locational capacity demand curves in iso-ne
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Copyright © 2014 The Brattle Group, Inc.
PREPARED FOR
PREPARED BY
Locational Capacity Demand Curves in ISO-NE
Samuel A. NewellKathleen SpeesBen Housman
June 11 , 2014
ISO New England Markets Committee
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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IntroductionReminder: FERC Status and Proposed System CurveFERC Status
▀ On April 1, ISO-NE and NEPOOL submitted a proposed system curve before FERC, to be in effect by FCA 9 (2018/19)
▀ FERC approved the proposed curve on May 30, 2014
▀ Our task now is to develop demand curves for each capacity zone, to be in effect by FCA 10 (2019/20)
System Curve▀ The approved system curve is a
simple straight-line curve (see right)▀ We use this curve as the starting
point for the local curve discussion Sources and Notes:See ISO-NE and NEPOOL filing and attached Newell/Spees Testimony, before FERC April 1, 2014, Docket No. ER14-1639-000.Quantity and reliability parameters consistent with FCA7.
Parameter Cap NICR Foot
Price ($/kW-m) $17.73 $13.16 $0.00
Corresponding RM in FCA 7 9.0% 12.1% 21.1%
Reliabil ity Index (1-in-x) 1-in-5 1-in-10 1-in-87
% of NICR 97.2% 100.0% 108.0%
Approved System Curve
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IntroductionProcess for Developing Zonal Curves Our approach is similar to that for developing a system demand curve
At this initial meeting today, we present and evaluate initial options▀ Starting point is the system curve adapted to zones (simplest option)▀ Also show flatter (and steeper) curves to address price sensitivity▀ Present sensitivity scenarios to facilitate discussion of options
Over the summer, we will work with you to develop a proposal▀ Invite stakeholder questions, comments, and alternative curves for
analysis (see schedule on slide 23)▀ Refine results into proposed local curves by September
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IntroductionLocal Demand Curve Objectives Reliability
▀ Maintain reliability near or above 0.105 LOLE (1-in-9.5) LOLE local reliability target▀ Rarely drop below a “minimum acceptable” reserve margin below which ISO-NE is more
likely to intervene, which we are defining as max of TSA or 1-in-5 at the local level Efficient Prices
▀ Long-run average price at Net CONE, consistent with a market capable of attracting sufficient merchant entry to attain reliability objectives at least cost
▀ Short-run prices consistent with current fundamentals, going above Net CONE during shortage and below Net CONE during surplus
▀ Rationalize prices according to the incremental value of capacity (if possible) Mitigate Price Volatility
▀ Reduce price volatility impact from lumpiness and small movements and uncertainties in supply, demand, and transmission (no bimodal price distribution)
▀ Few outcomes at the administrative cap Other
▀ Reduce susceptibility to market power▀ Minimize contentiousness, complexity, and uncertainty from administrative parameters
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IntroductionStarting Point for Zonal Candidate CurvesImporting Zones (see right)
▀ Simplest option is to adapt system curve to zones (details on slides 14-15)
▀ Preliminary recommendation is to adopt this zonal curve as-is, or a flatter curve that will further mitigate price volatility (but not below the volatility experienced system wide)
Exporting Zone▀ Maintain vertical constraint at MCL
Local Net CONE▀ Same as system (see detail on slide 13)▀ Periodic CONE studies to review need for
higher local net CONE in importing zones, to be estimated separately if local Net CONE is likely to be >15% above system
NEMA Initial Candidate Curve
Preliminary Recommended Range
Zonal StartingPoint Curve
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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Framework for Local CurvesZonal Auction Clearing Structure
▀ Zonal capacity market structure will remain essentially unchanged with local demand curves:
− Simultaneous clearing in system and sub-zones
− Export zones may have a lower clearing price if export constraint binds
− Importing zones may have a higher price if import constraints bind
▀ Difference is that minimum quantity procured in zones will vary with price (rather than a vertical minimum constraint at LSR)
ISO-NE Zonal Capacity Structure
System Demand CurveReflects total ISO-NE demand near NICR including four zones plus Rest-of-System
Exporting Zone “Maximum demand curve” near MCL prevents excess supply from being procured in export-constrained zone.
