3-4 July 2019, Lucerne Switzerland Assessing the impact of ... · 3.07.2019 · CESI 3-4 July...

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Assessing the impact of virtual qualified units on the Italian ancillary

Marco Stabile3-4 July 2019, Lucerne Switzerland

qualified units on the Italian ancillary services market

GSM 3rd European GRID SERVICE MARKETS Symposium

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Introduction

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Objective

This presentation relies on the results obtained by using MODIS, which is an ancillary market simulator

developed by CESI.

Sections of the presentation:

1. Introduction

2. Regulatory Framework


3-4 July 2019, Lucerne SwitzerlandCESI

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2. Regulatory Framework

3. About Italian ASM

4. Modis Simulator

5. Scenario Assumptions

6. Simulation Results

7. Final Remarks

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Introduction

1

Objective


developed by CESI.

You may ask, why to use a model ?

Model .. To deal with

future uncertainty



future uncertainty

Ok, but what about

model uncertainty

In CESI we use model for power market simulation since the day

ahead market was born.

.. the only option to cast a glance to the future.

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Introduction

1

Objective


developed by CESI.

Virtual Qualified Unit (VQU)

Recent changes in the Italian regulation of the National

Transmission Grid (NTG) demonstrate that the Italian Ancillary



Services Market (ASM) is opening up to new subjects different

from traditional producers.

Main Goal

The paper presents the methodology and a quantitative analysis

to assess the economic benefit, that can be achieved by the VQU

deployment in the NTG by 2025 and 2030.

The economic benefit is quantified in terms of cost savings for

providing regulating services and reserves in the Italian ASM.

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Introduction

1

Objective


developed by CESI.

Scenario

Simulations have been carried out looking to 2025 and 2030.

The methodology relies on scenario simulations and what-if



The methodology relies on scenario simulations and what-if

analysis through the comparison of different simulations obtained

using the MODIS simulation tool.

Results

Presented results are not saying how things will be.

Presented results are more focused on how things might be in the

future, according to the simulation assumptions.

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1.Introduction3.About Italian

ASM 4.MODIS

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2.Regulatory

Framework

5.Scenario

Assumptions

6.Simulation

Results2

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7.Final

Remarks

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Regulatory Framework

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What about the Italian regulatory framework ?

Starting from 2017 the Italian electrical market opened toward new subjects different from traditional

power producers.

Brief Regulatory Roadmap

5th May 2017 – ARERA approved the resolution (Delibera 300/2017 [3]) in which the Italian ASM

should admit in the market new subjects such as demand and renewable and storage system.



30th May 2017 – TERNA published specific new rules (Regolamento UVAC MSD [5]) regulating the

access to the ASM of consumption units;

25th September 2017 - TERNA published specific new rules (Regolamento UVAP MSD [6])

regulating the access to the ASM of non-significant producer unit;

19th June 2018 – TERNA published a new regulatory framework for the M-VQU (Regolamento

UVAM MSD [7]) regulating the access of heterogeneous units (that could provide upward and

downward regulation, including storage facilities).

All this is expected to be implemented in accordance with the European Balancing Guideline (2017)

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The new regulatory framework has provided the foundation for aggregating different type of subjects

into Virtual Qualified Units (VQUs)



Renewable

Traditional PP

Distributed Generation

Industrial Load

Demand Side Response

EV

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The new regulatory framework has provided the foundation for aggregating different type of subjects

into Virtual Qualified Units (VQUs)

C o n s u m p t i o n P r o d u c t i o n M i x e d



C-VQUConsumption Virtual Qualified

Unit

Able to reduce consumption

Minimum aggregation threshold between 10 MW to 1 MW.

P-VQUProduction Virtual Qualified

Unit

able to reduce or increase its injection toward the grid

Minimum aggregation threshold between 5 MW to 1 MW.

P-VQUMixed Virtual Qualified Unit

including P-VQU C-VQU and storage system. This virtual unit can modulate in both direction

Minimum aggregation threshold is 1 MW

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2.Regulatory

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5.Scenario

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6.Simulation

Results2

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7.Final

Remarks

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Italian Ancillary Services Market

3

Power Market Characteristics

The Italian ASM (also called MSD, Mercato Servizi di Dispacciamento) is operated by the country’s grid

operator TERNA.

The Italian ASM is an “Energy-Only” where all the services requested by the TSO to

manage the National Transmission Grid are procured at Zonal Level.

Offer/bids accepted in the ASM are valued at the offered price (Pay-as-bid clearing

mechanism).



mechanism).

The Italian TSO procures through the ASM the resources needed to:

Releasing intra-zonal congestion;

Procuring secondary reserves1 and Tertiary2;

Balancing the system in real-time.

