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The Electrical Grid and the Wholesale Electricity Market OSPE Energy Seminar OSPE presentations can be downloaded at: https://www.ospe.on.ca/presentations OSPE Energy Task Force May 2016 The Electrical Grid and the Wholesale Electricity Market Outline Historical Perspective - T. Edison, N. Tesla, Sir Adam Beck. The Electrical Grid Consumer Load Demand – daily, weekly, annual Generation Technologies Storage Load, Frequency and Voltage Control Wholesale Electricity Market How Retail Electricity Prices are Set Typical Electricity Bill Q/A 2 The Electrical Grid and the Wholesale Electricity Market Historical Perspective Thomas Edison – 1882 the first utility to distribute Direct Current (DC) in lower Manhattan eventually serving 1 sq. mile. Nicola Tesla developed the 3-phase Alternating Current (AC) distribution system we know today. AC won the day due to its ease of voltage transformation - made distribution of electricity over long distances cheap and efficient. Sir Adam Beck – the father of Ontario’s electrical power system. Beck built the power system with government debt which was paid back in user fees over the lifetime of the assets. 3 The Electrical Grid and the Wholesale Electricity Market The Electrical Grid The Electrical Power System or Electrical Grid includes: Generating Plants Centralized (hydroelectric, nuclear, gas-fired) Distributed (wind, solar, Bio-energy, combined heat and power) Transmission System: > 50,000 Volts Distribution System: < 50,000 Volts All the required control and protection systems and main control centers. Inter-ties: Interconnections to other electrical grids 4 The Electrical Grid and the Wholesale Electricity Market The Electrical Grid Courtesy of Nebraska Public Power District http://www.nppd.com/vegetation-management/faqs/ 5 The Electrical Grid and the Wholesale Electricity Market The Electrical Grid Courtesy of the Independent Electricity System Operator http://www.ieso.ca/Documents/IntertieReport-20141014.pdf 6 The Electrical Grid and the Wholesale Electricity Market Customer Load Demand – Typical Day Ontario Load Tue. Jul 28, 2015 ( highest demand day in 2015 ) Ontario Load Oct 12, 2015 Holiday ( lowest demand day in 2015 ) 25,000 25,000 20,000 20,000 15,000 15,000 MW MW 10,000 10,000 5,000 5,000 0 0 1 3 5 7 9 11 13 15 17 19 21 23 1 3 5 7 9 11 13 15 17 19 21 23 Time During Day (Hours) Time During Day (Hours) Total System Demand (with exports) Total System Demand (with exports) Ontario Demand Ontario Demand Ontario Base Load Demand 10,539 MW Ontario Base Load Demand 14,637 MW Load data courtesy of IESO http://www.ieso.ca Diagrams courtesy of Market Intelligence & Data Analysis Corporation 7 The Electrical Grid and the Wholesale Electricity Market Customer Load Demand – Typical Week Ontario Load Highest demand week Jul 2015 Ontario Load Lowest demand week Oct 2015 80% 80% Load data courtesy of IESO http://www.ieso.ca Diagrams courtesy of Market Intelligence & Data Analysis Corporation 1-Aug-15 31-Jul-15 0% 30-Jul-15 20% 29-Jul-15 17-Oct-15 16-Oct-15 15-Oct-15 14-Oct-15 13-Oct-15 12-Oct-15 0% 11-Oct-15 20% 40% 28-Jul-15 40% 60% 27-Jul-15 60% 26-Jul-15 % of Peak Rating 100% % of Peak Rating 100% 8 The Electrical Grid and the Wholesale Electricity Market Customer Load Demand – 2015 Daily Electrical Demand in 2015 25,000 20,000 Ontario Daily MAX 15,000 Ontario Daily MIN MW 100 % of Peak 10,000 47 % of Peak Load data courtesy of IESO http://www.ieso.ca 27-Dec-15 27-Nov-15 28-Oct-15 28-Sep-15 29-Aug-15 30-Jul-15 30-Jun-15 31-May-15 01-May-15 01-Apr-15 02-Mar-15 31-Jan-15 0 01-Jan-15 5,000 Diagrams courtesy of Market Intelligence & Data Analysis Corporation 9 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Ontario has phased out coal. In 2015 its energy supply was: Nuclear generation 58.8 % Hydro-electric generation 23.1 % Gas fired generation 9.8 % Wind turbine generation 6.5 % Solar generation 1.5 % Bio-energy generation 0.3 % Each of these have strengths and weaknesses To minimize cost of electricity, each has to be used in a way that accommodates their production characteristics. Load data courtesy of IESO http://www.ieso.ca Data adjusted for distribution installed supply by Market Intelligence & Data Analysis Corporation 10 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Nuclear Plant – Pickering NGS Courtesy of Ontario Power Generation http://www.opg.com/generating-power/nuclear/stations/pickering-nuclear/Pages/pickering-nuclear.aspx 11 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Hydro-electric Plant – Sir Adam Beck GS at Niagara Falls Courtesy of Ontario Power Generation http://www.opg.com/generating-power/hydro/southwest-ontario/Pages/sir-adam-beck-ii.aspx 12 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Gas Plant – Halton Hills GS Courtesy of TransCanada http://www.transcanada.com/docs/Key_Projects/HH_Fact_Sheet.pdf 13 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Wind