Introduction to Market4RES Questionnaire

This questionnaire has been drafted in the context of the European Project ‘Market4RES’, which is aimed at providing recommendations on the developments to take place in short and long term electricity markets driving a successful and efficient integration of large amounts of RES generation in the long term.

Within this project, Work Package 3 focuses on the conceptual assessment of design options for the developments to take place in short and long term markets. Options here selected as most promising should be further investigated in WP5 of our project with the help of quantitative models to determine which deserve being proposed for their implementation.
A Workshop on the first findings of the analysis conducted within WP3 of the project took place in Brussels on the 24th of June. There, the project team presented their preliminary conclusions on preferred, or most promising, design options, together with those that should be disqualified as contenders because they had some serious drawbacks. Arguments for the selection of best, and worst, design options were provided.

This questionnaire represents a logical continuation of our Workshop and is aimed at collecting useful feedback from relevant stakeholders like you on a set of issues related to the design of markets that we believe are specially critical and controversial, or disputable. Topics to discuss have been arranged into a reduced number of blocks related to main aspects of the functioning of markets both in the long and the short term.

We count on your participation to provide us with very valuable information to take into account in our final analysis and conclusions. If you feel like answering only a specific part of the questionnaire because this is more the most related to your field expertise, do not hesitate to do so. We also encourage you to disseminate this within your institutions looking for complementary expertise.

Many thanks on behalf of WP3 team within the Market4RES project.

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    Part III: SUPPORT TO RES (BOTH LONG AND SHORT TERM)

    RES support objective: Support provided to RES generation is aimed at achieving the installation of certain amounts of non-cost-competitive RES technologies to accelerate their development (increase their level of maturity) by the so-called learning-by-doing effect. Then, support o RES is not aimed at remunerating clean energy, which should be achieved through a well-functioning Emission Trading Scheme (ETS).
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    The set of support schemes that we are analyzing include the following:

    * Net metering of demand and generation per network user for computation of regulated charges: demand and generation in each network location (node) are netted out when determining the network charges, and other regulated charges, to be paid by the corresponding market agents for these facilities. * Long-term clean energy auctions: the provision of a fixed amount of clean energy is auctioned long term in advance of system operation in order to attract possible new RES generation to provide it (separate auctions for new generation and already existing one). * Feed-In Tariffs (with Regulated Prices and with Auction): every unit of energy produced is paid a fixed amount that can be determined administratively (regulated prices) or via an auction. * Feed-In Premiums regulated (with/without price cap and floors): every unit of energy produced is paid an uplift on top of the market price. This uplift is determined administratively long term in advance of operation by authorities. The overall price earned by RES generation may be subject to price caps and floors or not. * Feed-In Premiums resulting from an auction (with/without price cap and floors): every unit of energy produced is paid an uplift on top of the market price. This uplift results from an auction where RES generators bid the premium they would need to receive (separate auctions for old and new capacity). The overall price earned by RES generation may be subject to price caps and floors or not. * Certificate Schemes with Quota: load, or suppliers representing them, must buy a certain amount of green certificates that are equivalent to a certain fraction of the overall amount of energy consumed. These certificates are issued by RES generation. One first option of application of this scheme involves that all kinds of clean generation can provide certificates, while another one involves that only a certain type (technology) or types of RES generation can issue these. * Support conditioned to the provision of grid support services: this scheme conditions the provision of support to RES generation (normally in the form of certificates or quotas) to whether this generation is providing voltage support. Only if providing voltage support, is RES generation entitle to receive support. * No support scheme (conventional market remuneration): this is the default scheme whereby RES generation is treated as any other type of generation and is not earning any kind of support. Besides these schemes, which were originally spotted, in the public workshop came up a suggestion that we also take into account the auction scheme that is going to be put in place in Belgium for the acquisition, via auctions, of certain amounts of RES generation capacity of certain types.
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    The project team have come up with the conclusion that, out of the schemes considered, clean energy auctions, capacity auctions, FIT schemes, FIP schemes, and Certificate ones, could be effective in achieving the installation of new amounts of RES generation, even when schemes that are based on regulated prices (FITs or FIPs) could end up attracting more or less generation than expected unless combined with some caps on the maximum amount of generation benefiting from this support. However, the option based on regulated charges being computed according to the net of demand and generation in each location, conditioning support to the provision of voltage support by RES generation, or the default option of not providing support may be unable to attar enough new RES generation capacity.
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    Other considerations

    Accelerating the development of RES technologies (achieving an improvement in their performance) should be pursued while at the same time aiming to make the development of the system in the long term (investments in generation, demand, and the network) and the operation of the system in the short term as efficient from an economic point of view as possible. Then, the application of the preferred scheme should result in the most cost-competitive RES generation possible of the type targeted being installed.
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    At the same time, short term efficient signals (efficient short term energy prices as resulting from integrated day ahead, or shorter-term, markets at European level) should not be distorted by RES support being provided.
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    In order to be efficient, markets must be liquid (have a large enough amount of offers placed in them).
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    In the view of the project, this should be the ones that allow the total amount of revenues of RES generation depend on the amount of energy sold in the market. Then, FIT schemes would be undesirable, since this scheme fixes total revenues of RES generation already in the long term, while the rest of schemes would provide incentives for RES generation to participate in long term markets to shield from the volatility of RES revenues, and in short term ones for that part of their energy production not contracted in the long term. Do you agree with this view? Another important issue is the robustness of the outcome of the application of the support scheme against political intervention or a change in the conditions existing in the system. In this regard, we believe that market schemes are more robust than schemes based on regulated prices, since market schemes are more difficult to intervene (intervention becomes more apparent). Within market schemes, those limiting to the extent possible the distortion of market signals are more robust than those introducing large distortion.
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