Maine
NEMA/B
CT
SEMA/RI
Importing Zones “Minimum demand curve” near LSR+TTC ensures a sufficient quantity is sourced locally in import-constrained zones.
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Framework for Local CurvesReflecting Zonal Imports in the Demand Curve▀ It is a matter of convention whether to
include TTC in x-axis (i.e. capacity supply imported into the zone from Rest-of-System)
▀ Including TTC in the x-axis is functionally equivalent to excluding TTC
▀ We recommend applying PJM’s convention of including TTC in the x-axis because it intuitively reflects capacity as the “reserve margin” above local peak load (i.e. demand curve width scales in proportion to local peak load)
▀ An alternative approach would be to draw the curve through LSR (as in NYISO), but the approaches are functionally equivalent in a simultaneously-solved optimal auction clearing mechanism
Demand Curve at LSR + TTC• Supply curve defined as imports
(at system-wide price) plus local supply
• Intuitive demand curve shows “reserve margin” over local peak load
• X-axis would be approximately 133% and 135% of local peak load in both NEMA and CT respectively
Demand Curve with TTC (PJM Approach - Recommended)
LSRTTC
Notes:Imports are paid the system clearing price. LSEs receive CTRs that are calculated as the difference between charges to LSEs with capacity load obligations and payments to capacity resources.TTC = Total Transfer Capability (i.e. transmission import/export limit)LSR = Local Sourcing Requirement
LSE = Load Serving Entity CTR = Capacity Transfer Right
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$0
$50
$100
$150
$200
$250
$300
$350
$400
0 0.5 1 1.5 2 2.5 3 3.5
VRR Curve
Constrained Supply CurveUnconstrained Supply Curve
$/MW-d
UCAP GW
Imports at Parent Price
Framework for Local CurvesImpact of System on Importing Zone Prices
▀ Prices in import-constrained zones are equal or greater than prices in the Rest-of-Pool (or any parent-level LDA)
▀ If the zone is import constrained (top chart) then the zone will price separate and a local resource will be marginal
▀ If the zone has abundant local supply (bottom chart) then the price will clear with system and import capability will be only partly used
Import Constraints BindingPJM DPL-South 2012/13
$0
$50
$100
$150
$200
$250
$300
$350
$400
0 5 10 15 20 25
VRR Curve
Constrained Supply CurveUnconstrained Supply Curve
$/MW-dUCAP
UCAP GW
Imports at Parent Price
Abundant Local SupplyPJM SWMAAC 2012/13
Sources: PJM auction clearing data and parametershttp://www.pjm.com/markets-and-operations/rpm/rpm-auction-user-info.aspx
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Framework for Local CurvesMonte Carlo Modeling Approach in ZonesModel Structure
▀ We use the same Monte Carlo simulation model at the system and locally, with 1,000 random draws on local supply and demand
▀ Run a local auction clearing mechanism to calculate resulting price, quantity, and reliability results in each draw
▀ Supply adjusts so long-run average price equals true Net CONE by location
Differences in Zones (vs. System)▀ Offer “blockiness” is a bigger factor in zones
(each unit is a bigger fraction of the zone)▀ Evaluate curve performance assuming that
true Net CONE is 10% higher in import-constrained zones (10% lower in export-constrained zones), but administrative Net CONE is equal to the system value
Standard Deviation in Supply Shocks
Standard Deviation in Demand Shocks
(MW) (MW)
Rest of System 327 n/aCT 486 387NEMA/Boston 387 567ME 148 287Total System 721 567
Shocks to Supply and Demand
Sources and Notes:Supply shocks calculated as the standard deviation in offers below the cap over FCAs 1-7, based on ISO-NE FCA offer data.Demand shocks calculated as the standard deviation in NICR, LSR, and MCL over FCAs 1-7, from ISO-NE, Summary of Historical ICR Values, posted at: http://iso-ne.com/markets/othrmkts_data/fcm/doc/summary_of_icr_values%20expanded.xls
$0$2$4$6$8
$10$12$14$16$18$20
30,000 32,000 34,000 36,000
Offe
r Pric
e ($
/kW
-m)
Supply Quantity (MW)
Offer Curve with Individual Offer Blocks Supply Curve
Core Shape
Supply Curve Blocks
Individual BlocksHave size and location from
FCA 7 offer stack, but with randomly shuffled merit order.
