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ERCOT Wholesale Market Basics

ERCOT Wholesale Market Basics. Module 2 Market Operations. Topics . Module 2. Essential Concepts Ancillary Services Congestion Management. Topic 1: Essential Concepts. Module 2. Essential Concepts. Module 2. Market Structure, Wholesale Concepts and Roles

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ERCOT Wholesale Market Basics

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  1. ERCOTWholesale Market Basics Module 2 Market Operations

  2. Topics Module 2 • Essential Concepts • Ancillary Services • Congestion Management ERCOT Wholesale Market Basics

  3. Topic 1: Essential Concepts Module 2 ERCOT Wholesale Market Basics

  4. Essential Concepts Module 2 • Market Structure, Wholesale Concepts and Roles • Day-Ahead and Operating Day Concepts ERCOT Wholesale Market Basics

  5. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Wholesale Market: • Zonal Congestion Management • Unbundled Transmission • Bilateral Market Requirements: • QSE Representation • Balanced Schedules • Portfolio & Unit-Specific Dispatch ERCOT Wholesale Market Basics

  6. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Qualified Scheduling Entities (QSEs)submit Balanced Schedules, Ancillary Services Bids and a Resource Plan (if applicable) to ERCOT. Load Serving Entities (LSEs) provide electric service to retail and wholesale customers. LSEs include Retail Electric Providers, Competitive Retailers, and Non-Opt In Entities that serve load. Resource Entities (REs) own or control a resource. ERCOTmanages any real-time imbalances during the Operating Period between forecasts and actual demands by deploying balancing energy to QSEs qualified to represent Resources. ERCOT Wholesale Market Basics

  7. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 ERCOT is here to ensure reliability by: • Resource capacity planning • Real-time transmission management • Procure balancing energy • Issue deployment instructions to units, as needed ERCOT is similar to an Air Traffic Controller ERCOT Wholesale Market Basics

  8. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Qualified Schedule Entities functions: • Submit Balanced Schedules • Submit Ancillary Services Bids • Resource Command and Control • Settle with ERCOT QSE All Resource Entities and LSEs must be represented by a QSE ERCOT Wholesale Market Basics

  9. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Bilateral Transactions: • A trade agreement between two entities • Bilateral transactions are scheduled with ERCOT Examples: • QSE A sells a block of 50 Mwh (North Zone), to QSE B for Hour-Ending 1100-1300 • QSE A sells 3 Mw of Responsive Reserve to QSE B for Hour-Ending 1400. ERCOT Wholesale Market Basics

  10. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Bilateral Transactions cont’ • Quantity of Resources and Obligations must Balance • Bilateral Transactions must include Qty, QSE, Zone, Matched with Counterparty. Resources: Generation or purchases Obligations: Load or sales ERCOT Wholesale Market Basics

  11. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 QSE Balanced Schedule – Portal Display ERCOT does not require QSEs to be balanced within each Congestion Zone. ERCOT Wholesale Market Basics

  12. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Balanced, but mismatched ERCOT Wholesale Market Basics

  13. A QSE exporting from ERCOT through a DC Tie export schedule will include that DC Tie export schedule as an Obligation in its Balanced Schedule by using the identifier field indicating the appropriate DC Tie. Imports include the DC Tie import schedule as a Supply in its Balanced Schedule (as shown below). Direct Current Tie Transactions Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 ERCOT Wholesale Market Basics

  14. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 Two commercially operational DC-Ties between ERCOT and the Eastern Interconnection • North (DC_N) located near Oklaunion • East (DC_E) located near Monticello Three DC-Ties between ERCOT and Operating Authority in Mexico Comision Federal de Electricidad (CFE) • Eagle Pass (DC_S) located near Eagle Pass • Railroad (DC_R) located near McAllen • Laredo (DC_L) located near Laredo ERCOT Wholesale Market Basics

  15. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Module 2 “Relaxed” Balanced Schedules: • QSE may set obligations equal to supply, and/or schedule BES via ERCOT to meet Obligations* • QSE is NOT to schedule ERCOT ISO as an Obligation for Balancing Energy (only used for RMR) Resources: Generation or purchases Obligations: Load or sales * Limited by QSE’s collateral with ERCOT ERCOT Wholesale Market Basics

  16. Essential ConceptsMarket Structure, Wholesale Concepts and Roles Let’s Check Under the Hood! Module 2 Resource Plans Each QSE representing a Resource or Load Acting as a Resource must submit a Resource Plan!! • Plan of how Generation Resources will operate • Due to ERCOT by 4:00 pm of the day-ahead period • Used by ERCOT to determine resource adequacy • Validated against scheduled Portfolio Generation ERCOT Wholesale Market Basics

