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20 Energy Markets, Grids and Flexibility: A Future Market Design for a Decarbonized Energy System

  • Louisa Wasmeier , Michael Hinterstocker and Simon Köppl
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Handbook of Electrical Power Systems
This chapter is in the book Handbook of Electrical Power Systems

Abstract

The German energy market system, which for a long time distinguished active supplier and passive end consumers on wholesale markets, is undergoing transformation. The increasing share of renewable energies (RE), which differ significantly from conventional generation in terms of location and plant size requirements, is leading to decentralization and enabling generation by small, often privately operated plants. Additionally, volatility in dispatch due to fluctuating weather conditions requires increasing flexibility. On one hand, the large-scale electrification of consumption poses a challenge for the current trading system, but on the other hand, it offers great potential to provide consumer-side flexibility. The challenges of a decentralized and volatile energy system have prompted research and development of new forms of marketing, which are analyzed in this chapter in relation to the trends of decentralization, participation, and flexibilization. By integrating these trends into the current market design, various scenarios for the future development of the German market system could be derived. In the following sections, we will describe in more detail the replacement of the cost-based grid congestion management with market-based approaches, the shift of the trading volume from the current wholesale to segmented market forms, and the conversion to a nodal pricing system.

Abstract

The German energy market system, which for a long time distinguished active supplier and passive end consumers on wholesale markets, is undergoing transformation. The increasing share of renewable energies (RE), which differ significantly from conventional generation in terms of location and plant size requirements, is leading to decentralization and enabling generation by small, often privately operated plants. Additionally, volatility in dispatch due to fluctuating weather conditions requires increasing flexibility. On one hand, the large-scale electrification of consumption poses a challenge for the current trading system, but on the other hand, it offers great potential to provide consumer-side flexibility. The challenges of a decentralized and volatile energy system have prompted research and development of new forms of marketing, which are analyzed in this chapter in relation to the trends of decentralization, participation, and flexibilization. By integrating these trends into the current market design, various scenarios for the future development of the German market system could be derived. In the following sections, we will describe in more detail the replacement of the cost-based grid congestion management with market-based approaches, the shift of the trading volume from the current wholesale to segmented market forms, and the conversion to a nodal pricing system.

Chapters in this book

  1. Frontmatter I
  2. List of Contributing Authors V
  3. Foreword by Professor Andris Piebalgs, Former EU Commissioner for Energy XI
  4. Foreword by Dr. Peter Körte, Chief Technology Officer & Chief Strategy Officer at Siemens AG XV
  5. Preface of the Editors XIX
  6. Contents XXV
  7. Abbreviations XXXI
  8. Frequently Used Metric Prefixes and Physical Quantities XLV
  9. 1 History and Current Challenges of Electrical Power Supply Systems 1
  10. 2 General Technical Aspects of the Electrical Power System: A Case Study of the German Power System in Transition 37
  11. 3 Power Sector Transformation: An Indian Perspective 53
  12. 4 Major Non-technical Questions of Today’s Energy Supply: Between Energy Policy and Regulation 95
  13. 5 Scenarios for the Energy System 111
  14. 6 How Europe Regulates the Internal Energy Market 127
  15. 7 Requirements for the Reliability of Energy System Planning 137
  16. 8 Currents of Change: Electrification for a Greener Future 151
  17. 9 Understanding the Levelized Cost of Energy 167
  18. 10 Influence of CO2 Targets on Energy Planning: Optimal Energy Supply from a Climate Perspective 185
  19. 11 Energy Planning With a Special Focus on Hard-To-Abate Sectors and Decarbonization 203
  20. 12 Energy Storage Technologies in Support of the Energy Transition and Climate Neutrality 235
  21. 13 Electrical Supply Infrastructure Under Transformation 249
  22. 14 Innovation (Not Only) in the Grid Sector: Market and Regulation Also Require Reinvention 275
  23. 15 Challenges of Today’s Energy Distribution 303
  24. 16 Resilience: Considering Disruptive Events in the Energy Planning of Buildings and Neighborhoods 335
  25. 17 Siemens Princeton Resilient Campus: Defining the Future of Energy with a Sustainable and Reliable Microgrid 351
  26. 18 Introduction to Energy Trading and the Role of Energy Exchanges 361
  27. 19 The Role of Power Exchanges (PX) in the Energy Transition: Between Cross-Border and Local Trading 375
  28. 20 Energy Markets, Grids and Flexibility: A Future Market Design for a Decarbonized Energy System 395
  29. 21 Local Trading Within Energy Communities 419
  30. 22 Verification Methods for Renewable Electricity: Guarantees of Origin, PPAs, and Renewable Fuels of Non-biological Origin 435
  31. 23 The Unique German Smart Metering Approach in Contrast to International Strategies 453
  32. 24 Real-Time as a Natural System Boundary 473
  33. 25 Internet of Things (IoT) and Sensor Technology in Electrical Energy Supply Systems 495
  34. 26 The Perfect Storm: Where the Energy Transition Meets the Digital Transformation 509
  35. 27 The Dark Side of Digitalization 529
  36. 28 Artificial Intelligence and Data Efficiency 543
  37. 29 Aspects of Data Protection and Security in Smart Electronical Systems out of “European Perspective” 565
  38. 30 Actively Shaping the Digital Transformation Process with Systemic Organizational Development 581
  39. 31 New IT for the Digital Energy of the Future 609
  40. 32 Connecting and Digitalizing the Energy Sector with a Dynamic IT Strategy 629
  41. 33 Information Security and Digitalization at Distribution System Operators 649
  42. 34 Digital Efficiency – a Powerful Tool! 671
  43. 35 Asset Management in the Energy Transition: Requirements and Technologies 695
  44. 36 Power Shortage Situation 715
  45. 37 Blackout: The European Electricity Supply System in Transition 733
  46. 38 Everyday Life Without Electricity in the Household Customer Sector 781
  47. 39 Technical Requirements and Implications of Functioning Sector Coupling 791
  48. 40 Transition from Planning to Implementation of District Projects with Sector Coupling 819
  49. 41 Green Hydrogen Potentials for the Power Sector in Germany 831
  50. 42 Electricity is Easy, Fuels are Hard: Lessons from the Maritime Industry 843
  51. 43 Project example “pebbles” 867
  52. 44 New Digital Technologies Find Their Way into the Grid Sector 889
  53. 45 Environmental, Social, Governance (ESG), and Digitalization in the Commercial Real Estate Industry 909
  54. 46 Scenarios for Training and Continuing Education 923
  55. 47 Electricity Market and Electricity System Transformation: North American Perspective 943
  56. Index 953
https://doi.org/10.1515/9783111264271-020