Turbines Photo Courtesy of Market Intelligence & Data Analysis Corporation 14 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Solar Panels Photo Courtesy of Market Intelligence & Data Analysis Corporation 15 The Electrical Grid and the Wholesale Electricity Market Generation Technologies Bio-energy Plant – 211 MW Atikokan GS (wood pellets) Courtesy of Ontario Power Generation http://www.opg.com/generating-power/thermal/stations/atikokan-station/Pages/atikokan-station.aspx 16 The Electrical Grid and the Wholesale Electricity Market Storage Pumped Hydro-electric Flywheel Storage Battery Storage Compressed Air Storage 17 The Electrical Grid and the Wholesale Electricity Market Load, Frequency and Voltage Control For the grid to operate in a stable and reliable manner the system operators must ensure: Generation output and load demand are in balance. Frequency is held steady (60 Hertz in North America). Voltage is maintained within standard low and high limits. 18 The Electrical Grid and the Wholesale Electricity Market Load, Frequency and Voltage Control Generation output and load demand is controlled in 4 ways: Dispatch commands every 5 min. to dispatchable generators and loads. An automatic generation controller (AGC) continuously raises and lowers plant output at one or more designated generators to achieve an exact load balance. Manual voltage reductions (brown-outs) are used to reduce load demand during generation shortages. Manual load shedding (localized black-outs) are used to reduce load demand during severe generation shortages. 19 The Electrical Grid and the Wholesale Electricity Market Load, Frequency and Voltage Control Frequency is controlled in 4 ways: Automatic frequency control originating from one authority in an interconnected region or grid island. Automatic speed governor control at each station if grid frequency falls outside of a narrow band. During power system emergencies, very low frequency excursions are terminated by automatic load shedding relays at various transformer stations. Beyond very low and very high frequency limits, generating stations automatically disconnect to protect plant equipment - typically the grid will black out. 20 The Electrical Grid and the Wholesale Electricity Market Load, Frequency and Voltage Control Voltage is controlled in 3 ways: Adjusting the setpoint of the generator excitor voltage controller to add or remove reactive power from the power system. Adjusting the setpoint of the voltage control equipment at transformer stations to add or remove reactive power from the power system. The distribution level voltage can also be adjusted on individual buses by adjusting the voltage ratio at transformers. Normal supply voltage at the distribution level is controlled within limits established by the CSA Group in CAN3-C235-83 Table 3. 21 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Prior to deregulation on May 1, 2002, Ontario’s electrical system was: Centrally planned and procured by Ontario Hydro (HEPCO earlier) Generation dispatched by variable cost order-of-merit including: Consideration of startup/shutdown cost Consideration of emissions (SOx, NOx primarily) Ontario Hydro planned the supply mix to minimize electricity rates. Inflexible technologies were assigned base-load duty. Flexible technologies were assigned peak-load duty. Intermittent generation was avoided - high capital & integration costs. Producers were paid their total costs plus rate of return. 22 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Deregulated wholesale market opened on May 1, 2002. Wholesale market operates as an auction administered by the Independent Electricity System Operator (IESO). Dispatchable generators submit “offers” to sell a quantity of energy at a min. price per MWh at a specific ramp rate. Dispatchable loads submit “bids” to buy a quantity of energy at a max. price per MWh at a specific ramp rate. IESO uses these offers and bids to match total supply with total demand (including non-dispatchable supply and demand). IESO then sets the wholesale market clearing price that is paid to all generators and charged to all loads participating in the market. Note: For a more complete description refer to the IESO “Introduction to Ontario’s Physical Markets” at http://www.ieso.ca/Documents/training/IntroOntarioPhysicalMarkets.pdf 23 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Price $/MWh Generator Offers at Marginal Cost Positive Market Clearing Price 0 Load MW High Load Demand 24 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market For reliability purposes the market requires a number of ancillary services that are contracted by the IESO. Their cost is added to the commodity cost by the IESO when it creates the final commodity price. In 2014 the cost of ancillary services was approx. $64 million dollars. These ancillary services include: Regulation services (for both load balance and frequency