1、Paliza Consulting, LLC. ,1,The FERC SMD and the Midwest Electricity Markets,IEEE PES Chicago Chapter Chicago, IL - January 8, 2003Roberto F. Paliza, Ph.D.,Paliza Consulting, LLC. ,2,Agenda,FERC SMD Focus is in the RTM, DAM, and FTRs What is missing in the SMD? Inter-ITP coordination Midwest Markets
2、Initiative MISO-SPP MISO-PJM-SPP joint and common market,Paliza Consulting, LLC. ,3,FERC SMD,Sets the direction for the design and implementation of wholesale markets. Defines the desired end state for these markets. Does not provide solution for transitional issues although establishes principles t
3、o be followed. Provides flexibility in regards to timing of the implementation and in accommodating regional differences.,Paliza Consulting, LLC. ,4,Basic Elements of the SMD,From an operational perspective: Real-time market Day-ahead market Ancillary services market Congestion revenue rights market
4、 Market power monitoring & mitigation Capacity requirement Markets administered by RTOs/ITPs,Paliza Consulting, LLC. ,5,Hedge Congestion,RTO Market Settlements At Nodal Prices,Bid based Security- Constrained Dispatch,Self Schedules,Load Bids,Generator Bids,Bilateral Schedules,ITP Market Operations,I
5、TP Functions,Market Inputs,Market Support,CongestionRedispatch,Cover Imbalances,Real-Time Balancing,Buy Through Congestion,Buy and Sell In Spot Market,Market-Driven Decisions,Transmission Rights,$,Calculate Nodal Prices,Ensure Reliability,Paliza Consulting, LLC. ,6,The Real-time Market (RTM),RTOs wi
6、ll ensure that all market participants have equal access to the spot market. RTM main component is a bid-based security constrained dispatch (5 min cycle). RTM is a voluntary market. Market participants can submit: Bilateral schedules, Self-schedule, or Bid into the real-time market,Paliza Consultin
7、g, LLC. ,7,Load,499,MWs,RTO,300,MWs, $10,199,MWs, $15,Not Dispatched,$15,I need MWs.,Sale goes to the,lowest bidder with capacity.,Going once,Least expensive generators are dispatched,Capacity,200 MWs,MW,$10,Capacity,300 MWs,MW,MW,Capacity,200 MWs,$15,$20,Example1: Economic Dispatch,LMP for all sett
8、lement nodes is $15,Paliza Consulting, LLC. ,8,Example2: Economic Dispatch,Load,599,MWs,RTO,300,MWs, $10,200,MWs, $15,99,MWs, $20,$20,I need MWs.,Sale goes to the,lowest bidder with capacity.,Going once,Highest Cost Generator Sets Price,Capacity,200 MWs,MW,$10,Capacity,300 MWs,MW,MW,Capacity,200 MWs
9、,$15,$20,LMP for all settlement nodes is $20,Paliza Consulting, LLC. ,9,If There is Congestion,Delivery limitations prevent use of “next least-cost generator” Higher cost generator closer to load must be used to meet demand Cost to operate more expensive generation are translated into transmission c
10、ongestion costs in LMP calculation Nodal pricing results in cost causation for congestion pricing to market participants,Paliza Consulting, LLC. ,10,Real-time Market Settlements,All real-time injections, withdrawals and transmission congestion will be settled at LMP prices determined by the real-tim
11、e dispatch. The difference in LMP prices across the grid will reflect congestion and incremental cost of losses. Loads have the choice to settle at nodal or zonal prices. Generators may self-schedule but only accepted schedules will settle at LMP prices.,Paliza Consulting, LLC. ,11,LMP Definition,Ma
12、rginalCongestionComponent (MCC),=,Marginal Energy Component (EC),LMP,+,+,Marginal Loss Component (MLC),Cost of supplying next MW of load at a specific location, considering generation marginal cost of energy, cost of transmission congestion, and losses,Paliza Consulting, LLC. ,12,The Day-ahead Marke
13、t (DAM),DAM main component is a bid-based security constrained unit commitment. It is a voluntary market and is financially binding. DAM main function is to provide certainty for Market Participants (MPs). In the DAM, participants will be able to: Buy/sell energy and self-schedule generation. Submit
