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ERCOT MARKET EDUCATIONLoad Serving Entities 201
2
PROTOCOL DISCLAIMER
This presentation provides a general overview of the Texas Nodal Market Implementation and is not intended to be a substitute for the ERCOT Nodal Protocols (available at http://nodal.ercot.com/protocols/index.html), as amended from time to time. If any conflict exists between this presentation and the ERCOT Nodal Protocols, the ERCOT Nodal Protocols shall control in all respects.
ANTITRUST ADMONITION
ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, an electronic version is available at http://www.ercot.com/about/governance/index.html. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws.
Legal Disclaimers and Admonitions
3
• Restrooms
• Refreshments
• Attendance sheet
• Exam
• Questions
• Microphones
Legal Disclaimers and Admonitions
Please turn off cell phones & other electronics
Course Introduction
5
Load Serving Entities (LSEs), including:
• Retail Electric Providers
• Electrical Cooperatives
• Municipally-Owned Utilities
This course is designed for:
Course Audience
6
• Identify key Wholesale Market costs associated with serving load in the ERCOT Market
• Describe several means of hedging these costs
• Evaluate your current strategies against your needs
Upon completion of this course you will be able to:
Course Objectives
7
• Nodal Market Overview
• Nodal Market Pricing
• Market Costs of Serving Load
• Nodal Market Tools
• Trades
• Day-Ahead Market
• Congestion Revenue Rights
• Using Tools to Manage Costs
Topics covered in this course:
Course Objectives
8
Nodal Market Overview
9
• Registration Requirements
• Network Modeling
• CRR Auction
• Day-Ahead Market
• Reliability Unit Commitment
• Adjustment Period
• Real-time Operations
• Settlements
• Market Information System (MIS)
Topics in this lesson . . .
Course Objectives
10
NODAL MARKET OVERVIEW – The Market Structure
11
NODAL MARKET OVERVIEW – The Market Structure
12
LSEs in ERCOT – Defining LSEs
A Load Serving Entity (LSE) provides
electrical service to end-use customers
Load Serving Entity
13
LSEs in ERCOT – Defining LSEs
Types of LSEs:• Retail Electric Providers• Electrical Cooperatives• Municipally-Owned Utilities
Load Serving Entity
14
LSEs in ERCOT – Defining LSEs
Registration Requirements:• Registration as an LSE• Designation of a QSE
15
LSEs in ERCOT – LSE Registration
To register as an LSE• Market Participant application• Standard Market Participant agreement
16
LSEs in ERCOT – LSE Registration
Designating a QSE• Occurs during registration• LSE may also be a QSE
Changing QSE Representation• LSE must inform ERCOT • New QSE must confirm
17
NODAL MARKET OVERVIEW – Network Modeling
18
NODAL MARKET OVERVIEW – CRR Auction
19
LSEs in ERCOT – LSE Registration
Congestion Revenue Rights (CRR)• Financial instrument • Hedge against congestion costs
20
LSEs in ERCOT – LSE Registration
CRR Account Holders• Must register with ERCOT and
meet qualification requirements• LSE may also be a CRR
Account Holder
21
NODAL MARKET OVERVIEW – Day-Ahead Market
22
NODAL MARKET OVERVIEW – Reliability Unit Commitment
23
NODAL MARKET OVERVIEW – Adjustment Period
24
NODAL MARKET OVERVIEW – Real-Time Operations
25
NODAL MARKET OVERVIEW – Settlement
26
NODAL MARKET OVERVIEW – Market Information System
27
• Registration requirements• The purpose of Network Modeling• The role CRRs play in the Nodal Market• Participation in the Day-Ahead Market• Reliability Unit Commitment• Activities of the Adjustment Period• The components of Real-Time Operations• The goals of Settlements• The uses of the MIS
You’ve learned about…
Summary
28
Nodal Market Pricing
29
• Settlement Points
• Settlement Point Pricing
• Locational Marginal Pricing
Topics in this lesson . . .
Overview
30
All Energy in the ERCOT Market is settled at one of three types of Settlement Points:
Settlement Points
ResourceNodes
LoadZones
Hubs
Each Settlement Point has its own Settlement Point Price
31
An Electrical Bus where a Resource’s measured output is settled
What is a Resource Node?
Settlement Points
ResourceElectrical Bus
32
A grouping of Load Buses where Load is settled.
What is a Load Zone?
