SUMMARY OF REPORT TO ENERGIAVIRASTO SEPTEMBER Study on the amount of peak load capacity for

Transcription

1 SUMMARY OF REPORT TO ENERGIAVIRASTO SEPTEMBER Study on the amount of peak load capacity for

2 This report has been prepared by Pöyry Management Consulting Oy ( Pöyry ) for use and publication by Energiavirasto (the Recipient ). This report has been prepared according to the terms of the contract between Pöyry and the Recipient. Any and all liability arising out of or relating to the use of this report is based solely on these contract terms. NOTHING IN THIS REPORT IS OR SHALL BE RELIED UPON AS A PROMISE OR REPRESENTATION OF FUTURE EVENTS OR RESULTS. PÖYRY HAS PREPARED THIS REPORT BASED ON INFORMATION AVAILABLE TO IT AT THE TIME OF ITS PREPARATION AND HAS NO DUTY TO UPDATE THIS REPORT. Pöyry makes no representation or warranty, expressed or implied, as to the accuracy or completeness of the information provided in this report or any other representation or warranty whatsoever concerning this report. This report is partly based on information that is not within Pöyry s control. Statements in this report involving estimates are subject to change and actual amounts may differ materially from those described in this report depending on a variety of factors. Pöyry hereby expressly disclaims any and all liability based, in whole or in part, on any inaccurate or incomplete information given to Pöyry or arising out of the negligence, errors or omissions of Pöyry or any of its officers, directors, employees or agents. Pöyry expressly disclaims any and all liability arising out of or relating to the use of this report by third parties. Pöyry also hereby disclaims any and all liability for special, economic, incidental, punitive, indirect, or consequential damages. All rights (including copyrights) are reserved to Pöyry. No part of this report may be reproduced in any form or by any means without prior permission in writing from Pöyry. Any such permitted use or reproduction is expressly conditioned on the continued applicability of each of the terms and limitations contained in this disclaimer.

3 Contact information P.O. Box 4 (Jaakonkatu 3) FI Vantaa Tel Fax Pöyry Management Consulting Oy Authors: Jimmy Forsman Kari Vilén Jenni Patronen Javier Revuelta Ignacio Cobo

4 SUMMARY Background and approach The peak load capacity system aims at securing the electricity supply in Finland in situations where the planned electricity supply is not sufficient to cover the anticipated consumption. The peak load capacity system is based on Finnish Act 117/2011, i.e. Act on Peak Load Capacity, which is aimed securing a balance between electricity production and consumption. The peak load capacity can consist of both power plants and demand-side facilities. In this study, the relevant parameters for the security of electricity supply in Finland have been estimated for the years , and based on these an estimate of required peak load capacity for this period has been made. The purpose of this study is to provide supporting material for the decision by the Finnish Energy Authority regarding the procurement of peak load capacity for the period starting on July 1st, This study uses a probabilistic methodology, which examines the probability distributions of availabilities of different generation technologies and interconnectors as well as the uncertainty of demand. As a result, the following key parameters for security of supply can be calculated: Loss of Load Expected, h/a (LOLE) Expected Unserved Energy, MWh/a (EUE) The Value of Lost Load (VOLL) represents the value an electricity consumer gives to a reduction in electricity supply. The use of the VOLL value helps to define the cost-optimal level of security of supply in the system, because this way it is possible to specify the cost of the Expected Unserved Energy. This cost can then be compared to the cost of peak load capacity and the minimum of their sum defines the cost-optimal amount of peak load capacity. Results Table 1 shows the LOLE and EUE values for years without peak load capacity. LOLE and EUE will reach their maximum values in 2018 before the commissioning of Olkiluoto OL3 unit, a nuclear power plant. The level of security of supply will increase in 2019 with the commissioning of OL3 as the LOLE decreases to about one tenth compared to the level in Table 1 Loss of Load Expected and Expected Unserved energy without capacity reserve in Year Loss of Load Expected (h/a) Expected Unserved Energy (GWh/a) The cost-optimal level of peak load capacity depends on the Value of Lost Load (VOLL) and the cost of peak load capacity. The results look at the level of cost-optimal peak load capacity using different values for VOLL and average procurement costs for the capacity. VOLL values range from 5 to 20 k /MWh and the cost of capacity range from 20 to 50 k /MW/a in this study. In the base scenario, VOLL value of 10 k /MWh has been used and 30 k /MW/a for the cost of peak load capacity.

