd Energy Package – Directive 2003/54/EC

  - legal, management, operational and informational unbundling

  \alert{2009}: 3rd Energy Package – Directive 2009/72/EC

  - Transmission System Operator (TSO): ownership unbundling; alternatively ISO or ITO model

  - Independent System Operator (ISO): while the VIU keeps ownership control, an independent system operator operates the grid, incl. decisions on third-party access and investment planning

  - Independent Transmission Operator (ITO): TSO remains part of VIU but is subject to additional stricter requirements for effective independence

  - Distribution Service Operator (DSO): legal, management, operational and informational unbundling

  %ISO/ITO: separate ownsership and operation of grid - ISO is separate operator

\end{frame}

\begin{frame}
  \frametitle{Electricity markets: main actors}

  \centering
  \includegraphics[width=12cm]{electricity-main_actors.png}
\end{frame}

\begin{frame}
  \frametitle{Competitive versus natural monopoly actors}

  \centering
  \includegraphics[width=12cm]{electricity-competitive_monopoly.png}

\end{frame}


\begin{frame}
  \frametitle{Electricity markets: Objectives}

  Objectives of an electricity market design:

  \begin{itemize}
  \item  \alert{Short-run efficiency}, i.e. making the best use of existing resources (generation capacities etc.)
  \item  \alert{Long-run efficiency}, i.e.  promoting efficient investment into new resources (generation assets, grid, storage etc.)
  \item \alert{Reliability}, i.e. reserves for satisfying demand at times of generation shortage
  \item \alert{Sustainability}, i.e. preserving health, environment and climate
  \end{itemize}

\end{frame}


\begin{frame}
  \frametitle{Electricity market structure types}

  We will consider four variations:
  \begin{itemize}
  \item Single buyer
   \item Power pool
     \item Free wholesale competition
       \item Fully liberalised market with retail competition
  \end{itemize}


\end{frame}


\begin{frame}
  \frametitle{Electricity markets: Single buyer}

  \centering
  \includegraphics[height=7cm]{single_buyer.jpg}

\end{frame}


\begin{frame}
  \frametitle{Electricity markets: Power pool}

  \centering
  \includegraphics[height=7cm]{power_pool.jpg}
\end{frame}


\begin{frame}
  \frametitle{Electricity markets: Wholesale competition}

  \centering
  \includegraphics[height=7cm]{wholesale_competition.jpg}
\end{frame}


\begin{frame}
  \frametitle{Electricity markets: Wholesale and retail competition}

  \centering
  \includegraphics[height=7cm]{retail_competition.jpg}
\end{frame}


\section{Electricity consumption}

\begin{frame}
  \frametitle{Why is electricity useful?}

  Electricity is a versatile form of energy carried by electrical
  charge which can be consumed in a wide variety of ways (with selected examples):
  \begin{itemize}
  \item Lighting (lightbulbs, halogen lamps, televisions)
  \item Mechanical work (hoovers, washing machines, electric vehicles)
  \item Heating (cooking, resistive room heating, heat pumps)
  \item Cooling (refrigerators, air conditioning)
  \item Electronics (computation, data storage, control systems)
  \item Industry (electrochemical processes)
  \end{itemize}

  Compare the convenience and versatility of electricity with another
  energy carrier: the chemical energy stored in natural gas (mostly methane),
  which can only be accessed by burning it.

\end{frame}



\begin{frame}
  \frametitle{Power: Examples of consumption}

  At full power, the following items consume:

  \ra{1.1}
  \begin{table}[!t]
    \begin{tabular}{lr}
      \toprule
      Item & Power\\
      \midrule
      New efficient lightbulb & 10 W \\
      Old-fashioned lightbulb & 70 W \\
      Single room air-conditioning & 1.5 kW \\
      Kettle & 2 kW \\
      Factory & $\sim$1-500 MW \\
      CERN & 200 MW \\
            Germany total demand & 35-80 GW \\
      \bottomrule
    \end{tabular}
  \end{table}

\end{frame}


\begin{frame}
  \frametitle{Discrete Consumers Aggregation}

  The discrete actions of individual consumers smooth out
  statistically if we aggregate over many consumers.

  \centering
  \includegraphics[width=10cm]{demand_smoothing}

\end{frame}


\begin{frame}
  \frametitle{National daily load curve}

  The national German load curve includes residential, services and industry demand.

