The BCDC Market team consists economists from three different organizations; the Finnish Environment Institute, Oulu Business School and the VATT Institute for Economic Research. The team is led by researcher, postdoctoral researcher Enni Ruokamo. Team members include BCDC Energy Principal investigator, Professor Maria Kopsakangas-Savolainen, Professor emeritus (PI 2015–2019) Rauli Svento, Chief Researcher, Research Leader Marita Laukkanen, researchers and doctoral students Hannu Huuki, Santtu Karhinen and Ludi Wang, doctoral students Chao DingAnna-Maija JuusoTeemu Meriläinen, Hannu Savolainen, and research assistant Jouni Räihä.

In the picture: Rauli Svento and Maria Kopsakangas-Savolainen. Photo: Kati Leinonen.

The main focus of this team is to look at electricity market transition from the social welfare point of view. This includes analysing and quantifying integration costs of large scale variable production, deriving efficient market mechanisms to minimize these costs, analysing the incentive mechanisms to motivate consumers to become active market players and finding an optimal energy mix for an energy system with large scale variable distributed production.

Electricity markets in transition

Energy markets are going through probably the biggest change in their history. The main drivers of this transition are climate change, globally increasing energy consumption, reducing stocks of fossil fuels, the increasing share of renewable energy and smart electricity networks. These changes together challenge us to create a more sustainable and efficient energy system. Cutting edge technological developments related to smart grids and ICT based digital services enable integration of large scale variable production into the energy system in a way that is simultaneously economically, technologically and socially efficient.

Figure: Demand and wind profiles (by hour) for Nordic power markets.

Integration costs of variable production

An increasing share of electricity is produced from renewable sources. Significant parts of these sources produce electricity variably (intermittently). Intermittency creates new challenges and potential problems for the whole energy system. The key problem related to intermittent production is the fact that e.g. wind generators only produce electricity when the wind blows. This increases system level costs, which depend e.g. on the system production technology mix and on the level of demand elasticity.

Figure: Wholesale (spot) price 2011.

The BCDC Market group analyses these costs and develops methods to quantify the economic value of bringing large-scale intermittent renewable energy to the energy system. By using this information market mechanisms minimizing integration costs of variable production can be developed. Because it is not possible to reduce integration costs through management of intermittent production the management of demand and optimal utilization of forecasts related to both load and weather conditions are of prime importance.

In the picture: Market team members and other researchers of BCDC Energy Community. Photo: Kati Leinonen.