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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Import-Constrained ZonesAdditional Challenges in Importing Zones
▀ Smaller size relative to realistic fluctuations in supply and demand, means:− One large plant can make the difference between the price cap and floor if the curve is too
steep− Greater susceptibility to low reliability events− Greater price volatility (mostly upside price volatility, with downside price volatility
mitigated by system-wide price)
▀ Two types of reliability must be considered, with the current Local Sourcing Requirement (LSR) set at the max of:
− Local Resource Adequacy (LRA) Requirement, set at the local supply quantity that would result in local loss of load event (LOLE) of 0.105 events/year in an import-constrained zone
− Transmission Security Analysis (TSA) Requirement, which ensures that local supply will be sufficient to protect transmission security in the event of deterministic contingency scenarios
▀ Net CONE estimation error is more likely in smaller zones:− Same factors as in the system, plus− Idiosyncratic siting, gas availability, or environmental factors, which may affect some
individual zones but not the system (or they may be difficult to discover or estimate in CONE studies if there are few or no comparable projects built)
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Import-Constrained ZonesCurrently No Indication of Need for Local Net CONE Location-specific Net CONE values for NEMA/Boston likely to be <5% higher
than Rest-of-System Net CONE▀ No change in technical specifications▀ Assume NEMA/Boston plant located in Lowell, MA with labor rates estimated at
20% higher than Rest-of-System (Worcester, MA)▀ Slightly higher land costs ▀ Differences in E&AS revenue offset not considered due to limited data available for
NEMA/Boston capacity zone (but would likely reduce the Net CONE differential)▀ Connecticut and SEMA/RI Net CONE expected to be similar due to labor rates less
than NEMA/Boston
Capacity Installed Total Plant Overnight After-Tax Capital Fixed Gross E&AS NetZone Capacity Capital Cost Cost WACC Costs O&M CONE Offsets CONECC MW $m $/kW % $/kW-mo $/kW-mo $/kW-mo $/kW-mo $/kW-mo $/kW-mo
ROP 715 $900 $1,178 8.0% $11.59 $2.44 $14.04 $3.33 -$0.37 $11.08NEMA/Boston 715 $910 $1,192 8.0% $11.73 $2.50 $14.23 $3.33 -$0.37 $11.27
PER/PFPOffsets
Indicative Estimate of Local Net CONE in NEMA/Boston
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0.0x
0.5x
1.0x
1.5x
2.0x
6,75
0
7,00
0
7,25
0
7,50
0
7,75
0
8,00
0
8,25
0
8,50
0
8,75
0
9,00
0
9,25
0
9,50
0
Pric
e (%
of N
et C
ON
E)
Local ICAP MW + TTC MW
1-in-5 1-in-10 LRA TSA (LSR)
Cap Price: 1.6x Net CONE Minimum at Gross CONELocal Net CONE only if >115% of System
Cap Quantity: Minimum Acceptable atMax of 1-in-5 or TSA
Foot Price: $0Foot Quantity: Same % of Minimum
Acceptable as System Curve
Import-Constrained ZonesStarting Point: System Curve Applied LocallyStarting point is to adapt the proposed system curve to importing zones
▀ Cap is at MAX [1-in-5 LOLE (same as system) or TSA], and 1.6x Net CONE− Cap quantity corresponds to minimum
acceptable reliability level below which ISO-NE would be more likely to intervene
▀ Foot quantity is the same ratio above minimum acceptable in the system curve
▀ Local Net CONE is assumed to be equal or greater than system Net CONE:
− Estimate local Net CONE as a separate value only if likely to be 15% higher than system
− Currently estimating <5% higher for CT, NEMA/Boston, and SEMA/RI
NEMA Starting Point Curve