  \centering
  \includegraphics[width=14cm]{daily_load_curve.jpg}
\end{frame}

\begin{frame}
  \frametitle{National yearly load curve}

  The Germany load curve (around 500 TWh/a) shows \alert{daily}, \alert{weekly} and
  \alert{seasonal} patterns; religious festivals are also visible.

  \centering
  \includegraphics[width=13cm]{DE-load-H}

\end{frame}



\begin{frame}
  \frametitle{Load duration curve}

  For some analysis it is useful to construct a \alert{duration curve}
  by stacking the hourly values from highest to lowest.

  \centering
  \includegraphics[width=13cm]{DE-load-duration}

\end{frame}




\section{Electricity generation}


\begin{frame}
  \frametitle{How is electricity generated?}

  \alert{Conservation of Energy}: Energy cannot be created or destroyed:
  it can only be converted from one form to another.

  There are several `primary' sources of energy which are converted
  into electrical energy in modern power systems:
  \begin{itemize}
  \item Chemical energy, accessed by combustion (coal, gas, oil, biomass)
  \item Nuclear energy, accessed by fission reactions, perhaps one day by fusion too
  \item Hydroelectric energy, allowing water to flow downhill (gravitational potential energy)
  \item Wind energy (kinetic energy of air)
  \item Solar energy (accessed with photovoltaic (PV) panels or
    concentrating solar thermal power (CSP))
  \item Geothermal energy
  \end{itemize}

\end{frame}



\begin{frame}
  \frametitle{Power: Examples of generation}

  At full power, the following items generate:

  \ra{1.1}
  \begin{table}[!t]
    \begin{tabular}{lr}
      \toprule
      Item & Power\\
      \midrule
      Solar panel on house roof & 15 kW \\
      Wind turbine & 3 MW \\
      Coal power station & 1 GW \\
      \bottomrule
    \end{tabular}
  \end{table}

\end{frame}



\begin{frame}
  \frametitle{Generators}

  With the exception of solar photovoltaic panels (and electrochemical
  energy and a few other minor exceptions), all generators convert to
  electrical energy via rotational kinetic energy and electromagnetic
  induction in an \emph{alternating current generator}.

  %https://en.wikipedia.org/wiki/Fossil-fuel_power_station#/media/File:Coal_fired_power_plant_diagram.svg

  \centering
  \includegraphics[width=10cm]{Coal_fired_power_plant_diagram}

  \source{Wikipedia}
%  https://de.wikipedia.org/wiki/Drehstrom-Synchronmaschine#/media/File:Walchenseekraftwerk-1_Turbinenhalle.jpg
% Walchenseekraftwerk-1_Turbinenhalle.jpg



\end{frame}


\begin{frame}
  \frametitle{Electricity generation in EU countries in 2022}

  \begin{columns}[T]
    \begin{column}{7.5cm}
  \centering
  \includegraphics[height=7.5cm]{eu-electricity-2022.png}

    \end{column}
    \begin{column}{6.5cm}
39\% (1,104 TWh) of the EU's electricity is generated from coal, gas and other fossil sources. Coal produces 16\% (447 TWh), gas 20\% (557 TWh) and other fossil fuels 3.6\% (100 TWh). Nuclear remains the single largest contributor to EU electricity at 22\% (613 TWh) of the mix. 15\% (420 TWh) is produced by wind and 7.3\% (203 TWh) is produced by solar. Combined, wind and solar produce more electricity than any other fuel (22\%, 623 TWh). The rest is produced by hydro (10\%, 283 TWh), bioenergy (6\%, 167 TWh) and other renewables (0.2\%, 6.7 TWh).


    \end{column}
  \end{columns}

  \source{\hrefc{https://ember-climate.org/insights/research/european-electricity-review-2023/}{Ember European Electricity Review 2023}}


\end{frame}


\begin{frame}
  \frametitle{Electricity generation in EU 2000-22}

  \centering
  \includegraphics[height=7.5cm]{eu-electricity-2000-22.png}

  \source{\hrefc{https://ember-climate.org/insights/research/european-electricity-review-2023/}{Ember European Electricity Review 2023}}
\end{frame}




\begin{frame}
  \frametitle{Renewables reached 56\% of gross electricity in Germany in 2025}

  \centering
  \includegraphics[height=7.6cm]{Fig2_Gross electricity production in Germany 1990 2025.png}

  \source{\hrefc{https://www.cleanenergywire.org/factsheets/germanys-energy-consumption-and-power-mix-charts}{Clean Energy Wire, 2026}}
\end{frame}


\begin{frame}
  \frametitle{Efficiency}

  When fuel is consumed, much/most of the energy of the fuel is lost
  as waste heat rather than being converted to electricity.

