Energies

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24 pages, 3661 KiB

Open AccessArticle

Economic Model of Ancillary Services in Real Time for Frequency Control

by Kristian Balzer, Joaquín Lazo and David Watts

Energies 2023, 16(17), 6378; https://doi.org/10.3390/en16176378 - 3 Sep 2023

Viewed by 2077

Modern power systems integrate ancillary services (ASs) to provide security and quality of service in real-time operation (RTO) due to the intense frequency variations caused by the uncertainty of solar–wind generation. To this end, the ancillary services market focuses on power reserves for [...] Read more.

Modern power systems integrate ancillary services (ASs) to provide security and quality of service in real-time operation (RTO) due to the intense frequency variations caused by the uncertainty of solar–wind generation. To this end, the ancillary services market focuses on power reserves for secondary and tertiary frequency control. The adjustment and dispatch of reserves from plants are manual instructions executed by the system operator in order to maintain the frequency within the normal operating range (49.80 ≤ f ≤ 50.20 Hz). This work proposes a methodology for the economic modeling of the ancillary services market in real time using a dynamic hourly mathematical model that integrates the variability of solar–wind generation, a demand monitoring curve, and the trajectory of marginal cost (MgC). This is a segmented methodology in which plants with costs close to the marginal cost are identified in real time using the Supramarginal (SMg) and Inframarginal (IMg) methods. Finally, this economic model for real-time power reserve reallocation represents an innovation in the ancillary services market because its results allow for the operation costs (OC) of the reserves to be reduced by up to 60% and for the displacement of marginal costs to be reduced by 10 to 40% with respect to traditional methodologies such as the economic merit list and the technical minimum methodology, which cause plants to operate without economic justification. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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23 pages, 5769 KiB

Open AccessArticle

A Comparative Analysis of Two Pricing Mechanisms, MCP and PAB, in the Chinese Frequency Regulation Market

by Xian Huang and Zhehan Li

Energies 2023, 16(6), 2876; https://doi.org/10.3390/en16062876 - 21 Mar 2023

Cited by 1 | Viewed by 2047

Abstract

In the face of the new reform of China’s “unified electricity market”, the frequency regulation ancillary service market in each region of China is still divided between using the MCP and PAB pricing mechanisms. The purpose of this paper is to explore the [...] Read more.

In the face of the new reform of China’s “unified electricity market”, the frequency regulation ancillary service market in each region of China is still divided between using the MCP and PAB pricing mechanisms. The purpose of this paper is to explore the different impact the laws of the above two pricing mechanisms have on the frequency regulation market and to provide relevant suggestions for this electricity market reform. This paper simulates the competitive activities of the frequency regulation market based on the multi-agent simulation model, conducts a comparative experiment by changing the pricing mechanism to a single variable based on the rules of the Sichuan frequency regulation market in China, and concludes that MCP can make the market fast and stable, and that its market settlement price is low, which is suitable for the “unified electricity market”. Although PAB makes the market settlement price high, it can ensure the retention of high-performance units in the market, and the stable settlement price makes this model able to accurately reflect the “price signal”, making it suitable for late adoption in the “unified electricity market”. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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30 pages, 3985 KiB

Open AccessArticle

Dependence Analysis for the Energy Sector Based on Energy ETFs

by Katarzyna Kuziak and Joanna Górka

Energies 2023, 16(3), 1329; https://doi.org/10.3390/en16031329 - 27 Jan 2023

Cited by 2 | Viewed by 1996

Abstract

This study investigates the effects of crude oil and natural gas future returns on energy stock portfolios. We consider returns of portfolios of energy companies approximated by energy ETFs and returns of Brent crude oil and natural gas contracts listed on the US [...] Read more.

This study investigates the effects of crude oil and natural gas future returns on energy stock portfolios. We consider returns of portfolios of energy companies approximated by energy ETFs and returns of Brent crude oil and natural gas contracts listed on the US market from January 2015 to September 2022. To study the relationship between Brent crude oil, natural gas, and ETFs, we apply Granger causality in mean and variance, Dynamic Conditional Correlation and the tail dependence-focused copula approach. The research hypothesis regarding the dependence between energy ETFs and the underlying energy risk factors—crude oil and natural gas, and therefore, the existence of hedging or diversification opportunities, was verified. Our empirical findings indicate that crude oil has a medium effect on energy ETFs, and for natural gas it is even lower in the analyzed period, so hedging opportunities are weak, but opportunities for diversification arise. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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28 pages, 2908 KiB

Open AccessArticle

ARX-GARCH Probabilistic Price Forecasts for Diversification of Trade in Electricity Markets—Variance Stabilizing Transformation and Financial Risk-Minimizing Portfolio Allocation

by Joanna Janczura and Andrzej Puć

Energies 2023, 16(2), 807; https://doi.org/10.3390/en16020807 - 10 Jan 2023

Cited by 5 | Viewed by 2289

Abstract

In this paper, we propose dynamic, short-term, financial risk management strategies for small electricity producers and buyers that trade in the wholesale electricity markets. Since electricity is mostly nonstorable, financial risk coming from extremely volatile electricity prices cannot be reduced by using standard [...] Read more.

