Autorità per l’energia elettrica il gas e il sistema idrico
Regulatory approaches for a new
paradigm in the electricity market
Alberto Biancardi
Rio de Janeiro 10 April 2014
Autorità per l’energia elettrica il gas e il sistema idrico
Outline
AEEGSI in a nutshell
The Italian electricity sector: from liberalization to the European
integration
Regulatory measures in the new paradigm
Autorità per l’energia elettrica il gas e il sistema idrico
AEEGSI in a nutshell
Independent Authority created in 1995 pursuant to law 481
5 members of the board, proposed by Government and approved with a 2/3 majority
vote of Parliamentary Committees (7 years mandate)
Regulated sectors: Electricity, Gas and since 2011 also Water Services
Regulation
Monitoring
Enforcement
Tariffs
TPA
Quality
Unbundling
EU
Regulation
Data collection
Wholesale and retail
markets
Consumer protection
Sanctions
Dispute settlement
Advising
Proposals to
Government
and
Parliament
International
Relations
ACER
CEER
ECRB
Medreg
ICER
Bilateral
Autorità per l’energia elettrica il gas e il sistema idrico
Organization structure
Board
Regulation
Juridical affairs &
Institutional relations
IT & Logistic
Resources
Enforcement &
Consumers
Autorità per l’energia elettrica il gas e il sistema idrico
Outline
AEEGSI in a nutshell
The Italian electricity sector: from liberalization to the European
integration
Regulatory measures in the new paradigm context
Autorità per l’energia elettrica il gas e il sistema idrico
The Italian electricity sector:
from liberalization to European integration
1999- Liberalization decree (79/99) following directive 92/96/CE
Unbundling
Generation: incumbent
splitting (4 GENCOs)
Transmission: ownership
Distribution: legal
Wholesale market
Public Power Exchange
(Long term - Day AheadIntra Day -Balancing)
Bilateral contracts
Retail market
Single Buyer model
Two market segments:
eligible and captive
customers
2007-Completion of retail market opening following directive 53/2003/CE:
domestic customers and SME can refer to a protection service provided by a default
supplier at prices defined by AEEGSI on a market basis
2014- Completion of Internal Electricity Market in Europe: the Italian market is going to
be integrated with other markets through day ahead market coupling
Autorità per l’energia elettrica il gas e il sistema idrico
Italian electricity system in 2012: energy
Trend of generation mix
Electricity demand (328 TWh)
Wind & Sun
Thermo
317
Geo
provisional
Hydro
Electricity Domestic Production (285 TWh)
Net import (43 TWh)
32% of generation comes
from RES and 13% comes
from abroad
Source:Terna
Autorità per l’energia elettrica il gas e il sistema idrico
Italian electricity system in 2012: capacity
RES effects on low load days
Net installed capacity (124 GW)
Demand peak 54,1 MW (max 56,8 MW in 2007)
Measures for the balance of the grid
•Import reduction
•Pumping storage
From an energy
•RES curtailment
only market... to a capacity based market?
The penetration of intermittent RES with zero marginal costs is deeply changing the market
structure: thermo PP cannot recover fixed costs and flexibility services have to be enhanced
Autorità per l’energia elettrica il gas e il sistema idrico
Outline
AEEGSI in a nutshell
The Italian electricity sector: from the liberalization to the European
integration
Regulatory measures in the new paradigm context
Autorità per l’energia elettrica il gas e il sistema idrico
Two-fold meaning of smart regulation
1) Better management of grids, flexibility, quality of the service…
2) Demand Side Management, smart services…
Present
Next future
Far future
Autorità per l’energia elettrica il gas e il sistema idrico
Regulatory measures in the new paradigm: present regulation
Area of intervention
Problem
Solution
RES
How to allow RES
prosumers to disentangle
production and
consumption
Decision 74/2008
In-site trading
The value of withdrawn energy can be reduced of
the value of injected energy
Ri-dispatching activity
How to reduce ancillary
service procurement cost
Decision 315/2007
Output based regulation
Rewards and penalties are set for the TSO to
minimize the amount of services procured
System flexibility
How to increase the
resources available to
balance the grid
Consultation document 368/2013
Local dispatching
Intermittent RES and embedded generation could
be accepted as participants in the balancing
market
Quality of the service
How to reduce the local
electricity shortages
Decision 198/2011
Output based regulation
Rewards and penalties are set for the DSO to
minimize the amount of energy not supplied
Regulatory measures in the new paradigm: next future regulation
GLOBAL BALANCING MARKET
Extended centralized dispatch
CP (HV- MV- LV)
TSO
Local dispatch
CP (HV)
NP-RES (HV)
TSO
NP-RES (HV)
CP (HV)
TSO
ZERO
IMBALANCES
COMMITTEMENT
NP-RES (HV- MV- LV)
DSO
Bids
Programmed exchange profile
CP (MV-LV)
NP-RES (MV-LV)
DSO
CP (MV-LV)
NP-RES (MV-LV)
CP = CONVENTIONAL PLANT
NP-RES =NON PROGRAMMABLE RES
12
LOCAL BALANCING MARKET
Autorità per l’energia elettrica il gas e il sistema idrico
Regulatory measures in the new paradigm: far future regulation 1/2
General approach:
– focus on effectiveness (i.e. performance) and economic efficiency (i.e. costs):
projects are paid for by all consumers
– full transparency of procedures, rules, criteria (e.g. for project selection and
evaluation) defined and known ex-ante
– scientific and technical support (Universities, research centers; technical
Committee)
– continuous monitoring (throughout the project’s lifetime)
– replicability
– public dissemination of results
Autorità per l’energia elettrica il gas e il sistema idrico
Regulatory measures in the new paradigm: far future regulation 2/2
Pilot project approach
Area of intervention
Problem
Solution
Smart grids
How to integrate RES in
MV grids
Decision 39/2010
DSOs receive an extra remuneration (WACC +2%) on
pilot project investments
8 projects have been selected and are presently
ongoing
Electric Vehicle
recharging infrastructure
How to select the best
Decision 242/2010
electricity distribution
DSOs & service providers receive a remuneration on
model for electric vehicles pilot projects based on €/point/year
5 projects have been selected and are presently
ongoing
Electricity Storage
How to find the best
technology for electricity
storage
Decisions 288/2012, 66/2013, 43/2013
8 projects presented by the TSO have been selected
Ongoing definition of data, indicators of performance to
be monitored, contents of interim and final reports
Multi-service Smart
metering
How to check technical
and economic feasibility
and find the best model
of governance (e.g. Third
Party Agent vs Third
Party Operator)
Decision 393/2013
State of the art: definition of selection criteria (number
of points, variety of services included), minimum
requirements (e.g. at least 30% of points in the gas
sector and 60% in services regulated by AEEGSI)
Autorità per l’energia elettrica il gas e il sistema idrico
Drivers for the new regulation
•
Decarbonisation increases the need for flexibility of the electricity system =>
growing share of renewables
•
Expected growth of markets for electrification of mobility and heating (power to
heat) => significant increase of the peak of demand above the limits of the existing
electricity distribution networks
•
The European Directive 2012/27/EC pushes towards the integration of demand-side
flexibility (= modification of consumption patterns in reaction to an external price
signal or activation, in order to provide a service within the energy system) in the
electricity system
•
Tlc externalities