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Market Pricing Integrated Proposal: Consequences, Trade-Offs & Implementation. Background. Three pricing issues pre-dispatch vs. real-time prices counter-intuitive prices in times of shortage size, content and variability of uplift - PowerPoint PPT Presentation
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Jun 18, 2003 Market Operations Standing Committee of the IMO 1
Market Pricing Integrated Proposal:
Consequences, Trade-Offs & Implementation
Jun 18, 2003 Market Operations Standing Committee of the IMO 2
Background • Three pricing issues
– pre-dispatch vs. real-time prices– counter-intuitive prices in times of shortage– size, content and variability of uplift
• Contributing factors not only give rise to pricing issues, but also:– reduce market efficiency– jeopardize reliability of IMO-controlled grid
Jun 18, 2003 Market Operations Standing Committee of the IMO 3
Given That...• Maintaining status quo is not acceptable:
– pricing signals and outcomes (incl scarcity pricing)– reduced market efficiency; reliability at risk
• Supply is tight in Ontario for foreseeable future• Market structure schedules “just enough”
resources to meet market demands• Significant increase in average HOEP would
cause hardship to load customers
then……….
Jun 18, 2003 Market Operations Standing Committee of the IMO 4
Proposed Integrated Approach
• Objective:– Provide rational and understandable market prices,
improve efficient operation of IMO-administered Markets and improve reliable operation of IMO-controlled Grid
• Strategy:– Reduce frequency of need for control actions, then
change manner in which control actions are utilized i.e. put control action sources of Operating Reserve “in the market”
– Staging of initiatives
Jun 18, 2003 Market Operations Standing Committee of the IMO 5
Summary of Stages• Stage 1 (already underway):
– 4-2 window; HADL; additional market information
• Stage 2 (under development):– reduce failed transactions– spare generation on-line
• Stage 3:– additional supply (R/S of domestic generation units)
• Stage 4:– put control action OR into the market (price & qty)
Jun 18, 2003 Market Operations Standing Committee of the IMO 6
Consequences and Trade-OffsInitiative and Approach Address Pricing, Efficiency &
Reliability Issues but…..
Initiatives, singly and together, have consequences that would mean trade-offs to achieve the stated
objective
Question: To what extent are these consequences and trade-offs acceptable in order to move the market forward from
the status quo?
Jun 18, 2003 Market Operations Standing Committee of the IMO 7
Spare Generation On-LineIssues/Consequences/Trade-offs - Market Pricing• Potential for reduced price volatility; scarcity pricing
• Downward pressure on market prices (impact of 12x ramp rate in market schedule)
Issues/Consequences/Trade-offs - Suppliers • Level playing field with neighbouring suppliers
• Potential for reduced market value of flexible generation
• Potential for reduced generator revenues through reduced prices
• What costs are guaranteed? Is auditing necessary?
Jun 18, 2003 Market Operations Standing Committee of the IMO 8
Control Action ORIssues/Consequences/Trade-offs - Suppliers• Potential for not scheduling market sources of Operating
Reserve• Cap on Operating Reserve prices; scarcity pricing• Activation vs Scheduling
Issues/Consequences/Trade-offs - Loads• Potential for reduced reliability and quality of service i.e.
