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MOPC Workshop Series on Future Markets: Session I August 24, 2010

MOPC Workshop Series on Future Markets: Session I August 24, 2010. 1. Agenda. Introduction The Day Ahead Market Reliability Unit Commitment (RUC) The Real-Time Balancing Market Financial Schedules Virtual Transactions Co-optimization Scarcity Pricing. Objectives .

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MOPC Workshop Series on Future Markets: Session I August 24, 2010

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  1. MOPC Workshop Series on Future Markets: Session I August 24, 2010 1

  2. Agenda • Introduction • The Day Ahead Market • Reliability Unit Commitment (RUC) • The Real-Time Balancing Market • Financial Schedules • Virtual Transactions • Co-optimization • Scarcity Pricing

  3. Objectives • Describe high level overview of the relationships between the DA Market, RUC, and RTBM. • Define Demand Bids and Resource Offers in the Day-Ahead Market • Provide examples for Demand Bids and Resource Offers cleared in the DA Market. • Define virtual transactions and financial schedules • Explain examples for virtuals transactions and financial schedules. • Define co-optimization of Energy and Operating Reserves • Understand example of a co-optimized, least-cost solution. • Define scarcity pricing of Operating Reserves • Identify examples of scarcity pricing in the Future Market design

  4. INTRODUCTION

  5. Future Markets Motivation • Increase Market Participant savings by moving from self-commitment to centralized unit commitment • Create a Day-Ahead Market so members can get price assurance capability prior to real-time • Market-based Operating Reserves to support the Consolidated Balancing Authority (CBA)

  6. Future Market Products • Energy • Operating Reserve • Regulation • Regulation Up • Regulation Down • Spinning • Supplemental

  7. SPP Regulation Reserve Definition • Regulation Deployment • The utilization of Regulation-Up and Regulation-Down through Automatic Generation Control (“AGC”) equipment to automatically and continuously adjust Resource output to balance the SPP Balancing Authority Area in accordance with NERC control performance criteria. • Regulation-Down • Resource capacity that is available for the purpose of providing Regulation Deployment between zero Regulation Deployment and the down direction. • Regulation-Up • Resource capacity held in reserve for the purpose of providing Regulation Deployment between zero Regulation Deployment and the up direction.

  8. SPP Spinning Reserve Definition • “The portion of Contingency Reserve consisting of Resources synchronized to the system and fully available to serve load within the Contingency Reserve Deployment Period following a contingency event.” • SPP defines contingency deployment period as 10 minute interval

  9. SPP Supplemental Reserve Definition • “The portion of Operating Reserve consisting of on-line or off-line Resources capable of being synchronized to the system that is fully available to serve load within the Contingency Reserve Deployment Period following a contingency event.” • SPP defines contingency deployment period as 10 minute interval

  10. DA Market Offers (Energy DA Market Offers (Energy RTBM Offers, Load RTBM Offers, Load RTBM Offers, Load RTBM Offers, Load and Operating Reserve), and Operating Forecast, Operating Forecast, Operating Forecast, Operating Forecast, Operating Bids, Operating Reserve Bids, Operating Reserve Reserve Requirements Reserve Requirements Reserve Requirements Reserve Requirements Requirements Requirements Real Real - - Time Time Dispatch Dispatch Day Day - - Ahead Ahead Reliability Unit Reliability Unit Instruction, cleared Instruction, cleared Balancing Balancing Market Market Commitment Commitment DA Market r RUC RUC O Operating Reserve perating Reserve Market Market Commitm Commitment Commitment Commitment (DA Market) (DA Market) (RUC) (RUC) (MW) (MW) (RTBM) (RTBM) (5 minute) (5 minute) DA Market DA Market Dispatch Dispatch Commitment, Cleared Commitment, Cleared Instruction, clea red Energy and Operating Energy and Operating Operating Reserve Operating R Reserve (MW and Reserve (MW and (MW and Price) (MW and Price) DA Market & DA Market & Price) (hourly) Price) (hourly) (5 minute) (5 minute) Net RTBM Net RTBM EMS EMS Settlements Settlements Resource Resource TCR Markets TCR Markets and Load and Load Meter Data Meter Data Future Energy and Operating Reserve Market Functions

