john dumas director of wholesale market operations ercot operating reserve demand curve
TRANSCRIPT
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John DumasDirector of Wholesale Market Operations
ERCOT
Operating Reserve Demand Curve
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Objectives
• Identify the System Wide Offer Cap price that became effective on June 1, 2014.
• Identify the NPRR that implemented the Operating Reserve Demand Curve (ORDC)
• Identify what the Value of Lost Load is in ERCOT.
• Identify the On-Line Adder for On-Peak of August 2014
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ERCOT Market
High Level Market Design
Energy Only
Voluntary Day-Ahead Market Co-optimizes energy and reserves hourly for next
day
Real-Time Market 5-minute nodal pricing
15-minute settlement
Semiannual and Monthly Congestion Revenue Rights (CRR) Auctions
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Summary of Nodal Policy Changes
• Established Offer Floors for Non-Spinning Reserve, Responsive Reserve & Regulation Up Reserve• NPRR 426, 427, & 428 (effective January 2012)
• System Wide Offer Cap raised to • $4,500/MWh effective Aug 1, 2012• $5,000/MWh effective June 1, 2013• $7,000/MWh effective June 1, 2014• $9,000/MWh effective June 1, 2015
• NPRR 568 & 598 • Implemented an Operating Reserve Demand Curve
(ORDC) with the Value of Lost Load equal to $9,000/MWh effective June 1, 2014
• Removed Offer Floors for Responsive Reserve & Regulation Up Reserve and updated the one for Non-Spinning Reserve to $75/MWh
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• The marginal cost of energy in ERCOT is currently $0.05/kwh
• ERCOT will run out of reserves in 30 minutes due to expected demand increase – We need to curtail
75% of the homes in order to cover peak
• What are you willing to pay in order to not be interrupted?
Exercise
T=0 T=15 T=300%
10%20%30%40%50%60%70%80%90%
100%
Spinning ReservesGeneration Output
Current ERCOT Generation
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The Operating Reserve Demand Curve (ORDC)
0 1000 2000 3000 4000 5000 6000 7000 8000
Available Reserves (MWs)
Pri
ce
of
Re
se
rve
s (
$/M
Wh
)
VOLL
VOLL = Value of Lost Load
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• Can a generator make money selling energy at cost without appropriate scarcity pricing mechanism?– ORDC provides revenue to generators above their fuel
costs– ORDC appropriately prices system conditions
• Provides incentive to generate during scarcity• Provides incentive to reduce consumption during scarcity
• Expected Reserve margins per the Brattle study– 10.2% economic optimum– 11.5% in equilibrium of current energy market design
(minimizes customer cost)– 14.1% required to meet 1-in-10 reliability standard
ORDC and Resource Adequacy
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Fleet Flexibility in ERCOT (2014)
44,800 MW
of Natural GasGeneration
Plenty of Wind, but
also…
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Weather
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Operating Reserve Demand Curve (ORDC) – How did it perform this summer?
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Average Monthly On-Peak
Prices
System Lambda ($/MWh)
On-Line Reserve Price
Adder ($/MWh)
Off-Line Reserve Price
Adder ($/MWh)
June-2014 40.54 0.043 0.010
July-2014 38.45 0.157 0.038
August-2014 41.37 1.093 0.586
Average Monthly Off-Peak Prices
System Lambda ($/MWh)
On-Line Reserve Price
Adder ($/MWh)
Off-Line Reserve Price
Adder ($/MWh)
June-2014 31.93 0.003 0.000
July-2014 29.55 0.038 0.008
August-2014 30.73 0.265 0.105
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Average Hourly Reserves
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Market Heat Rate and Reserves – June 2011 to 2014
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Monthly Average Hub Price
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Summary
• System Wide Offer Cap price is changing from $7,000/MWh to $9,000/MWh on June 1, 2015.
• A new scarcity pricing mechanism using Operating Reserve Demand Curve (ORDC) based on Value of Lost Load of $9,000/MWh was implemented this summer which created pricing consistent with the system conditions this summer and fall.
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Questions
1. Which of the following is the System Wide Offer Cap price that became effective on June 1, 2014?
a. $4,500b. $5,000c. $7,000d. $9,000
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Questions
2. Which NPRR implemented the Operating Reserve Demand Curve (ORDC)?
a. NPRR 428b. NPRR 568c. NPRR 598d. Both b & c
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Questions
3. A generator can make money while selling energy at cost without appropriate scarcity pricing mechanism.
a. Trueb. False
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Questions
4. The average On-Line Adder ($/MWh) for On-Peak of August 2014 was roughly?
a. 0b. 1c. 10d. 100