5 Overall costs , M Overall costs , M Loss of Load Expected, h/a With the assumptions in the base scenario, the cost-optimal level of peak load capacity in is 0 MW, if we take into account the fact that the peak load capacity for year 2018 would have to be procured with a 2-year contract (starting in summer 2017). If we study years 2017 and 2018 together, when the system margin is the tightest during the studied period, security of supply can however be improved by additional capacity causing only a moderate increase in overall costs (sum of cost of Expected Unserved Energy and cost of peak load capacity) during this 2-year period (Figure 1) Overall Kokonaiskustannus cost Loss Tehovajeen of Load odotusarvo Expected, 2018 Loss Tehovajeen of Load odotusarvo Expected, Amount of peak load capacity, MW Figure 1 Combined overall costs for 2017 and 2018 as well as LOLE in 2017 and 2018 with different amounts of peak load capacity If a value from the upper end of VOLL values used in other European countries is applied (20 k /MWh), the cost-optimal level of peak load capacity for years is MW. Between these levels of peak load capacity, the overall costs vary only by about 1 M for the 2-year period (Figure 2) Value Haittakustannus of Lost Load, k /MWh Base Perusskenaario scenario Value Haittakustannus of Lost Load, k /MWh Amount of peak load capacity, MW Figure 2 Combined overall costs for 2017 and 2018 with different values of VOLL (cost of capacity 30 k /MW/a)

6 Overall costs , M A lower cost of peak load capacity than the one used in the base scenario has the same effect: using a 20 k /MW/a average procurement cost, the cost-optimal level of peak load capacity is 100 MW and the total costs remain relatively even between 0 and 300 MW (Figure 3) Hankintakustannus Avg. procurement cost k /MW/a Perusskenaario Base scenario Hankintakustannus Avg. procurement cost k /MW/a Amount of peak load capacity, MW Figure 3 Combined overall costs for 2017 and 2018 with different procurement costs of peak load capacity (VOLL 10 k /MWh) Year 2018, with a LOLE of 3.7 h/a without peak load capacity, is the tightest in terms of security of supply. In European countries with an official LOLE target level, the maximum allowed values for LOLE vary between 3 and 8 h/a. In Finland there is no such official LOLE target level. In order to reach less than 3 h/a LOLE in 2018, a peak load capacity of 100 MW would be needed. This amount of additional capacity would decrease the LOLE to 2.8 h/a. 100 MW is also the cost-optimal level of peak load capacity if we only consider year 2018 alone, and do not take into account how the peak load capacity is procured in practice. Sensitivity analyses carried out for increased demand and decreased available capacity showed that changes in the input data, which decrease the system margin, will immediately have an impact on the amount of cost-optimal peak load capacity. An increase of 2 TWh/a in the annual demand in 2018 (+2.3 %) will increase the optimal peak load capacity by 300 MW (100 MW 400 MW), if the year 2018 is studied alone. A decrease in available capacity will naturally have a similar impact on the need for additional capacity. In this study this was illustrated by a decrease of 1,000 MW of available capacity in This increases the cost-optimal level of peak load capacity by a corresponding amount, if we use the same assumptions for VOLL and cost of capacity as in the base scenario and if the year 2018 is studied alone.

7 Pöyry Management Consulting Oy P.O.Box 4, Jaakonkatu 3, FI Vantaa, Finland Pöyry is an international consulting and engineering company. We serve clients globally across the energy and industrial sectors and provide local services in our core markets. We deliver management consulting and engineering services, underpinned by strong project implementation capability and expertise. Our focus sectors are power generation, transmission & distribution, forest industry, chemicals & biorefining, mining & metals, transportation and water. Pöyry has an extensive local office network employing about 6,000 experts.