Congestion management in power systems

In liberalized power systems, generation and transmission services are unbundled, but remain tightly interlinked. Congestion management in the transmission network is of crucial importance for the efficiency of these inter-linkages. Different regulatory designs have been suggested, analyzed and followed, such as uniform zonal pricing with redispatch or nodal pricing. However, the literature has either focused on the short-term efficiency of congestion management or specific issues of timing investments. In contrast, this paper presents a generalized and flexible economic modeling framework based on a decomposed inter-temporal equilibrium model including generation, transmission, as well as their inter-linkages. The model covers short-run operation and long-run investments and hence, allows to analyze short and long-term efficiency of different congestion management designs that vary with respect to the definition of market areas, the regulation and organization of TSOs, the way of managing congestion besides grid expansion, and the type of cross-border capacity allocation. We are able to identify and isolate implicit frictions and sources of inefficiencies in the different regulatory designs, and to provide a comparative analysis including a benchmark against a first-best welfare-optimal result. To demonstrate the applicability of our framework, we calibrate and numerically solve our model for a detailed representation of the Central Western European (CWE) region, consisting of 70 nodes and 174 power lines. Analyzing six different congestion management designs until 2030, we show that compared to the first-best benchmark, i.e., nodal pricing, inefficiencies of up to 4.6% arise. Inefficiencies are mainly driven by the approach of determining cross-border capacities as well as the coordination of transmission system operators’ activities.     

Regulation of non-marketed outputs and substitutable inputs

We study the regulation of a monopolistic firm that provides a non-marketed output based on multiple substitutable inputs. The regulator is able to observe the effectiveness of the provision, but faces information asymmetries with respect to the efficiency of the firm’s activities. Specifically, we consider a setting where one input and the output are observable, while another input and related costs are not. Multi-dimensional information asymmetries are introduced by discrete distributions for the functional form of the marginal rate of substitution between the inputs as well as for the input costs. For this novel setting, we investigate the theoretically optimal Bayesian regulation mechanism. We find that the first-best solution cannot be obtained in case of shadow costs of public funding. The second-best solution implies separation of the most efficient type with first-best input levels, and upwards distorted (potentially bunched) observable input levels for all other types. Moreover, we compare these results to a simpler non-Bayesian approach, i.e., a single pooling contract, and hence, bridge the gap between the academic discussion and regulatory practice. In a numerical simulation, we identify certain conditions in which a single contract non-Bayesian regulation can indeed get close to the second-best solution of the Bayesian menu of contracts regulation.     

Ein Rollenmodell zur Einbindung der Endkunden in eine smarte Energiewelt

The successful expansion of renewable energies requires a phase of change in the energy supply system. On the one hand solutions have to be found to ensure the system dependability in spite of the high volatility of the feeding-in from renewable sources. On the other hand the differences between feeding-in and demand, which also occurs on the regional level evermore, have to be equalized on the regional level, too. For this purpose, it is necessary to develop new control and modified market mechanisms. The role definition of the involved actors gets an increasing relevance because of the politically predetermined unbundling. However, only a slight attention was paid to the role of the final consumers in the past. For a successful rebuilding of the energy supply system it is nevertheless important to involve the consumers in this process. It could be demonstrated within the research project “MeRegio”, that the integration of the consumers into an incentive based demand side management can tap significant potentials to equalize differences between feeding-in and demand. Therefore, the focusing on the final consumers can have an important contribution to rebuild the energy supply system.