SEPTEMBER 12, 2012 | MARKETS COMMITTEE

Aleks MitreskiMARKET DEVELOPMENT

AMITRESKI@ISO-NE.COM (413) 535-4367

Hourly Offer and Intraday Reoffers

Overview of Current Market Components

Presentation Objective

• This presentation is intended to provide high level overview of the current Day-Ahead and Real-Time Energy Market offer rules with focus on: – Timing and offer requirements in the DAM– Parameters used to formulate an offer in the DAM – Modification of offers during the Re-Offer Period– Supplemental commitments during the Resource Adequacy

Assessment– Commitment and Dispatch of generators in real-time– Parameter re-offer/re-declaration in real-time

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Energy Markets Overview

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Real-Time Energy Market balances differences between

the Day-Ahead scheduled amounts of electricity and the actual real-time requirements

DAM produces financially binding schedules for the

production and consumption of electricity (occurs on the day

before the operating day)

EnergyMarkets

Day-Ahead Energy Markets(DAM) Real-Time Energy Markets

Energy Markets Overview (cont.)

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Real-Time Energy Market

Day-Ahead Energy Market

―00

:00

―16

:00

DA Energy Market results

published

Real-Time Energy Market starts

16:0

0―

18:0

0―

Re-Offer

Period

―12

:00

DA Energy Market

offer and bid period

closes

OPERATING DAYOPERATING DAYOPERATING DAY -1OPERATING DAY -1

22:0

0―

Initial RAA is performed to

finalize operating plan

for next day

RAA is performed

throughout the operating day

DAY-AHEAD ENERGY MARKETReview of offer structure, clearing, obligations

Day-Ahead Energy Market

• The DAM allows participants to sell/purchase energy on a forward basis

• Load/Asset Related Demand• Virtual Transactions (Increments/Decrements)• Dispatchable Asset Related Demand• External Transactions (Imports/Exports)• Generators

• The DAM produces financially binding positions that are satisfied through:– Physical performance (i.e. delivery/consumption) in real-time, or– Cash settlement at the Real-Time Price for Day-Ahead quantities not

delivered/consumed

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Price Taker versus Price Sensitive Behavior

• Participants have the ability to participate in the energy market as price-sensitive or a price taker (i.e.,fixed)

• A fixed demand in the market effectively represents a bid to consume energy at any cost below $1,000 MWh

• A fixed supply in the market effectively represents an offer to sell energy at $0 MWh

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Participation – Load/ARD

• Load/ARD participate through Demand Bids only in the DAM

• Demand Bids can be submitted as:– Fixed Demand Bid specifying quantity and location (one per hour) or– An individual priced Demand Bid specifying price, quantity and

location• Participants can submit up to 10 individual demand bids per location, per

hour • The price range can be between $0 and $1,000 MWh

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Participation – External Transactions

• External Transactions are submitted to capture energy flow into New England (Import) or out to one of the neighboring areas (Export) in the DAM and RTM

• External Transactions can be submitted as:– Fixed External Transaction specifying quantity and external node

ranging in duration from one hour to 24 hours– An individual priced External Transaction specifying price, quantity

and external node ranging in duration from one hour to 24 hours• The price range can be between $0 and $1,000MWh

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Participation – Virtual Transactions

• Virtual Transactions are a virtual supply Increments (INCs) and virtual demand Decrements (DECs) only in the DAM

• Virtual Transactions can be submitted as;– Up to 50 priced bid blocks per location, per participant

• The price range can be between $0 and $1,000MWh

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Participation – Generators

• Generators participate by submitting Supply Offer with physical and financial parameters in the DAM and RTM

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Physical Parameters (sample)

Time Interval

Emergency Min Hourly

Economic Min Hourly

Economic Max Hourly

Start Up Time Daily

Notification Time Daily

Minimum Down Time Daily

Minimum Run Time Daily

Manual Response Rate Daily

Financial Parameters (sample)

Time Interval

Start Up Fee Daily

No Load Fee Daily

Incremental Energy Offer

Daily

Generator’s Financial Parameters

• Start Up Fee is the cost a generator incurs when started. Separate cost can be designated when coming on-line from the following three states (in $)– Cold– Intermediate– Hot

• No Load Fee is the cost a generator incurs for each hour it remains on-line (in $/hr)

• Incremental Offers are the blocks of energy quantities paired with particular prices that reflect what a generator can produce at certain incremental cost (price/quantity pairs)– Quantity must be monotonically increasing – Cost must be between $0 MWh and $1,000 MWh– Identical price/pair blocks are used for the entire day

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Example: Incremental Energy Offer

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Price MWQuantity

$60 300

$50 250

$40 200

$30 150

$20 100

$10 50

Generator’s Physical Parameters

• Emergency Minimum is the lowest value at which the generator can be dispatched during Minimum Generation Emergency

• Economic Minimum (“EcoMin”) is the lowest value at which the generator can be dispatched during normal conditions

• Economic Maximum (“EcoMax”) is the highest value at which the generator can be dispatched during normal conditions

• Manual Response Rate is the rate at which the generator can ramp its output

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Generator’s Physical Parameters (cont.)