Acronyms:TTC = Total Transfer Capability (i.e. transmission import/export limit)LSR = Local Sourcing Requirement TSA = Transmission Security AnalysisLRA = Local Resource Adequacy
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Import-Constrained ZonesStarting Point: Parameter Values by Importing Zone
ConnecticutNEMA
Notes: MW quantities based on FCA7; prices based on a Net CONE of $11.1/kW-m. Foot quantity based on the system demand curve foot-to-cap ratio of 1.1.TTC values were 2,600 MW CT, 4,850 MW NEMA in FCA& from http://iso-ne.com/markets/othrmkts_data/fcm/doc/summary_of_icr_values%20expanded.xls
Cap Foot
Curve DefinitionPrice 1.6 Net CONE $0
Quantity Max of 1-in-5 LOLE or TSA
1.1x Cap Quantity
Corresponding Quantities in FCA7
Local + Import MW 8,059 8,952
Cap to Foot
Change in Price ($/kW-m) $17.7Change in Quantity (MW) 893Slope ($/kW-m per 100 MW) $1.98
Cap to Foot
Change in Price ($/kW-m) $17.7Change in Quantity (MW) 1,118Slope ($/kW-m per 100 MW) $1.59
Cap Foot
Curve DefinitionPrice 1.6 Net CONE $0
Quantity Max of 1-in-5 LOLE or TSA
1.1x Cap Quantity
Corresponding Quantities in FCA7
Local + Import MW 10,089 11,207
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Import-Constrained ZonesComparison of Vertical to Sloped Curves
▀ A vertical curve at the reliability requirement produces high price volatility and a high frequency of low reliability events, and makes the zones more susceptible to exercise of market power
▀ Applying a sloped curve to the system only (leaving local zones vertical) partly mitigates the concerns, but local reliability concerns remain (CT not meeting LOLE target, CT and NEMA with relatively high frequency below TSA)
▀ Applying the system sloped curve at the local level shows reasonably good performance− Price volatility is reduced to a standard deviation of $4.0 and $3.9/kW-m in NEMA and CT respectively (compare
to $3.7/kW-m at the system level), and 15-17% frequency at the price cap− LOLE equal to 0.105 target in CT, and better than target in NEMA − Frequency below TSA is 11-12%
Notes: Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
Quantity Zonal Load Cost
Average Standard Deviation
Frequency at Cap
Frequency of Price
Separation
Average Excess
(Deficit) Above LSR
Standard Deviation
Frequency Below
LSR
Frequency Below
TSA
Frequency Below 1-in-5
Average LOLE
Average Customer
Costs
Average of Bottom
20%
Average of Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (% of draws) (% of draws) (% of draws) (events/yr) ($mil/year) ($mil/year) ($mil/year)
NEMA/BostonVertical in Zones and System $12.2 $6.3 54.2% 10.7% 502 398 21.7% 21.7% 15.0% 0.143 $941 $275 $1,646Vertical in Zones (System Sloped) $12.2 $4.3 23.9% 18.3% 558 404 20.0% 20.0% 6.9% 0.094 $959 $495 $1,482Sloped in Zones and System $12.2 $4.0 16.6% 25.6% 785 404 12.2% 12.2% 6.2% 0.091 $962 $499 $1,474
ConnecticutVertical in Zones and System $12.2 $6.2 53.0% 12.6% 345 443 22.9% 18.2% 17.5% 0.150 $1,208 $385 $1,853Vertical in Zones (System Sloped) $12.2 $4.3 24.7% 20.0% 409 469 22.2% 17.6% 10.2% 0.114 $1,232 $666 $1,815Sloped in Zones and System $12.2 $3.9 15.2% 30.1% 594 469 14.9% 11.3% 7.4% 0.105 $1,237 $701 $1,775
Price
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Import-Constrained ZonesSteeper and Flatter Local Curves
▀ We compare performance relative to steeper and flatter local curves (no change to system curve)
▀ Steeper Curve: − Higher price cap at 1.75x Net CONE provides better protection against low
reliability events but increases price volatility▀ Flatter Curves:
− Improve protection against exercise of local market power− Provide reduced price volatility (including better than system for CT in the