  11. Example Conventions • To stay consistent with SPP Settlements, all the examples throughout the presentation that involve settlement calculations follow the convention below:

  12. THE DAY-AHEAD MARKET(DA Market)

  13. Understanding The Day Ahead Market • The Day Ahead Market provides Market Participants with the ability to submit offers to sell Energy, Regulation-Up, Regulation-Down, Spinning Reserve and Supplemental Reserve and/or to submit bids to purchase Energy • SPP goal is to create a financially-binding day-ahead schedule for Energy and Operating Reserves • SPP will use a “Security-Constrained Unit Commitment” software to derive the day-ahead schedule, based on resource offers and bids submitted by Market Participant at 11 am on the day prior to Operating Day

  14. Understanding The Day Ahead Market Bid in Load and Operating Reserves cleared in DA Market • Generation committed through the Day-Ahead Market is selected by SPP in a way that results in the lowest total production cost to serve bid in load and to meet Operating Reserve requirements in the Day-Ahead Market. Generation cleared in DA Market Megawatts Self Committed Resources (Day Ahead Input) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour

  15. Highlights • Market Participants submit Offers and Bids by 11:00 am previous day to Operating Day • Suppliers submit MW quantity and price offers for each hour of Operating Day including any Operating Reserve Offers • Loads submit MW requirement bids for each hour of Operating Day including any price sensitive load bids • Includes offers / bids for virtual supply and virtual load • Security Constrained Unit Commitment (SCUC) scheduling software co-optimizes Energy and Operating Reserves for least cost solution

  16. Highlights • Locational Marginal Prices (LMPs) and Operating Reserve Market Clearing Prices (MCPs) posted by 4:00 PM previous day to Operating Day • Cleared Energy supply paid at Settlement Location LMP • Cleared Energy demand charged at Settlement Location LMP • Cleared Operating Reserves paid at the Reserve Zone MCPs • SPP guarantees revenue sufficiency of committed resource Offers • Supply-Demand deviations settled in Real-Time Market

  17. Cleared Energy & OR Offers DA Market Resource Offers: Energy and OR RTBM Resource Offers RTBM Resource Offers RTBM Resource Offers DA Market DA Confirmed Import, Export & Interchange Transactions DA Market Demand Bids Cleared Energy Bids: Virtuals & Demand DA Resource Commit Schedules DA Resource Commit Schedules DA Resource Commit Schedules DA Market Import, Export & Interchange Transactions Resource Outage Notifications Resource Outage Notifications Cleared Import, Export & Interchange Transactions SPP Operating Reserve Requirements SPP Operating Reserve Requirements SPP Operating Reserve Requirements SPP Operating Reserve Requirements [SCUC] SPP Forecasts (Load & Wind) Virtual Energy Offers and Bids

  18. DA Market Timeline • SPP Publishes Load and Wind Forecast • SPP publishes Operating Reserve requirements • Submit DA Demand Bids, Unit Offers (Energy & OR), Virtual bids & offers and physical transactions to SPP • SPP runs SCUC in the day-ahead mode • Submit revised offers and/or self schedules for units that were not selected in DA run • SPP runs SCUC in RUC mode • SPP reports DA RUC results to affected market participants 0600 1100 1600 1700 1900 2000 Day Prior to Operating Day

  19. What Data Will Market Participants Need to Submit to SPP for Resources? • 3-Part Energy Offers • Energy Offer Curve ($/MWh as a function of MW) • Startup Offers ($/Start for hot, warm, and cold starts) • No-Load Offers ($/hr) • Operating Reserve Offers • Regulation Up ($/MW) • Regulation Down ($/MW) • Spin ($/MW) • Supplemental ($/MW)

  20. What Data Will Market Participants Need to Submit to SPP for Resources? • Operating Parameters and Limits • Ramp rates • Hourly min and max operation limits • Hourly min and max emergency limits • Min and max run time, • Min down time • Etc. • Commit Status • Market • Reliability • Self • Outage • Energy Dispatch Status • Market • VER • Not Qualified • OR Dispatch Status • Market • Fixed • Not Qualified