In this paper, we propose dynamic, short-term, financial risk management strategies for small electricity producers and buyers that trade in the wholesale electricity markets. Since electricity is mostly nonstorable, financial risk coming from extremely volatile electricity prices cannot be reduced by using standard finance-based approaches. Instead, a short-term operational planing and a proper trade diversification might be used. In this paper, we analyze the price risk in terms of the Markowitz mean–variance portfolio theory. Hence, it is crucial to forecast properly the variance of electricity prices. To this end, we jointly model day-ahead and intraday or balancing prices from Germany and Poland using ARX-GARCH type models. We show that using heteroscedastic volatility significantly improves probabilistic price forecasts according to the pinball score, especially if variance stabilizing transformation is applied prior to a model estimation. The price forecasts are then used for construction of dynamic diversification strategies that are based on volatility-type risk measures. We consider different objectives as well as a buyer’s and a seller’s perspective. The proposed strategies are applied for the diversification of trade among different markets in Germany and Poland. We show that the objective of the strategy can be achieved using the proposed approach, but the risk minimization is usually related to lower profits. We find that risk minimization is especially important for a seller in both markets, while for a buyer a profit maximization objective leads to a more optimal risk–return trade-off. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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17 pages, 2794 KiB

Open AccessArticle

The Impact of Shale Energy on Population Dynamics, Labor Migration, and Employment

by Onur Sapci

Energies 2022, 15(22), 8628; https://doi.org/10.3390/en15228628 - 17 Nov 2022

Cited by 1 | Viewed by 1566

Abstract

This paper is designed to determine whether producing oil and gas via shale has an economically significant effect on population migration dynamics and on the labor market in terms of the number of employed individuals, the number of establishments, total wages, and average [...] Read more.

This paper is designed to determine whether producing oil and gas via shale has an economically significant effect on population migration dynamics and on the labor market in terms of the number of employed individuals, the number of establishments, total wages, and average annual pay per person in twenty-six counties in Ohio and Pennsylvania, USA. The analysis incorporates migration inflow and outflow between producing and nonproducing counties. The results of the analysis show that the counties that engage in shale gas extraction saw a negative impact on net migration but a much larger positive impact on labor market outcomes. Specifically, the number of jobs is higher by 2.4%, the number of establishments is higher by 1.1%, total wages are 3% more and the average annual pay is 1.5% more in producing counties after shale. The analysis reveals a small but statistically significant negative impact on migration, as shale regions experienced some migration outflows. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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8 pages, 658 KiB

Open AccessArticle

The Impact of Coskewness and Cokurtosis as Augmentation Factors in Modeling Colombian Electricity Price Returns

by Edgardo Cayon and Julio Sarmiento

Energies 2022, 15(19), 6930; https://doi.org/10.3390/en15196930 - 22 Sep 2022

Cited by 2 | Viewed by 1568

Abstract

This paper explores the empirical validity of an augmented volume model for Colombian electricity price returns (in the present study, the definition of returns is simply the “rate of change” of observed prices for different periods). Of particular interest is the impact of [...] Read more.

This paper explores the empirical validity of an augmented volume model for Colombian electricity price returns (in the present study, the definition of returns is simply the “rate of change” of observed prices for different periods). Of particular interest is the impact of coskewness and cokurtosis when modeling Colombian electricity price returns. We found that coskewness as an augmentation factor is highly significant and should be considered when modeling Colombian electricity price returns. The results obtained for coskewness as an augmentation factor in a volume model are consistent when using either an Ordinary Least Square (OLS) and Generalized Method of Moments (GMM) specification for the data employed. On the other hand, the effect of cokurtosis is highly irrelevant and not significant in most cases under the proposed specification. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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31 pages, 2703 KiB

Open AccessArticle

Asset Profitability in the Electricity Sector: An Iterative Approach in a Linear Optimization Model

by Annika Gillich and Kai Hufendiek

Energies 2022, 15(12), 4387; https://doi.org/10.3390/en15124387 - 16 Jun 2022

Cited by 4 | Viewed by 1920

Abstract

In a competitive electricity market, generation capacities can exactly cover their full costs. However, the real market deviates from this ideal in some aspects. One is the concern of non-existent or insufficient scarcity prices. We present an iterative method in a linear optimization [...] Read more.

