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UCL ESPO/IAG/POMS Perspectives on Benchmarking Central Grids Prof. Per AGRELL CORE/IAG School of Management Université Catholique de Louvain BELGIUM.

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Presentation on theme: "UCL ESPO/IAG/POMS Perspectives on Benchmarking Central Grids Prof. Per AGRELL CORE/IAG School of Management Université Catholique de Louvain BELGIUM."— Presentation transcript:

1 UCL ESPO/IAG/POMS Perspectives on Benchmarking Central Grids Prof. Per AGRELL CORE/IAG School of Management Université Catholique de Louvain BELGIUM

2 Stockholm Presentation

3 Stockholm Outline Three central questions on benchmarking: Why? Whom? What?

4 Stockholm The European Electricity Market regulator transmission operator GENERATORS DISTRIBUTORS GENERATORS CUSTOMERS GENERATORS TRADERS LEGISLATOR INVESTORS GENERATORS OTHER TSO

5 Stockholm Key challenges for the regulator How to provide the transmission service operator with Motivation incentives – Cost efficiency Coordination incentives – Technical efficiency

6 Stockholm Possible approaches Laissez-faire – Monopolies under competition law (D) Light-handed regulation – Selective intervention (S) Relative norms – Pseudo-market arrangements (N, NL) Absolute norms – Technical (ES) and ad hoc revenue caps (UK)

7 Stockholm Scope of the analysis National – Sunk costs and PSO etc. can ultimately be paid by final demand. International – Social obligations, past inefficiency and sunk costs may distort market effectiveness.

8 Stockholm Transmission is the key to the electricity market The physical grid defines – the market place for supply and demand The congestion management defines – market liquidity, reliability and – market power The access pricing defines – market entry and future capacity

9 Stockholm Why benchmarking? The TSOs are the backbone of the electricity market – their incentives and costs directly affect social welfare The regulators are responsible for the implementation – they need to coordinate incentives and signals to achieve a coherent cooperation – national comparisons do not make sense Benchmarking provides feasible and relevant estimates.

10 Stockholm TSO Benchmarking Three central questions on benchmarking: Why? Whom? What?

11 Stockholm The TSO is multi-tasking Open access scheduling Ensuring supply reliability Congestion management Real-time dispatching services Grid planning Ancillary services Information provision Financial settlements (administration, billing,..) Clearing energy markets ….

12 Stockholm Central grid services Grid owner/leaser Transmission services Grid maintainer Grid constructor System operator Market facilitator Grid planner

13 Stockholm Function and organization Grid maintainer Systems operator Grid planner Market facilitator Grid owner/leaser examples: ISO Transelec (Chile) Independent system operator Grid constructor Statnett (N) Transmission company TO PJM (US) Wire company WO ? Hybrid

14 Stockholm Institutional compromise TSO ControllabilityEfficiency ExternalitiesIndependence

15 Stockholm Independence Access rights Capacity investments Operations Supply/demand implications Independence requirement favors tight public control

16 Stockholm Efficiency Information and motivation problems in – Public enterprises – Large structures – Organizations with unclear objectives – Market power Allocative and productive efficiency favors privatization

17 Stockholm Task interdependency

18 Stockholm Externalities Information Investment reviews Non-transmission options Externalities favor integrated TSOs

19 Stockholm Controllability Information asymmetry Scope of operations Comparability Complexity of control Controllability increases with unbundling

20 Stockholm New solutions for ISO/TO

21 Stockholm Whom to benchmark? TSOs are heterogenous, integrated multi-output firms – they are constrained, empowered and incentivized in different ways. – externalites between tasks give different options Benchmarking needs to – focus on a selected set of « TSO roles » to inform – acknowledge its partial information Benchmark selected dimensions, but keep the big picture!

22 Stockholm TSO Benchmarking Three central questions on benchmarking: Why? Whom? What?

23 Stockholm Budget and impact Grid maintainer Systems operator Grid planner Facilitator Grid owner/leaser Grid constructor Share of TSO budgetSocial welfare impact

24 Stockholm Benchmarking scope Input (unobserved/exogenous output) Output (fixed/sunk input) Process (complex system) – Procedures (ISO9000, control systems) – Incentive systems (int/ext contracts) – Competence (profile, training) – Cooperation (int. organizations, regulators)

25 Stockholm Benchmarking Grid maintainer Systems operator Grid planner Market facilitator Grid owner/leaser Grid constructor ECOM Construction and maintenance ECOM

26 Stockholm What to benchmark? ECOM is a spotlight on construction and maintenance – the two roles are less complex. ECOM will be complemented – models to address other activities ECOM gives one service dimension, together we will address some other

27 Stockholm Finally Regulators and TSOs share the responsibility – A common goal – Different roles Benchmarking is a strong incentive to aim for excellence. Benchmarking is looking forward to find good local solutions to global challenges.


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