important concepts in prr 342: simultaneous a/s selection
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Important Concepts in PRR 342: Simultaneous A/S Selection. Prepared for ERCOT WMS Meeting October 28, 2002 Julie Gauldin PUCT Market Oversight Division. Introduction. - PowerPoint PPT PresentationTRANSCRIPT
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Important Concepts in PRR 342: Simultaneous A/S Selection
Prepared for ERCOT WMS Meeting
October 28, 2002
Julie Gauldin
PUCT Market Oversight Division
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 2
Introduction PRR 342 modifies the ancillary service bid selection
process so that the selections of Regulation Up, Responsive Reserves and Non-Spinning Reserves occur simultaneously.
PUCT Order in Docket No. 23220 states: “ERCOT shall amend the Protocols such that it will procure ancillary services through use of simultaneous optimization for assignment of resources to A/S products, and will set prices for each ancillary service to the corresponding shadow price.”
Simultaneous selection is also consistent with the FERC NOPR on SMD.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 3
Simultaneous Optimization Key Concepts Main objective of simultaneous selection:
Prevent price reversals, whereby the MCPC for a lower quality services is higher than the MCPC for a higher quality service.
Price reversals provide incorrect price signals which provide incentives for inefficient use of resources.
Agreed-upon “quality” ranking: Regulation Up (RegUp)
Responsive Reserves (RRS)
Non-Spinning Reserves (NSRS)
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 4
Key Changes in PRR from the Version Passed by PRS MOD would like to understand any potential negative impact of
these changes. Payment to Suppliers
Each selected bid is paid the MCPC of the service for which it was selected or the MCPC of any higher quality service for which it was bid, whichever is higher.
Bid Content: One offer price The highest quality service to which the bid applies
“Bid Flow Down” A bid for a higher quality service will automatically be considered
to be used for any lower quality services.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 5
Linear Program Formulation Objective Function
Maximize Economic Value Minimize As Bid Costs As Bid Costs = ∑(bid price for selected A/S)*(quantity procured for
selected A/S) (sum over all struck bids) Key Constraints
(1) Meet required amount of RegUp (2) Meet required amount of RRS (3) Meet required amount of NSRS (4) Don’t exceed bid amounts
Key Assumption (“Bid Flow Down”) A bid for a higher quality service will automatically be considered to
be used for a lower quality service.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 6
Linear Program Formulation, cont.
Determination of MCPCs:
MCPC for RegUp will be equal to shadow price of constraint (1) This represents the cost of procuring another incremental unit of RegUp
MCPC for RRS will be equal to shadow price of constraint (2) This represents the cost of procuring another incremental unit of RRS
MCPC for NSRS will be equal to shadow price of constraint (3) This represents the cost of procuring another incremental unit of NSRS
Payment to Suppliers
Each selected bid is paid the MCPC of the service for which it was selected or the MCPC of any higher quality service for which it was bid, whichever is higher.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 7
Example 1 : Setup Requirements (Assume no RegUp):
RRS => 500 MW needed NSRS => 500 MW needed
Bids: For RRS or NSRS:
600MW @ $10/MW 100MW @ $15/MW 200MW @ $100/MW
For NSRS only: 200MW @ $5/MW 300MW @ $20/MW
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 8
Example 1 : Auction Results Under Current ERCOT Procedure RRS cleared first:
All 500MW procured from $10/MW bid MCPC for RRS = $10/MW – paid to selected bid
NSRS cleared next (remaining RRS bids can be used here) 200MW procured from $5/MW bid 100MW procured from $10/MW bid 100MW procured from $15/MW bid 100MW procured from $20/MW bid MCPC for NSRS = $20/MW – paid to selected bids
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 9
The Effect of Price Reversals: Over Time, Bids “Flee” to Lower Quality Services
Original bids: For RRS or NSRS:
300MW @ $10/MW 100MW @ $15/MW 200MW @ $100/MW
For NSRS only: 200MW @ $5/MW 300MW @ $20/MW
Revised bids after observing high NSRS MCPC: For RRS or NSRS:
300MW @ $10/MW 100MW @ $15/MW 200MW @ $100/MW
For NSRS only: 200MW @ $5/MW 300MW @ $10/MW 300MW @ $20/MWNew MCPC for RRS: $100, for NSRS: $10
Price reversals incentivize inefficient use of resources