In a competitive electricity market, generation capacities can exactly cover their full costs. However, the real market deviates from this ideal in some aspects. One is the concern of non-existent or insufficient scarcity prices. We present an iterative method in a linear optimization model to investigate the profitability of assets in the absence of scarcity prices and how the system changes when this risk is incorporated into investors’ expectations. Therefore, we use a two-step optimization of capacity planning and unit commitment. Iteratively, mark-ups at the height of uncovered costs are added to investment costs. This typically leads to a system with better investment profitability while keeping the system cost increase low. The methodology is applied to a simplified brownfield generation system, targeting CO₂-free power generation within 25 years. In a model with annual foresight of actors, iterations result in a generation system with significantly lower (or even no) uncovered costs for new investments within ten or fewer iterations. Our example case with full foresight shows that early-added gas (combined cycle) and wind onshore capacities are able to recover their full costs over a lifetime, even without scarcity prices. However, the contribution margin gap remains high, especially for storage and biomass. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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22 pages, 1226 KiB

Open AccessArticle

Price Responsiveness of Residential Demand for Natural Gas in the United States

by Raymond Li, Chi-Keung Woo, Asher Tishler and Jay Zarnikau

Energies 2022, 15(12), 4231; https://doi.org/10.3390/en15124231 - 8 Jun 2022

Viewed by 1828

Abstract

While price responsiveness of residential demand for natural gas has important implications on resource planning and energy modelling, its estimates from prior studies are very diverse. Applying panel data analysis and five parametric specifications to monthly data for the lower 48 states in [...] Read more.

While price responsiveness of residential demand for natural gas has important implications on resource planning and energy modelling, its estimates from prior studies are very diverse. Applying panel data analysis and five parametric specifications to monthly data for the lower 48 states in 1990–2019, we estimate own-price elasticities of residential demand for natural gas in the United States (US). Using results from cross-section dependence (CD) test, panel unit root tests, panel time-series estimators, and rolling-window analysis, we document: (1) the statistically significant (p-value ≤ 0.05) static own-price elasticity estimates are −0.271 to −0.486, short-run −0.238 to −0.555 and long-run −0.323 to −0.796; (2) these estimates vary by elasticity type, sample period, parametric specification, treatment of CD and assumption of partial adjustment; (3) erroneously ignoring the highly significant (p-value < 0.01) CD shrinks the size of these estimates that vary seasonally, regionally, and nonlinearly over time; and (4) residential natural gas shortage costs decline with the size of own-price elasticity estimates. These findings suggest that achieving deep decarbonization may require strategies that do not rely solely on prices, such as energy efficiency standards and demand-side-management programs. Demand response programs may prove useful for managing natural gas shortages. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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12 pages, 643 KiB

Open AccessArticle

What Is the Temporal Path of the GDP Elasticity of Energy Consumption in OECD Countries? An Assessment of Previous Findings and New Evidence

by Brantley Liddle

Energies 2022, 15(10), 3802; https://doi.org/10.3390/en15103802 - 21 May 2022

Cited by 10 | Viewed by 2213

Abstract

This paper answers the question: what is the path of the GDP elasticity of economy-wide energy consumption for OECD countries over the period 1960–2019? To do so, this study first considers the arguments as to why this elasticity might change over time, and [...] Read more.

This paper answers the question: what is the path of the GDP elasticity of economy-wide energy consumption for OECD countries over the period 1960–2019? To do so, this study first considers the arguments as to why this elasticity might change over time, and then reviews the previous evidence on whether this elasticity has changed over time. Lastly, the paper compiles and uses a new dataset to analyze whether the GDP elasticity of energy demand in OECD countries (i) has changed between the periods before and after the major energy crises (e.g., 1974–1985); and (ii) has been stable since 1986. Elasticity stability is analyzed via rolling window regressions using dynamic mean group cross-correlated errors. We argue that (i) the GDP elasticity for economy-wide energy consumption was around unity for OECD countries prior to the first energy crisis; and (ii) the reactions to the extreme oil price experiences that occurred over 1974–1985 led to a substantially lower GDP elasticity for economy-wide energy consumption of around 0.6 that has been stable at that level since the end of the second energy crisis (circa 1986). This demonstration of the path of the GDP elasticity is in contrast to some recent work that has suggested the GDP elasticity of energy has not changed (or changed very little) since the 1970s or even since the 1960s. Furthermore, this evidence that reactions to those extreme oil price experiences led to a step-function-like lowering of the GDP elasticity runs counter to other arguments that dematerialization, inverted-U-based development paths, or Kyoto Protocol ratification are responsible for continued declines in the GDP elasticity. Full article

(This article belongs to the Special Issue Energy Economics: Markets, Pricing and Policies)

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