Generation costs estimation in the Spanish Mainland Power System from 2011 to 2020

Abstract

The electricity sector in Spain had been evolving steadily in an ascendant rate since the liberalization in late 90’s. Demand was expected to keep growing but it suddenly dropped in 2009 creating an unbalance in the system in terms of demand and capacity available. In addition the increasing share of renewable energy contribution has also imposed an additional pressure on the hydro and thermal technologies leaving less residual demand for such technologies. The current and expected scenario in the Spanish mainland power system seems to be harder for the ordinary regime technologies for the coming years. It has just been issued a Royal Decree to support the domestic coal mines, imposing quotas for coal units using such coal. This work has the purpose of gather all the regulatory and economical constraints and apply them to estimate the generation costs for the following ten years. The approach to do such extensive task is to apply a regulated cost structure based on fixed and variable costs already proved in a previous work as a reference model to contrast the system costs in the mainland power system in Spain. The generation dispatch is done using a traditional approach of unit commitment based on the least cost dispatch and taking into consideration the different constraints to reflect the most plausible behavior of market players. The results are consistent with the costs associated to the different technologies. Nuclear units are base load during the whole year and CCGT is the technology that balances the system because of demand-generation variations. The most stable technology in terms of cost and production is the Nuclear while the technology with the lowest costs is hydro. Coal and CCGT technologies appear to be the most expensive and become the marginal technologies. Regarding to the evolution of the generation mix, there are thermal units decommissioned because of aging and the new Industrial Emissions Directive issued by EU. In addition, an assumption was made of what in reality would happen when the existing thermal units are not being dispatched and the owners decide closure. It was also included new hydro power plants either under construction or planned to be commissioned and the necessary additional MW needed as CCGT units in order to keep security of supply in the system. The latter was done mainly to keep the Coverage Index in the minimum level required by the system operator.