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2007 APEX Conference Paris, October 16, 2007

2007 APEX Conference Paris, October 16, 2007. SESSION 3: How to integrate renewable energy in the markets Wind power. Maria-Luisa Huidobro President. TABLE OF CONTENTS. Wind power and energy evolution in the world and in Spain Spanish regulation on power production in the special regime

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2007 APEX Conference Paris, October 16, 2007

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  1. 2007 APEX Conference Paris, October 16, 2007 SESSION 3: How to integrate renewable energy in the markets Wind power Maria-Luisa Huidobro President

  2. TABLE OF CONTENTS • Wind power and energy evolution in the world and in Spain • Spanish regulation on power production in the special regime • Wind power participating in the day ahead and intra-day market • Relevant market data • Conclusions

  3. Wind power and energy evolution in the world and in Spain.

  4. WORLD INSTALLED WIND POWER (GW) Source: GWEC, EWEA and AEE

  5. ALLOCATION BY COUNTRIES. INSTALLED WIND POWER IN 2006 (GW) Source: GWEC, EWEA and AEE

  6. INSTALLED POWER IN THE SPECIAL REGIME IN SPAIN AND FORECAST UNTIL 2010 (MW) Source: Renewable Energy Plan

  7. RECENT FORECASTS FROM THE MINISTRY OF INDUSTRY, TOURISM AND COMMERCE • The forecasts of the Secretary General of Energy, aim at: • 35,000 MW in 2020 and • 44,000 MW in 2030. • In addition, “during the following 10-years period, the renewable energy will be able to compete without premium”.

  8. Spanish regulation on power production in the special regime.

  9. KINDS OF FACILITIES • Cogeneration and waste energy. • Renewable energy: • Group b.2 Wind power. • Group b.2.1 Windmills onshore. • Group b.2.2 Windmills offshore. • Waste energy with energy value. • Installed power per unit must be < 50 MW.

  10. ADMINISTRATIVE COMPETENCES • Installation licence corresponds to regional authorities. • Nevertheless, this competence is of the State Government when: • The installed power is > 50 MW. • Its location affects more than one Region. • It is located offshore. • Regulated price corresponds to the State Government: • Fix price applied to wind energy. • Premium over the market price: • Wind power onshore: Fixed by the Government. • Wind power offshore: Established by auction.

  11. ACCESSING THE NETWORKS • Priority for accessing the transmission and distribution network. • Mandatory guarantee to be applied when accessing the transmission and distribution network: • 20 €/kW for wind power facilities. • Once the wind power facility starts up, the guarantee is cancelled.

  12. REQUIREMENTS APPLIED TO WIND POWER FACILITIES (I) • Adscription to a generation control centre, as a dispatch centre connected to the system operator: • Producer. • Special dispatch in the system operator. • All the facilities with capacity > 10 MW should be connected to a control centre or establish by itself a control centre. • Information will be transmitted to the system operator and instructions to control centre will be executed in real time. • This obligation will be a necessary condition for the perception of the tariff or the premium.

  13. REQUIREMENTS APPLIED TO WIND POWER FACILITIES (II) • The wind facilities will have to fulfil certain response requirements when a voltage dip. • This requirement will be a necessary condition for the perception of the tariff or the premium: • A transitory period is established until the 1st of January of 2010 without penalty, for the existing facilities before the Royal Decree is in force. • A transitory period is established for the facilities previous to 1 of January of 2008, during a maximum term of 5 years, for maintaining the continuity of supply, receiving a complementary income of 0.38 c€/kWh.

  14. SELLING THE WIND ENERGY • The wind energy producer has two options: • To sell the wind energy at a fix regulated tariff equal for all the hours (option a). • To bid in the organized market, through the system of auctions managed by the market operator, to establish a bilateral contract, or a forward contract (option b).