  The thermal energy, or calorific value, of the fuel is given in
  terms of MWh${}_{\textrm{th}}$, to distinguish it from the
  electrical energy MWh${}_{\textrm{el}}$.

  The ratio of input thermal energy to output electrical energy is the
  \alert{efficiency}.

  \ra{1.1}
  \begin{table}[!t]
    \begin{tabular}{lrrrrr}
      \toprule
      Fuel & Calorific energy & Per unit efficiency & Electrical energy \\
       & MWh\(_{\text{th}}\)/tonne & MWh\(_{\text{el}}\)/MWh\(_{\text{th}}\) & MWh\(_{\text{el}}\)/tonne \\
\midrule
Lignite & 2.5 & 0.4 & 1.0 \\
Hard Coal & 6.7 & 0.45 & 2.7\\
Gas (CCGT) & 15.4 & 0.58 & 8.9\\
Uranium (unenriched) & 150000 & 0.33 & 50000 \\
      \bottomrule
    \end{tabular}
  \end{table}




\end{frame}


\begin{frame}
  \frametitle{Fuel costs to marginal costs}


  The cost of a fuel is often given in \euro/kg or \euro/MWh\(_{\text{th}}\).

  Using the efficiency, we can convert this to
  \euro/MWh\(_{\text{el}}\).

  For the full marginal cost, we have to
  also add the CO$_2$ price and the variable operation and maintenance
  (VOM) costs.


  \ra{1.1}
  \begin{table}[!t]
    \begin{tabular}{lrrrrr}
      \toprule
      Fuel &  Per unit efficiency & Cost per thermal & Cost per elec. \\
      &  MWh\(_{\text{el}}\)/MWh\(_{\text{th}}\)  & \euro/MWh\(_{\text{th}}\) & \euro/MWh\(_{\text{el}}\)\\
\midrule
Lignite  & 0.4  & 4.5 & 11\\
Hard Coal  & 0.45   & 11 & 24\\
Gas (CCGT) & 0.58  & 19 & 33\\
Uranium & 0.33 & 3.3 & 10\\
      \bottomrule
    \end{tabular}
  \end{table}



\end{frame}




\begin{frame}
  \frametitle{CO2 emissions per MWh}

  The \co2 emissions of the fuel.

  \ra{1.1}
  \begin{table}[!t]
    \begin{tabular}{lrrr}
      \toprule
Fuel & t\(_{\text{CO2}}\)/t & t\(_{\text{C02}}\)/MWh\(_{\text{th}}\) & t\(_{\text{CO2}}\)/MWh\(_{\text{el}}\)\\
\midrule
Lignite &  0.9 & 0.36 & 0.9 \\
Hard Coal  & 2.4 & 0.36 & 0.8 \\
Gas (CCGT) & 3.1 & 0.2 & 0.35\\
Uranium & 0 & 0 & 0 \\
      \bottomrule
    \end{tabular}
  \end{table}

  Current \co2 price in EU Emissions Trading Scheme (ETS) is around \euro 60-80/tCO$_2$.

\end{frame}


\begin{frame}
  \frametitle{You calculate: What CO$_2$ price to switch gas and lignite?}

  What CO$_2$ price, i.e. x \euro/t${}_{\textrm{CO2}}$, is required so
  that the marginal cost of gas (CCGT) is lower than lignite?

  NB: It helps to track units.

  \pause

  We need to solve for the switch point by adding the CO$_2$ price to the fuel cost.  Left is lignite, right is gas:
  \begin{equation*}
    11 \textrm{ \euro/MWh}_{\textrm{el}} + (0.9 \textrm{ tCO}_2/\textrm{MWh}_{\textrm{el}}) \cdot (x \textrm{ \euro/tCO}_2)
    =    33 \textrm{ \euro/MWh}_{\textrm{el}} + (0.35 \textrm{ tCO}_2/\textrm{MWh}_{\textrm{el}}) \cdot (x \textrm{ \euro/tCO}_2)
  \end{equation*}