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 10
Example 1 : Auction Results Under Simultaneous Optimization RRS procurements:
400MW procured from $10/MW bid 100MW procured from $15/MW bid MCPC for RRS = $20/MW – paid to selected bids
NSRS procurements: 200MW procured from $5/MW bid 200MW procured from $10/MW bid 100MW procured from $20/MW bid MCPC for NSRS = $20/MW – paid to selected bids
Simultaneous selection provides incentives for efficient use of resources
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 11
Example 2 : Setup
Requirements RegUp => 150 MW needed
RRS => 400 MW needed
NSRS => 300 MW needed
Bids: For RegUp, RRS, or NSRS:
150MW @ $30/MW
150MW @ $25/MW
100MW @ $10/MW
80MW @ $5/MW
Bids, cont: For RRS or NSRS:
110MW @ $20/MW
50MW @ $15/MW
50MW @ $10/MW
75MW @ $9/MW
For NSRS only:
100MW @ $14/MW
75MW @ $13/MW
75MW @ $10/MW
75MW @ $5/MW
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 12
Bid ID
MW$/
MWReg Up
RRS NSRSMW picked for RegUp
MW Picked for RRS
MW Picked for NSRS
Total MW Picked
1 150 30 1 1 1 - - - -
2 150 25 1 1 1 - 85 - 85
3 100 10 1 1 1 70 30 - 100
4 80 5 1 1 1 80 - - 80
5 110 20 0 1 1 - 110 - 110
6 50 15 0 1 1 - 50 - 50
7 50 10 0 1 1 - 50 - 50
8 75 9 0 1 1 - 75 - 75
9 100 14 0 0 1 - - 75 75
10 75 13 0 0 1 - - 75 75
11 75 10 0 0 1 - - 75 75
12 75 5 0 0 1 - - 75 75
Example 2 : Solution
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 13
Example 2: Solution, cont. MWs awards are actually the same using either
sequential or simultaneous selection MCPCs under sequential selection:
RegUp = $10/MW RRS = $25/MW NSRS = $14/MW
MCPCs under simultaneous selection: RegUp = $25/MW RRS = $25/MW NSRS = $14/MW
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 14
Questions on Simultaneous Optimization?
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 15
Application of Competitive Solution Method The steps & logic used to apply the
Competitive Solution Method would be unchanged from those proposed for the current A/S selection procedure.
The mechanisms for applying each step are revised to fit with simultaneous selection.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 16
Step 1a: Test the sufficiency
of the bid stacks
< 115%
?
yesStep 3:
Compute MCP Limit
Step 1b: Test the impact of pivotal
bidders
Pivotal bidders impact MCPC?
no
no
yes
STOP: No mitigation needed
STOP: Set Mitigated MCP = min [MCP Limit,
Unmitigated MCP]
Application of Competitive Solution Method
Step 2: Post Indicative MCP &
Extend Day-ahead Market
Pass Competitive Suff. Test
now?
yes
no
Co
mp
etitive
Su
fficien
cy Te
st
(This diagram doesn’t show the OOM mechanism used for cases of insufficient bid stack.)
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 17
Step 1a: Test the sufficiency of the bid stacks:
Is RegUp Bid Stack < 1.15*(RegUp Requirement)?
Is (RegUp+RRS) Bid Stack (net of RegUp Requirement) < 1.15*(RRS Requirement)?
Is (RegUp+RRS+NSRS) Bid Stack (net of RegUp+RRS Requirement) < 1.15*(NSRS Requirement)?
If any of these is true, then the 115% test fails.
Application of Competitive Solution Method
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 18
Application of Competitive Solution Method Step 1b: Determination of Pivotal Bidders
Will removal of all offers from a single bidder result in a deficiency in RegUp, (RegUp+RRS), or (RegUp+RRS+NSPR)?
Step 1b: Test the impact of pivotal bidders Remove offers of pivotal bidder(s) and subtract pivotal
bidders’ awards from corresponding requirements.
Re-solve optimization.
If MCP(s) change from the original values, then pivotal bidders do impact the MCPC.
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 19
Competitive Solution Method
Step 3: Compute MCP Limits
Remove offers of pivotal bidder and subtract pivotal bidders’ awards from corresponding requirements.
Remove highest priced 5% from remaining bids
Re-solve simultaneous optimization and determine MCP limits = 1.5*(shadow prices for modified problem)
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 20
Step 1a: Test the sufficiency
of the bid stacks
< 115%
?
yesStep 3:
Compute MCP Limit
Step 1b: Test the impact of pivotal
bidders
Pivotal bidders impact MCPC?
no
no
yes
STOP: No mitigation needed
STOP: Set Mitigated MCP = min [MCP Limit,
Unmitigated MCP]
Application of Competitive Solution Method
Step 2: Post Indicative MCP &
Extend Day-ahead Market
Pass Competitive Suff. Test
now?
yes
no
Co
mp
etitive
Su
fficien
cy Te
st
(This diagram doesn’t show the OOM mechanism used for cases of insufficient bid stack.)
PRR 342 - Prepared for ERCOT WMS Meeting October 28, 2002 21
Questions?