2x width case), and better reliability performance− Local load cost increase is small despite higher local quantity, with cost
increase only 10% of Net CONE on MW sourced locally instead of outside− Making curves flatter may over-mitigate price signals relative to changes in
fundamentals, one guideline may be that price volatility need not be mitigated below the $3.7/kW-m standard deviation realized at system level
Notes: Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
Steeper and Flatter Curves in NEMA
Quantity Zonal Load Cost
Average Standard Deviation
Frequency at Cap
Frequency of Price
Separation
Average Excess
(Deficit) Above LSR
Standard Deviation
Frequency Below
LSR
Frequency Below
TSA
Frequency Below 1-in-5
Average LOLE
Average Customer
Costs
Average of Bottom
20%
Average of Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (% of draws) (% of draws) (% of draws) (events/yr) ($mil/year) ($mil/year) ($mil/year)
NEMA/BostonSteeper, Cap at 1.75x in Zones $12.2 $4.3 9.5% 23.2% 911 404 9.5% 9.5% 6.0% 0.091 $962 $497 $1,504Starting Point Curve $12.2 $4.0 16.6% 25.6% 785 404 12.2% 12.2% 6.2% 0.091 $962 $499 $1,474Flatter, Curves at 1,500 Width $12.2 $3.8 13.0% 27.4% 976 403 8.2% 8.2% 6.1% 0.091 $965 $507 $1,467Flatter, Curves at 2x Base Width $12.2 $3.8 11.7% 30.1% 1,050 403 6.8% 6.8% 5.9% 0.091 $966 $508 $1,463
ConnecticutSteeper, Cap at 1.75x in Zones $12.2 $4.1 7.9% 26.7% 721 469 11.1% 7.9% 6.6% 0.100 $1,236 $690 $1,842Starting Point Curve $12.2 $3.9 15.2% 30.1% 594 469 14.9% 11.3% 7.4% 0.105 $1,237 $701 $1,775Flatter, Curves at 1,500 Width $12.2 $3.7 12.3% 30.6% 728 470 11.0% 7.9% 6.7% 0.101 $1,238 $715 $1,756Flatter, Curves at 2x Base Width $12.2 $3.5 8.3% 35.1% 957 470 5.8% 3.5% 6.2% 0.096 $1,242 $744 $1,723
Price
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Import-Constrained ZonesPerformance at Different Local Net CONE Levels
Notes: Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
▀ Zones may have higher Net CONE (otherwise should not price-separate or remain import-constrained in the long term)
▀ If Net CONE in an import constrained zone is substantially higher than the system Net CONE, defining the local demand curve based on system Net CONE will result in under-procurement and lower reliability
▀ This issue is small if the difference in Net CONE is small, but is substantial for large differences ▀ We recommend that if Net CONE in an import constrained zone is more than approximately 15%
higher than system Net CONE, then the demand curve in that zone be based on the local net CONETrue Net CONE as Varying % Above System Net CONE
(Administrative Zonal Net CONE = System Net CONE in All Cases)
Quantity Zonal Load Cost
Average Standard Deviation
Frequency at Cap
Frequency of Price
Separation
Average Excess
(Deficit) Above LSR
Standard Deviation
Frequency Below
LSR
Frequency Below
TSA
Frequency Below 1-in-5
Average LOLE
Average Customer
Costs
Average of Bottom
20%
Average of Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (% of draws) (% of draws) (% of draws) (events/yr) ($mil/year) ($mil/year) ($mil/year)
NEMA/BostonNet CONE 5% Higher than System $11.7 $3.9 11.4% 13.7% 1,068 404 6.6% 6.6% 5.6% 0.090 $939 $495 $1,451Net CONE 10% Higher (Base) $12.2 $4.0 16.6% 25.6% 785 404 12.2% 12.2% 6.2% 0.091 $962 $499 $1,474Net CONE 15% Higher than System $12.8 $4.1 23.1% 33.2% 600 403 18.8% 18.8% 7.2% 0.094 $985 $506 $1,488Net CONE 25% Higher than System $13.9 $4.2 38.8% 50.4% 282 400 36.0% 36.0% 8.5% 0.106 $1,023 $518 $1,494
