OeNB Freitagsseminar with Johannes Schmidt

Rare extreme events and resource adequacy in energy only markets: lessons learnt from the Texan power system

OeNB Freitagsseminar with Johannes Schmidt, BOKU - University of Natural Resources and Life Sciences

Energy only electricity markets may not provide sufficient incentives to guarantee resource adequacy of the power system, in particular under extreme events. An extended blackout in Texas in February 2021, caused by exceptionally low temperatures, fueled the debate, as power plant operators did not winterize their capacities sufficiently. Here we assess if incentives for winterization have been sufficient on the energy-only market by combining power demand estimates with estimates of power plant outages to derive power deficits and scarcity prices over long, simulated periods of time. Expected profits from winterization of a large share of existing capacity are positive. However, investment risk is high due to the low frequency of freeze events, potentially explaining the under-investment of risk-averse operators.

These results are also relevant for future European power systems with high shares of renewables, which may suffer from rare climatically induced capacity scarcities. I therefore also review current proposals to adjust regulation and long-term market arrangements with the aim to increase resource adequacy in such systems.

Date:
Friday, 12 Mai 2023, 11:00–12:30

Venue:
Oesterreichische Nationalbank
Otto-Wagner-Platz 3
1090 Vienna
and online via Webex

Please contact the Event-Management by 10 May 2023 at the latest.