Settlement Points
All Load must be assigned to a specific Load Zone for Settlement purposes
33
• Competitive Load Zones
• Non Opt-in Entity Load Zones
• DC Tie Load Zones
Three types of Load Zones
Settlement Points
34
A grouping of 345kV buses wherefinancial transactions are settled.
What is a Hub?
Settlement Points
Hub
Specific buses in each Hub defined by Protocols
35
ERCOT Hub Average
ERCOT Bus Average
Six Hubs in ERCOT Market
Settlement Points
Four Regional Hubs• North
• West
• South
• Houston
Two Average Hubs
36
Settlement Point Prices are calculated from Locational Marginal Prices:
Settlement Points
• Load Zone: Load-weighted average of LMPs at Load Buses within the Load Zone
• Hub: Simple Average of LMPs at defined Hub Buses within the Hub
• Resource Node: LMP at Resource Node
37
Additional Real-Time pricing component…
Settlement Points
• Reserve Price Adder: the economic value of reserves that are available for energy dispatch in Real-Time
• LMPs and Reserve Price Adders are used together to form SPPs in Real-Time
LMPs are location-specific. Reserve Price Adders represent the value of
reserves ERCOT-wide.
38
What is Locational Marginal Pricing (LMP)?
• Pricing: Cost
• Marginal: to serve the next increment of Load
• Locational: at an Electrical Bus
Locational Marginal Pricing
Locational Marginal Pricing
Buses can be:• Load Buses• Generation Resource Buses• Hub Buses• Other Buses
39
• Energy
• Congestion
LMP components
Locational Marginal Pricing
In some markets, LMPs have a component for losses.
The ERCOT Nodal Market does NOT include losses in LMPs.
40
Introducing the players…
Locational Marginal Pricing
345kVHub Bus
69kVLoad Bus
Gen 1
Gen 2 Gen 3
Load
41
Let’s solve for LMPs at each Bus
Locational Marginal Pricing
Gen 1
Gen 2 Gen 3
20 MW20 MW @ $20
20 MW @ $10
345kVHub Bus
69kVLoad Bus
5 MW Limit
10 MW Limit
40 MW @ $30
$10LMP?
$20LMP?
$30LMP?
$30LMP?
Clear 5 MW
Clear 5 MW Clear 10 MW
Load$20LMP?
42
Since we have congestion. . .
Locational Marginal Pricing
Charges to BuyersLMP MW
$30 20 $600
Total $600
Payments to SellersLMP MW
Gen 1 $20 5 $100
Gen 2 $10 5 $50
Gen 3 $30 10 $300
Total $450
43
Locational Marginal Pricing
$600
$450
$150
Chargesto
Buyers
Paymentsto
Sellers
Day-Ahead Market Congestion Rent funds Congestion Revenue
Rights (CRRs)
44
• LMPs and Settlement Point Prices
• Every Hour
How often are LMPs & Settlement Point Prices calculated?
Settlement Point Prices
LMPs and Reserve Price Adders• Every 5 minutes*
Settlement Point Prices• Every 15 minutes
* Generated every SCED cycle
45
• LMP Contour Map
• Day-Ahead Market SPPs
• Real-Time LMPs
• Real-Time SPPs
Market Information System
46
• Settlement Points
• Settlement Point Pricing
• Locational Marginal Pricing
You’ve learned about…
Summary
47
Market Costs of Serving Load
48
• The LSE Business Environment
• Wholesale Market Costs of Serving Load
• The Challenges of Predicting Cost Exposure
Topics in this lesson . . .
Overview
49
The LSE Business Environment
50
• Primary Costs to Manage: Other costs
• Energy - Reliability Must Run
• Capacity - Black Start
• Congestion - Voltage Support
• Ancillary Services - ERCOT Administrative Fee
Settlement Exposure
Market Costs of Serving Load
51
Market Costs of Serving Load
Energy
Capacity
Congestion
Ancillary Services
What are the wholesalemarket costs for serving load?
52
Acquire Energy to serve Load
Market Costs of Serving Load
Bilateral Trade
Day-Ahead Market
Real-Time Purchase
53
Acquire Energy to serve Load
Market Costs of Serving Load
Bilateral Trade
Day-Ahead Market
Real-Time Purchase
Energy& Capacity
Energy& Capacity
Energy
54
Congestion Cost exposure
Market Costs of Serving Load
Congestion costs are built in to the energy prices.