ConnecticutNet CONE 5% Higher than System $11.6 $3.8 9.9% 16.9% 843 470 7.9% 5.6% 6.0% 0.097 $1,184 $679 $1,721Net CONE 10% Higher (Base) $12.2 $3.9 15.2% 30.1% 594 469 14.9% 11.3% 7.4% 0.105 $1,237 $701 $1,775Net CONE 15% Higher than System $12.7 $3.9 19.6% 38.0% 442 470 20.7% 16.6% 10.0% 0.113 $1,286 $720 $1,799Net CONE 25% Higher than System $13.9 $3.9 32.3% 55.9% 168 470 36.8% 30.4% 15.6% 0.135 $1,384 $776 $1,822
Price
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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Export-Constrained ZoneDefinition of a “Maximum” Demand CurveNew Problem
▀ No other capacity market has used a demand curve in an export-constrained zone
▀ MISO and ISO-NE have defined fixed maximum capacity limits in export constrained zones (i.e., vertical curve for export zones)
Different Type of Constraint▀ Defines “maximum” demand curve
constraint▀ Unlike “minimum” demand curves
applicable for total system and import-constrained zones
“Minimum” Demand Curve(System and Import-Constrained Zones)
“Maximum” Demand Curve(Export-Constrained Zones)
Possible Prices &
Quantities
Impossible Prices &
Quantities
ImpossiblePrices &
Quantities
PossiblePrices &
Quantities
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Export-Constrained ZoneComparison of Vertical and Sloped Curves in Maine
Notes: System LOLE exceeds 0.100 in base case for 3 reasons: (1) slight difference in approach to translating system curve to zones (impact of 0.002), (2) applying a vertical curve in Maine in the base Case (impact of 0.002), and (3) change from 15% to 10% higher/lower Net CONE in zones (impact of 0.002).Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
▀ As in import-constrained zones, the export-constrained zone of Maine is also susceptible to price volatility, but the price volatility is mostly downward “spikes” during excess-supply conditions as compared with upward spikes in the zones and system
▀ A sloped curve in Maine improves price volatility (from standard deviation of $4.4/kW-m to $4.1/kW-m) and reduces susceptibility to buy-side market power exercise (sell-side already mitigated by system-wide curve)
▀ However, a sloped curve also slightly degrades system reliability by 0.002 LOLE because Maine MW in excess of MCL have reduced reliability value, and displace system resources that would have cleared. An even flatter local curve would begin to introduce more substantial reliability concerns due to the greater displaced system MW
▀ On balance, the additional complexity of a sloped “maximum demand curve” in Maine may not be warranted
Quantity Zonal Load CostAverage Standard
DeviationFrequency
at CapFrequency
of Price Separation
Average Quantity
Above (Below) MCL
Standard Deviation
System LOLE
Final Customer
Costs
Averageof Bottom
20%
Averageof Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (events/yr) ($mil/year) ($mil/year) ($mil/year)
MaineVertical at MCL (System is Sloped) $10.0 $4.4 4.3% 13.1% (385) 151 0.094 $289 $105 $457Maine with Sloped Curve $10.0 $4.1 3.7% 18.6% (265) 161 0.096 $288 $122 $455Maine with Sloped Curve (2x Wider) $10.0 $3.7 3.1% 25.2% (176) 163 0.099 $288 $140 $448
Price
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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Next Steps
Date Meeting or Deadline
June 10-11, 2014 MC Capacity zone demand curve concepts and candidate curves
June 20, 2014 Participants submit additional questions which Brattle will endeavor to answer at the July 8-10 MC
July 8-10, 2014 MC Answers to stakeholder questions
July 18, 2014 Participants submit additional questions which Brattle will endeavor to answer at the August 5-6 MC
Aug. 5-6, 2014 MC Answers to stakeholder questions
