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PowerGEMPower Grid Engineering & Markets
1
LMP’s and Congestion Relief
Lens, Crystal Ball, or Alice’s Looking Glass ?
January 30, 2003Jim Mitsche
PowerGEMPower Grid Engineering & Markets
2
Opinions, Based on What ?
• Analysis of NY State Congestion Cost and Causes 2000 – 2002– Report at http://www.nyiso.com/services/documents/groups/oc_tpas_subcomm/12_04_02/draft_final_ny_trans_grid_rev_112602.pdf
• Analysis of Delmarva Peninsula (PJM) Congestion Cost and Causes 2000 – 2002– Report Athttp://www.pjm.com/transmission/trans_exp_plan/meeting/downloads/20021217_mitsche_cong.pdf
http://www.pjm.com/transmission/trans_exp_plan/meeting/downloads/20021217_delmarva_congestion_study4.pdf
• 3 Years of Decision Support to Major TCC Owner in New York
Thanks to my co-workers Boris Gisin and Manos Obessis, and to Scott Gass of PJM !
PowerGEMPower Grid Engineering & Markets
3
LMP’s Add to Price Volatility, What Do We Get for That ?
In A Nutshell
LMP’s point to congestion causes and impacting load/generation very well (with a little more data than usually available)
LMP differences (congestion cost) patterns are often very mysterious and difficult to predict
Financial products based on LMP differences are good for hedging, but not investment
Some new approaches may reduce LMP price volatility and encourage LMP based transmission investment
PowerGEMPower Grid Engineering & Markets
4
Delmarva Congestion Cost Components by Constraining Facility
Constrained Facility
Average Shadow Price in $/MWHr
Average MW Load Affected
Average Hourly
Congestion Cost in $/hour
KEENEY 500 KV KEENEY AT51 XFORMER $133.38 679 $90,551
KEENEY 500 KV KEENEY AT50 XFORMER $104.23 656 $68,418
KEENEY 230 KV KEENEY AT20 XFORMER $205.94 240 $49,481
69 KV BRIDGEVI-GREENWD 6738-1 $403.48 101 $40,634
69 KV GREENWD-SHARRING 6738-2 $410.96 95 $39,139
INTERFACE DPLSOUTH $28.57 1136 $32,442
CHURCH 138 KV CHURCH AT2 XFORMER $227.22 141 $32,125
PINEYGRO138 KV PINEYGRO AT1 XFORMER $331.61 54 $17,766
230 KV EDGEMOOR-HARMONY 23012 $34.72 478 $16,585
138 KV NELSON-VIENNA 13707 $156.63 95 $14,817
LMP’s Point to Congestion Causes
PowerGEMPower Grid Engineering & Markets
5
LMP’s Point to Impacting Load/Generation
ManhattanSame Hour Average Price Components
2000 - 2002 (156 weeks)
$0
$10
$20
$30
$40
$50
$60
$70
$80S
un 0
1:00
Sun
13:
00
Mon
01:
00
Mon
13:
00
Tue
01:
00
Tue
13:
00
Wed
01:
00
Wed
13:
00
Thu
01:
00
Thu
13:
00
Fri
01:0
0
Fri
13:0
0
Sat
01:
00
Sat
13:
00
Hour of the Week
$/M
W
Energy Congestion Losses LMP
Average % of Total LMP
Congestion 13%Losses 7%
PowerGEMPower Grid Engineering & Markets
6
A Little More Data is Needed
• Shadow Prices Are More Useful than LMP’s for Cause Impact & Analysis– Shadow Prices (value of relieving a constraint) reflect
• Multiple Constraints – (1.9 per hour in PJM, 5+ is common)
• Outages – (4 per hour average in Delmarva alone, 10+ is common in ISO’s)
• Relief Cost & Effectiveness– PJM Shadow Prices vary $0 to $1269
• Amount of Load Affected
These Data + LMP’s Inform Markets
PowerGEMPower Grid Engineering & Markets
7
• Why is Congestion Occurring at All Load Levels ?• Why Doesn’t Congestion Cost Go Up with the Supply Curve ?
Congestion Patterns are Often Mysterious
Shadow Price Variation with Load LevelDelmarva 2000 - 2002
$0
$200
$400
$600
$800
$1,000
1000 2000 3000 4000
Load in MW
Est
imat
ed S
had
ow
P
rice
in
$/M
W
PowerGEMPower Grid Engineering & Markets
8
• Does Congestion Increase with Increasing Load Level ?• Generally No !• Somewhat more frequent congestion with no outages at higher loads
Frequency of Congestion Occurrence at Varying Load LevelsDelmarva 2000 - 2002
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1000 2000 3000 4000
Load Level MW
% o
f H
ou
rs O
ccu
rrin
g All CongestedHours
No OutagesCongestedHours
All Hours(Congested orNot)
PowerGEMPower Grid Engineering & Markets
9
What Causes Congestion At Shoulder Load ?
• Transmission Outages• Generation Outages• Unit Commitment Decisions and Restrictions
– Unit Minimums
– Ramp Rates
– Minimum Run Times
• Bidding Patterns & Generation Location
PowerGEMPower Grid Engineering & Markets
10
Delmarva PeninsulaSummary of Congestion by Cause
August 1999 - August 2002
Hours
Cost
No Outages
Planned Maintenance
Outages
Forced Outages
Construction Outages
OutagesAverage $/hour
None $6,774Construction $10,000Forced $26,667Planned $47,143
PowerGEMPower Grid Engineering & Markets
11
CRR’s Make Good Hedgesbut Bad Investments
NY Central East Limit Congestion CostWeekly Average TCC Value
-$20
$0
$20
$40
$60
$801 7 13 19 25 31 37 43 49
Week Number
NY
Cen
tral
Eas
t T
CC
$/
MW
2000 ($785Million)
2001($175Million)
2002
PowerGEMPower Grid Engineering & Markets
12
Why Spend $$ on New Transmission ?
• Reliability Needs
• Entry Fee– Safe Interconnection and Capacity Deliverability Costs
• Insurance Policy– LMP’s Provide Actuarial Data
– CRR’s Define Hedges
• Investment– Volatile and Unpredictable
– Where is the Pay-Back ?
PowerGEMPower Grid Engineering & Markets
13
Improving LMP Based MarketsIs There a Way ?
Embryonic Ideas– Reducing LMP Volatility
• Create a financial resource (bilateral transactions or bilateral secondary market ?) to use in commitment/dispatch to avoid going over the congestion “cliff”.
• Clear congestion with a longer term (one week?) to reduce the effect of outages and unit commitment. More volatile and transient (Day Ahead and real time?) congestion charged to load.
– Transmission Investment • Flowgate Set Asides
– Identify Persistent but Somewhat Approximate Transmission Weaknesses
– Identify or Offer Flowgate Increase Opportunities
– Calculate & Use Flowgate Shadow Prices
– Reserve and Pay-out a New Set Aside Like CBM