Resource Node A
$30/MWh
$30/MWh
$30/MWh
Load Zone
$40/MWh
$50/MWh
55
Ancillary Services Costs
Market Costs of Serving Load
Regulation Up
Regulation Down
Responsive Reserve
Non-Spin ReserveQSEs (with Load)
56
Ancillary Service Plan
• Ancillary Services (MW) for each hour of the Operating Day
• Based on forecasted load
• Posted to MIS Public
Ancillary Services Costs (continued)
Market Costs of Serving Load
57
Ancillary Service Obligation
• AS Plan allocated to each QSE, by service, by hour.
• Based on Load Ratio Share
Ancillary Services Costs (continued)
Market Costs of Serving Load
58
QSE settles with LSE
• ERCOT charges QSE for any Obligation not self-arranged
• QSE may charge LSE for Ancillary Services
Ancillary Services Costs (continued)
Market Costs of Serving Load
59
• Supply and Demand
• Transmission Congestion
• Transmission and Generation Outages
• Weather
Factors Impacting Wholesale Market Costs:
Market Costs of Serving Load
60
Predicting Cost Exposure
Market Costs of Serving Load
61
Market Costs of Serving Load
62
• The LSE Business Environment
• Wholesale Market Costs of Serving Load
• The Challenges of Predicting Cost Exposure
You’ve learned about…
Summary
Market Tools
64
• Why do anything?
• Tools available in ERCOT, including:
• Trades
• Day Ahead Market
• Congestion Revenue Rights
• Criteria for using these tools
• Financial impact of using these tools
Topics in this lesson . . .
Overview
65
The Tools for Managing Wholesale Costs
Market Tools
Congestion
Energy, Capacity, Congestion
Day-Ahead Market
Congestion Revenue Rights
Bilateral TradesEnergy, Capacity, Ancillary Services
66
The more forward the Energy is purchased the higher the price.
In general . . .
Market Tools
So, why would an LSE buy energy forward?
67
Trades and DAM provide Price Certainty
Real-Time Price Volatility!
Market Tools
0
10
20
30
40
50
60
1 3 5 7 9 11 13 15 17 19 21 23
LMP
Hour
Load Zone
Real-Time Prices
Day-Ahead Prices
Trade Prices
68
Avoid Capacity-Related charges!
Market Tools
Bilateral Trade
Day-Ahead Market
Real-Time Purchase
Energy& Capacity
Energy& Capacity
Energy
69
Market Tools - Trades
70
• QSE-QSE transactions• Transfers financial responsibility• Types
• Capacity• Energy• Ancillary Service
Trades
Market Tools – Trades
Trades are used only in Settlements
71
Market Tools – Trades
Trade Options:• LSEs may trade• QSEs report trades to ERCOT
72
• Trades do not “exist” until bothQSEs agree.
• One QSE reports the trade• The other QSE confirms the trade
• After the Trade is confirmed, either party may reject it if the deadline for doing so has not passed.
Buyer and Seller QSE must confirm Trades
Market Tools – Trades
73
Information Needed Energy Trade Capacity Trade AS Trade
Buying QSE
Selling QSE
Type of AS:
Settlement Point:
MW quantity for each Settlement Interval 15 minute Hourly Hourly
Start and Stop Time 1st / Last 15-minute Settlement Interval 1st / Last Hour 1st / Last Hour
Submittal Criteria by Trade
Market Tools – Trades
74
Market Tools – Trades
Submitted prior to 1430
Energy Trade• Energy supply in Real-Time• Capacity supply in Day-Ahead
RUC
Capacity Trade• No Energy supply in Real-Time• Capacity supply in Day-Ahead
RUC
Submitted after 1430
Energy Trade• Energy supply in Real-Time• Capacity supply in subsequent
Hourly RUC
Capacity Trade• No Energy supply in Real-Time• Capacity supply in subsequent
Hourly RUC
75
Market Tools - Day Ahead Market (DAM)
76
• Centralized Forward Market• QSEs buy and sell Energy• ERCOT buys Ancillary Services • Forward market provides price
certainty
The Day-Ahead Market
Market Tools – Day Ahead Market
77
• Market opens at 0600
• Clearing Process begins at 1000
• Results posted by 1330
When does the Day-Ahead Market occur?
Market Tools – Day Ahead Market
06:00 13:30 00:00
78
Market Tools – Day Ahead Market
Only QSEs participate in the Day-Ahead Market.