Aug. 8, 2014 Participants submit additional alternative zonal demand curve proposals for quantitative & qualitative analysis
Sep. 3-4, 2014 MC Results of quantitative analysis for stakeholder proposals (and ISO proposed demand curves)
▀ Please submit questions, comments, or alternative proposed curves to ISO-NE by June 20, for Brattle response in the July MC meeting
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Contents
▀ Introduction▀ Framework for Local Curves▀ Import-Constrained Zones▀ Export-Constrained Zone▀ Next Steps▀ Appendix
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Appendix B: Detailed Local ResultsSystem-Level Detailed Results
Notes: System LOLE exceeds 0.100 in base case for 3 reasons: (1) slight difference in approach to translating system curve to zones (impact of 0.002), (2) applying a vertical curve in Maine in the base Case (impact of 0.002), and (3) change from 15% to 10% higher/lower Net CONE in zones (impact of 0.002).Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
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Appendix B: Detailed Local ResultsImporting Zones Detailed Results
Notes: Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
Quantity Zonal Load Cost
Average Standard Deviation
Frequency at Cap
Frequency of Price
Separation
Average Excess
(Deficit) Above LSR
Standard Deviation
Frequency Below
LSR
Frequency Below
TSA
Frequency Below 1-in-5
Average LOLE
Average Customer
Costs
Average of Bottom
20%
Average of Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (% of draws) (% of draws) (% of draws) (events/yr) ($mil/year) ($mil/year) ($mil/year)
NEMA/BostonStarting Point Curve $12.2 $4.0 16.6% 25.6% 785 404 12.2% 12.2% 6.2% 0.091 $962 $499 $1,474Maine with Sloped Curve $12.2 $4.0 16.7% 25.1% 788 404 12.0% 12.0% 6.5% 0.092 $962 $499 $1,475Maine with Sloped Curve (2x Wider) $12.2 $4.0 16.9% 25.3% 787 404 12.1% 12.1% 6.6% 0.092 $961 $498 $1,474Net CONE 5% Higher than System $11.7 $3.9 11.4% 13.7% 1,068 404 6.6% 6.6% 5.6% 0.090 $939 $495 $1,451Net CONE 15% Higher than System $12.8 $4.1 23.1% 33.2% 600 403 18.8% 18.8% 7.2% 0.094 $985 $506 $1,488Net CONE 25% Higher than System $13.9 $4.2 38.8% 50.4% 282 400 36.0% 36.0% 8.5% 0.106 $1,023 $518 $1,494Vertical in Zones and System $12.2 $6.3 54.2% 10.7% 502 398 21.7% 21.7% 15.0% 0.143 $941 $275 $1,646Vertical in Zones (System Sloped) $12.2 $4.3 23.9% 18.3% 558 404 20.0% 20.0% 6.9% 0.094 $959 $495 $1,482Flatter, Curves at 1,500 Width $12.2 $3.8 13.0% 27.4% 976 403 8.2% 8.2% 6.1% 0.091 $965 $507 $1,467Flatter, Curves at 2x Base Width $12.2 $3.8 11.7% 30.1% 1,050 403 6.8% 6.8% 5.9% 0.091 $966 $508 $1,463Steeper, Cap at 1.75x in Zones $12.2 $4.3 9.5% 23.2% 911 404 9.5% 9.5% 6.0% 0.091 $962 $497 $1,504
ConnecticutStarting Point Curve $12.2 $3.9 15.2% 30.1% 594 469 14.9% 11.3% 7.4% 0.105 $1,237 $701 $1,775Maine with Sloped Curve $12.2 $3.9 15.2% 29.7% 599 469 14.8% 11.3% 7.6% 0.105 $1,236 $701 $1,774Maine with Sloped Curve (2x Wider) $12.2 $3.9 15.3% 30.1% 596 469 14.9% 11.3% 7.8% 0.105 $1,236 $701 $1,774Net CONE 5% Higher than System $11.6 $3.8 9.9% 16.9% 843 470 7.9% 5.6% 6.0% 0.097 $1,184 $679 $1,721Net CONE 15% Higher than System $12.7 $3.9 19.6% 38.0% 442 470 20.7% 16.6% 10.0% 0.113 $1,286 $720 $1,799Net CONE 25% Higher than System $13.9 $3.9 32.3% 55.9% 168 470 36.8% 30.4% 15.6% 0.135 $1,384 $776 $1,822Vertical in Zones and System $12.2 $6.2 53.0% 12.6% 345 443 22.9% 18.2% 17.5% 0.150 $1,208 $385 $1,853Vertical in Zones (System Sloped) $12.2 $4.3 24.7% 20.0% 409 469 22.2% 17.6% 10.2% 0.114 $1,232 $666 $1,815Flatter, Curves at 1,500 Width $12.2 $3.7 12.3% 30.6% 728 470 11.0% 7.9% 6.7% 0.101 $1,238 $715 $1,756Flatter, Curves at 2x Base Width $12.2 $3.5 8.3% 35.1% 957 470 5.8% 3.5% 6.2% 0.096 $1,242 $744 $1,723Steeper, Cap at 1.75x in Zones $12.2 $4.1 7.9% 26.7% 721 469 11.1% 7.9% 6.6% 0.100 $1,236 $690 $1,842