1) Automatic Frequency Restoration Reserve (aFRR), automatic activation within 15 minutes, duration 2 hours

2) Replacement Reserve (RR)

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operator TERNA.

Day Ahead and Intraday Market

RE

AL-

TIM

EAncillary Services Market STAGE 1, TSO accepts energydemand bids and supply offers inorder to relieve residual intra-zonal congestions and create



Energy

Market

Day - 1

S TA G E 1

Ex-Ante

Phase

S TA G E 1

Ex-Ante

Phase

S TA G E 2

Balancing

Market

zonal congestions and create

reserve Margins.

STAGE 2, TSO accepts energydemand bids and supply offers inorder to provide secondaryregulation and to balance energy

injections and withdrawals.

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The resource necessary to maintain the balance between injection and withdrawal are activated at different time starting from the daybefore real time (D-1) until the real-time

Day

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operator TERNA.

S t a g e 1

R e s e r v e P r o c u r e m e n t

S t a g e 2

B a l a n c i n g



It’s necessary to start-up new thermal units toguarantee the right level of reserves (aFRR + RR).

Up/down offers to reschedule the set-point (day-ahead final program).

Energy payment (€/MWh only for differential re-schedule) + start-up fee to be corresponded tothermal power plants if called to be online.

No capacity is traded.

Up/down offers to reschedule power unitparticipant set-point in order to balance energyinjections and withdrawals.

Energy payment (€/MWh only for differential re-schedule).

No capacity is traded.

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2.Regulatory

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MODIS Simulator

4

Power Market Simulation

CESI has developed an ASM simulator, named MODIS, a multi-area market simulator, specifically

tailored to the Italian ASM.

Main Features

It works on yearly basis with hourly discretization.

It takes into account all the technical constraints of simulated market participants



It takes into account all the technical constraints of simulated market participants

(thermal, Hydro, Res, BESS, Demand…)

It reproduces all the balancing actions necessary to ensure the security reserve

margins.

It reproduces all the upward and downward regulating actions necessary to

offset the simulated imbalance;

It take into account intra-zonal constraint within the six zones of the Italian

ASM1.

1) MODIS is a power market model, It does not consider network model.

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MODIS Simulator

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Useful for

The model by leveraging on the optimization library, which is necessary to solve

a Mixed-Integer Linear Programming (MILP) underneath the main clearing



process, is able to minimize the cost to clear the ASM.

Useful for market analysis, price forecasting, scenario evaluation, risk

assessment, market design and policy analysis.

Emulating all the upward and downward actions of the simulated market, is

possible to estimate the requested energy the in re-dispatching process of the

ancillary services market.

It’s a useful tool to study NP-RES integration in power system, during ancillary

services market sessions.

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MODIS Simulator

4




Budget Projection

Investment performance evaluation

S e q u e n t i a l M a r k e t S i m u l a t i o n P l a n n i n g



Energy

Market

Day Ahead Simulation

Load

DAM results

and

outcome

Ancillary

Market

Balancing actions and

reserve procurement

Provides balancing

respecting reserve margin

Markets

Outcome

PROMED

RES Integration and overgeneration

Market Design Option

Policy Analysis

Scenario Analysis

Price forecast

Risk Assessment VIRTUAL

UNIT

M a r k e t A n a l ys i s

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M O D I S

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5.Scenario

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7.Final

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Scenario Assumptions

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Scenario hypothesis and simulation approach

The application of the proposed methodology, implemented using MODIS, is exemplified with some

case studies used to point out the benefits arising from considering VQUs participating into the Italian

ASM.

Problem Size

10 market areas

10 equivalent interconnections between areas



10 equivalent interconnections between areas

244 thermal and hydro units

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ASM.

Scenarios

Two different time horizons have been taken into account in this analysis,

considering 2020 as short-term scenario, to represent the near future, and 2030




as long-term scenario.

The proposed scenarios have been voluntarily created with the purposes of

emphasizing the effect of those new actors (distributed generation, DSR, small

scale generation, storage facilities and EV) in scenarios with high penetration of

NP-RES.

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ASM.


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ASM.

C l u s t e r D e s c r i p t i o n S e r v i c e s

Demand Side Response

Renewable Generation

The mix of generation and controllabledemand participate into the market



Renewable Generation

Distributed Generation

Mainly refers to electrochemical storagesystem. No stationary pumping unit will beinstalled in the future.

Electrical Vehicles (EV), the transition from acentury of mass-market dominance by theinternal combustion to the EVs appears to beimminent.

demand participate into the marketgiving upward and downward regulationfor balancing purposes.

It participates into the market throughupward and downward regulation forbalancing purposes.

