Security of supply in a green power market - The challenges and opportunities of intermittent power

Security of electricity supply in the long run is both a question of a) having sufficient energy and power capacity, and b) whether the system can deliver electricity efficiently where and when it is needed. This project concerns how to organize the power market in order to avoid system breakdown while at the same time get the right investments in power generation capacity and electricity transmission. New challenges arise because of the large increases in renewable (intermittent) power that are expected by 2050 and beyond. We answer this by looking at theory, explore different technical, judicial and economic mechanisms and studying the interaction of these mechanisms in models of the Norwegian and European energy markets. Intermittent power sources such as wind, run-of-river and solar depend crucially on weather conditions, with the implication that there is great uncertainty about the actual production possibilities to produce in the short to medium run. At the same time, the renewable power sources may have different geographical locations from consumption. The consequences for security of supply in the form of power outages and system breakdown could be substantial. These developments pose major challenges for the design and regulation of markets, supply and demand, and of optimal investments in infrastructure, i.e. in "smart grids". The challenges are technological, legal and economic and we propose to answer them with an interdisciplinary team representing economic, technical and legal expertise. A basic report provides a theoretical presentation of the conditions for optimal design of the power system when there is a sizeable share of renewable power. The project also looks at optimal pricing of transmission services in the power grid in a situation with increasing elements of unregulated power. An article in the journal "Energy" found significant additional costs in the form of necessary grid investments if wind power is built without taking into account the network needs. However, the total costs do not increase as much, since wind power is then built to a greater extent where it blows the most. A separate report also looks at the costs of various forms of electricity storage, e.g. in the form of pump power, batteries or pressure chambers. The power market models have been further developed to take into account that solar and wind power shortfalls can cause acute scarcity for very short periods of time. In collaboration with the distribution company Ringerikskraft a field experiment has been conducted on the effects of introducing smart meters and the pricing of power. This analysis shows that strong price signals during peak load periods dampen demand and can help relieve the use of electricity networks. In the last phase of the project, model simulations show that a significant but realistic amount of storage in the European power markets can make it possible to meet the EU's targets for CO2 emissions in the power sector. https://www.frisch.uio.no/english/projects/?view=project&pid=3149

Resultatene fra prosjektet har klar nytteverdi i utforming av norsk og europeisk politikk for en klimanøytral kraftsektor med store investeringer i uregulerbar kraftforsyning samtidig som forsyningssikkerheten blir ivaretatt. Resultatene er også viktige for den vitenskapelige litteraturen ved at det er nyvinninger knyttet til både eksperimentet og modellformuleringer som vil bygges videre på i fagmiljøene nasjonalt og internasjonalt. Prosjektet har styrket samarbeidet mellom juridiske, teknologiske og samfunnsøkonomiske fagmiljø. Endelig er resultatene viktige i videre utforming av våre egne simuleringsmodeller som dermed er bedre rustet for fremtidige analyser.

Security of electricity supply in the long run is both a question of having sufficient energy (TWh) and power (GW) capacity, and equally whether the system can deliver electricity efficiently where and when it is needed. This project concerns how to organize the power market in order to avoid short-run system breakdown and at the same time give socially optimal long-run incentives for investments in production and transmission capacities. Optimality must be defined with respect to both location and technical structure in the light of the large increases in intermittent power that are expected by 2050 and beyond. We propose to answer this by work packages that characterize theoretically the optimal electricity system (WP1), explore different technical, judicial and economic mechanisms (WP2-WP5), and study the interaction of these mechanisms in model-based policy analyses (WP6). Intermittent power sources such as wind, run-of-river and solar depend crucially on weather conditions, with the implication that there is great uncertainty about the actual production possibilities to produce in the short to medium run. At the same time, the renewable power sources may have different geographical locations from consumption. The consequences for security of supply in the form of power outages and system breakdown could be substantial. These developments pose major challenges for the design and regulation of markets, supply and demand, and of optimal investments in infrastructure, i.e. in "smart grids". The challenges are technological, legal and economic and we propose to answer them with an interdisciplinary team representing economic, technical and legal expertise. The project will be organised in 6 work packages (WP1-WP6), but with several important interdependencies. All WPs will use a combination of theoretical and empirical approaches, with an emphasis on the effects of mechanisms and developments on Norwegian and European power markets.