Modeling electricity markets: a challenge for the future

It’s everywhere, it travels at the speed of light, but it’s still invisible. The electricity that we all use without a second thought doesn’t come from thin air, however. Behind the outlet in the wall, there are complex production, distribution, purchasing, selling and consumption networks that must be managed.

The ELECTRA (Electricity markets and trade in Switzerland and its neighbouring countries) project, launched last week at EPFL with funding from the “Energy-Economy-Society” research program of the Swiss Federal Office of Energy (SFOE), will develop tools to enable long-term modeling of the country’s energy needs and resources in order to guarantee the country’s electricity supply under the best conditions.

The challenges in this sector are considerable. Electricity consumption in Switzerland is rising by about 1.3% per year. Even as several supply contracts with neighboring countries will be coming up for renewal, the government has just decided to progressively abandon nuclear power, which currently provides 40% of Switzerland’s electricity. In addition, the depletion of fossil fuels (oil, natural gas and coal) used in neighboring countries will mean that the price of international energy exchanges will rise.

Production fluctuations and economic models
What will European electricity networks look like in 2050? To find out, EPFL’s Economics and Environmental Management Laboratory (REME) has begun a collaboration with the Paul Scherrer Institute (PSI) and the company Econability to incorporate various models that are currently being used into a single tool. One of these models, CROSSTEM, developed at PSI, calculates the mix of technologies that would lead to the lowest-cost electricity production at the local or the international scale. Others, GENESwIS, developed at Econability, and GEMINI-E3, developed in REME, predict the evolution of energy markets in Switzerland and abroad. “It’s the first time that an effort has been made to integrate all these data so that we can get a complete picture of the entire network, including commercial exchanges with neighboring countries,” explains Philippe Thalmann, Director of REME.

Being able to anticipate demand and production capacities will be a considerable advantage in the years to come. Building a model that can do these simulations will involve overcoming numerous difficulties, however; and these will be tackled by two PhD students who will be hired by the ELECTRA project. It is important to be able to determine far ahead of time, as a function of various possible scenarios, what the “basic” electricity production provided by large power plants, whose power output is not intermittent (hydropower or natural gas, for example) will be. But it’s also important to take into account the potential of Alpine dams, some of whose heights could be raised in the coming decades. New, highly intermittent sources of renewable energy (wind power, solar power) must also be included in the calculations.

Multiple criteria
An entire series of macroeconomic parameters must be added to these “technological” data. The economic growth rate in Switzerland and Europe will have consequences on energy consumption, and the price of electricity, which Switzerland is constantly importing and exporting even though it is on average self-sustaining on an annual basis, is continually changing from one moment to the next. In addition, major international decisions (the Kyoto Protocol, the decision against nuclear power in Germany, the Desertec project, CO2 emissions quotas…) will also have an impact on energy markets.

Knowing in detail and at every moment in time, or even ahead of time, the price at which our neighbors are ready to sell or buy electricity is becoming an increasingly critical piece of information. All the more so because with its hydropower dams, Switzerland has one of the most efficient methods available to store energy indirectly when the price of exchange is low – at night, in particular – and to produce more during peak demand periods.

Switzerland could thus have a pivotal role to play in the future energy landscape of Europe as a whole. The two-year ELECTRA project will provide the necessary information for the country to benefit from the best opportunities, while guaranteeing a secure supply of electricity for its citizens.