  21. IMPACTS Energy 3-Part Offer The cost that a Market Participant incurs in starting up a generating unit Drive commitMENT decisions in SCUC The cost for operating a synchronized Resource at zero (0) MW output. Energy Offer Start-Up Offer No-Load Offer A set of price/quantity pairs that represents the offer to provide Energy from a Resource Drive DISPATCH decisions IN SCED

  22. Energy 3-Part Offer Example Consider the following Market Participant Resource: Assuming the Market Participant decides to offer this Resource at cost, formulate its 3-part offer

  23. Energy 3-Part Offer Example Consider the following Market Participant Resource: Startup Offer ($) No Load Offer ($/h) Incremental Offer

  24. Operating Reserve Offers • An Operating Reserve Offer is an offer to supply Reserve Product capacity • Impact: • Financial • Market Participants receive payment for cleared Offers • Reliability • Additional capacity offered into the DA Market allows SPP to cover all of its Operating Reserve Requirements

  25. What Data Will Market Participants Need to Submit to SPP for Loads? • Fixed Demand Bids • Market Participants specify a MW quantity, load location, and hours and become price takers. The bid will be cleared regardless of the price at the load settlement location. • Price-Sensitive Demand Bids • Market Participants specify a MW quantity/price pairs, load location, and hours. A price sensitive demand bid is a bid to buy generation as the price decreases.

  26. |Example 1|Day Ahead Market: Incremental Energy Offer • MP1 submits the DA Incremental Offer Curve below for resource Gen1 for hour 1100. Assuming Gen1 is online and that DA Market LMP clears at $40/MWh, determine Gen1’s expected: • DA Energy award • DA Energy credit / charge MP1 Load1 Gen1 Gen1 DA Energy Offer Curve DA Energy Award = 65 MWh DA Energy Credit/Charge = - DA Award * DA LMP = -65 x 40 = -$2600 (credit)

  27. |Example 2|Day Ahead Market: Price Sensitive Demand Bid • Assume MP1 submits the DA Price Sensitive Demand Bid Curve below for resource Load1 for hour 1100. If DA Market LMP clears at $40/MW, determine Load1’s expected: • DA Energy award • DA Energy credit / charge MP1 Load1 Gen1 Load1 DA Energy Bid Curve DA Energy Award = 65 MWh DA Energy Credit/Charge = DA Award * DA LMP = 65 x 40 = $2,600 (charge)

  28. |Example 3|Day Ahead Market: Operating Reserve Offer • MP1 submits a $5/MW DA Spin Offer for resource Gen1 for 1100. Assume Spin clears the DA Market at a 12 $/MW MCP and that Gen1 cleared 65 MW of Energy. Determine Gen1’s expected: • DA Spin award • DA Spin credit/charge MP1 Load1 Gen1 DA Spin Award = Min [15, 120 – 65] = 15 MW DA Spin Credit/Charge = - DA Award * DA MCP = - 15 x 12 = -$110 (credit) Gen1 DA Spin Offer

  29. Understanding Make Whole Payments • SPP Market offers the Make-Whole Payment guarantee: all units that are started by the RTO receive enough DA revenues to cover their 3-part offers (Energy, No-Load, and Startup Offers) and Operating Reserve Offers OR Reserve Offer Make-Whole Payment Energy Offer No-Load Offer Market Revenues Startup Offer

  30. |Example 4|Day Ahead Market: Understanding Make Whole Payments • Assume that: • Gen1 is initially on-line • SPP Commits Gen1 unit for all 24 hours • DA LMP = 40 $/MWh for all 24 hours • DA Schedule = 65 MWh for all 24 hours • Let’s determine: • DA Revenues • DA Costs • DA Make-whole Payment MP1 Load1 Gen1 Gen1 DA Energy Offer Curve

