1. ASM Phase II Real Time Dispatch and Reserve Constraint Penalty Factors rev2.0 NEPOOL Markets Committee June 28/29, 2005 Jim Milligan ISO-NE Markets Development

2. Presentation Title © 2005 ISO New England Inc. 2 Outline Review activities that take place prior to real time –System and locational Reserve Requirements –Resource commitment in DA and RAA Overview of real time dispatch Proposed Reserve Constraint Penalty Factors Use of RCPFs –Dispatch Solutions Reserve Shortages

3. Presentation Title © 2005 ISO New England Inc. 3 System Reserve Requirements System Reserve Reserve requirements are for real time –Provide resources to protect power system from supply loss –NERC/NPCC/ISO Procedures dictate: Ten Minute Reserves to cover 1 st Contingency supply loss Thirty Minute Reserves to cover ½ 2 nd Contingency supply loss –NEPOOL/ISO Procedures allow Ten Minute Reserves to be met with combination of Spinning and non-Spinning Reserves (nominally 50% of each) –Unless otherwise constrained, all eligible resources can be used to meet System Reserve requirements

4. Presentation Title © 2005 ISO New England Inc. 4 Locational Reserve Requirements Locational Reserves are required to protect sub-areas of the power system from local generation or transmission 2 nd contingencies in order to restore 1 st contingency protection Based on system status –Transmission system including planned or forced outages –Generation availability including economic operation

5. Presentation Title © 2005 ISO New England Inc. 5 Energy and Reserve Procurements Preliminary Reliability Assessment –Daily analysis by Transmission Group of expected power system conditions for next Operating Day based on initial and forecasted conditions Status of transmission system (planned and forced outages) Expected generation operation (initial status, planned and forced outages, forecasted operation) ISO Load Forecast –Evaluation includes forecast of both system and locational capacity and reserve requirements –Results are inputs to DAM clearing process

6. Presentation Title © 2005 ISO New England Inc. 6 Energy and Reserve Procurements (cont) Portfolio Obligations from LFRM are converted to physical resources in conjunction with DA Offers System reserve requirements are inputs to DAM clearing as capacity constraints and DAM provides an accounting of eligible resources to meet requirements DAM clears based on inputs and produces hourly energy schedules for resources Results are posted and are inputs to RAA process

7. Presentation Title © 2005 ISO New England Inc. 7 Energy and Reserve Procurements (cont) Updated Reliability Assessment –Based on: DAM clearing Updated availabilities from Re-Offer Period Updated system conditions, including Load Forecast –The Transmission Group updates the assumptions and assessment of system requirements for the Operating Day –This updated assessment of requirements is input to the RAA process

8. Presentation Title © 2005 ISO New England Inc. 8 Energy and Reserve Procurements (cont) Resource Adequacy Assessment –RAA outputs If RAA does not detect any violations of requirements, no additional resource commitments are required If RAA detects violations, commitments may be required: –If system capacity/reserves or 1 st contingency coverage, next economic resource(s) to satisfy constraints are notified of possible commitment (startup instructions issued) –If 2 nd contingency coverage to meet local constraints, next economic resource(s) to satisfy constraints are notified of commitment (startup instructions issued) RAA process results in a viable Real Time Operating Plan to meet all requirements for the Operating Day based on information available at time of execution

9. Presentation Title © 2005 ISO New England Inc. 9 Real Time Dispatch Objective of real time dispatch algorithm is to determine the least costly means of serving the next increment of load and reserves at each node in the system from available resources given all identified constraints Identified constraints include; –Active transmission constraints –Resource operating constraints including ramp rates and limits –System reserve requirements (new with ASM) –Locational reserve requirements (new with ASM) –Real time energy (load) requirements –Regulation requirements

10. Presentation Title © 2005 ISO New England Inc. 10 Real Time Dispatch (cont) Available Resources –On-line dispatchable Resources (Generators and Asset Related Demand) –On-line non-dispatchable Generators and scheduled External transactions (energy requirements) –Off-line Fast Start Generators

11. Presentation Title © 2005 ISO New England Inc. 11 Real Time Dispatch (cont) Real Time ex-ante dispatch inputs –Power system state from State Estimator Generator MW outputs Actual Load at each node Calculated flows and limits for each branch element Defined interface limits and actual flows Active transmission constraints –Next period load forecast from EMS load forecast algorithm –System and locational reserve requirements from EMS Reserve applications –Resource Bid/Offer data

12. Presentation Title © 2005 ISO New England Inc. 12 Real Time Dispatch (cont) Real time ex-ante dispatch outputs –Desired Dispatch Points (MW) and reserve designations for all dispatchable resources to meet the energy, reserve and transmission constraints –Ex-ante dispatch rates (energy LMP) for all pricing nodes and reserve clearing prices for each reserve product for system and reserve zones

13. Presentation Title © 2005 ISO New England Inc. 13 Real Time Dispatch (cont) If all allocations and assignments from LFRM, DAM clearing and RAA are reasonable accurate, real time dispatch throughout the Operating Day has the set of Resources to meet the energy and system/locational reserve requirements for the next real time dispatch cycle Therefore, under normal conditions, the real time dispatch produces nodal energy LMPs based on an economic dispatch, including transmission constraints, of available Resources and reserve clearing prices of zero.