79
The Day-Ahead Market
Market Tools – Day Ahead Market
80
Market Tools – Day Ahead Market
The Day-Ahead Market
Types of Bids:• Energy Bid• PTP Obligation Bid
81
Energy Bid
h
• Submitted at any Settlement Point• Includes:
• MW Quantity• Price buyer is willing to pay
Day-Ahead Market Energy Bid
Market Tools – Day Ahead Market
Energy bids are used only in DAM. Load is a price
taker in Real-Time
82
• Financial instruments• Hedge against
congestion costs• Financial Investment
• Purchased at DAM price spread
• Settled at Real-Time price spread
Day-Ahead Market PTP Obligations
Market Tools – Day Ahead Market
83
• Submitted for any two Settlement Points• Includes:
• MW Quantity• (Sink – Source) price buyer is willing to pay
DAM PTP Obligation Bid
Market Tools – Day Ahead Market
SourceSettlement
Point
SinkSettlement
Point
PTP Obligation
84
• Awarded DAM Energy Bid
• Energy supply in Real-Time
• Capacity supply in RUC
• Awarded DAM PTP Obligation
• Payment or Charge in Real-time
• No Energy supply in Real-Time
• No Capacity supply in RUC
Market Tools – Day Ahead Market
TOMORROWTODAY
85
Market Tools - Congestion Revenue Rights (CRRs)
86
• Financial instruments• Hedge against
congestion costs• Financial Investment
• Purchased at Auction Clearing Price
• Settled at DAM price spread
Congestion Revenue Rights
Market Tools – Congestion Revenue Rights
87
Price certainty - Locking in the price of congestion at the cost of purchasing the CRR
Market Tools – Congestion Revenue Rights
Price Separation between two Settlement Points
Diff
eren
ce
Hour
As a Financial Hedge for…
88
•As a Financial Investment…
•CRRs may be purchased as a financial tool to speculate:
Market Tools – Congestion Revenue Rights
Congestion Rent > Purchase Price
89
Congestion Revenue Rights Characteristics
Market Tools – Congestion Revenue Rights
• Designated point of injection (source) and point of withdrawal (sink)
• Settlement based on difference between sink and source Settlement Point Prices (Sink – Source)
• Two Instruments:• Point-to-Point Options• Point-to-Point Obligations
Point-to-Point Congestion
Revenue Rights
90
Types of Congestion Revenue Rights
Market Tools – Congestion Revenue Rights
Point-to-Point Options• Can only result in a payment
Point-to-Point Obligation• Can result in a payment or charge
Point-to-Point Congestion
Revenue Rights
91
Point-to-Point (PTP) Options
Market Tools – Congestion Revenue Rights
Point A
Point B
Point COptionAB Payment = $10.00
OptionCB Payment = $0?
$10/MWh$20/MWh
$30/MWh
92
Point-to-Point (PTP) Obligations
Market Tools – Congestion Revenue Rights
Point A
Point B
Point CObligation AB Payment = $10.00
Obligation CB Payment = -$10.00 ?
$10/MWh$20/MWh
$30/MWh
93
• CRR Auction
• Allocation (NOIEs only)
• Bilateral Trades
Market Tools – Congestion Revenue Rights
Auction
Allocation
Trade
CRRs
Three ways of acquiring CRRs:
94
• Time-of-Use Blocks
• One month strips
CRRs are auctioned and allocated by:
Market Tools – Congestion Revenue Rights
95
• CRR Auction• Monthly and Semi-Annual Auctions• Based on Network Operations Model
Market Tools – Congestion Revenue Rights
96
Market Tools – Congestion Revenue Rights
Only CRR Account Holders can become owners-of-record for CRRs
97
• Timing of Auctions:
• Monthly
• Long Term Auction Sequence
• Semi-annual
• Four successive auctions
Market Tools – Congestion Revenue Rights
1st Six months
2nd Six months
3rd Six months
4th Six months
98
• Available Capacity
• 90% in Monthly Auction
• Less in Long-Term Auction
• 60% for first six months
• 45% for second six months
• 30% for third six months
• 15% for fourth six months
Market Tools – Congestion Revenue Rights
CRR Auction Awards are also constrained by
Credit Limits
99
Pay to QSEs representing Load
Annual and MonthlyCRR Auctions
Distribution occurs once a month.
CRR Auction Settlement
Market Tools – Congestion Revenue Rights
100
• PTP Options• PTP Obligations
• Characteristics remain unchanged
• Both parties must meet credit requirements.