It participates into the market throughupward and downward regulation forbalancing purposes.

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ASM.

C l u s t e r


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ASM.

B a s e l i n e B a s i c P r o c u r i n g

S c e n a r i o

A d v a n c e P r o c u r i n g

S c e n a r i o



BSBaseline Scenario

It represents a future snapshots under the assumption VQUs are not participating into the ASM.

BPBasic Procuring

VQUs are activated only for balancing purposes.

For technical reason or security motivations VQUs do not provide reserve.

APAdvance Procuring

VQUs are activated only for balancing purposes.

VQUs could provide tertiary reserve

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2.Regulatory

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7.Final

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Results

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Scenario Results

In the following session are presented the main findings of the analysis: all the results are collected

starting from the hourly output given by MODIS for the proposed scenarios.

Two different time horizons have been taken into account in this analysis,


as long-term scenario.



The proposed scenarios have been voluntarily created with the purposes of

emphasizing the effect of those new actors (distributed generation, DSR, small

scale generation, storage facilities and EV) in scenarios with high penetration of

NP-RES.

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Results

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Scenario Results



A S M D i s b u r s e m e n t C o s t S a v i n g

Billion €

2.453

Billion €

1.421.5



Absolute cost of the Italian ASM: it represents the cost for procuring therequested services (balancing and reserves) by activating upward anddownward regulation

1.91

2.45

1.471.84

1.02 1.04

0

0.5

1

1.5

2

2.5

3

2025 2030

BS B-Procuring A-Procuring

0.450.61

0.89

1.42

0

0.5

1

1.5

2025 2030

B-Procuring A-Procuring

Differential value of cost disbursement respect to Baseline Scenario, foralternative scenarios where VQUs are participating into the market,challenging with traditional units (hydro and thermal units).

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Results

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Scenario Results



2 0 2 5 2 0 3 0

Cost Saving Share % Cost Saving Share %

EV EV



This figure refers to the BP scenario, in 2025 the greatest contribution inreducing the cost of the ASM is given by controllable demand, controllablerenewable production, distributed generation and storage facilities.

This figure refers to the BP scenario, in 2030 the greatest contribution inreducing the cost of the ASM is still given by controllable demand,controllable renewable production, distributed generation and storagefacilities but EV reach a remarkable share in reducing ASM cost.

[VALORE]

29%

66%

EV

Storage

DG, DSR, RES

[VALORE]

25%61%

EV

Storage

DG, DSR, RES

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Results

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Scenario Results



500

1'000

1'500Vo l u m e U p / D o w n R e g u l a t i o n 2 0 3 0

Sum Of Energy - GWh

Comparison of regulating volume between



-1'500

-1'000

-500

0

500

H1 H3 H5 H7 H9 H11H13H15 H17H19H21H23

VQU Traditional Baseline

Comparison of regulating volume betweenBaseline Scenario and Basic Procuring Scenario.

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Scenario Results



500

1'000


Sum Of Energy - GWh




The headroom between the red line and colored areain the positive side of the chart indicates the avoidedupward activation volume in the case VQUs areparticipating into the market.

-1'500

-1'000

-500

0

500

H1 H3 H5 H7 H9 H11H13H15 H17H19H21H23



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Scenario Results



500

1'000


Sum Of Energy - GWh




On the contrary, looking into the negative part of thechart, downward activation for BP scenario is greaterthan the quantity observed in the Baseline scenario.This result is consequent the augmented flexibility ofthe system given by the VQUs, which permits tointegrate more NP-RES production (by increasingsystem capacity of providing downward regulationduring solar hours).

-1'500

-1'000

-500

0

500

H1 H3 H5 H7 H9 H11H13H15 H17H19H21H23



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500500

Results

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Scenario Results




2025 - NP-RES Curtailment - GWh 2025 - NP-RES Curtailment - GWh



0

100

200

300

400

500

H1

H2

H3

H4

H5

H6

H7

H8

H9

H1

0

H1

1

H1

2

H1

3

H1

4

H1

5

H1

6

H1

7

H1

8

H1

9

H2

0

H2

1

H2

2

H2

3

H2

4

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

0

100

200

300

400

500

H1

H2

H3

H4

H5

H6

H7

H8

H9

H1

0

H1

1

H1

2

H1

3

H1

4

H1

5

H1

6

H1

7

H1

8

H1

9

H2

0

H2

1

H2

2

H2

3

H2

4

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

This chart refers to Baseline Scenario (2025) and it represents the Non-programmable RES curtailment without VQU’s contribution into the ASM.This is production is not integrable in the system, and that is the amount ofproduction that the TSO is forced to cut off in the ASM market, in order tooffset injections and withdrawals and to provide reserves.

