load resources negative rrs bidding in the nodal market credit working group january 30, 2008

Load Resources Negative RRS Bidding in the Nodal Market

Credit Working Group

January 30, 2008

2Credit Working GroupJanuary 30, 2008 2

Some Background: What is a LaaR?

• Load Acting as a Resource, or “LaaR”, is an end use customer with an interruptible load that meets ERCOT requirements and is qualified to provide Ancillary Services under ERCOT’s “LaaR” program

• Responsive Reserve is one Ancillary Service that a Load can provide if the customer is capable of instantaneously interrupting their power supply with no notice prior to the interruption

• In the Nodal market these facilities will be called Load Resources (LR)

• LaaR providers can sell their capacity by either:

– Contracting directly with an REP (fixed price, term)– Bidding into the daily ERCOT Ancillary Service Auction

• In the Zonal market, LaaRs compete with generators for a single clearing price (MCPC of RRS)

– LaaRs can provide up to a maximum of 1150 MWs for any hour– Generators comprise a minimum of 1150 MWs plus any incremental RRS

ERCOT procures above 2300 MWs– ERCOT procures 2300 MW to 2800 MW of RRS depending on projected

temperatures (day-ahead)


LaaR Bidding History

• ERCOT procures RRS MWs in the ERCOT auction starting with the lowest offer and working their way up the bid stack

• LaaR participation eventually exceeded the 1150 MW quantity cap and LaaRs began reducing their offer prices, eventually bidding negative to get selected by ERCOT

– Offers as low as -$19,000/MW were submitted

– Positive bid actually clears the market (normally a positive generation offer sets the MCPC)

• CWG identified the market flaw: What if all RRS generation for a particular hour came in self-arranged?

– MCPC could be set by a LaaR at a negative clearing price and there may not be credit available at the QSE level to cover the exposure


Historical LaaR Bidding

LaaR Bidding Behavior Jan 2005 to Present

($20,000)($19,000)($18,000)($17,000)($16,000)($15,000)($14,000)($13,000)($12,000)($11,000)($10,000)($9,000)($8,000)($7,000)($6,000)($5,000)($4,000)($3,000)($2,000)($1,000)

$0$1,000

Jan-

05

Feb

-05

Mar

-05

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep

-05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb

-06

Min

imu

m R

RS

Bid

November 19thBid of -$19,155

May of 2005LaaRs consistently fully subscribed

PRR646 implements a

$0 RRS floor price


Solutions to the Problem

Solving the problem in Zonal: – Credit Working Group sponsored PRR646 in November of 2005 which created a

$0 floor on the RRS bidding priceSolving the problem in Nodal:

– In junction with PRR646, a long term solution task force was created to determine solutions under the Nodal protocols

– Task force proposed a dual bid stack mechanism to correct the problem in the Nodal protocols (Floor price was not included in the Nodal protocols.)

– Resulting NPRR018: Separate LaaR & Generator MCPCs for RRS was rejected by TAC in Jan 2007.

– No stop gap measure has been put in place to compensate for NPRR018

– DSWG believes CWG should support the addition of a floor price until another solution is implemented

– Without a stop gap measure to correct this issue the

extreme negative bidding seen in 2005 could reemerge.


Nodal Solution Issues

DSWG believes there are two potential options to correct issue for day one of the Nodal market:

1. Implement a floor price until a market based solution in agreed upon by stakeholders

2. Modify the credit requirements used during procurement activities:• Current design approach for AS Procurement in DAM does not take into

account negative AS bids• Requires system modification to not accept bids unless credit limits were met • Penalizes smaller LR’s who don’t have large corporate financial backing and

may create an ‘unequal playing field’ for Loads

• DSWG has proposed continuing use of the floor price approach until better alternatives can be identified.

– Would result in pro-ration of individual resources which may be problematic for some loads

– Other solutions will require significant system changes that could result in $ increase to Nodal budget or delays in delivery

– DSWG proposes the CWG again take this issue on and propose an NPRR that would set a floor price for DAM RRS procurement

– Finding a solution to negative RRS bidding is on the list of 2008 goals for both DSWG and WMS


DSWG Proposed Nodal Solution

4.4.7.2.1 Ancillary Service Offer Criteria (1) Each Ancillary Service Offer must be submitted by a QSE and must include the following information:

(a) The selling QSE; (b) The Resource represented by the QSE from which the offer would be supplied; (c) The quantity in MW and Ancillary Service type from that Resource for this specific offer and the specific quantity in

MW and Ancillary Service type of any other Ancillary Service offered from this same capacity; (d) An Ancillary Service Offer linked to a Three-Part Supply Offer from a Resource designated to be Off-Line for the offer

period in its COP may only be struck if the Three-Part Supply Offer is struck. The total capacity struck must be within limits as defined in item (4)(c)(iii) of Section 4.5.1, DAM Clearing Process.

(e) An Ancillary Service Offer linked to other Ancillary Service offers or an Energy Offer Curve from a Resource designated to be On-Line for the offer period in its COP may only be struck if the total capacity struck is within limits as defined in item (4)(c)(iii) of Section 4.5.1.

(f) The first and last hour of the offer; (g) A fixed quantity block, or variable quantity block indicator for the offer;

(i) If a fixed quantity block, not to exceed 150 MW, which may only be offered by a Load Resource, the single price (in $/MW) and single quantity (in MW) for all hours offered in that block;

(ii) If a variable quantity block, which may be offered by a Generation Resource or a Load Resource, the single price (in $/MW) and single “up to” quantity (in MW) contingent on the purchase of all hours offered in that block; and

(h) The expiration time and date of the offer. (2) A valid Ancillary Service Offer in the DAM must be received before 1000 for the effective DAM. A valid Ancillary Service

Offer in a SASM must be received before the applicable deadline for that SASM. (3) No Ancillary Service Offer price may exceed the System-Wide Offer Cap (in $/MW) or be less than zero. (4) The minimum amount per Resource for each Ancillary Service product that may be offered is one MW. (5) A Resource may offer more than one Ancillary Service. (6) A Load Resource that is qualified to perform as a Controllable Load Resource may not offer to provide Ancillary Services as a

Controllable Load Resource and a Load Resource controlled by high-set under-frequency relay simultaneously behind a common breaker.


Q&A

ON

OFF

• Questions?

load resources negative rrs bidding in the nodal market credit working group january 30, 2008

Documents