potential for increased utilization of voltage reductions• Upward pressure on market prices; rational price signals
and outcomes
Jun 18, 2003 Market Operations Standing Committee of the IMO 9
Control Action OR• Objective is to reduce pricing issues• Proposal - to offer Control Action Resources
into the market based on their value• Value difficult to determine directly - use
participant issues to arrive at approximate value
Jun 18, 2003 Market Operations Standing Committee of the IMO 10
Control Action OR• Value of Control Action Resources -
participant issues1 Maintain reliability and quality - limit exposure2 Minimize competition for OR selection with
dispatchable resources
[Lower Bound on resource price] 3 Impact on average HOEP should be consistent
with the benefit of use of Control Action OR
[Upper Bound on resource price]
Jun 18, 2003 Market Operations Standing Committee of the IMO 11
Control Action OR• Uncertainty in implementation
– Control Action Resources are included in pre-dispatch and real-time
– Impact of initiatives going forward is difficult to quantify
– Balance of benefits is difficult to establish
• Uncertainties are driving conservative impact assumptions - balance of benefits skewed depending on assumptions
Jun 18, 2003 Market Operations Standing Committee of the IMO 12
Control Action OR• Implement Stage 4 in steps
– Prudent approach recognizing uncertainty– Allow assumptions to be benchmarked– Allow participants to react to market changes
Jun 18, 2003 Market Operations Standing Committee of the IMO 13
Control Action OR• Proposal
– Implement 200 MW of 3 % V/R as soon as possible (covers 15 % of historical incidents), followed monthly by;
– additional 200 MW of 3 % V/R (total 3 % covers 60 % of historical incidents)
– 280 MW of 5 % V/R– Removal of 200 MW supplemental OR
requirement– Allow pricing of 30 minute OR shortfall
Jun 18, 2003 Market Operations Standing Committee of the IMO 14
Control Action OR• Trade-off’s are required -
Minimize competition for OR selection with dispatchable resources
- choose conservative prices to meet objectives
- choose prices which meet 95 % criteria in pre-dispatch
ie. 95 % of historical pre-dispatch OR MCP’s < OR price chosen
- Results in OR price of;
30 $ for 3 % Voltage Reduction resource
Jun 18, 2003 Market Operations Standing Committee of the IMO 15
Control Action OR• Choosing price based on 95 % pre-dispatch
criteria results in outcomes for objectives 1 and 3
1 - Maintain reliability and quality - limit exposure- Load exposure expected to be less than that
experienced in 2002
3 - Impact on average HOEP consistent with benefit of use
- Upper bound impact on average HOEP is expected to be approximately neutral
Jun 18, 2003 Market Operations Standing Committee of the IMO 16
Control Action OR• Benefits of the stepped approach
– Starts to address pricing signal concerns immediately (first 200 MW addresses ~ 15 % of historical incidents, second 200 MW ~ 60 %)
– Starts to improve reliability based on better price signals
– Allows the marketplace to gain experience with control action resources in the market
– Allows for benefit of other initiatives to be observed and factored into future steps
Jun 18, 2003 Market Operations Standing Committee of the IMO 17
Failed Intertie Transactions - Update
• Ongoing compliance measures– clarifying MISO “safe harbours”– minor adjustments to existing “safe harbours”
• Ongoing MISO discussions– release of transmission capacity
• Ongoing NYISO discussions– protocol enhancements
Jun 18, 2003 Market Operations Standing Committee of the IMO 18
Implementation of SGOL and Control Action Operating
Reserve
Jun 18, 2003 Market Operations Standing Committee of the IMO 19
Implementation TimelineConcepts Developed
SGOL & ORIMImplementation
MarketRulesDates Milestone
NewSupply
Reduce FailedTransactions
TP
June 24
July 3
June 18June 16
June 10June 11
MOSC
MOSC
IMO Board
Go live
June 4
MAC
Notification ofintent to go live
Procedures, QuickTakes issuedMid-July
End July
TP
TP
Jun 18, 2003 Market Operations Standing Committee of the IMO 20
SGOL - Market Rules (MR-00235)• Generation facility eligibility criteria
– dispatchable, not quick start, domestic
• MP Obligations if they wish facility to be eligible– provide minimum loading point, minimum run time– provide costs on per start basis
• Other eligibility criteria– scheduled for hour “h” in “h-3” P-D schedule; notify IMO of
intent to synchronize; synchronize before end of hour “h”
• Combined Guaranteed Costs: fuel only; auditing
Jun 18, 2003 Market Operations Standing Committee of the IMO 21
SGOL Implementation - Overview
HH-1H-2H-3 H+1 H+2 H+3
SyncTime
Unitstart-up
Scheduled
H+4
Maysynchroniseanytime here
ReachedMin MW
Min Runtime = 3hrs
Min MW
0 MW
Start ofMin
Constraint
End ofMin
Constraint
Start-up costMinimum
generation cost
Unitstart-up
SyncTime
ReachedMin MW
End of minruntime
Minimum loadramping cost
Jun 18, 2003 Market Operations Standing Committee of the IMO 22
Affected Market Manuals• MM 1.2: Facility Registration, Maintenance and De-
Registration (MDP_PRO_0016);• MM 4.2: Submission of Dispatch Data in the Real-
Time Energy and Operating Reserve Markets (MDP_PRO_0027);
• MM 5.5: Physical Markets Settlement Statements (MDP_PRO_0033);
• IMO Charge Types and Equations (IMP_LST_0001);• Format Specifications for Settlement Statement Files
and Data Files (IMP_SPEC_0005)
Jun 18, 2003 Market Operations Standing Committee of the IMO 23
MM 1.2 Facility Registration, Maintenance and De-Registration
• Market participants are required to complete a registration form. Information to be provided:– Market Participant Name and ID;– Resource Name and ID;– Minimum Loading Point [MW];– Minimum Run-Time [hrs].