  Solve:
  \begin{equation*}
    x = \frac{33 - 11}{0.9 - 0.35} = 40
  \end{equation*}

\end{frame}


\begin{frame}
  \frametitle{CO2 and import costs change over time...}

  \centering
  \includegraphics[width=14cm]{import_costs-2019.png}

 \source{\href{https://www.agora-energiewende.de/fileadmin2/Projekte/2019/Jahresauswertung_2019/AGORA_State_of_Affairs_German_Power_Sector_2019_Webinar_28012020.pdf}{Agora Energiewende, 2019}}
\end{frame}

\begin{frame}
  \frametitle{...which affects the marginal costs of generation}

    \centering
  \includegraphics[width=14cm]{marginal_costs-2019.png}

\source{\href{https://www.agora-energiewende.de/fileadmin2/Projekte/2019/Jahresauswertung_2019/AGORA_State_of_Affairs_German_Power_Sector_2019_Webinar_28012020.pdf}{Agora Energiewende, 2019}}
\end{frame}


\begin{frame}
  \frametitle{CO2 emissions from electricity sector}

  \co2
  emissions in electricity generation stagnated for years because of coal, which is slowly being pushed out by the \co2 price and in the longer term by the Kohleausstieg.

  \centering
  \includegraphics[width=11cm]{co2-strom-2019.png}
  \source{\href{https://www.agora-energiewende.de/fileadmin2/Projekte/2019/Jahresauswertung_2019/171_A-EW_Jahresauswertung_2019_WEB.pdf}{Agora Energiewende Jahresauswertung 2019}}
\end{frame}





\begin{frame}
  \frametitle{Capacity Factors and Full Load Hours}


  A generator's \alert{capacity factor} is the average power generation divided by the power capacity.

  For variable renewable generators it depends on weather, generator model and
  curtailment; for dispatchable generators it depends on market
  conditions and maintenance schedules.

  A generator's \alert{full load hours} are the equivalent number of hours at full capacity the generator required to produce its yearly energy yield.  The two quantities are related:
  \begin{equation*}
    \textrm{full load hours} = \textrm{per unit capacity factor} \cdot 365 \cdot 24 = \textrm{per unit capacity factor} \cdot 8760
  \end{equation*}


  Typical values for Germany:
  \begin{table}[!t]
    \begin{tabular}{lrr}
      \toprule
Fuel & capacity factor [\%] & full load hours \\
\midrule
wind & 20-35 & 1600-3000 \\
solar & 10-12 & 800-1000 \\
nuclear & 70-90 & 6000-8000 \\
open-cycle gas & 20 & 1500 \\
      \bottomrule
    \end{tabular}
  \end{table}


\end{frame}



\section{Matching consumption to generation}

\begin{frame}
  \frametitle{Electricity consumption and generation must always be matched}

  Electricity markets have several important differences compared to
  other commodity markets.

  At every instant in time, consumption must be balanced with
  generation.

  If you throw a switch to turn on a light, somewhere a generator will
  be increasing its output to compensate.

  If the power is not balanced in the grid, the power supply will
  collapse and there will be blackouts.

  It is not possible to run an electricity market for every single
  second, for practical reasons (the network must be checked for
  stability, etc.).

  So electricity is traded in blocks of time, e.g. hourly,
  14:00-15:00, or quarter-hourly, 14:00-14:15, well in advance of the
  time when it is actually consumed (based on forecasts).

  Additional markets trade in backup balancing power, which step in if the
  forecasts are wrong.


\end{frame}



\begin{frame}
  \frametitle{Baseload versus Peaking Plant}

  \alert{Load} (= Electrical Demand) is low during night; in Northern Europe in the winter, the peak is in the evening.
  To meet this load profile, \alert{baseload} generation with low fuel and running costs runs the whole time; more expensive \alert{peaking plant} covers the difference.

  \centering
  \includegraphics[width=9cm]{baseload-peaking}

  \source{Tom Brown}

\end{frame}


\begin{frame}
  \frametitle{Merit order}

  The \alert{merit order} is the arrangement of generation capacities by marginal costs, i.e. the electricity inverse supply function.  As long as there is sufficient capacity in the market, the market clearing price equals the marginal cost of the last (i.e. most expensive) generation unit required to match the load.

  \centering
  \includegraphics[width=9cm]{merit_order-clean.png}


\end{frame}

\begin{frame}
  \frametitle{Merit order: effect of varying demand for fixed generation}

  As demand rises, so does the market clearing price.

