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See detailDesigning Pareto optimal electricity retail rates when utility customers are prosumers
Saumweber, Andrea; Wederhake, Lars; Cardoso, Gonçalo et al

in Energy Policy (2021), 156

Electric retail rate design is relevant to utilities, customers, and regulators as retail rates impact the utility's revenue as well as the customers' electricity bills. In California, regulators approve ... [more ▼]

Electric retail rate design is relevant to utilities, customers, and regulators as retail rates impact the utility's revenue as well as the customers' electricity bills. In California, regulators approve rate proposals by privately owned vertical integrated utilities. Approval, however, is subject to compliance with multiple, potentially conflicting objectives such as economic or environmental objectives. Additionally, retail rates are price signals that affect how customers use electricity services. When utility customers change their usage, they also impact the ratemaking objectives to which rates have been designed. This suggests a feedback loop, which is particularly pronounced with prosumers, as they can systematically optimize their interactions with the electricity system. Prevalent ratemaking methods may not deliver retail rates that are optimal for multiple objectives when customers are prosumers. We propose a novel ratemaking method that formalizes the problem of designing retail rates as a multi-criteria optimization problem and accounts for prosumer reactions through a simulation-based optimization approach. Through a fictive case study, we found that the resulting Pareto frontiers are useful in recognizing and balancing tradeoffs among conflicting ratemaking objectives. Additionally, our results indicate that prevailing retail rates in California are not Pareto optimal. [less ▲]

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See detailThe search for the perfect match: Aligning power-trading products to the energy transition
Fridgen, Gilbert UL; Michaelis, Anne; Rinck, Maximilian et al

in Energy Policy (2020), 144

Given the growing share of uncertain renewable energy production, the energy transition challenges modern power systems and especially calls for increased flexibility. However, relevant information on the ... [more ▼]

Given the growing share of uncertain renewable energy production, the energy transition challenges modern power systems and especially calls for increased flexibility. However, relevant information on the highly assetspecific flexibility potential is typically only known to plant operators themselves and not, e.g., to transmission system operators. Therefore, liberalized electricity markets use prices that set explicit monetary incentives to disclose the relevant private information about the market participants’ assets. In this way, information asymmetries may be reduced. Given the different challenges of an integration of renewables, we argue that the associated new forms of volatile power profiles require new forms of power-trading products. In particular, based on recent advances in technical power measurement and billing, individual and market participant-specific power profiles may be superior to the current trading of average volumes. Against this background, we first outline various evolutionary adjustments of existing power-trading products and their underlying product parameters including (1) strengthening local pricing, (2) finer temporal granularity, (3) smaller minimum volume, and (4) shorter gate-closure time. Second, we open up a new perspective in form of a more disruptive shift towards power-profile trade, where market participants define their trading product using the actual power profile as a new product parameter. [less ▲]

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See detailA holistic view on sector coupling
Fridgen, Gilbert UL; Keller, Robert; Körner, Marc-Fabian et al

in Energy Policy (2020), 147

Sector coupling (SC) describes the concept of a purposeful connection and interaction of energy sectors to increase the flexibility of supply, demand, and storing. While SC is linked to research on smart ... [more ▼]

Sector coupling (SC) describes the concept of a purposeful connection and interaction of energy sectors to increase the flexibility of supply, demand, and storing. While SC is linked to research on smart energy system and locates itself in the research stream of 100% renewable energy systems, it currently focusses on counteracting challenges of temporal energy balancing induced by the intermittent feed-in of renewable energy sources. As regarding the coupling of grids, SC currently remains within classical energy grids. It does not exploit the coupled sectors’ potential to its full extent and, hence, lacks a holistic view. To include this view, we call on the use of all grids from coupled sectors for spatial energy transportation, resulting in an infrastructural system. By using the different loss structures of coupled grids, we illustrate how a holistic view on SC minimizes transportation losses. We argue that SC should include all grids that transport whichever type of energy (e.g., even transportation or communication grids). Ultimately, we derive and discuss implications relevant for policy makers and research: We illustrate why regulation and market design should be aligned in a way that the resulting incentives within and across the different sectors support climate change goals. [less ▲]

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See detailCompensating Balancing Demand by Spatial Load Migration : The Case of Geographically Distributed Data Center
Thimmel, Markus; Fridgen, Gilbert UL; Keller, Robert et al

in Energy Policy (2019), 130

The increasing share of renewables confronts existing power grids with a massive challenge, stemming from additional volatility to power grids introduced by renewable energy sources. This increases the ... [more ▼]

The increasing share of renewables confronts existing power grids with a massive challenge, stemming from additional volatility to power grids introduced by renewable energy sources. This increases the demand for balancing mechanisms, which provide balancing power to ensure that power supply always meets with demand. However, the ability to provide cost-efficient and eco-friendly balancing power can vary significantly between locations. Fridgen et al. (2017) introduce an approach based on geographically distributed data centers, aiming at the spatial migration of balancing power demand between distant locations. Although their approach enables the migration of balancing demand to cost-efficient and/or eco-friendly balancing mechanisms, it will come up against limits if deployed on a global scale. In this paper, we extend Fridgen et al. (2017)’s approach by developing a model based on geographically distributed data centers, which not only enables the migration of balancing demand but also compensates for this migration when it is contradictory between different balancing power markets without burdening conventional balancing mechanisms. Using a simulation based on real-world data, we demonstrate the possibility to exploit the potential of compensation balancing demand offered by spatial load migration resulting in economic gains that will incentivize data center operators to apply our model. [less ▲]

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See detailEco-efficiency outcomes of mergers and acquisitions in the European electricity industry
Monastyrenko, Evgenii UL

in Energy Policy (2017), 107

The European electricity industry was recently liberalized. In response, there was a surge of mergers and acquisitions (M&As). This study addresses the effects of M&As on the eco-efficiency of European ... [more ▼]

The European electricity industry was recently liberalized. In response, there was a surge of mergers and acquisitions (M&As). This study addresses the effects of M&As on the eco-efficiency of European electricity producers in 2005–2013. The environmental production technology comprises CO2 emissions as an undesirable output. I compute eco-efficiency using data envelopment analysis (DEA) and the Malmquist-Luenberger productivity index, which are both based on radial directional distance function. I observe a decreasing trend in average eco-efficiency, which contradicts the previously documented moderate efficiency gains of liberalization. The effects of M&As are isolated using second-step fractional regression. The domestic horizontal M&As, which are systematically regulated by the European Commission, have no impact. Although one cross-border horizontal deal has a same-year effect of roughly −3%, this effect becomes approximately +1.5% over a two-year timespan. Vertical domestic M&As have a short-run negative impact of 3.6% that does not persist over time. Vertical international M&As reduce the eco-efficiency by 2.1% two years after their completion. Limited evidence suggests that the conglomerate deals are at least not harmful. The policy implication is that the merger regulation should be based on DEA eco-efficiency measures. Regulators should devote more attention to cross-border M&As and particularly to vertical deals. [less ▲]

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See detailShifting Load through Space : the Economics of Spatial Demand Side Management Using Distributed Data Centers
Fridgen, Gilbert UL; Keller, Robert; Thimmel, Markus et al

in Energy Policy (2017)

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