USA electricity market

As mentioned before, supply and demand should be in balance in the electricity market. Independent system operators (ISO) and regional transmission organizations (RTO) have a duty to keep this balance in the USA electricity market. ISOs anticipate and plan for electricity generation. Electricity generation should be adequate. Back-up equipment should be ready for unusual demand or problems in any power plant. ISOs are non-commercial in the USA. North America has nine ISO/RTOs in total. Each of them is in charge of the reliability, supply preparation, and development of the deregulated electricity market in their working region. PJM (PJM interconnection), SPP (South West Power pool), ERCOT (Electricity Reliability Council of Texas), NYISO (New York Independent System Operator), AESO (Alberta Electric System Operator), IESO (Ontario Independent Electricity System Operator), CAISO (California Independent System Operator), ISO-NE (ISO New England) and MISO (Midcontinent Independent System Operator Inc.) are the name of this nine ISOs in North America.

Some of them work just in the USA. Some of them work for both the USA and Canada [84]. Figure 33 demonstrates these ISOs and RTOs on the North America map [85].

ISOs and RTOs on North America [85]

There are two kinds of electricity market on a time scale: Short term and long term markets. Short-term markets consist of day-ahead and real-time markets in the USA.

Production and load bids are offered to ISOs in the day-ahead market, one day before the actual time. Planning is made based on LMP (Locational Marginal Price). LMP is the sum of system energy price, transmission costs, and marginal losses fees. In deregulated areas, wholesale markets are operated by other adjacent ISOs. Day-ahead anticipation is for each one hour (in one day before) in the USA. The real-time market is working in real-time exactly. After that penalties are paid by LMP rules. Long term markets are capacity and reserve markets in the USA [84]. The intraday market is different from Nordic or some European countries. ISOs are based on their rules regulating the supply and demand until five minutes or one minute by SCED (Security Commitment Economical Dispatch) models. But trading is not existing at this stage.

The intraday is just to make a balance of production and consumption for real-time [86].

Electricity generation in the USA is mainly based on private companies. More than two hundred companies produce electricity in the USA. Eighth of them has the largest generation rate. Alleghany energy, Luminant, AES Corporation, Pacific gas and electric company, Southern Company, Reliant Energy, Duke Energy, and American electric power are among the biggest generation companies in the USA.

USA is part of NERC (North American Electric Reliability Corporation) which interconnects the U.S, Canada, and the north of Mexico together. It is divided into three main regions: eastern, western, and Texas interconnection. In total there are nine zones of interconnections coordinating by NERC. For eastern SPP, FRCC, SERC, MRO, RFC and NPCC are concluded. Western includes WECC (Western Electricity Coordination Council). Texas interconnection is regulating by ERCOT (Electricity Reliability of Texas) and ASCC is for Alaska interconnection. Distribution companies are 75% in the hand of private companies. The numbers of them are high [87]. Figure 34 demonstrates the USA market mechanism briefly.

USA electricity market mechanism

Market data is collected by ICE (Intercontinental Exchange) from all markets in the USA. There are eight electricity hubs and regions electricity market. Regions, Electricity hub name, and ICE electricity product names can be seen in table 6. ICE plays a day-ahead market in North America and is accomplished for OTC (Over the Counter) trading [88]

USA hubs and wholesale daily spot price name [88]

4. DAY-AHEAD ELECTRICITY MARKET IN SELECTED CONUTRIES

Chapter four discusses about day-ahead market and electricity production and con-sumption in all eight different countries, which contains four Nordic countries (Norway, Finland, Sweden, and Denmark) and four others (Germany, UK, Australia, and the USA). All data has been gathered from reliable resources in each country. At the end of this chapter, it can be concluded that different factors influence the day-ahead electrici-ty market.

4.1 Nordic countries

There are four Nordic countries that have been discussed in this thesis. Firstly day-ahead price and production and consumption values are studied separately in each country. After that average data to make Nordic values is revealed. All nordic data is open data. It is extracted from the Nordpool website. Nordpool reveals all data by different time range for some countries including Nordic countries, Germany, and the UK [89].