  15. OPTION A: TO SELL AT A REGULATED TARIFF • The wind power producer communicates the day ahead schedule to the market operator: • The auction system managed by the market operator considers this schedule as a bid at null price. • The schedule can be communicated directly or through a representative. • Producers can send bids also to the intra-day market • The wind power producer is paid by: • The market operator for the amount that corresponds to daily and intra-day market. • The system operator by the amount that corresponds to the ancillary services and deviations. • The Energy Regulatory Commission for the rest of the fix price of the tariff. This part of the retribution is paid until 2009 by the distributors.

  16. OPTION B: TO SELL IN THE MARKET (I) • The wind power producer send the bids for the day ahead market to the market operator: • The bid can be sent directly or through a representative. • Producers can also send bids to the intra-day market. • The price is paid to the wind power producer by: • The market operator for the amount that corresponds to daily and intra-day market. • The system operator by the amount that corresponds to the ancillary services and the deviations. • The Energy Regulatory Commission for the premium. This part of the retribution is paid until 2009 by the distributors. • Alternatively the power producer can sign a bilateral contract or operate through the forwards market.

  17. OPTION B: TO SELL IN THE MARKET (II) • Negotiated price • + • Premium • + • Reactive energy complement • - • Deviations • + • Complement to help voltage dip problems • (applicable to wind facilities previous to 1/1/2008 and maximum 31/12/2013, that support voltage dip)

  18. REQUIREMENTS THAT THE WIND PRODUCERS SHOULD COMPLY • In case the entity accessing the market on behalf of the wind producer is not a market agent, then the wind producer should be a market agent. • The entity accessing the market on behalf of the wind producer can send several bids for the set of facilities of the wind producer. • The dominant operators will only be able to act as representatives of their own facilities when their participation is greater than 50%. • The non dominant operators, will be able to act as representatives, until they reach a maximum of 5% of all the suppliers.

  19. REGULATED TARIFF AND PREMIUM

  20. LOWER AND UPPER PRICE LIMITS TO BE PERCEIVED BY WIND FACILITIES Upper limit = 8.4944 Price to receive Lower limit = 7.1275 Premium = 2.9291 Market price If the price of the market plus the premium is below the lower limit, this limit will be received

  21. THE REGULATED TARIFF AND THE PREMIUMS (I) • Parameters for establishing: • Regulated tariff option: IRR of 7% • Market option: • Lower and upper limits IRR of 7%, with a minimum of 5% and a maximum of 9% are the limits of the band.

  22. THE REGULATED TARIFF AND THE PREMIUMS (II) • Updates: • Renewable: annual based on the RPI – 0.25 up to 31/12/2012 and from then RPI – 0.50. • Revisions. Every 4-years period: • Costs associated to each of the technologies. • Degree of participation of the special regime in the demand coverage. • Incidence in the technical and economic management of the system.

  23. ROYAL DECREE 1028/2007WIND FACILITIES OFFSHORE • The construction or extension of the electrical systems for wind generation offshore requires: • The production licence given by the Ministry of Industry regulated in the Royal Decree 1955/2000. • The licence to set the installation on the sea as public dominion by the Ministry of Environment (Law 22/1988, of 28 of July, relative to coasts). • The auction result licence that grants the applicant the zone reserve, regulated in the Royal Decree 1028/2007.

  24. Wind power participating in the day ahead and intra-day market.

  25. INSTALLED CAPACITY IN CCGT,COGENERATION AND WINDMILLS Installed capacity in CCGT, cogeneration and windmills Current (MW) In the market (%) (*) CCGT 16,657 100.0 Cogeneration 5,773 52.0 Windmills 12,323 95.5 (*) 6,000 MW more are in testing period and will be in commercial operation in last quarter of 2007 and first quarter of 2008.