control) Reactive support and voltage control services Certified black start facilities Reliability must run services (including operating reserves): Note: For a more complete description refer to the IESO “Procurement Market” at http://www.ieso.ca/Pages/Participate/Markets-and-Programs/Procurement-Market.aspx 25 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Capacity is planned centrally by the IESO – type, location & qty. Currently, capacity is contracted through a competitive bidding process for large facilities and through a Feed-In-Tariff (FIT) program for small renewable facilities. Contracts include guaranteed payments for capacity (fixed costs). IESO plans to establish a capacity auction market that will supply all short term and long term capacity in response to market price signals and planning direction from the IESO. The objective is to transfer a greater share of planning risk from the consumer to the generators. 26 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Market prices can go negative ! If a generation facility has a high cost of shutdown, its marginal cost is negative. It would then offer a negative price so it does not get dispatched off. However if load demand is very low, all other higher cost generators could have been dispatched off. If load continues to fall, eventually the generator with negative offers will set the market clearing price. 27 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Wind, solar and flexible nuclear generation have fixed contract prices so they have large negative marginal costs because they don’t get paid if they don’t get dispatched. To prevent wind, solar and flexible nuclear plants from creating high cost shutdowns of inflexible plants, market rules set floor prices on their offers. In 2016 the floor prices are: - 3 $/MWh for 100% of solar & 90% of wind output - 5 $/MWh for flexible nuclear output - 15 $/MWh for the last 10% of wind output 28 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Price $/MWh Low Load Demand 0 Negative Market Clearing Price Generator Offers at Marginal Cost Load MW 29 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Supply vs Demand ( Week of Sep 8 to 14, 2014 ) 24,000 “Curtailment” (waste) of carbon-free electricity occurs when available supply exceeds Total Demand Line (Red Line) 14 12 20,000 10 16,000 8 MW 12,000 6 4 8,000 2 4,000 black line only 0 “Export” of carbon-free electricity occurs when available supply exceeds Ontario Demand Line (Green Line) Wind Availability MW Total Demand incl Exports MW HOEP Price (cents/kWh) 1 pm 1 pm Sun, 1 am 1 pm Sat, 1 am Fri, 1 am 1 pm Thu, 1 am 1 pm Wed, 1 am 1 pm Tue, 1 am 1 pm -2 Mon, 1 am 0 HOEP cents/kWh Hydro + Nuclear Availability MW Ontario Demand MW Electricity prices can become negative (Ontario pays to export) when carbon-free electricity is being curtailed. 30 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market The wholesale market does not collect enough revenue to cover all fixed costs to operate generation. To honour generation contracts with fixed prices a global adjustment is computed by the IESO to pay for: Fixed generation costs not recovered in the wholesale market Conservation costs Other costs related to ensuring reliable efficient operation The global adjustment is added to the market clearing price to arrive at a total commodity price. transmission, distribution and other regulatory costs are added to the commodity price to arrive at a total retail price. 31 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market The wholesale market does not support grid scale storage ! During the day, a storage facility will offer its capacity as “generation” and drive the clearing price down. During the night, a storage facility will bid its capacity as “demand” and drive the clearing price up. The net effect of a large storage facility is to reduce the clearing price spread between day and night. As the spread is reduced, there is insufficient revenue for storage to justify its construction and operating costs (incl. losses). Grid scale storage must be an ancillary service for the grid. Storage must be controlled by the grid operator to prevent gaming and excessive price volatility. 32 The Electrical Grid and the Wholesale Electricity Market Wholesale Electricity Market Price $/MWh Low Load Demand Generator Offers at Marginal Cost 0 Negative Market Clearing Price Grid scale storage will drive the two red lines together and eliminate the revenue to pay for operation. Load MW High Load Demand 33 The Electrical Grid and the Wholesale Electricity Market Questions ? OSPE seminars are available at: https://www.ospe.on.ca/presentations Are you an engineering graduate and would like to become a member of OSPE? Visit: http://www.ospe.on.ca/?page=JOIN Engineering students can now join OSPE for free. 34 35 www.ospe.on.ca 4950 Yonge Street, Suite 502, Toronto ON M2N 6K1 Tel: 416-223-9961 • Toll Free: 1-866-763-1654