Trading CRRs Bilaterally
Market Tools – Congestion Revenue Rights
101
• The need for forward energy purchases
• Tools available in ERCOT, including:
• Trades
• Day Ahead Market
• Congestion Revenue Rights
• Criteria for using these tools
• Financial impact of using these tools
You’ve learned about…
Summary
102
Using Market Tools to Manage Costs
103
• Introduce our Laboratory LSE and the experimental conditions
• Use various market tools to manage costs for our LSE
• Explore many scenarios
• Use single tools and combinations of tools
• Compare costs
• Discuss the benefits and risks associated with each tool.
In this lesson we will. . .
Overview
104
MEGALOAD CORPORATION
Goals in doing Business in the ERCOT Market:
• Provide reliable electric service at a competitive rate
• Manage cost exposure
Introducing…
Scenario Conditions
MegaLoadCorp
105
Scenario Conditions
What do I do
now?
MegaLoadCorp
• MegaLoad is it’s own QSE.
• MegaLoad is also a CRR Account Holder.
• MegaLoad does not own any generation.
106
Hour Ending 1200
Resource Node A West HubWest Load
Zone
Trade Price $23 25 $35DAM SPP $20 25 $30RT SPP $30 40 $50
Scenario Conditions
Peak Weekday Block PTP Option Clearing Price
West Hub to West Load Zone $5Resource Node A to West Load Zone $8
107
Comparing Forward & Real-time transactions
• DAM transactions & Trades are conducted hourly
• Real-Time is settled in 15 minute intervals
• For simplicity, we will
• Calculate all examples on an hourly basis
• Assume Real-Time prices and loads are constant for an hour
Scenario Conditions
108
Scenarios – Managing Costs of Serving Load
Costs Tools
CRRs
Bilateral Trades
Energy
Congestion
Capacity
Ancillary Services Do Nothing
Day-Ahead Market
109
Managing Energy Costs
Costs Tools
Energy
Congestion
Capacity
Ancillary Services Do Nothing
110
QSE Representing Load• Settled for difference between
Real-Time Load and Trade or DAMtransactions
• Settles with LSE
Managing Energy Costs
Loads in Real-Time• Are price takers
• Pay for all energy not previouslyarranged through Trade or DAM
05
1015202530354045
1 3 5 7 9 11 13 15 17 19 21 23
LMP
Hour
Load Zone
111
ERCOT calculates each QSE’s Real-Time Energy Imbalance:
Real-Time Energy Settlement
Managing Energy Costs
( )_ x (-1) RTSPP ($/MWh)Real-Time Settlement
Point Price
ERCOT settles a QSE’s Energy Imbalance at each Settlement Point
Supplies Obligations
112
Real-Time Energy Purchase:SCENARIO 1
Managing Energy Costs
x (-1) RTSPP ( )_Supplies Obligations
• QSE does not buy forward energy
• Load is 5 MW in West Load Zone for hour ending 1200
• Settlement Point Price: $50/MWh
113
Real-Time Energy Purchase:SCENARIO 1
Managing Energy Costs
_0 (-1) $50.00 = $250.005 xSupplies
(Obligations
)
• Load is exposed to Real-Time Price
• QSE pays $250 (per hour)
114
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $250.00Payment for DAM PTP Obligations N/A
Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A
CRR Auction Charge for Awarded CRR Auction Bid N/A
Total ERCOT Settlement $250.00
Energy Trade Cost to LSE for Energy Traded N/A
NET MegaLoad Cost $250.00
SCORECARD
115
Managing Energy Costs
Costs Tools
Energy
Congestion
Capacity
Ancillary Services
Day-Ahead Market
116
Day-Ahead Market PurchaseSCENARIO 2
Managing Energy Costs
5MW X $30.00/MWh = $150.00 for the hour
• QSE buys 5MW in the West Load Zone for Hour Ending1200
• Day-Ahead Settlement Point Price• West Load Zone: $30/MWh
117
Real-Time SettlementSCENARIO 2
Managing Energy Costs
x (-1) RTSPP ( )_Supplies Obligations
• QSE bought 5MW in DAM
• Load is 5 MW in West Load Zone for interval 1200
118
Real-Time SettlementSCENARIO 2
Managing Energy Costs
_5 (-1) $50.00 = $0.005 xSupplies
(Obligations
)
• Load is not exposed to Real-Time Prices