4.1.1 Norway

Norway is separated into six different areas in the electricity market: Oslo, KR. Sand, Bergen, Molde, TR.Heim, and Tromso. Figure 35 displays different price rates in one year from August 2019 to August 2020 in each different area. As can be seen, there were no huge differences between them. Just in September and November TR. Heim prices were a little bit more than other areas and Tromso had more fluctuations in prices this year. In order to simplify the thesis comparison between Norway and other countries, it has been tried to make an average between six various zones in Norway.

It has only displayed an average one in later comparisons.

Six different zones day-ahead prices From Aug 2019-Aug 2020 in Norway

Figure 36 represents an average price in the day-ahead market between six market zones in Norway. Norway's day-ahead electricity price was the most expensive rate during autumn. November had the highest price. On the 6^th of November 2019, the price was about 52 EUR/MWh. June and July had the cheapest price in Norway. On the 5^th of July, the price was near 1 EUR/MWh. In order to realize why this vital diversity in prices in day-ahead market production and consumption of electricity have been analyzed.

Day-ahead daily average price in Norway from Aug 2019-Aug 2020 In figure 37 production and consumption of electricity have been noticeable. Electricity usage was increasing from August 2019 to November moderately. From March 2020 it was starting to decrease slightly until July. One of the most visible facts is that it can be concluded that the consumption curve and day-ahead price curves are changing approximately similar to each other. It can be said that whenever consumption is less than production the price of the day-ahead market is cheaper than the times that supply and usage are in the same value. The reason is one of the market economic mechanisms. When the generation is higher than demand prices fall down in any wholesale market. Norway can sell extra energy to other countries, if there are no bottles neck in the transmission network. All in all inequality of supply and demand is one of the factors that affected electricity prices in the day-ahead market. Norway

produces its electricity 97% by hydropower, 2% by wind, and 1% by fossil fuels.

Norway is geographically one of the best countries in the world for installing hydro generators and reservoirs.

Production and consumption of electricity in Norway from Aug 2019-Aug2020

4.1.2 Finland

Finland's daily day-ahead market price from August 2019 to August 2020 is represented in figure 38. Alternation in prices was high. Generally, the prices had a larger amount from August to December. There were two twists in prices at beginning of October 2019 and July 2020. The most expensive fee rate was 89.75 EUR/MWh on the 25^th of September 2019. The cheapest rate was 2.99 EUR/MWh on the 13^th of June 2020.

Day-ahead daily price in Finland from Aug 2019-Aug 2020 Daily generation and consumption of electricity in Finland from August 2019 to August 2020 have shown in figure 39. Vitally production was less than consumption in Finland at all times. Finland imports the remaining value by interconnection with other countries. Both data moved up from August to November. In March the consumption fluctuated around 250 GWh. Production oscillated around 200 GWh for five months.

From the starting of April demand and local supply diminished for two months. After June the average values were being steady.

Share of production in Finland is 34% nuclear, 24% hydro, 20% fossil, 16% biomass 5% wind, and 1% of other resources. By comparing figures 38 and 39 it can be cleared that consumption had a positive impact on production and day-ahead prices. Changing and fluctuating in prices are definitely relying on production and consumption. For instance, when they are in the lowest value the prices were at the lowest value too.

Exporting electricity may cause some higher prices than other countries in Finland.

Using a high amount of nuclear and fossil fuel is one of the reasons for the high prices in Finland. Using a small amount of hydro generation and reservation is one the reason for fluctuations in prices. The highest amount of production and consumption was about 226265 MWh and 275968 MWh respectively. The lowest amount of generation and demand was 111242 MWh and 153323 MWh sequentially.

Production and consumption of electricity in Finland from Aug 2019-Aug2020

4.1.3 Sweden

Sweden's day-ahead market is divided into four parts in the Nordpool system from SE1 to SE4. SE1 is for the northern part of Sweden. SE2 and SE3 are for the middle of the country. SE4 is the place of the southern section (including Capital) of Sweden. Figure 40 displays the daily day-ahead market in these four areas from August 2019 to August 2020. SE4 had the most expensive prices with the highest fluctuation. SE1 and SE2 had the same values and the cheapest one. The reason was mainly because of overpopulation in the southern part of Sweden which means that demand was higher than other zones. So prices were higher too. For comparing Sweden’s day-ahead price curve with other countries at the end of this chapter, the average between these four market zones is shown in figure 41.