14、 bilateral transactions. Submit virtual bids.,Paliza Consulting, LLC. ,13,Day-ahead Market Settlements,Process is very similar to RTM settlement for energy, congestion, and losses. RTM settles deviations with respect to DAM schedules. FTRs are settled based on the DAM hourly prices.,Paliza Consultin
15、g, LLC. ,14,Paliza Consulting, LLC. ,15,Day-ahead Reliability Check,Check is performed after DAM closes and it focuses on: Evaluating overall resource adequacy. Evaluating reserve adequacy. Evaluating transmission reliability. Reliability Commitment: Units are committed/de-committed to satisfy relia
16、bility criteria.,Paliza Consulting, LLC. ,16,Financial Transmission Rights,FTR is a financial instrument that entitles holder to a stream of revenues (or charges) based on the DA hourly energy price differences across the path or shadow price of a flowgate.,Paliza Consulting, LLC. ,17,FTR Characteri
17、stics,MPs will be able to acquire point-to-point (PTP) and flowgate (FGR) transmission rights to hedge congestion charges. PTPs and FGRs will be financial. PTP is a full hedge between source and sink while FGR is a full hedge for a specific constraint only. PTPs will be available in the form of obli
18、gations and options and FGRs will be available as options. Awarded PTPs and FGRs will be simultaneously feasible.,Paliza Consulting, LLC. ,18,Congestion Charge = 100 MWh * ($20-$15) = $500 FTR Credit = 100 MW * ($20-$15) = $500,LMP $20,LMP $15,Example: Delivery with FTR,Paliza Consulting, LLC. ,19,P
19、TP Rights Characteristics,Obligations can have a zero, positive, or negative value. Options can only have a zero or positive value. It is a perfect hedge against congestion costs as long as: Schedule is between specified source and sink. Schedule is equal or less than the FTR amount.,Paliza Consulti
20、ng, LLC. ,20,FGR Rights Characteristics,FGR owner gets paid the constraint shadow price of that flowgate. FGRs are proposed as options and only hedge the specified flowgate. Available as PTDF (monitored element) and OTDF (monitored/contingency pair) flowgates. Place responsibility for assessment of
21、shift factors and the number of FGRs required to hedge a transaction on the market participant.,Paliza Consulting, LLC. ,21,Priorities and FTRs,SMD proposes when transmission is tight, participants with FTRs have scheduling priority. How about curtailment priorities? Current LMP markets do not have
22、this physical characteristic. Many comments have been submitted on this subject.,Paliza Consulting, LLC. ,22,Acquiring FTRs,Allocation Is based on existing contracts. Is a conversion process from physical to financial. FTR Auction - administered by the ITP MPs can purchase “left over” capability. It
23、 may be used as the primary way to assign FTRs. MPs can reconfigure FTRs. Secondary market - bilateral trading ITPs will facilitate the secondary market. FTRs that exist are bought or sold.,Paliza Consulting, LLC. ,23,What Is Missing in the SMD?,From an operations perspective: SMD embraces the goal
24、of seamless markets but no approach is suggested. FERC has taken a significant step forward in developing the SMD but the next step coordination of these markets - is also a very important one.,Paliza Consulting, LLC. ,24,Inter-ITP Coordination,Types of ITP coordination under SMD: LMP market and non
25、-market coordination LMP market and other LMP markets Reliability backstop process One stop shopping desired features: Common business practices Common user interface Availability of CRRs that expand several ITPs,Paliza Consulting, LLC. ,25,Transitional Issues,SMD calls for conversion of all transmi
26、ssion service to SMD. However, if grandfather contracts do not convert to the SMD tariff, another level of complexity will be created Will require that ITPs support physical service in all of their markets (RTM, DAM, FTR). Certain special provisions of these grandfather contracts may be difficult to
27、 honor/administer by the ITP under LMP.,Paliza Consulting, LLC. ,26,Transitional Issues,Initial allocation of CRRs May prove to be very contentious specially in places where the system is oversold. Availability of FTR options will add another layer of complexity. Modeling of FTRs in the allocation p