• Settlement Point Price• West Load Zone: $50/MWh
119
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $0.00Payment for DAM PTP Obligations N/A
Day-AheadDAM Energy Charge $150.00Payments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A
CRR Auction Charge for Awarded CRR Auction Bid N/A
Total ERCOT Settlement $150.00
Energy Trade Cost to LSE for Energy Traded N/A
NET MegaLoad Cost $150.00
SCORECARD
120
Managing Energy Costs
Costs Tools
Energy
Congestion
Capacity
Ancillary Services
Bilateral Trades
121
Trade Energy PurchaseSCENARIO 3
Managing Energy Costs
5MW X $25.00/MWh = $125.00 for the hour
• QSE buys 5MW at the West Hub for Hour Ending1200
• Trade Price• West Hub: $25/MWh
122
Real-Time SettlementSCENARIO 3
Managing Energy Costs
x (-1) RTSPP ( )_Supplies Obligations
• QSE bought 5MW through Trade
• Load is 5 MW in West Load Zone for Hour Ending 1200
123
Real-Time SettlementSCENARIO 3
Managing Energy Costs
_5 (-1) $40.00 = -$200.000 xSupplies
(Obligations
)
• Trade energy is delivered to West Hub
• Settlement Point Price• West Hub: $40/MWh
124
Real-Time SettlementSCENARIO 3
Managing Energy Costs
_0 (-1) $50.00 = $250.005 xSupplies
(Obligations
)
• QSE still has load at the West Load Zone
• Settlement Point Price• West Load Zone: $50/MWh
125
Real-Time Settlement
Managing Energy Costs
Resource Node A
$30/MWh
$40/MWh
$50/MWhWestLoad Zone
Payment at West Hub
Charge at West Load Zone Real-time Net Cost
$200 $250 $50
West Hub
126
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations N/A
Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A
CRR Auction Charge for Awarded CRR Auction Bid N/A
Total ERCOT Settlement $50.00
Energy Trade Cost to LSE for Energy Traded $125.00
NET MegaLoad Cost $175.00
SCORECARD
127
Managing Energy Costs
Costs Tools
CRRs
Energy
Congestion
Capacity
Ancillary Services
Day-Ahead Market
128
Managing Congestion Costs
Costs Tools
Energy
Congestion
Capacity
Ancillary Services
Day-Ahead Market
129
Congestion Cost exposureSCENARIO 4
Managing Congestion Costs
Resource Node A
$??/MWh
$??/MWh
$??/MWhWestLoad Zone
• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone
West Hub
130
The Day-Ahead Market
Managing Congestion Costs
Types of Bids:• Energy Bid• PTP Obligation Bid
131
Day-Ahead Market PTP ObligationsSCENARIO 4
Managing Congestion Costs
Price in Day Ahead Market = $5
Value in Real Time = $10 ?
?
$25/MWh $30/MWh
DAMPTP Obligation
DAM Prices:
$40/MWh $50/MWhReal-Time Prices:
WestLoad Zone
Source SinkWest Hub
132
DAM PTP Obligation Purchase:SCENARIO 4
Managing Congestion Costs
5MW X $5.00/MW = $25.00
• QSE buys 5MW of PTP Obligations from West Hub to West Load Zone for hour ending 1200
• Day-Ahead Price = $5/MW
133
Real-Time SettlementSCENARIO 4
Managing Congestion Costs
Resource Node A
$30/MWh
$40/MWh
$50/MWhWestLoad Zone
• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone• 5MW PTP Obligation Hub to Load Zone
West Hub
134
Payment at West Hub
Charge at West Load Zone
Payment for PTP Obligation
Real-timeNet Cost
$200 $250 $50 $0
Real-Time SettlementSCENARIO 4
Managing Congestion Costs
Resource Node A
$30/MWh
$40/MWh
$50/MWh
WestLoad Zone
West Hub
135
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations -$50.00-
Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations $25.00
CRR Auction Charge for Awarded CRR Auction Bid N/A
Total ERCOT Settlement $25.00
Energy Trade Cost to LSE for Energy Traded $125.00
NET MegaLoad Cost $150.00
SCORECARD
Don’t forget: A PTP Obligation can result in a charge in Real-Time
136
Managing Congestion Costs
Costs Tools
CRRs
Energy
Congestion
Capacity
Ancillary Services
137
• CRR Auction• Monthly and Semi-Annual Auctions• Based on Network Operations Model
Managing Congestion Costs