  26. INSTALLED POWER IN SPECIAL REGIME AND ORDINARY REGIME WITH PREMIUM BIDDING IN THE MARKET ON SEPTEMBER 16th, 2007

  27. DAILY ENERGY BY PRODUCTION TECHNOLOGIESJANUARY 2004 – 10th OCTOBER 2007

  28. TYPICAL BID OF A WIND POWER PRODUCER • Bid at 0 €/MWh to be matched. • Bid at a price different from 0 €/MWh with risk of none being matched

  29. NUMBER OF MARKET PARTICIPANTS • Power producers in the Spanish power production market: • On October 11, 507 power producers are participating in the dayly and intraday markets. • Number of wind power producer facility owners than ere selling in the daily market: 3 • Number of wind power producer facility owners that are selling in the daily market through units managed by other kind of agents (representative or seller agent): 212 • Number of power producer agents without wind power facilities: 292

  30. PRICES AND ENERGY IN THE DAILY MARKET1st January 2004 – 10th October 2007 MWh c€/kWh

  31. PRICES IN THE SPANISH SYSTEM IN THE DAILY MARKET1st January 2004 – 10th October 2007 c€/kWh

  32. THE WIND ENERGY PRICE IN 2006 • This participation of the wind energy in the electric market diminishes the price of the electricity due to: • The incorporation of the wind energy moves the market supply curve causing a lower price. • In addition, the wind production is greater in periods of low/medium prices, because the local winds take place in the periods of diurnal transition that in many cases does not correspond with the highest demand. • Wind price in the daily market: 48.01 €/MWh, is lower 4.96% to the arithmetic average price of the daily market (50.52 €/MWh) • Wind Price in regulated tariff: 72.73 €/MWh

  33. AVERAGE PRICE COMPONENETSOF WIND ENERGY IN 2006 (€/MWh) Market price components 91.01 €/MWh Source: REE and AEE

  34. WIND ENERGY MATCHED AND MARGINAL PRICE 2004

  35. WIND ENERGY MATCHED AND MARGINAL PRICE 2005

  36. WIND ENERGY MATCHED IN THE DAILY MARKET AND MARGINAL PRICE IN 2006

  37. SPECIAL REGIME ENERGY MATCHED IN THE DAILY MARKET AND MARGINAL PRICE IN 2007

  38. MARKET ENERGY OF POWER STATION UNDER THE SPECIAL REGIME

  39. WIND PRODUCERS ACTING IN THE INTRA-DAY MARKET • The wind producers are very active in the intra-day market: • As weather forecast is close to real time, the producers modify schedules to more accurate figures. • To solve the power production unavailability.

  40. THE FORWARD CONTRACTS AND THE DAILY MARKET • The participation of the wind power producers in the daily market serves to them as a base to be able to take part in the CESUR (last resort supply), VPP auctions and the forward organized market, buying or selling the necessary amounts of energy to fulfil their compromises.

  41. INCORPORATING OFFERS INTO DAILY MARKET OMEL

  42. Relevant market data.

  43. INSTALLED POWER BY TECHNOLOGIESIN 2006 (%)

  44. ENERGY PRODUCED BY TECHNOLOGIES IN 2006 (%) Wind power production reached 8.5% in 2006 of the demand coverage. In 2007 a 12% is expected to be reached.

  45. ENERGY PRODUCED IN SEPTEMBER 2006 & 2007 (%)

  46. INSTALLED POWER IN THE SPECIAL REGIME IN 2006 (%)

  47. ENERGY PRODUCED IN THE SPECIAL REGIME IN 2006 (%)

  48. DAILY WIND GENERATION IN 2006 (MWh) On December 8th, 2006, a maximum in wind power production was achieved with an average daily energy of 159,291 MWh and an hourly energy of 8,010 MWh at 15:00 hours. This wind power production covered 23.3 % of the domestic demand Source: REE and AEE

  49. DAILY ENERGY PRODUCEDBY WIND POWER IN 2006 (%) Source: REE and AEE

  50. WIND ENERGY SOLD AT REGULATED TARIFFAND IN THE MARKET (GWh)

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