Reliability standards and generation adequacy assessments for interconnected electricity systems

The paper “Reliability standards and generation adequacy assessments for interconnected electricity systems” will be presented at the 10th FSR Annual Conference (10-11 June, 2021).

ABSTRACT:

This paper studies the use of national reliability standards, defined as loss of load expectation (LOLE) targets, in generation adequacy assessments when electricity systems are interconnected. We show that the widely-used optimal reliability standard under autarky — equal to the ratio of the long-term marginal capacity cost and the value of lost load — can still lead to the welfare optimum in the presence of interconnections, but only under two conditions. First, installed generation capacities should be determined jointly, while considering the full power system. Second, LOLE calculations should internalize the generation adequacy benefits occurring in neighboring systems. Counter-intuitively, LOLE levels computed in adequacy assessment simulations should thus differ from their realized levels. We run a numerical application for a set of European countries and find that existing interconnections may lead to welfare gains of around one billion euro per year in generation adequacy benefits alone, by enabling a 17.6 GW decrease in installed capacity. In our case study, regional coordination is found to be more important than fully internalizing external adequacy benefits in adequacy simulations.