• Notification Time is the time needed for generator to synchronize once informed to come on-line

• Start Up Time is the time the generator needs to reach its Economic Minimum once synchronized to the system

• Minimum Run Time is the shortest duration the generator has to remain on-line (after reaching Economic Minimum and available for ISO dispatch) prior to being asked to come off-line,

• Minimum Down Time is the shortest duration between the time the generator has gone off-line and the time to come on-line, reach Economic Minimum and is available for ISO dispatch

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Example: Generation Physical Parameters

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Example: Financial & Physical Parameters

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Parameter

Offered Value

Emergency Minimum 25 MW

Economic Minimum 50 MW

Economic Maximum 300 MW

Generator Self Scheduling

• Resource can chose to self-schedule (i.e., fixed) their output and become a price taker. A self-schedule “overrides” the resources financial parameters effectively reflecting a desire to operate at zero price, assuming no reliability issues.

• There are two key aspects of self-scheduling;– Self-Commitment: A request for a resource to come online for a

duration (e.g., Minimum Run Time) at its EcoMin and be economically dispatched between its EcoMin and EcoMax

– Self-Dispatch: An adjustment of a resource’s EcoMin to a desired minimum output level. Resources will continue to be dispatched between their EcoMin and EcoMax

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Self Scheduling in DAM

• Generator can Self-Schedule which will result in clearing the Day Ahead Energy Market as a price taker – Equivalent to an offer to produce at the EcoMin at no cost (zero price

offer), and compensated at the Day-Ahead Clearing Price (set by another generator)

• This is achieved by setting the Must Run flag and the parameters are treated as:– Start Up Fee = $0– No Load Fee = $0– Energy price pair blocks below the Economic Minimum offered at $0

• Generator will clear the Day Ahead Energy Market with at least the energy below the Economic Minimum (unless there is a reliability issue)

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Example: Self-Schedule in DAM

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• Generator Self-Schedules in the DAM and sets its Economic Minimum at 150MW

• At a minimum, generator A will clear 150MW for all 24hr of the day at the Day-Ahead clearing price

• Clearing/dispatch of output above 150MW will be on economic merit

Example: Self-Scheduling & Dispatchable Range

• A generator that is not constrained by its physical parameter is eligible to set the Real Time Price – When self-scheduled, participants often increase the Economic Minimum

from their DAM offer, which naturally decreases the range in which a generator is eligible to set the Real-Time Price

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RE-OFFER PERIOD AND THE RESOURCE ADEQUACY ASSESSMENTModification of financial parameters as previously submitted in the DAM, supplemental commitments

Re-Offer Period

• Between 16:00 and 18:00 prior to the operating day, Participants may modify certain financial Supply Offer parameters that were submitted in the DAM – The Incremental Offer (price/quantity pairs) can be modified for all

generators– For generators that have not cleared the DAM, the Start Up and No

Load fee can be modified– Generators that did not clear the DAM can also request to self-

schedule

• Physical parameters can be re-declared only through phone call to the Control Room

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Resource Adequacy Assessment

• Between 18:00 and 22:00, the ISO performs the initial Resource Adequacy Assessment to ensure that resources committed in the DAM can meet the operational requirements (e.g., forecasted load, operating reserves)

• During this time, supplemental commitments are considered using offers submitted in the DAM (or modified during the Re-Offer Period)

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REAL-TIME ENERGY MARKETDispatching resources, settling Day-Ahead positions

Real-Time Energy Market Redeclaration

• Participants cannot change the financial parameters of their Supply Offers

• Participants have the ability to self-schedule (self-commit) in real-time, with 30 minute advance notice – If approved, the generator will be permitted to come on-line – If approved, the generator will at least be operated at its Economic

Minimum parameter

• Participant can also self-scheduled its output by re-declaring their the Economic Minimum (self-dispatch) or to request release to go off-line.

• Physical parameters in real-time can only be re-declared through phone call to the Control Room

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Real-Time Energy Market

• The ISO is evaluating system needs throughout the operating day and will commit additional generators as needed

• During the operating day, economic dispatch of committed generators is done based on the incremental offer submitted in the DAM (or modified during the Re-Offer period)

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Settlement

• Generators that clear in the DAM and produce energy up to their cleared schedule are not impacted by the Real-Time Price for that energy

• During an hour, if a generator produces less energy than its Day-Ahead cleared schedule then it must procure the shortfall at the Real-Time Price

• If a generator is dispatched above its Day-Ahead schedule then the additional energy is settled based on the Real-Time Price

• Generators which were committed/dispatched out of merit for system needs are made whole through NCPC (i.e., indifferent regarding Real-Time Prices)

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Summary

• As discussed, participants do not have an opportunity to update financial parameters after the Re-Offer Period

• The Incremental Offer blocks must be identical for each hour of the day

• The price of the Incremental Offer blocks can range between $0 and $1,000

• During upcoming meetings, the ISO will discuss the observed problems with the current market rules and the proposed enhancements

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