Chapters in this book

  1. Frontmatter I
  2. List of Contributing Authors V
  3. Foreword by Professor Andris Piebalgs, Former EU Commissioner for Energy XI
  4. Foreword by Dr. Peter Körte, Chief Technology Officer & Chief Strategy Officer at Siemens AG XV
  5. Preface of the Editors XIX
  6. Contents XXV
  7. Abbreviations XXXI
  8. Frequently Used Metric Prefixes and Physical Quantities XLV
  9. 1 History and Current Challenges of Electrical Power Supply Systems 1
  10. 2 General Technical Aspects of the Electrical Power System: A Case Study of the German Power System in Transition 37
  11. 3 Power Sector Transformation: An Indian Perspective 53
  12. 4 Major Non-technical Questions of Today’s Energy Supply: Between Energy Policy and Regulation 95
  13. 5 Scenarios for the Energy System 111
  14. 6 How Europe Regulates the Internal Energy Market 127
  15. 7 Requirements for the Reliability of Energy System Planning 137
  16. 8 Currents of Change: Electrification for a Greener Future 151
  17. 9 Understanding the Levelized Cost of Energy 167
  18. 10 Influence of CO2 Targets on Energy Planning: Optimal Energy Supply from a Climate Perspective 185
  19. 11 Energy Planning With a Special Focus on Hard-To-Abate Sectors and Decarbonization 203
  20. 12 Energy Storage Technologies in Support of the Energy Transition and Climate Neutrality 235
  21. 13 Electrical Supply Infrastructure Under Transformation 249
  22. 14 Innovation (Not Only) in the Grid Sector: Market and Regulation Also Require Reinvention 275
  23. 15 Challenges of Today’s Energy Distribution 303
  24. 16 Resilience: Considering Disruptive Events in the Energy Planning of Buildings and Neighborhoods 335
  25. 17 Siemens Princeton Resilient Campus: Defining the Future of Energy with a Sustainable and Reliable Microgrid 351
  26. 18 Introduction to Energy Trading and the Role of Energy Exchanges 361
  27. 19 The Role of Power Exchanges (PX) in the Energy Transition: Between Cross-Border and Local Trading 375
  28. 20 Energy Markets, Grids and Flexibility: A Future Market Design for a Decarbonized Energy System 395
  29. 21 Local Trading Within Energy Communities 419
  30. 22 Verification Methods for Renewable Electricity: Guarantees of Origin, PPAs, and Renewable Fuels of Non-biological Origin 435
  31. 23 The Unique German Smart Metering Approach in Contrast to International Strategies 453
  32. 24 Real-Time as a Natural System Boundary 473
  33. 25 Internet of Things (IoT) and Sensor Technology in Electrical Energy Supply Systems 495
  34. 26 The Perfect Storm: Where the Energy Transition Meets the Digital Transformation 509
  35. 27 The Dark Side of Digitalization 529
  36. 28 Artificial Intelligence and Data Efficiency 543
  37. 29 Aspects of Data Protection and Security in Smart Electronical Systems out of “European Perspective” 565
  38. 30 Actively Shaping the Digital Transformation Process with Systemic Organizational Development 581
  39. 31 New IT for the Digital Energy of the Future 609
  40. 32 Connecting and Digitalizing the Energy Sector with a Dynamic IT Strategy 629
  41. 33 Information Security and Digitalization at Distribution System Operators 649
  42. 34 Digital Efficiency – a Powerful Tool! 671
  43. 35 Asset Management in the Energy Transition: Requirements and Technologies 695
  44. 36 Power Shortage Situation 715
  45. 37 Blackout: The European Electricity Supply System in Transition 733
  46. 38 Everyday Life Without Electricity in the Household Customer Sector 781
  47. 39 Technical Requirements and Implications of Functioning Sector Coupling 791
  48. 40 Transition from Planning to Implementation of District Projects with Sector Coupling 819
  49. 41 Green Hydrogen Potentials for the Power Sector in Germany 831
  50. 42 Electricity is Easy, Fuels are Hard: Lessons from the Maritime Industry 843
  51. 43 Project example “pebbles” 867
  52. 44 New Digital Technologies Find Their Way into the Grid Sector 889
  53. 45 Environmental, Social, Governance (ESG), and Digitalization in the Commercial Real Estate Industry 909
  54. 46 Scenarios for Training and Continuing Education 923
  55. 47 Electricity Market and Electricity System Transformation: North American Perspective 943
  56. Index 953
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