  17. Essential Concepts Module 2 • Market Structure, Wholesale Concepts and Roles • Day-ahead and Operating Day Concepts ERCOT Wholesale Market Basics

  18. Essential ConceptsDay-ahead and Operating Day Concepts Commercial Operations ERCOT Market Timeline Market Operations Power Operations Module 2 Final Settlement 59 days after Operating Day True-up Settlement: 180 days after Operating Day And/or specific Protocol Criteria is met Initial Settlement 10 days after Operating Day Operating Period:Balancing Energy ClearingOccurs every 15 minutes Day-Ahead Period:6:00am to 6:00pm prior to Operating Day. Adjustment Period: Precedes Operating Period ERCOT Wholesale Market Basics

  19. Day-Ahead Period 6:00AM to 6:00PM on the day prior to the Operating Day (“flow” date) QSEs submit balanced schedules and ancillary services bids ERCOT clears Ancillary Services Markets, and publishes results Adjustment Period Time between the close of the Day-Ahead Market and the start of the Operating Period QSEs may modify their schedules and/or bids during this time Operating Period Includes the Operating hour (“flow hour”) and the hour prior to Operating hour (look-ahead studies) Essential ConceptsDay-ahead and Operating Day Concepts Module 2 ERCOT Wholesale Market Basics

  20. Market Timeline & When QSE Schedules Become Binding Essential ConceptsDay-ahead and Operating Day Concepts Module 2 HOUR 1: The operating period begins one hour prior to the operating hour 1800: End of Day Ahead Period HOUR 2: Operating hour OPERATING PERIOD DAY AHEAD ADJUSTMENT PERIOD Two hour time period Adjustment period begins at 1800 the day before the operating period and ends one hour prior to operating hour At each Execution Of SPD Balancing Energy Market, Snapshot of QSE Resource Plan is taken. 1300: A/S Schedules and A/S Bids LOCKED End of Adjustment Period snapshot: Replacement Reserve, Resource Plan, Bilateral Energy Resource Plans may be Updated at any time during the Balancing Energy Market 1600: Bilateral Energy and Resource Plan snapshot ERCOT Wholesale Market Basics

  21. Essential ConceptsDay-ahead and Operating Day Concepts Module 2 Midnight ERCOT Wholesale Market Basics

  22. Day-Ahead Period Key Times 06:00 Forecast and A/S Obligations Information Published 11:00 Deadline for Day-Ahead Scheduling (Bilateral, A/S) 11:15 Deadline to resolve Day-Ahead Mismatches 13:00 Deadline for A/S Capacity Market Bids Deadline for Adjusted Day-Ahead Schedules 13:15 Deadline to resubmit corrected updated schedules 13:30 A/S Capacity results & MCPC 15:00 Submit updated AS schedule including Self-Arranged and AS bids selected by ERCOT 16:00 Deadline for Resource Plan submittal Replacement Reserve Bids System Lockdown for Day-Ahead Analysis 18:00 Day-Ahead Period complete; start of Adjustment Period Essential ConceptsDay-ahead and Operating Day Concepts Module 2 ERCOT Wholesale Market Basics

  23. Adjustment Period On the Operating Day, the Adjustment Period is anytime up to one hour prior to Operating (“flow”) Hour when QSEs can alter or remove existing schedules, or submit new schedules for the Operating Hour. Deadline for QSEs to submit schedules & changes is one hour prior to the “flow” hour. (i.e., deadline for HE1300 is 1100, because HE 1300 begins at 1200). Essential ConceptsDay-ahead and Operating Day Concepts Module 2 ERCOT Wholesale Market Basics

  24. Operating Period is 2 Hours It starts immediately after the Adjustment Period. QSE schedules cannot be altered or removed. First Hour – system lockdown – allows for system studies for the upcoming flow hour based on QSE schedules Second Hour - is the Operating (“Flow”) Hour – real-time monitoring and security analysis Essential ConceptsDay-ahead and Operating Day Concepts Module 2 ERCOT Wholesale Market Basics

  25. Topic 2: Ancillary Services Module 2 • Essential Concepts • Ancillary Services • Congestion Management ERCOT Wholesale Market Basics

