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Limitations on Load Participation in the Future Nodal Market

Limitations on Load Participation in the Future Nodal Market. PUCT Demand Response Workshop (Project No. 32853) Jay Zarnikau Frontier Associates January 2007. Outline. How will we know what the price is? Problems introduced by the RUC Capacity Short Charge.

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Limitations on Load Participation in the Future Nodal Market

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  1. Limitations on Load Participation in the Future Nodal Market PUCT Demand Response Workshop (Project No. 32853) Jay Zarnikau Frontier Associates January 2007

  2. Outline • How will we know what the price is? • Problems introduced by the RUC Capacity Short Charge

  3. The Need for Advanced Price Information • Presently, balancing energy prices are announced to the market 10 or 15 minutes in advance of a 15-minute interval. • In the future nodal market, there will be no advance notice of real-time prices. • How can loads respond to real-time prices if they aren’t given price information?

  4. Questions for ERCOT • When will zonal price information be available? • We know that nodal prices will be available at the start of a 5-minute SCED interval. And a particular SCED interval may start 5 or 10 minutes into a settlement interval. But when will they be averaged and reported to the market on a zonal basis?

  5. Will the DAM Help? • While the Day-Ahead Market (DAM) may provide some indication of real-time prices, a lot of things can happen between the close of the DAM and real-time that could affect real-time prices. For example: • Weather may differ from the day-ahead forecast • Generating units may become unavailable • Load may be higher than forecast • Thus, I have doubts whether the DAM prices will be an accurate indicator of real-time prices. • And isn’t real-time response as important (if not more important) than day-ahead demand response?

  6. Topics for Discussion • How can we provide loads with advanced notice of zonal prices? • Should we try to provide at least nodal prices to loads that agree to be settled on nodal prices? • Will (non-binding) forecasts of real-time zonal prices help? • How will power plants with “ramping time” requirements be provided with advance notice of dispatch instructions? Is there an analogous problem there? • Should price responsive loads be settled based on 5-minute SCED intervals, rather than 15-minute intervals (which might address part of the problem).

  7. The RUC Capacity Short Charge • This is intended as a penalty to discourage REPs from going into the market with insufficient capacity. • A QSE that fails to arrange a sufficient supply of electricity through the DAM or bilateral contracts risks a penalty in the RUC process. • No load can perfectly anticipate its load level. • Thus, loads will be unexpectedly long or short at various times. • The amount of any RUC penalty is not known in advance.

  8. The RUC Capacity Short Charge • Consequently, this charge will discourage consumers from relying upon tomorrow’s analog to today’s “MCPE Products.” • If consumers “go long” in order to minimize the risk of RUC Capacity Short Charges, then they may have little motivation to respond to real-time prices.

  9. Proposal • Create a program which: • Insulates price-responsive loads from the RUC Capacity Short Charge • Provide a payments to program participants • In return, participants are required to curtail at certain price points • The ISO uses this information regarding the amount of load that will curtail at each price point to assist in system operations (perhaps it could be used in SCED and RUC runs) • This is consistent with the idea of priority pricing

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