Reversed emergency power

Reversed emergency power

TenneT created something new: reversed emergency power. Indeed reversed. From the first tender, the market turned a bit upside down by this new system. Also, the value is not very clear to the participants yet.
In this article Peeeks throws a light on reversed emergency power. What is it and what does it result in?

What is reversed emergency power?

Let’s start easy. What actually is regular emergency power? The regular emergency power can be described as a commitment between TenneT and companies that generate electricity. TenneT pays around €15.000 a year per MW to reserve your generator and to supply electricity when emergencies occur. The supply of extra electricity to the network is called ‘ramping up’. This effect could also be reached also trough the use of less electricity. Consuming less is equal to generating more.

In the case of reversed emergency power everything is the other way around. In situations where a lot of electricity is generated in a longer time span, for example with strong wind, TenneT announces the reversed emergency power. The message is to ‘ramp down’. Increase the consumption of electricity or decrease the generation of it. This could be accomplished by for example activate extra cooling systems or lower the cogeneration production.

Lost already in all of these different types of power? This illustration might help to clarify it!

Schermafdruk 2017-03-24 15.20.50

The value of reversed emergency power

The value of ramping up is not equal to the value of ramping down in the world of electricity. As the outcome of a small simulation based on historical prices from 2016, Peeeks calculated that the prices of ramping up are almost twice as high as ramping down1. This means ramping down had less value. Due to this fact, it makes sense that reversed emergency power results in lower payment compared to the regular system.

First prices of reversed emergency power
A few weeks ago TenneT announced the prices of the first quarter of 2017. This was done both for regular as reversed emergency power and had a remarkable result: the price for the reversed emergency power is about 65% higher than the price for the regular emergency power.
This is weird though! Especially because we just told you about the fact that reversed emergency power should be valued lower.

Probably there were just a few companies aware of this new system and offered this for an incredible high price, which is a classic example of demand and supply. Peeeks predicts that there will be more suppliers, which will cause a decrease in the price of regular emergency power. Exactly how we expected it to happen.

The market: incomprehension and chances.
The market shows that a certain amount of participants don’t understand the reversed emergency power. Proposals that are two times the price of the regular emergency power are totally missing the point. Nevertheless, many smart agrarians are activating their cogeneration with this new system and currently take advantage of an amazingly high payment.
TenneT’s newest system, the reversed emergency power is the perfect chance to earn some extra money. However, be aware that the price of this system will decrease by TenneT. So do not make the mistake that you are rich already, but consider the possible value change of half the price (€8.500 /MW/yr) compared to the regular emergency power

–Kaz Vermeer, 2016

 

[1] These results are created while using 1 MW power and this is applied at the imbalance market from the 1st of December 2015 until the 1st of December 2016. The MW will be applied in ramp up version at prices above €80/MWh (two times average), and applied in ramp down version at prices under €0/MWh (zero times average). It is assumed that remainders and shortages in usage can be compensated by the average market prices. The remaining revenues are 85% higher at ramping up compare to ramping down.

Leave a Reply