  26. Ancillary Services Module 2 • Definitions and Requirements • LSE Obligations and Supply Options • Services Exclusively Arranged By ERCOT • Merit-Order vs. Out of Merit ERCOT Wholesale Market Basics

  27. Ancillary ServicesDefinitions and Requirements Module 2 What are Ancillary Services, and why does ERCOT need them? • Generation that is intentionally reserved, in the event it is needed (i.e., a plant that generates 50 Mw of its maximum of 100 Mw has 50 Mw of reserve capacity available) • Reserve capacity can be utilized (converted to energy) to keep the lights on in the event of an unforeseen system disturbance “Energy Insurance” ERCOT Wholesale Market Basics

  28. Ancillary ServicesDefinitions and Requirements Module 2 As a QSE that schedules load, why do I need to know about A/S? • Market Participants serving load have an A/S Obligation as a “cost of doing business”. • Similar to Auto Insurance: If you own a vehicle in Texas, Liability Insurance is a mandated cost that goes along with owning the vehicle. ERCOT Wholesale Market Basics

  29. Ancillary ServicesDefinitions and Requirements Module 2 Capacity Reserve Services that can be self arranged by QSEs: • Regulation – provision of Resource capacity to ERCOT for continuous frequency control • Responsive Reserve – unloaded Generation, or Load Resources capable of controlling consumption, which can be deployed within 15 seconds • Non-Spinning Reserve – Off-line or reserved capacity, or Loads acting as a Resource, capable of deploying within 30 minutes for at least one hour ERCOT Wholesale Market Basics

  30. Ancillary ServicesDefinitions and Requirements Module 2 Balancing Energy Service: • Awarded by ERCOT to bidding QSEs • Used to balance system wide Load variations with generation • Used to resolve transmission constraints and congestion ERCOT Wholesale Market Basics

  31. Ancillary ServicesDefinitions and Requirements Module 2 System Requirements Annual Procedure • ERCOT establishes the methodology for determining A/S system requirements. It is reviewed and approved in the stakeholder process (TAC). Monthly Calculation • System-wide requirement is calculated, based on statistical calculations and historical deployments. “2008-2009 ERCOT Methodologies for Determining Ancillary Service” posted under Key Documents. ERCOT Wholesale Market Basics

  32. Ancillary ServicesDefinitions and Requirements Module 2 OK, what is my share of the ERCOT System Requirements? • It is based on your load relative to total ERCOT load, or Load Ratio Share (LRS). • If you have 10 Mw of Load, and ERCOT has 100 Mw of total load, your LRS is 10%. Your obligation will be 10% of each service that ERCOT requires. QSE Day-Ahead LRS Obligations are posted each morning by 6AM ERCOT Wholesale Market Basics

  33. Ancillary ServicesDefinitions and Requirements Module 2 Do I have a requirement if I am a QSE that has no load? • No. If you only have bilateral transactions and no load, you will not incur any A/S Obligations, UNLESS…… • …you have an EXPORT on the DC Tie. An export is considered load, so if you schedule an export, you can expect to see an A/S Obligation 14 days later. ERCOT Wholesale Market Basics

  34. Ancillary Services Module 2 • Definitions and Requirements • LSE Obligations and Supply Options • Services Exclusively Arranged By ERCOT • Merit-Order vs. Out of Merit ERCOT Wholesale Market Basics

  35. Ancillary ServicesLSE Obligations and Supply Options Module 2 A/S Obligation – Load Ratio Share • ERCOT calculates the “load-ratio share” (LRS) of each Load Serving Entity (LSE). • QSE’s Load Ratio Share is the aggregate total of the LSE LRS that it represents. • QSE’s A/S Obligation is its LRS of the Total ERCOT-wide requirement. ERCOT Wholesale Market Basics

  36. Ancillary ServicesLSE Obligations and Supply Options Module 2 Determination of LRS for Settlement Day-Ahead Obligation: Based on the Load Ratio Share of the Load from the Initial Settlement data, for the Operating Day that is 14 days before the day in which the Obligation is being calculated. After the Operating Day: The AS Obligation calculations are adjusted (trued-up) based on the most up-to-date Load Data for each settlement run. ERCOT Wholesale Market Basics

  37. Ancillary ServicesExample – Load Ratio Share Module 2 INTRODUCING!! AlphaQSE AlphaQSE A FULL SERVICE QSE • Markets and Schedules WATTSco power generation • Wholesale Supplier and Scheduler for POWERMART and EZWatts, retailers • Qualified to provide Ancillary Services • Provide Power Marketing Services ERCOT Wholesale Market Basics

