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Energy in Transition

Energy in Transition

General

How can market and regulatory design concepts assist in the integration of more renewables in the Middle East?

Renewable power generation is penetrating countries across the Middle East. The significant proportion of must run renewable energy expected within the capacity mix combined with the large seasonal variation in electricity demand, summer demand being approximately double that of winter demand, suggests that the role of existing power plants will change significantly over time. For example, in the future, a generator which supplies a constant (on all the time) base electricity demand in the summer, may have mid-merit utilization in winter and simple cycle plants may take on a peaking role. Power plants may become dedicated to providing ancillary services to ensure that system reliability is maintained.

The transmission system operator (TSO) is responsible for determining the spinning reserve requirements and location of these to meet forecast demand. The TSO can bring on-line or take off-line generating units from the dispatch schedules, in response to the real time load demands to maintain system security or to respond to system emergencies.

The sheer transition being undertaken in terms of gigawatts (GW) and billions of dollars being invested gives rise to the need for new and more appropriate arrangements to regulate the relationship between all stakeholders in the power system.

Market and regulatory transition

A sound regulatory framework ensures open and fair access to the private sector service providers as it’s become increasingly important for governments to attract private sector capital. Government authorities can catalyse this investment by introducing the right market incentives in line with current operating practices, incentivize new investments across technologies, have pathways for new technologies and innovation and enable further value creation for existing assets by way of ancillary services. Ancillary services can be separated into elements which match assets to the services; frequency measure, voltage measure, supply reconstruction, and operational management.

Opportunities

Within the Middle East there are opportunities to improve the current electricity regulations, including generation connection guidelines and codes which in general may not adequately address the commercial requirements for investing in new generation projects.

There is an opportunity for industrial players and others with excess generation capacity/energy to spill and export to the national grid for additional needs if there are gaps or ancillary services. Herein lies an opportunity for those assets that can provide ancillary services due to the increasing levels of intermittent generation being added to the grid both at transmission level and more distributed generation at the distribution level.

Therefore, it is beneficial to understand how the ancillary service requirements might change with the high levels of renewable generation expected to be operating by 2030, and how it might position existing players with conventional generation assets in this market.

A well-structured set of arrangements

It’s important that eligibility criteria for market participants are in line with international best practices, local market characteristics and potential, economic growth outlook, current private sector structure and capabilities.

Commercial agreements assume a fair rate of return for market participants, covering all costs in a clear and transparent manner and taking into account technical requirements/constraints. The implementation phase of any new arrangements needs to be well designed and the design should ensure cost optimization for large consumers (consumer choice). Depending on the type of market design if it is based on bilateral contracting, a balancing market should be set up and transmission and distribution use criteria of charges clearly defined.

The regulatory framework should include technical and commercial specifications, also quantification of the different ancillary services. Commercial issues and market design principles should also be included in the regulatory framework developed.

Types of services likely to be in demand

There is likely to be demand for black start and restoration which includes stable operation and supply of the unit auxiliaries as well as energization of the nearby grid. In frequency response and spinning reserve, we include containment reserve under normal (undisturbed) conditions, and frequency response to credible contingencies (normally n-1) for example. In reactive power reserve for voltage support, we focus on support from power generation modules, synchronous generators as well as converter connected generation and continuously controllable reactive power support.

Regulatory enhancements needed

In order to have a proper functioning ancillary services market one must seek to develop a contract framework and service level agreements for the provision of black start including related commercial terms within a standard ancillary services contract and provide enhancements to the grid code.

A Review and provision of enhancement recommendations is needed for the power reserve policy and the security standard applicable to planning and operating the national (or regional) grid system and how securing the largest system generation loss is managed within the respective time scales. There needs to be a specific definition and technical requirements for dynamic frequency response, spinning reserve and backup or standing reserve that are applicable to the country’s or region’s regulations.

Enhancing, specifically the grid code and developing a sound regulatory and contract framework and service level agreements for the provision of dynamic frequency response, spinning reserve, backup and/or standing reserve holding for all generators within a standard ancillary services contract is a necessary way forwards to maintain system security in an economic and efficient way.

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