Download Continued Reliability Through Market Signals

Continued Reliability Through Market Signals
September 19, 2013
Initial Stakeholder Discussion
In ISO NE…
• On March 27, 2013 Vitol, Inc. presented in an ISO NE Stakeholder Forum a proposal to address concerns for winter 2013/2014
• In that presentation they said that ISO NE has communicated on many occasions reliability concerns related to fuel procurement/availability to meet generation/load needs. Further they stated that both ISO NE and NEPOOL participants recognize that deficiencies in ISO NE market structure are an underlying cause of these issues
– DA market commitments average 90% of load requirements
– RT LMP suppression incents wrong behavior (e.g. generation management and load buying)
– Out of merit commitments and side payments prevent price signal transparency for market participants
– Lack of ability to update offers handcuffs generation
– Lack of right incentives in FCM adversely impacts future capability
Some of the fixes proposed by Vitol are: •
Implement temporary price formation solution to reflect RT fuel reliability concerns, avoid price suppression, and incent behavior
– Overhaul of RT LMP formation may not be feasible by winter
– Simplified proxy calculation for energy price component to be used in RT LMP is feasible by winter
– Forward price signal becomes stronger (incents generation hedging and fuel procurement)
– Short‐term price signal becomes stronger (discourages short positions in RT)
– Visible to all participants
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Utilize alternative calculation for energy component during times of fuel reliability concerns
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Use fuel economics (e.g. price index of needed fuel)
Use heat rate of needed generation
Include a multiplier to ensure sufficient signal
Use triggers to activate (conceptually whenever ISO NE reserves/commits/ dispatches generation to cover other generation with fuel reliability issues)
Excerpts from Vitol proposal, cont.
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Allocate heavier weighting to RT deviations that contribute to problematic dispatch days
– Place higher burden on RT short positions
– Virtual transactions that contribute are not absolved
– Define threshold(s) for problematic dispatch days (conceptually any day ISO NE reserves/commits/dispatches generation to cover other generation with fuel reliability issues)
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ISO NE surveys generation owners on fuel stocks on a rolling 15‐day basis
– Estimated oil refilling timeframe of 15 to 20 days
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ISO NE provides system‐wide fuel stock information and peak load forecast to all participants for same rolling 15‐day period
– Fuel reported by type on an aggregate level, perhaps on an equivalent MW basis
– Enables all participants to assess market conditions on a short‐term forward basis
Do we have the same concerns in MISO?
• MISO DA market commitments average 98% of load requirements
• Majority of MISO load is served by utilities with an obligation to serve (traditional utility business model). Fuel costs recovered through rate structure – FAC
• Market includes an ability to update offers in response to changing conditions
• The MISO footprint is rich in NG infrastructure to deliver natural gas, storage, and pipeline, LDC, and marketer products and services to mitigate fuel risk
What are the market design elements that provide appropriate reliability?
• What are the market signals?
– LMP
– Transparent transmission congestion information
– Efficient and Transparent Emergency Operating Procedures
– Other?
What metrics measure the effectiveness of the market signals?
– % clearing in day ahead – shows how effective market incentives are to participate in day ahead
– Cost recovery through LMPs appropriate for membership • Costs of energy
– Production costs
– Opportunity costs
• How are fuel costs recovered by the membership
– For those with obligation to serve – FAC
– For those without obligation to serve ‐ LMP
– Flexibility to allow for changing offers – appropriate response to changing conditions
– Other?
What do we need to know to address this national question?
• What % of MISO load is served by utilities with an “obligation to serve”
• How will the generation fleet change? What % will be natural gas fired generation?
• Is the instance of out of merit dispatch predictable and transparent? How much influence does it exert over the LMP? Is it related to NG availability?
• Other?
Next Steps
(Not necessarily in order of importance)
• Determine % load served by traditional utilities; others
• Determine if % increase in NG fired generation in the fleet puts footprint at risk; is there sufficient base load generation?
• Determine if all prudent and necessary fuel costs can be recovered in LMP given the membership