Four different zones day-ahead prices From Aug 2019-Aug 2020 in Sweden

Sweden's daily average day-ahead market price is gathered in figure 41. Prices were barely climbing up from August 2019 to December 2019. After that, it had witnessed a price decline until May 2020. In the following fluctuation until the end of July 2020 can be seen. There were two sudden rises in fees on the first of March and July 2020. The maximum price was 52.8 EUR/MWh in the early part of November 2019. The minimum fee was 2.19 at end of July 2020. Vacillation was the most in June and July and the less in January and April 2020.

Day-ahead daily average price in Sweden from Aug 2019-Aug 2020

Figure 42 exhibited production and consumption in Sweden for one year from August 2019. As can be observed electricity generation was higher than demand most of the time. The country sold extra to other adjacent countries especially in November, March, and April which diversity is the most. The fluctuation was gentler in production. 580280 MWh and 264657 MWh was the highest and lowest rate of production. 490153 MWh and 255967 MWh was the largest and smallest amount for consumption.

Production and consumption of electricity in Sweden from Aug 2019-Aug2020

Sweden generation is 41% hydro, 40% nuclear, 10% wind, 6% biomass and 2% fossil fuels. By comparing figures 41 and 42 some important and noticeable conclusion can be taken. Whenever production is higher than consumption, the electricity price is curtailed.

4.1.4 Denmark

Denmark's day-ahead electricity market is split into two sections. Dk1 and DK2 are symbols of the west and east respectively. Figure 43 reveals both prices in one year from August 2019 to August 2020. DK2 prices principally were higher than DK1.

Denmark's wind generation in DK2 was more than DK1 which is explained by the higher intermittency. DK1 has more interconnections with other countries and it may cause cheaper prices. For the case of contrasting in figure 44 average between these two zones has been shown.

Two different zones day-ahead prices From Aug 2019-Aug 2020 in Denmark

Figure 44 is about Denmark's daily average day-ahead market price from August 2019 to August 2020. As can be seen, price changes are really fast and divergences were

high. The reason was the large amount share of wind generation in Denmark. Total prices were higher from August to January and the lowest average is from March to May. The highest fee was 53.11 EUR/MWh at beginning of December. The lowest fee was -7.63 EUR/MWh in the middle of April. A negative price is hence to the high generation of wind power.

Day-ahead daily average price in Denmark from Aug 2019-Aug 2020

Denmark's electricity production and consumption by daily data from August 2019 to August 2020 are apparent in figure 45. Although production values alternate a lot, consumption didn't have a huge shift. The highest and lowest amount of demand was 110888 MWh and 73272 MWh. This rate in production was about 140547 MWh and 20112 MWh which has 120 GWh differences. Electricity generation was enhancing from August to January and until the middle of March. The average supply was steady and following that curtailing is visible until July. On the other hand, electricity average usage had approximately the same going up and down in values.

Production and consumption of electricity in Denmark from Aug 2019-Aug2020

By correlating figures 44 and 45 it can be realized that whenever demand is more than supply prices are higher than the dates when production is higher than consumption.

Production and price curves act similarly in the whole year. Denmark's electricity generation is 44% wind, 37% fossil, 10% biomass, and 9% others. So Denmark prices mainly rely on wind generation and fossil fuel prices.

4.1.5 Whole Nordic area

Figure 46 exposes day-ahead daily prices for four different Nordic countries (Norway, Finland, Sweden, and Denmark) from Aug 2019-Aug 2020. As can be seen prices in Finland were the highest rate among Nordic countries. Norway had the lowest price. In addition, Norway had the smoothest price and the root is having the most hydropower production against the rests. Norway's electricity production is 97% from hydro and the prices are affecting mostly by that. Changing and intermittent in prices were significantly visible in Denmark which has 44% of wind generation. Several rapid cut down was happening during the year in Denmark price which results in wind generation and exporting electricity. Finland used the most export energy. It may be impacting its prices. All Nordic data are open data extracted by the Nordpool website [89]. Nordpool has a duty for organizing electricity day-ahead and intraday markets in some European countries.

