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Reliability Metrics for Generation Planning and the Role of Regulation in the Energy Transition: Case Studies of Brazil and Mexico

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  • Ana Werlang

    (PSR Energy Consulting & Analytics, Rio de Janeiro 22250-040, Brazil)

  • Gabriel Cunha

    (PSR Energy Consulting & Analytics, Rio de Janeiro 22250-040, Brazil)

  • João Bastos

    (PSR Energy Consulting & Analytics, Rio de Janeiro 22250-040, Brazil)

  • Juliana Serra

    (PSR Energy Consulting & Analytics, Rio de Janeiro 22250-040, Brazil)

  • Bruno Barbosa

    (PSR Energy Consulting & Analytics, Rio de Janeiro 22250-040, Brazil)

  • Luiz Barroso

    (Instituto de Investigación Tecnológica, Escuela Técnica Superior de Ingeniería (ICAI), Universidad Pontificia Comillas, 28015 Madrid, Spain)

Abstract

In recent years electricity sectors worldwide have undergone major transformations, referred to as the “energy transition”. This has required energy planning to quickly adapt to provide useful inputs to the regulation activity so that a cost-effective electricity market emerges to facilitate the integration of renewables. This paper analyzes the role of system planning and regulations on two specific elements in the energy market design: the concept of firm capacity and the presence of distributed energy resources, both of which can be influenced by regulation. We assess the total cost of different regulatory mechanisms in the Brazilian and Mexican systems using optimization tools to determine optimal long-term expansion for a given regulatory framework. In particular, we quantitatively analyze the role of the current regulation in the total cost of these two electricity systems when compared to a reference “efficient” energy planning scenario that adopts standard cost-minimization principles and that is well suited to the most relevant features of the new energy transformation scenario. We show that two very common features of regulatory designs that can lead to distortions are: (i) renewables commonly having a lower “perceived cost” under the current regulations, either due to direct incentives such as tax breaks or due to indirect access to more attractive contracts or financing conditions; and (ii) requirements for reliability are often defined more conservatively than they should be, overstating the hardships imposed by renewable generation on the existing system and underestimating their potential to form portfolios.

Suggested Citation

  • Ana Werlang & Gabriel Cunha & João Bastos & Juliana Serra & Bruno Barbosa & Luiz Barroso, 2021. "Reliability Metrics for Generation Planning and the Role of Regulation in the Energy Transition: Case Studies of Brazil and Mexico," Energies, MDPI, vol. 14(21), pages 1-27, November.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:21:p:7428-:d:674440
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    References listed on IDEAS

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    1. Daglish, Toby & de Bragança, Gabriel Godofredo Fiuza & Owen, Sally & Romano, Teresa, 2021. "Pricing effects of the electricity market reform in Brazil," Energy Economics, Elsevier, vol. 97(C).
    2. Tolmasquim, Maurício T. & de Barros Correia, Tiago & Addas Porto, Natália & Kruger, Wikus, 2021. "Electricity market design and renewable energy auctions: The case of Brazil," Energy Policy, Elsevier, vol. 158(C).
    3. EHRENMANN, Andreas & SMEERS, Yves, 2013. "Risk adjusted discounted cash flows in capacity expansion models," LIDAM Reprints CORE 2550, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Gonzalez-Romero, Isaac-Camilo & Wogrin, Sonja & Gomez, Tomas, 2021. "Transmission and storage expansion planning under imperfect market competition: Social planner versus merchant investor," Energy Economics, Elsevier, vol. 103(C).
    5. Пигнастый, Олег & Koжевников, Георгий, 2019. "Распределенная Динамическая Pde-Модель Программного Управления Загрузкой Технологического Оборудования Производственной Линии [Distributed dynamic PDE-model of a program control by utilization of t," MPRA Paper 93278, University Library of Munich, Germany, revised 02 Feb 2019.
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    Cited by:

    1. Andr s Oviedo-G mez & Sandra Milena Londo o-Hern ndez & Diego Fernando Manotas-Duque, 2023. "Directional Spillover of Fossil Fuels Prices on a Hydrothermal Power Generation Market," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 85-90, January.
    2. Huclin, Sébastien & Ramos, Andrés & Chaves, José Pablo & Matanza, Javier & González-Eguino, Mikel, 2023. "A methodological approach for assessing flexibility and capacity value in renewable-dominated power systems: A Spanish case study in 2030," Energy, Elsevier, vol. 285(C).
    3. Dolf Gielen, 2022. "Energy Planning," Energies, MDPI, vol. 15(7), pages 1-6, April.
    4. Costa, Vinicius Braga Ferreira da & Bonatto, Benedito Donizeti, 2023. "Cutting-edge public policy proposal to maximize the long-term benefits of distributed energy resources," Renewable Energy, Elsevier, vol. 203(C), pages 357-372.

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