Price
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Appendix B: Detailed Local ResultsNEMA Results
▀ Avg Price: $12.2/kW-m (SD = 4.3 W-m)
▀ Avg cleared quantity +TTC as % of LSR + TTC: 107.4% (SD = 9.2%)
▀ % of draws below TSA: 20.0%▀ Avg Cost: $959 mil
▀ Avg Price: $12.2/kW-m (SD = $4.0kW-m)
▀ Avg cleared quantity +TTC as % of LSR + TTC: 110.2% (SD = 9.3%)
▀ % of draws below TSA: 12.2%▀ Avg Cost: $962 mil
System Curve Adapted to Zones
Vertical Curve for Zones (System Sloped)
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Appendix B: Detailed Local ResultsConnecticut ResultsLocal Curve Vertical at LSR
▀ Avg Price: $12.2/kW-m (SD = $4.3kW-m)
▀ Avg cleared quantity +TTC as % of LSR + TTC: 104.1% (SD = 5.9%)
▀ % of draws below TSA: 17.6%▀ Avg Cost: $1,232 mil
▀ Avg Price: $12.2/kW-m (SD = $3.9kW-m)
▀ Avg cleared quantity +TTC as % of LSR + TTC: 106.0% (SD = 5.9%)
▀ % of draws below TSA: 11.3%▀ Avg Cost: $1,237 mil
Local Curve Same Shape as System Curve
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Appendix B: Detailed Local ResultsExporting Zone Detailed Results
Notes: System LOLE exceeds 0.100 in base case for 3 reasons: (1) slight difference in approach to translating system curve to zones (impact of 0.002), (2) applying a vertical curve in Maine in the base Case (impact of 0.002), and (3) change from 15% to 10% higher/lower Net CONE in zones (impact of 0.002).Base case assumes true Net CONE in NEMA/Boston and Connecticut is 10% higher than system.Zonal load costs reflect capacity procurement costs paid by customers in each zone, assuming all zonal CTRs are awarded to local customers.
Quantity Zonal Load CostAverage Standard
DeviationFrequency
at CapFrequency
of Price Separation
Average Quantity
Above (Below) MCL
Standard Deviation
System LOLE
Final Customer
Costs
Averageof Bottom
20%
Averageof Top 20%
($/kW-m) ($/kW-m) (% of draws) (% of draws) (MW) (MW) (events/yr) ($mil/year) ($mil/year) ($mil/year)
MaineStarting Point Curve $10.0 $4.4 4.3% 13.1% (385) 151 0.094 $289 $105 $457Maine with Sloped Curve $10.0 $4.1 3.7% 18.6% (265) 161 0.096 $288 $122 $455Maine with Sloped Curve (2x Wider) $10.0 $3.7 3.1% 25.2% (176) 163 0.099 $288 $140 $448Net CONE 5% Higher than System $10.5 $4.1 5.2% 6.2% (469) 122 0.093 $303 $138 $459Net CONE 15% Higher than System $9.4 $4.7 4.3% 19.3% (325) 162 0.095 $274 $71 $456Net CONE 25% Higher than System $8.3 $5.1 3.5% 30.9% (236) 176 0.096 $243 $32 $450Vertical in Zones and System $10.0 $6.6 38.7% 11.6% (410) 187 0.145 $283 $66 $529Vertical in Zones (System Sloped) $10.0 $4.4 4.3% 13.5% (378) 153 0.094 $288 $102 $457Flatter, Curves at 1,500 Width $10.0 $4.4 4.3% 13.5% (377) 153 0.094 $288 $101 $458Flatter, Curves at 2x Base Width $10.0 $4.4 4.3% 13.5% (378) 153 0.094 $288 $101 $457Steeper, Cap at 1.75x in Zones $10.0 $4.4 4.3% 13.1% (386) 151 0.093 $289 $106 $457
Price
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Appendix B: Detailed Local ResultsMaine ResultsLocal Curve Vertical at MCL
▀ Avg Price: $10.0/kW-m (SD = $4.4 kW-m)
▀ Avg cleared quantity as % MCL: 90.1%
▀ % of draws above MCL: 0.0%▀ Avg Cost: $289 mil
▀ Avg Price: $10.0/kW-m (SD = $4.1 kW-m)
▀ Avg cleared quantity as % MCL: 93.4%
▀ % of draws above MCL: 22.9%▀ Avg Cost: $288 mil
Local Curve Same Shape as System Curve
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