  31. |Example 4|Day Ahead Market: Understanding Make-Whole Payments • Assume that: • Gen1 is initially on-line • ISO Commits Gen1 unit (cold start) for all 24 hours • DA Schedule = 65 MWh for all 24 hours • DA LMP = 40 $/MWh for all 24 hours • Answers: • DA Revenues = DA LMP x DA Energy Award x 24 • (40 x 65 ) x 24 = $62,400 • DA Costs =(DA Energy Cost + DA No-Load Cost) x 24 • = (1,175 + 700) x 24 =$45,000 • DA Make-Whole Payment = Min{0;DA Rev-DA Cost) • = $0 MP1 Load1 Gen1 Gen1 DA Energy Offer Curve

  32. |Example 5|Day Ahead Market: Understanding Make-Whole Payments • Assume that: • Gen1 is initially off-line • SPP Commits Gen1 unit (cold start) for all 24 hours • DA Schedule = 65 MWh for all 24 hours • DA LMP = 40 $/MWh for all 24 hours • Let’s determine: • DA Revenues • DA Costs • DA Make-Whole Payment MP1 Load1 Gen1 Gen1 DA Energy Offer Curve

  33. |Example 5|Day Ahead Market: Understanding Make-Whole Payments • Assume that: • Gen1 is initially off-line • SPP Commits Gen1 unit (cold start) for all 24 hours • DA Schedule = 65 MWh for all 24 hours • DA LMP = 40 $/MWh for all 24 hours • Answers: • DA Revenues = DA LMP x Energy Award x 24 • (40 x 65 ) x 24 = $62,400 • DA Costs =(Energy Cost + No-Load Cost) x 24 • + Startup Cost • = (1,175 + 700)x24 + 17,500 = $62,500 • DA Make-Whole Payment = Min{0;DA Rev-DA Cost) • = -$100 (credit) MP1 Load1 Gen1 Gen1 DA Energy Offer Curve

  34. RELIABILITY UNIT COMMITMENT (RUC)

  35. Understanding RUC • RUC is required to ensure reliable operating plan during the operating day • Day-Ahead RUC performed following Day-Ahead Market clearing • Intra-Day RUC performed throughout the operating day as needed, at least every 4 hours • RUC process ensures that Market physical commitment produces adequate capacity to meet SPP Load Forecast and Operating Reserve requirements in real-time • Uses SCUC algorithm to commit / de-commit additional resources as needed

  36. Understanding RUC Bid in Load and Operating Reserve cleared in DA Market Generation committed in RUC Generation cleared in DA Market SPP Load Forecast and Operating Reserve Requirements (RUC Input) Megawatts Generation de-committed in RUC Self Committed Resources 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour

  37. Highlights • Reliability Unit Commitment (RUC) ensures enough capacity, in addition to Operating Reserve capacity, is committed to reliably serve the SPP forecasted load for the next operating day • All Market Participants need to submit offers for all their registered resources that are not on a planned, forced or otherwise approved outage (Real-Time Balancing Market Resource Offers) • RUC will take into consideration the cleared resource commitment schedules from the DA Market or previous RUC clearing process (dependent upon market timeline) • Same as in the Day-Ahead Market, Resources committed by the RUC processes are subject to make-whole payments given that they meet the eligibility criteria

  38. Highlights • A Security Constrained Unit Commitment (SCUC) program is used in order to commit (decommit) and dispatch committed resources based on submitted 3-Part Energy Offers and Operating Reserve Offers in order to meet SPP Load Forecast and Operating Reserve Requirements, respecting transmission system operating constraints • RUC clearing is performed for Energy and Operating Reserve products on a least cost, co-optimized basis accounting for Resource marginal impacts on the transmission network (marginal system losses and congestion)

  39. Resource Commit / De-commit Schedules RTBM Resource Offers RTBM Resource Offers RTBM Resource Offers RTBM Resource Offers R U C Process DA Confirmed Import, Export & Interchange Transactions DA Confirmed Import, Export & Interchange Transactions Resource Dispatch and AGC Notifications DA Resource Commit Schedules DA Resource Commit Schedules DA Resource Commit Schedules DA Resource Commit Schedules Resource Outage Notifications Resource Outage Notifications Fixed Interchange Transaction Curtailment Notification SPP Operating Reserve Requirements SPP Operating Reserve Requirements SPP Operating Reserve Requirements SPP Operating Reserve Requirements [SCUC] SPP Forecasts (Load & Wind) SPP Forecasts (Load & Wind)