138
MegaLoad buys CRRs in Monthly Auction
Managing Congestion Costs
MegaLoad
5 MWs of Peak Weekday CRRs
Clearing price is $5 per MW per hour
ERCOT will charge MegaLoad for all hours in the Time-Of-Use block
139
CRR Purchase:SCENARIO 6
Managing Congestion Costs
139
5MW X $5.00/MW = $25.00
for Hour Ending 1200
MegaLoad
CRR Account Holder buys 5MW Peak WD PTP Option from West Hub to West Load Zone
Auction Clearing Price = $5/MW
140
Congestion Revenue RightsSCENARIO 5
Managing Congestion Costs
$25/MWh $30/MWh
PTP Option
DAM Prices:
$40/MWh $50/MWhReal-Time Prices:
WestLoad ZoneSource Sink
• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone• 5MW PTP Option from Hub to Load Zone
West Hub
141
Congestion Revenue RightsSCENARIO 5
Managing Congestion Costs
CRR Payment in DAM $25Real-Time Congestion Cost $50
$25/MWh $30/MWh
PTP Option
DAM Prices:
$40/MWh $50/MWhReal-Time Prices:
WestLoad ZoneSource SinkWest Hub
142
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations N/A
Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM -$25.00-Charge for DAM PTP Obligations N/A
CRR Auction Charge for Awarded CRR Auction Bid $25.00
Total ERCOT Settlement $50.00
Energy Trade Cost to LSE for Energy Traded $125.00
NET MegaLoad Cost $175.00
SCORECARD
143
Congestion Revenue RightsSCENARIO 6
Managing Congestion Costs
CRR Payment in DAM $25Real-Time Congestion Cost $50
Might bridge with DAM PTP Obligation
$25/MWh $30/MWh
PTP Option
DAM Prices:
$40/MWh $50/MWhReal-Time Prices:
WestLoad ZoneSource SinkWest Hub
144
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations -$50.00-
Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM -$25.00-Charge for DAM PTP Obligations $25.00
CRR Auction Charge for Awarded CRR Auction Bid $25.00
Total ERCOT Settlement $25.00
Energy Trade Cost to LSE for Energy Traded $125.00
NET MegaLoad Cost $150.00
SCORECARD
145
Day-Ahead Congestion HedgingSCENARIO 7
Managing Congestion Costs
• 5MW DAM Energy Purchase at West Load Zone• 5MW PTP Option from Resource Node A to West Load Zone
WestLoad Zone
Resource Node A
West Hub
146
CRR Purchase:SCENARIO 7
Managing Congestion Costs
146
5MW X $8.00/MW = $40.00
for Hour Ending 1200
MegaLoad
CRR Account Holder buys 5MW Peak WD PTP Option from Resource Node A to West Load Zone
Auction Clearing Price = $8/MW
147
Managing Congestion Costs
Day-Ahead Congestion HedgingSCENARIO 7
Energy Purchase PTP Option Payment Net Day-Ahead Cost$150 $50 $100
$20/MWh
$25/MWh
$30/MWh
WestLoad Zone
Resource Node A
West Hub
148
Real-Time SettlementSCENARIO 7
Managing Congestion Costs
148
_5 (-1) $50.00 = $0.005 xSupplies
(Obligations
)
Load is not exposed to Real-Time Prices
Settlement Point PriceWest Load Zone: $50/MWh
149
Type of Settlement Hour 12:00
Real-TimeReal-Time Energy Imbalance $0.00Payment for DAM PTP Obligations N/A
Day-AheadDAM Energy Charge $150.00Payments for CRRs Settled in DAM -$50.00-Charge for DAM PTP Obligations N/A
CRR Auction Charge for Awarded CRR Auction Bid $40.00
Total ERCOT Settlement $140.00
Energy Trade Cost to LSE for Energy Traded N/A
NET MegaLoad Cost $140.00
SCORECARD
150
CLASSACTIVITY
Class Activity
Split into groups:• Maximum of 5 people per group• Minimum of 3
• Analyze pricing information for Interval 0800• Minimize MegaLoad’s costs for serving 5MW of Load at the
West Load Zone
151
Hour Ending 0800
Resource Node A West HubWest Load
Zone
Trade Price $25 30 $35DAM SPP $20 25 $30RT SPP $15 20 $28
Class Activity Conditions
Peak Weekday Block PTP Option Clearing Price
West Hub to West Load Zone $3Resource Node A to West Load Zone $5
152
A Few Other Risks Impacting Market Costs
153
• Funding of CRRs
• CRR Balancing Account
• Derations
A few other things you should know about . . .