  \centering
  \includegraphics[width=10cm]{demand-supply}

  \source{Tom Brown}

\end{frame}



\begin{frame}[fragile]
  \frametitle{Power Production Real Example}

  At \href{https://energy-charts.de/power_de.htm}{\bf\color{blue}\underline{energy-charts.de}}  you can see the forecast of load, wind, solar and conventional generation right now in Germany, here's an old version:


  \centering
    \includegraphics[width=11cm]{strom-170531-14.png}


\end{frame}

\begin{frame}[fragile]
  \frametitle{Supply-Demand Curve Real Example}

  At \href{https://www.epexspot.com/en/market-data?market_area=AT&trading_date=2020-06-04&delivery_date=2020-06-05&underlying_year=&modality=Auction&sub_modality=DayAhead&product=60&data_mode=aggregated&period=}{\bf\color{blue}\underline{epexspot.com}} you can find the real supply-demand curves for every hour, here's an old example for Germany-Austria from 2017:

  \centering
    \includegraphics[width=9cm]{DEAT-170531-14}

\end{frame}



\begin{frame}
  \frametitle{Duration curve for generation}

  \centering
  \includegraphics[width=14cm]{load_curve_to_duration_curve.png}

\end{frame}



\section{Merit order effect}


\begin{frame}
  \frametitle{Example market 1/3}

  \centering

  \includegraphics[width=11cm]{germany_generation-price-2015-01-06-2015-01-12}

\end{frame}

\begin{frame}
  \frametitle{Example market 2/3}

  \centering
  \includegraphics[width=11cm]{germany_generation-price-2015-03-15-2015-03-31}

\end{frame}

\begin{frame}
  \frametitle{Example market 3/3}

  \centering
  \includegraphics[width=11cm]{germany_generation-price-2015-04-07-2015-04-14}

\end{frame}




\begin{frame}
  \frametitle{Effect of varying renewables: fixed demand, no wind}

  \centering
  \includegraphics[width=10cm]{demand-supply-no_wind}

\end{frame}



\begin{frame}
  \frametitle{Effect of varying renewables: fixed demand, 35~GW wind}

  \centering
  \includegraphics[width=10cm]{demand-supply-with_wind}

\end{frame}


\begin{frame}
  \frametitle{Spot market price development}

  As a result of so much zero-marginal-cost renewable feed-in, spot
  market prices steadily decreased until 2016. This is called the
  \alert{Merit Order Effect}.  Since then prices have been rising due
  to rising gas and CO$_2$ prices.


  \centering
  \includegraphics[width=10cm]{strompreis-2019.png}

  \source{\href{https://www.agora-energiewende.de/fileadmin2/Projekte/2019/Jahresauswertung_2019/171_A-EW_Jahresauswertung_2019_WEB.pdf}{Agora Energiewende Jahresauswertung 2019}}
\end{frame}




\begin{frame}
  \frametitle{Merit Order Effect}

  To summarise:
  \begin{itemize}
  \item Renewables have zero marginal cost
  \item As a result they enter at the bottom of the merit order, reducing the price at which the market clears
  \item This pushes non-CHP gas and hard coal out of the market
  \item This is unfortunate, because among the fossil fuels, gas is the most flexible and produces lower \co2
    per MWh\el~than e.g. lignite
  \item It also reduces the profits that nuclear and lignite make
  \item Will there be enough backup power plants for times with no wind/solar?
  \end{itemize}

  This has led to lots of political tension, but has been counteracted in recent years by the rising CO$_2$ price.

\end{frame}


\begin{frame}
  \frametitle{Merit order}

  \centering
  \includegraphics[width=10cm]{merit_order-clean.png}


\end{frame}

\begin{frame}
  \frametitle{Merit order with CO$_2$ price}

  A CO$_2$ price can alter the merit order (pulling gas before coal) and increase the revenue for low-emission generators like nuclear and renewables.

  \centering
  \includegraphics[width=10cm]{merit_order-co2.png}


\end{frame}

\begin{frame}
  \frametitle{Residual load duration curve}

  The \alert{residual load} is the regular load minus variable renewable energy (wind and solar). The positive part must be met by dispatchable generators or storage; the negative part must either be curtailed or stored.

  \centering
  \includegraphics[width=10cm]{residual_load_duration.png}


\end{frame}

\end{document}