  40. Day-Ahead RUC vs. Intra-Day RUC • Both RUC processes share the same purpose: ensure a reliable operating plan during the operating day • Both processes use similar input data: • Day-Ahead RUC uses outputs from Day-Ahead Market clearing process and the SPP available forecasts in the Day-Ahead period. • Intra-day RUC uses outputs from the Day-Ahead Market, Day-Ahead RUC and previously run Intra-day RUC processes within the operating day • Intra-day RUC uses more up to date forecast data and state estimator data closer to the operating hour

  41. Day-Ahead RUC Timeline • Submit revised offers and/or self schedules for units that were not selected in DA run • SPP runs SCUC in RUC mode • SPP reports DA RUC results to affected Market Participants 1700 1900 2000 Day Prior to Operating Day

  42. Intra-Day RUC Timeline = • Submit revised offers and/or self schedules for units that were not selected in previous DA, DA RUC, Intra-Day RUC • SPP runs SCUC in RUC mode • SPP reports RUC results to affected Market Participants Intra-Day RUC Process Intra-Day RUC Process Intra-Day RUC Process Intra-Day RUC Process Intra-Day RUC Process Intra-Day RUC Process Intra-Day RUC Process 1600 2400 0800 1200 2000 0000 0400 Operating Day

  43. THE REAL-TIME BALANCING MARKET(RTBM)

  44. Understanding the Real-Time Balancing Market • The Real-Time Balancing Market (RTBM) serves as the mechanism through which SPP balances real-time load and generation. • Resources are selected to be increased (incremented) or decreased(decremented) in order to maintain system balance Generation Load

  45. Highlights • Uses Security Constrained Economic Dispatch (SCED) to ensure results are physically feasible. • Operates on a continuous 5-minute basis; calculates Dispatch Instructions for Energy and clears Operating Reserve by resource. • Energy and Operating Reserve are co-optimized. • Settlements are based on the difference between the results of the RTBM process and the DA Market clearing. • Charges are imposed on Market Participants for failure to deploy Energy and Operating Reserve as instructed.

  46. Highlights • 1-part offer: Energy Offer Curve • Operating Reserve Offers • Regulation-up and Regulation-down • Spinning Reserve and Supplemental Reserves • Accommodates participation of supply and demand external to SPP • Imports, exports and through transactions and external resources

  47. |Example 6|Real-Time Balancing Market Energy Offer Curve • MP1 clears DA as shown in Example 1 and then submits the following Incremental Offer Curve for Resource Gen1 for hour 1100 in Real-Time. Assuming Gen1 is online and that RT Market LMP is $40/MWh, Gen1’s dispatch instruction is 60MW for each interval of the hour. • What will be settlement for this scenario? MP1 Load1 Gen1 Gen1 RT Energy Offer Curve RT Energy Actual= 60MWh RT Energy Settlement = (RT Actual -DA Award) x RT LMP = (-60 + 65) x 40 = $200.00 (charge)

  48. |Example 7|Real Time Balancing Market Incremental Energy Offer • MP1 clears DA as shown in Example 1. Assuming Gen1 is metered at 70 MWh at hour 1100 and that RT Market LMP clears at $40/MWh, determine Gen1’s: • RT Energy award • RT Energy settlement MP1 Load1 Gen1 Gen1 RT Energy Offer Curve RT Energy Award = 70MWh RT Energy Settlement = (RT Actual -DA Award) x RT LMP = (-70+65) x 40 = -$200 (credit)

  49. FINANCIAL SCHEDULES

  50. Understanding Financial Schedules • Bilateral Transactions that transfer financial responsibility within the SPP Market Footprint • Energy • Operating Reserve • May be entered up to 4 days after Operating Day

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