Introduction¶
Why is energy special?¶
- There should be equilibrium between power generation and consumption
- Transportation and distribution performed on power network, with specific physical rules
- Storage is uneconomical
- Large part of energy demand is of critical nature (hospitals, residencies)
- Consumers should not differentiate origin, quality and nature of production
Deregulation¶
| Regulated | De-regulated | |
|---|---|---|
| Prices determined by | Regularity body | “Invisible hand” of market |
| Structure | Vertical integration | Horizontal restructuring |
| Supplier | Fixed | Multiple - Competition |
Chile > UK > Scandinavia > California (crisis, shortage, Enron)
Participants¶
| Grid Operators | TSO (Transmission System Operator) | Operates transmissions assets Responsible for power balance on transmission system |
| DisCo (Distribution Company) DSO (Distribution System Operator) | Operates distribution grid Often acts as retailer (not preferable) | |
| Producers | GenCo (Generating Company)/ IPP (Independent Power Producer) | Owns production assets Generation is offered through energy market |
| Intermediary | Retailer | Buys energy from wholesale electricity market Sales to end-consumers |
| Consumers | Household (small)/ Industrial (large) | Use energy for various purposes Large consumers may be allowed to directly participate in whole electricity market |
| Regulator | Market design Rules Monitoring Curb misbehavior (collusion, power abuse) | |
| Operator | Organizes and operates energy market Definition of bid products & forms Set up & maintenance of trading platform Daily matching of supply and demand offers |
Models¶
| Monopoly |  | |
| Purchasing Agent |  | |
| Wholesale Market |  | |
| Retail Market |  | |
| Consumer-Centric | Peer-Peer Model Micro-Grids |  |
| Supplier-Centric | Consumer-Centric | |
|---|---|---|
| Characteristic | Hierarchical | Decentralized |
| “Prosumers” | ||
 |  |
Markets¶
Types¶
| Capacity | For system operator to ensure that sufficient generation capacity is present for reliable system operation in future year and at competitive prices |
| Energy | Central place for optimal scheduling and settlement of energy exchanges |
| Ancillary Service | Any type of service that supports power system operations, directly bought by system operator - Primary reserves - Secondary reserves - Tertiary receivers (manual) - Black-start capability, short-circuit power, reactive reserves, voltage control |
Financial¶
| Market | Meaning |
|---|---|
| Futures | Financial contracts with time horizons unto 6 years Used for price hedging and risk management |
| Day-ahead/Spot | Central instrument for everyday matching of electricity supply and demand |
| Balancing | Close to real-time operator for system operator to ensure power system balance |
| Intra-day | Continuous trading platform between day-ahead and balancing Allows to correct original schedules (when plant outages/changes in wind power generation) |
Challenges¶
| Variable energy demand “Duck Curve” |  |
| Renewable energy generation is variable and non-dispatchable |  |
| Renewable energy generation is hard to forecast |
Economic impact of renewable energy¶
Wind and solar energy induces a downward pressure on market prices
Quest for Flexibility¶
Flexibility is seen as ability to adapt to variable and unforeseen changes in operating conditions
- Generation units
- Power system
- Demand side
- Integrated energy systems view (heat and gas energy systems)
Traditional vs Renewable¶
| Traditional | Renewable | |
|---|---|---|
| Producers | Fossil fuels | Wind Solar |
| Fixed Production | ✅ | ❌ |
| Fixed Demand | ❌ | ❌ |
| Cost distribution | Demand | Demand Supply |
Probabilistic matching rather than regular price matching
2025-12-01