CRRs – A Few Other Risks
154
Payment due toCRR Account Holders
Hourly
Funding of CRRs
CRRs – A Few Other Risks
155
Payment due toCRR Account Holders
Hourly
CRR Settlement
CRRs – A Few Other Risks
may be short paid in some hours
156
Payment due toCRR Account Holders
Pay to QSEs representing Load
Monthly
CRR Balancing Account Fund
CRR Rolling Balancing Account
157
Payment due toCRR Account Holders
CRR Rolling Balancing Account
Monthly
158
Payment due toCRR Account Holders
Monthly
CRR Rolling Balancing Account
X
may remain short paid
159
• Transmission elements are oversold
• The Target Payment is a positive value
• CRR source or sink is a Resource Node
CRR payments may be derated if:
CRRs – A Few Other Risks
Resource Node A
WestLoad Zone
PTP Option
West Hub
160
Managing Capacity Costs
Costs Tools
Bilateral Trades
Energy
Congestion
Capacity
Ancillary Services
Day-Ahead Market
161
It ensures:
• Enough capacity is committed to serve the forecasted load
• Committed capacity is in the right locations
Reliability Unit Commitment (RUC)
Managing Capacity Costs
162
If ERCOT commits a Resource through RUC
• ERCOT provides QSE with a payment guarantee
• May provide “Make-Whole Payment”
Cost recovery
• QSEs are responsible for capacity
• QSEs who are capacity short responsible for Make-Whole
Managing Capacity Costs
163
• Load (Adjusted Metered Load )
• Capacity Trades where the QSE is a seller
• Energy Trade where the QSE is a seller
• Cleared DAM Energy Offer
What is included in the QSE’s capacity obligation?
Managing Capacity Costs
Capacity Required to meet QSE Obligations
164
• Show capacity from its Resources in its COP
• Capacity Trades where the QSE is a buyer
• Energy Trades where the QSE is a buyer
• Cleared DAM Energy bids
How can a QSE arrange to meet these obligations?
Managing Capacity Costs
Capacity arranged by QSE
165
QSEs that do not arrange enough capacity to cover obligations are responsible for the costs of RUC
Managing Capacity Costs
Capacity Short Charge
Capacity Required to meet QSE Obligations
Capacity arranged by QSE
Capacity Shortfall
166
• RUC Capacity-Short Charges are subject to a cap• Remaining Make-Whole funds are collected on a Load
Ratio Share basis.
RUC Make-Whole Uplift Charges
Managing Capacity Costs
Make-Whole Payments
Capacity Short Charges
Make-Whole Uplift Charge
Settlement
167
Managing Ancillary Service Costs
Costs Tools
Bilateral Trades
Energy
Congestion
Capacity
Ancillary Services
168
(AS Price) * (AS Quantity)
A QSE’s share of the Ancillary Service cost for an Operating Hour is
Managing Ancillary Service Costs
=AS Price ERCOT Total AS Cost( )MW procured by ERCOT
=AS Quantity ( )QSE Obligation - ( )Self-Arranged Qty
TotalAS Costs
169
QSE chooses how to fulfill Obligations
Managing Ancillary Service Costs
Self-Arrange Allow ERCOT to procure
DAM SASM
170
• May become part of QSE’s Self-Arrangement
• Reduces AS cost exposure in DAM or SASM
LSE may have Ancillary Service trades
Managing Ancillary Service Costs
171
• The risks of “doing nothing”
• The impact of forward energy purchases on costs
• The risks associated with delivery points for energy
• Hedging congestion costs
• Real-Time congestion costs
• Day-Ahead congestion costs
• Hedging capacity costs
• Managing Ancillary Service costs
You’ve learned about. . .
Summary
Wow!That’s a
lot.
Course Conclusion
173
• Identify key Wholesale Market costs associated with serving load in the ERCOT Market
• Energy
• Congestion
• Capacity
• Ancillary Services
• Describe several means of hedging these costs
• Evaluate your current strategies against your need
You should now be able to …
Course Objectives
174
ERCOT Nodal Market Protocols http://www.ercot.com/mktrules/nprotocols/
ERCOT Training
http://www.ercot.com/services/training/
Nodal Market Education Contact
Training@ercot.com
Additional Resources
Links
Recommended