Peaking capacity in restructured power systems: experience and solutions

This paper discusses two alternative ways to ensure the availability of power reserves through market based mechanisms. The first way is procurement of reserves by the transmission system operator (TSO) on a seasonal and annual basis. The Norwegian TSO, Statnett, has organized a reserves auction where both the supply and demand side can participate. The successful bidders are obliged to make their capacity available for reserve purposes instead of bidding it in the spot market. The standby price that was paid for these reserves was between 30 and 50% of the estimated annual cost of the cheapest alternative, increasing capacity in existing hydro plants. With this market the TSO has succeeded in contracting reducible loads from paper mills and smelting plants. The challenge of including domestic load and smaller industry as regulation objects is discussed in this paper. The other alternative described is to procure reserves directly in the spot market. In this case the reserve price will be the implicit result of the market participants´ energy bids and offers