  38. Ancillary ServicesExample – Load Ratio Share AlphaQSE Module 2 Example: Day-Ahead A/S Obligation for 4/26/08 represents POWERMART [88]and EZWatts [55], LSEs. On April 12, 2008 (14-days ago) the aggregated load for these two LSEs came to: AlphaQSE April 12 Load LRS ERCOT Wholesale Market Basics

  39. Ancillary ServicesExample – Load Ratio Share AlphaQSE Module 2 A/S Obligation – For Example! For intervals “hour-ending” 1000 through 1200 the A/S obligations are determined by taking the LRS times each ERCOT-wide obligation, rounded to a whole MW. ERCOT Wholesale Market Basics

  40. Ancillary ServicesExample – Load Ratio Share AlphaQSE Module 2 A/S Obligation – For Example! -represents LSE_88 and LSE_55 - A/S Obligation = sum of the obligations of LSE_88 and LSE_55: AlphaQSE AlphaQSE 26-Apr-04 ERCOT Wholesale Market Basics

  41. Ancillary ServicesLSE Obligations and Supply Options Module 2 Portal View of Day-Ahead Obligations Posted by 6 AM one day prior to the Operating Day Obligation is under “Required MW” column Legend: DRS: Down Regulation Service NSRS: Non Spin Reserve Service RRS: Responsive Reserve Service URS: Up Regulation Service ERCOT Wholesale Market Basics

  42. Ancillary ServicesLSE Obligations and Supply Options Module 2 What are my options for buying and scheduling Ancillary Services to fulfill my obligation? • QSEs can Self-Arrange: a. Using its own resource b. Purchase from another QSE (A/S Bilateral Trade) • QSEs can purchase from ERCOT at the Day-Ahead MCP for Capacity (MCPC) Note: Per Protocol Section 4.3.1: QSEs that intend to purchase their obligation from ERCOT MUST schedule a bilateral PURCHASE from ERCOT. ERCOT Wholesale Market Basics

  43. Ancillary ServicesLSE Obligations and Supply Options Module 2 Ancillary Services Sellers • A/S providers must be qualified by ERCOT to provide each A/S • Must keep awarded capacity in reserve • Must meet performance metrics (perform when called upon) A/S ERCOT Wholesale Market Basics

  44. Ancillary ServicesLSE Obligations and Supply Options Module 2 Option to Self-Arrange Other Attributes: • Day-Ahead Capacity Market • Selected in Merit Order ERCOT Wholesale Market Basics

  45. Ancillary ServicesLSE Obligations and Supply Options Module 2 A/S Cash Flows Day-Ahead Capacity Result Award * $ Hourly MCPC QSE A ERCOT “I will reserve X Mw (awarded qty) of generation” Deployment on Operating Day Mw * $ MCPE (BES) QSE A ERCOT ERCOT-instructed Mw ERCOT Wholesale Market Basics

  46. Ancillary ServicesLSE Obligations and Supply Options Module 2 Day-Ahead Capacity Result Award * $ Hourly MCPC QSE A ERCOT “I will reserve X Mw (awarded qty) of generation” If NO Deployments are issued by ERCOT • QSE “A” KEEPS the capacity payment • Also similar to paying auto insurance premium, but not having a claim before the policy expires ERCOT Wholesale Market Basics

  47. Ancillary ServicesLSE Obligations and Supply Options Module 2 How does ERCOT get the money to pay for Capacity? $$ $$ QSE A (e.g. Resource) QSE Z (Load) ERCOT Capacity (MW) Capacity (MW) • ERCOT charges load QSEs for non- self-arranged obligations • ERCOT remains revenue-neutral! ERCOT Wholesale Market Basics

  48. Ancillary Services Module 2 • Definitions and Requirements • LSE Obligations and Supply Options • Services Exclusively Arranged By ERCOT • Merit-Order vs. Out of Merit ERCOT Wholesale Market Basics

  49. Ancillary ServicesExclusively Arranged By ERCOT Module 2 Replacement Reserve • Resources planned to be off-line, but available • Deployed for Capacity Insufficiency, Local Congestion Black Start • Widespread black out event • Started without support of the power grid • Contracted by ERCOT annually ERCOT Wholesale Market Basics

  50. Reliability Must-Run (RMR) Resolves local system reliability Contracted by ERCOT Otherwise would not be an active resource Ancillary ServicesExclusively Arranged By ERCOT Module 2 ERCOT Wholesale Market Basics

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