This chart refers to Basic Procuring Scenario (2025) and it represents the Non-programmable RES curtailment with VQU’s contribution into the ASM. WithVCU's available, the ASM solution can find a more efficient way toaccommodate NP-RES production, leveraging on new flexible resources, andreducing the NP-RES curtailment.

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Results

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Scenario Results




2030 - NP-RES Curtailment - GWh 2030 - NP-RES Curtailment - GWh

500 500



This chart refers to Baseline Scenario (2030) and it represents the Non-programmable RES curtailment without VQU’s contribution into the ASM.This is production is not integrable in the system, and that is the amount ofproduction that the TSO is forced to cut off in the ASM market, in order tooffset injections and withdrawals and to provide reserves.

0

100

200

300

400

500

H1

H2

H3

H4

H5

H6

H7

H8

H9

H1

0

H1

1

H1

2

H1

3

H1

4

H1

5

H1

6

H1

7

H1

8

H1

9

H2

0

H2

1

H2

2

H2

3

H2

4

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

0

100

200

300

400

500

H1

H2

H3

H4

H5

H6

H7

H8

H9

H1

0

H1

1

H1

2

H1

3

H1

4

H1

5

H1

6

H1

7

H1

8

H1

9

H2

0

H2

1

H2

2

H2

3

H2

4

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

This chart refers to Basic Procuring Scenario (2030) and it represents the Non-programmable RES curtailment with VQU’s contribution into the ASM. WithVCU's available, the ASM solution can find a more efficient way toaccommodate NP-RES production, leveraging on new flexible resources, andreducing the NP-RES curtailment.

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Scenario Results



A b o u t N P - R E S i n t e g r a t i o n f o r 2 0 2 5

NP-RES Integration - GWh VQUs contribution share - %

2500 EV



This chart shows NP-RES integration for the Basic Procuring Scenario.Calculation has shown that the amount of NP-RES curtailment, necessary tomatch the system reserve requirement, settles down to 233 GWh from 973GWh.

This chart shows in which amount each VQUs is contributing in reducing theNP-RES curtailment. From simulation results storage system is more effectivein integrating NP-RES generation than other technologies .

973

233

740

0

500

1000

1500

2000

2500

Baseline Basic Proc.

NP-RES Curtailment RES-Integration

[VALORE]

48%49%

EV

Storage

DG, DSR, RES

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Scenario Results



A b o u t N P - R E S i n t e g r a t i o n f o r 2 0 3 0

NP-RES Integration - GWh VQUs contribution share - %

2500 EV



This chart shows NP-RES integration for the Basic Procuring Scenario.Calculation has shown that the amount of NP-RES curtailment, necessary tomatch the system reserve requirement, settles down to 382 GWh from 2.3TWh.

This chart shows in which amount each VQUs is contributing in reducing theNP-RES curtailment. From simulation results storage system is more effectivein integrating NP-RES generation than other technologies.

2318

382

1935

0

500

1000

1500

2000

2500

Baseline Basic Proc.

NP-RES Curtailment RES-Integration

[VALORE]

60%

36%

EV

Storage

DG, DSR, RES

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Final Remarks

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So what can we expect from VQUs operation in ASM ?

This analysis presents a new methodology and a quantitative analysis to assess the benefits that can

be achieved by the VQUs deployment in the Italian electrical system by 2025 and 2030.

Power Market Cost Saving

Thanks to the ASM cost assessment carried out by using the simulation tool MODIS the

economic benefit given by VQUs participating on the ASM market has been estimated. The



amount of cost saving, respect to the total cost of the Italian ASM, is about 23 - 25 %

(respectively for 2025 and 2030).

The amount of cost saving could be further increased by enabling VQUs to provide tertiary

reserve, achieving 47-58 % (respectively for 2025 and 2030). This amount should be

understood as the highest potential achieved by enabling all VQUs available capacity.

NP-RES Integration

According to the simulation results VQUs are really effective at preventing NP-RES

curtailment, supporting national power system to accommodate a growing share of non

programmable generation.

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Contact

Marco Stabile

Senior Consultant Consulting, Solutions & Services Division

Via Rubattino, 54 - 20134 Milano (Italy)

Ph: +39 02 2125 5806

@: [email protected]



Mr. Marco Stabile is a senior consultant in the energy and utility industry field. He has got his bachelor degree

in energy engineer at “Università degli studi di Pavia” and his master degree as well in Energy Engineering at

“Politecnico di Milano”, academic year 2006-2007 and he specialized in “energy production and conversion”.

After one year experience in Alstom Power Italia as plant support engineer in O&M activity of new CCGT power

plants across Italy, he started to work in CESI in 2008 on electricity power market modelling and simulation has

consultant.

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