• This information should be fairly static. Any modifications will be processed via the facility registration change-management process.
Jun 18, 2003 Market Operations Standing Committee of the IMO 24
HH-1H-2H-3 H+1 H+2 H+3
SyncTime
Unitstart-up
Scheduled
H+4
Maysynchroniseanytime here
ReachedMin MW
MM 4.2: Submission of Dispatch Data in the Real-Time Markets• The sequence of events is:
– Market participant decides to start up its unit and run in hour H;
– Market participant ensures that a valid offer for the unit is submitted at least 3 hours before the dispatch hour H;
– Market participant is allowed to revise its offer without restriction until the start of H-3;
Jun 18, 2003 Market Operations Standing Committee of the IMO 25
MM 4.2: continuedThe sequence of events is (cont’d):• After the publication of the H-3 pre-dispatch results and until the
start of H-2, the market participant is not allowed to revise the portion of dispatch data reflective of the unit’s Minimum Loading Point;
• Market participant may synchronize its unit anytime after the H-3 pre-dispatch run, but no later than the end of hour H;
HH-1H-2H-3 H+1 H+2 H+3
SyncTime
Unitstart-up
Scheduled
H+4
Maysynchroniseanytime here
ReachedMin MW
Jun 18, 2003 Market Operations Standing Committee of the IMO 26
MM 4.2: continuedThe sequence of events is (cont’d):
– Once the unit has reached its Minimum Loading Point, the IMO will constrain the unit to at least this minimum for the duration of its Minimum Run-Time;
HH-1H-2H-3 H+1 H+2 H+3
SyncTime
Unitstart-up
Scheduled
H+4
Maysynchroniseanytime here
ReachedMin MW
Min Runtime = 3hrs
Min MW
0 MW
Start ofMin
Constraint
End ofMin
Constraint
Jun 18, 2003 Market Operations Standing Committee of the IMO 27
Settlement Principles• Guarantee recovery of start-up, minimum load ramping and
minimum generation cost - Combined Guaranteed Costs.• The MP will be compensated if market revenues from Energy,
Operating Reserve and CMSC payments, earned by the facility over the period between synchronization and the end of the MP specified Minimum Runtime is less than the Combined Guaranteed Costs submitted by the MP.
• Guarantee payments will be paid out to eligible Market Participants monthly, and will be calculated on a “per start” resolution.
• Costs for guarantee payments will be recovered from other Market Participants as a monthly uplift charge on basis of AQEW.
Jun 18, 2003 Market Operations Standing Committee of the IMO 28
MM 5.5Physical Markets Settlement
Statements• Eligible Market participants must notify the IMO of an
eligible facility’s Combined Guaranteed Costs by completing a cost notification form by the close of the second business day following the day of the synchronization
Jun 18, 2003 Market Operations Standing Committee of the IMO 29
Format Specifications for Settlement Statement Files and
Data Files• Append New Charge Types• Generation Cost Guarantee Payment
– Will appear in “Manual Line Item” and include Date and hour the facility synchronized
• Generation Cost Guarantee Recovery Debit– Will appear in “Manual Per Unit Allocation”
Jun 18, 2003 Market Operations Standing Committee of the IMO 30
IMO Charge Types and Equations
• Append new variables– Combined Guaranteed Cost (CGC): start-up cost +
minimum load ramping cost + minimum generation cost– Generation Cost Guarantee Payment– Generation Cost Guarantee Recover Debit
• Append New Equations– Generation Cost Guarantee Payment– Generation Cost Guarantee Recover Debit
Jun 18, 2003 Market Operations Standing Committee of the IMO 31
Control Action OR - Implementation
• IMO will publish:– offer prices and quantities (to be approved by IMO
Board in July)– scheduled quantities
• Settlements– settle and collect only for market sources of
operating reserve
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