28、rocess needs to be consistent with settlements of these rights.,Paliza Consulting, LLC. ,27,Inter-ITP Coordination Elements,Honor external constraints in the same way as internal constraints are respected. Treatment of resources in a multi-market environment Bidding, control, scheduling, settlement
29、Ancillary services Parallel flow agreement that includes: Definition and calculation of parallel flow Agreement on usage and compensation Convergence of LMP prices at the seams.,Paliza Consulting, LLC. ,28,Reliability Backstop Process,NERC TLR is the reliability backstop process in the eastern inter
30、connection Relies on a central database of “tagged” transactions Relies on a single transmission model for impact calculation and curtailments Input data and results are available to all SCs Equivalent capability needs to be provided under SMD May require policy changes by NERC,Paliza Consulting, LL
31、C. ,29,One-stop Shopping,Market participants do business over large geographical areas Establishment of a single network access service will enable development of large markets Requires compatible market rules Timings, scheduling practices, market protocols and procedures, settlements Development of
32、 a single user interface is a must. Support for CRRs across several ITP regions.,Paliza Consulting, LLC. ,30,The Obvious Fix,Creation of a single market run by a single market operator Single RTM, DAM, and FTR markets Is this feasible over a very large area? Eastern Interconnection MISO-PJM-SPP What
33、 is the criteria for determining the appropriate size of a single market?,Paliza Consulting, LLC. ,31,Managing Seams,Type of seams: Manageable. Unmanageable (e.g. unable to control internal constraints). A couple of factors to consider to manage seams: Proper grouping of constraints & resources. Int
34、ernalize as much loop flow as possible.,Paliza Consulting, LLC. ,32,The Midwest Markets,Dec 2003 is the target date for MISO-SPP market operation. It is a staged project. Functionality to be provided in the first stage is based on RTM, DAM with no SCUC, FTR market, and Market Power Mitigation. Full
35、SCUC and Ancillary Services market will be added in future stages.,Paliza Consulting, LLC. ,33,MISO Markets Initial Functionality,Paliza Consulting, LLC. ,34,The Midwest Markets,Significant challenges: No experience operating as a pool. Many control areas of all sizes. Allocation of transmission rig
36、hts in areas where system is overbooked. Coordination with PJM and other neighboring entities. Resolution of WI and MI hold harmless provisions. Aggressive timeline. MISO-SPP merger needs to be completed.,Paliza Consulting, LLC. ,35,MISO-PJM-SPP Territory,Paliza Consulting, LLC. ,36,A Joint and Comm
37、on Wholesale Energy Market,The goal is to develop a common single wholesale market with a “one-stop shop” that meets the needs of all customers and stakeholders using the electric grid in the 26 states served by them.,Paliza Consulting, LLC. ,37,Paliza Consulting, LLC. ,38,Schedule,May 2003 AEP & DP
38、L in PJM market Oct 2003 Dominion in PJM market Dec 2003 ComEd & IP in PJM market Dec 2003 MISO-SPP market operation October 2004 MISO-PJM-SPP market is implemented with one-stop shopping,Paliza Consulting, LLC. ,39,Current Activities,MISO and PJM have chosen to resolve seams without implementing th
39、e single market. MISO is also working on its LMP market and the integration of Grid America and TransLink while PJM is focused on the expansion of its markets in AEP & DPL areas.,Paliza Consulting, LLC. ,40,Market Model for RTO Coordination,Data Transport,Data Transport,Data Transport,Control Area,I
40、TC,Regional Entity,Control Area,ITC,Regional Entity,Control Area,ITC,Regional Entity,Paliza Consulting, LLC. ,41,Implementation of the SMD Markets in the Midwest,Proper solution to the coordination between MISO and PJM, and between these RTOs and the Independent Transmission Companies in their footprints, is the key to a successful implementation of the SMD markets in the Midwest.,
