UE6 - Innovation Management

This course aims to understand how electricity markets work (price formation, sub-marginal rents, impact of the introduction of renewable energy, reserve mechanisms to ensure the stability of the electricity network, demand-side shaving, NEBEF, capacity mechanisms, frequency control, etc.) and the link with the carbon market. The general organisation of the electricity sector is explained, including the roles of the regulator, transmission and distribution system operators, electricity producers and suppliers, aggregators, etc. The origins of the opening up of the electricity sector to competition are explained, using the concepts of economies of scale, natural monopolies and the evolution of technologies and costs in this industry.

A large part of the course is also devoted to explaining how the European carbon market works, what the determinants are that help explain the formation of the carbon price and what strategies electricity producers are using to reduce their CO2 emissions in response to the carbon price (reversing the order in which power stations are called up, co-combustion of wood in coal-fired power stations, hydrogen in gas-fired power stations, etc.).

Numerous illustrative exercises are provided for students to calculate the price of electricity at different times, rents, the remuneration of renewable energy operators benefiting from various support mechanisms (feed-in tariffs, contracts for the

Understanding of electricity price formation (merit-order, marginal plant, etc.) and infra-marginal rents to finance investment costs;

     Understand the challenges for the electrical system of the increasing injection of renewable energies: operation of the support mechanisms put in place, impact on the formation of the price of electricity (merit order effect) and on the remuneration of investments (missing money) , the need to set up reserve and capacity markets to manage intermittency and ensure the stability of the electricity system, etc.

     Knowledge of the market mechanisms put in place to ensure the stability of electricity networks at different time horizons ranging from the very short term (system service and adjustment mechanism) to the long term (capacity mechanism);

     Understand how different types of services work for the electricity network: demand response (which can be valued on different market mechanisms depending on the relevant time horizon), upward or downward service, remuneration in activatable capacity and/or or in activated ability, etc.

     Ability to explain the formation of the carbon price: impact of changes in the emission reduction targets set by the regulator or of exogenous events such as temperature variations or the evolution of the relative price of gas compared to coal ;

     Ability to calculate indicators used by practitioners in the electrical industry to determine CO2 emission reduction strategies in response to carbon pricing (e.g. fuel-switching prices).