CIGRE conducts global review of market capacity mechanisms

CIGRE C5 Working Group publications provide a detailed review of market mechanisms and the regulatory aspects of demand side response.

The nature of power systems across the world is changing quite rapidly as the penetration of renewables increases and energy efficiencies are introduced.  In addition, market mechanisms are now being used in many countries to help reduce the risk associated with the timing and sizing of new generation capacity. CIGRE has been reviewing market capacity mechanisms as well as the regulatory aspects of demand side response that can influence the required capacity.  Alex Cruickshank, the Convenor of Australian Panel C5, has been involved with two working groups that have been researching these two topics and which have now produced Technical Brochures.  The research included surveys of a number of markets across the world and provides an analytical framework that may help parties decide on their approaches. Both these aspects are directly relevant to the NEM in Eastern Australia and the Capacity Market in the West Australian South West Interconnected System.

Technical Brochure 647, ‘Capacity Mechanisms; needs, solutions and state of affairs’  (click here to download exec summary)  takes a detailed view to provide a history and an analytical framework for examining Capacity Mechanisms.  The document then applies that framework to 31 countries that responded to a survey, with some specific case studies.  The brochure notes that the various forms of capacity mechanisms used around the world are becoming more complex as countries attempt to reduce their shortcomings by using “shandy” mechanisms.

It is noted that capacity mechanisms can be problematic in both theory and practice. However, more markets are adopting or improving their capacity mechanisms, as is the South West Interconnected System in West Australia (SWIS).  One of the drivers in Europe is the increased penetration of intermittent energy sources that force a direct valuation and compensation for capacity.  This question has been an undercurrent in the Australian NEM for some time, with many participants asking when capacity will need specific support.

The brochure provides the analytical framework and the thinking in some of the European changes that may help Australian markets to decide on their approaches.

Technical Brochure 651 (click here to download exec summary) examines another area of interest to Australia, ‘Regulatory Aspects of Demand Side Response in Markets’. This brochure notes that demand side participation now includes the use of distributed generation and storage but for efficiency, focuses narrowly on the variation of site loads via market mechanisms leaving the broader question to later studies.

The document begins by examining the drivers for demand response, including power shortages, greater efficiency and reduced costs.  It also examines the enablers for demand response, which include community support, market mechanisms and market participants.  Using these two frameworks, the brochure then reviews 15 markets that have formal demand response structures. The “informal” approach in the NEM (and newer markets) where demand response is contracted by retailers was noted but not considered as formal demand response.

It is noted some key enablers for successful demand response include markets with capacity mechanisms and clear separation of the supply to a site from the sale of demand response from that same site.  This has also been noted in the SWIS, where an independent demand response player has been more successful because of the capacity market.  Central purchasing approaches, like PJM and, recently France, are also more supportive of demand response.

[please note: - Technical Brochures are available for download from e-cigre - most are free to members]