Day-ahead daily prices for four different Nordic countries from Aug 2019-Aug 2020

Daily wind power production from August 2019 to August 2020 in Nordic countries is displaying in figure 47. Sweden's data before February 2020 were not accessible. The wind generation in Sweden was mainly more than in other countries. Although Denmark has good potential for wind generation but due to Sweden's geographic areas are more so it generates also more. Finland had the lowest wind generation capacity

among these countries. There was no data for Norway in this case. The highest amount of wind production was between January to April 2020. It may cause a reduction in prices during this period in the whole Nordic area.

Daily wind power generation in Nordic countries from Aug 2019-Aug 2020

Figure 48 represented the hydro reservoir in Nordic countries from August 2019 to August 2020. Norway had the highest rate of hydro reservation. Finland had the lowest. There is no data for the hydro reservoir for Denmark. The capacity of hydro was at the highest rate in autumn and lowest in summer. By comparing prices and the hydro reservoir it can be seen that the hydro reservoir impacts prices. It also caused smoothness to the prices. This phenomenon can be realized from Norway that has the most hydro reserve in the Nordic area.

A hydro reservoir in different Nordic countries from Aug 2019-Aug 2020

In order to compare Nordic areas with other countries like Germany, U.K, Australia, and the U.S.A. Nordic average system price has been created in figure 49. All in all Nordic average price is high from August to January. After that prices decreased until

July. The highest rate was 52.42 EUR/MWh at beginning of November. The lowest rate was 1.88 EUR/MWh in the middle of July.

Daily Nordic average system price from August 2019 to August 2020

4.2 Germany

Figure 50 demonstrates Germany's day-ahead daily price from August 2019 to August 2020. The largest fee was 51.36 EUR/MWh on the third of December 2019. The lowest fee was -26.13 EUR/MWh on the 24^th of May 2020. Fluctuation in Germany's day-ahead price was spectacular. Some days the price was negative. These days the market is paid to consumers to use electricity. The average price was the highest amount during November and December 2019. The average price was at the lowest costs from April to June 2020. There were lots of sudden jumps in February and May. The largest sudden jump was in May 2020, which price was 10.27, -26.13, and 18.63 EUR/MWh in three days. The price was more stable in September, November 2019, and January 2020. To understand the reasons for fluctuation and low and high prices, electricity production has been studied. Day-ahead prices are extracted as open data from the Nordpool website[89]. Nordpool is one of the biggest electricity markets in Europe.

Day-ahead daily price in Germany from Aug 2019-Aug 2020 Figure 51 repents Germany's electricity production by different resources and consumption from August 2019 to August 2020. Raw data for production and consumption for Germany wasn’t found. So the figure is extracted from [90]. Biomass, hydro, offshore and onshore wind, solar and conventional power plants provide production. The rate of biomass was stable with no changes in the whole year. Hydro was stable too but in October 2019, it was at the lowest rate. Intermittence in wind generation was noticeable. Wind energy was at the highest rate from December 2019 to March 2020. Wind energy was low from April to August 2020. Solar energy was highest in August and September 2019 and from April to August 2020. Solar was lowest in autumn and winter time. November, December, and February had the highest rate of conventional power plants. Conventional power plant production was more stable than wind and solar. Electricity consumption had intermittent values. The lowest conception was in January. The highest is in February. Average consumption didn’t change a lot and it oscillates between 50 to 70 GW. CO2 emission changed in each month depending on using conventional power plants. Electricity production and consumption are historical chart data. It is collected from Agora Enrgiewende which is a German website [90].

Production and consumption of electricity in Germany from Aug 2019-Aug2020 [90]

By comparing figures 50 and 51, it can be concluded that the times that renewable energies (especially wind and solar) have the highest rate and conventional production is at the lowest rate the day-ahead electricity price is lower. High intermittency in wind production causes high oscillation in prices. Increasing solar generation caused the fall down of average prices. Also the difference between production and consumption influence prices too and when consumption is higher than production the prices increases.

4.3 United Kingdom

United Kingdom's day-ahead daily electricity price from August 2019 to August 2020 is

United Kingdom's day-ahead daily electricity price from August 2019 to August 2020 is

In document Day-ahead and intraday electricity markets in various market areas (sivua 65-0)