14. Presentation Title © 2005 ISO New England Inc. 14 Real Time Dispatch (cont) Non-normal dispatch conditions –Re-dispatch to meet system TMSR reserve requirements When re-dispatch is required to maintain the system TMSR reserve requirement, the resource(s) re-dispatched will incur an opportunity cost to provide the reserves When this condition occurs, the real time TMSR Reserve Clearing Price will be the highest opportunity cost of the resource dispatched to provide the reserves All resources that are designated as providing TMSR will be eligible to receive the TMSR Clearing Price for the MWs of reserve provided

15. Presentation Title © 2005 ISO New England Inc. 15 Real Time Dispatch (cont) Non-normal dispatch conditions –Re-dispatch to meet local reserve requirements See example

16. Presentation Title © 2005 ISO New England Inc. 16 Real Time Dispatch (cont) Non-normal dispatch conditions –System Capacity Deficiency (OP#4) Capacity deficiencies exist when there is insufficient resources available in real time to meet the energy and reserve requirements of the power system Capacity deficiencies can result from a) peak load conditions or real time loads substantially higher than forecast or b) forced outage(s) in R/T and the lack of available resources after the outage(s) to meet the requirements

17. Presentation Title © 2005 ISO New England Inc. 17 Real Time Dispatch (cont) Non-normal dispatch conditions –System Capacity Deficiency (OP#4) If there is insufficient capacity in real time to meet the energy and reserve requirements, the energy needs of the system will be met and the reserve requirements will not be met Under these conditions, one or more reserve constraint violation(s) will occur and non-zero real time reserve clearing price(s) will be produced by the Reserve Constraint Penalty Factor(s)(RCPF) The RCPFs have been developed to recognize the value of the reserve shortage and reduced reliability state of the power system

18. Presentation Title © 2005 ISO New England Inc. 18 Proposed Reserve Constraint Penalty Factors Location ProductRoSReserve Zones TMSR S $50n/a TMNSR S $850n/a TMOR S $100n/a TMOR L n/a$50

19. Presentation Title © 2005 ISO New England Inc. 19 Derivation of RCPFs RCPFs have been established to be consistent with operational requirements and practices of power system. RCPFs reflect the costs the ISO would be willing to incur to procure reserves given the $1000/MW Energy Cap. RCPFs will replace the existing Reserve Shortage Condition Pricing Rule as defined in Market Rule 1. RCPFs will provide mechanism to reflect reserve shortages in stages for system and locational requirements.

20. Presentation Title © 2005 ISO New England Inc. 20 Use of RCPFs RCPFs have two functional uses under ASM Phase II: –Allows the real time dispatch algorithm to achieve a feasible solution when a Reserve Constraint cannot be satisfied, –Determines a real time Reserve Clearing Price (by product and location) when a Reserve Constraint cannot be satisfied.

21. Presentation Title © 2005 ISO New England Inc. 21 Dispatch Feasibility The real time dispatch algorithm will include system reserve requirements for TMSR, TMNSR and TMOR and local reserve requirements for TMOR for each Reserve Zone The real time reserve requirements (system and locational) will be calculated based on real time conditions and will be inputs to the dispatch

22. Presentation Title © 2005 ISO New England Inc. 22 Dispatch Feasibility (cont) Additional Dispatch Rules: –Unused MWs of higher quality reserves will be available to meet lower quality reserve requirements –Lower quality Reserve Clearing Prices will cascade upward to higher quality Reserve Clearing Prices Reserve capability of on-line Resources will be computed based on either 10*MRR or 30*MRR from DDP constrained by EcoMax using MRR at DDP. Reserve capability of off-line Resources will be computed based on CLAIM10/30 Offer data constrained by EcoMax.

23. Presentation Title © 2005 ISO New England Inc. 23 Dispatch Feasibility (cont) Objective function of real time dispatch will be to minimize the cost of meeting all constraints from available Resources. Constraints include: –Nodal/system energy balance, –Resource specific constraints (limits, MRR, etc.) –Transmission constraints (branch, interface, etc.) –System/local reserve requirements

24. Presentation Title © 2005 ISO New England Inc. 24 Dispatch Feasibility (cont) RCPFs will be set equal to values as specified. When a reserve constraint cannot be satisfied with available resources, the constraint will be violated in the dispatch solution, and the RCPF will act conceptually as a reserve resource with infinite MW and a price equal to the RCPF. This concept will allow the dispatch algorithm to arrive at a feasible solution.

25. Presentation Title © 2005 ISO New England Inc. 25 Locational Example of RCPFs Initial conditions: ActualEcoMinEcoMaxEnergyMRRReserve –GenA2525100$70130 –GenB8050100$50520 –GenC0525$150C10=2525 –GenD0525$200C30=2525 GenA and GenB committed, Local Reserve Reqt = 100 MW Interface Limit =200MW, Interface Flow=150MW Local Load = 255 System LMP = $50, Reserve Prices = $0

26. Presentation Title © 2005 ISO New England Inc. 26 Conditions at t=0 Local Load = 255 GenA 25R=30 GenB 80R=20 GenC 0R=25 GenD 0R=25 Load 255 L Res = 150 Local LMP $50 L RCP = $0 Limit = 200 Actual = 150 System LMP = $50 System RCPs = $0 System Reserve Zone

27. Presentation Title © 2005 ISO New England Inc. 27 Conditions at t=1 Local Load = 300 GenA 25R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 300 L Res = 105 Local LMP = $55 L RCP = $0 Limit = 200 Actual = 175 System LMP = $55 System RCPs = $0 System Reserve Zone Energy Balance is satisfied Local Reserve Reqt is satisfied

28. Presentation Title © 2005 ISO New England Inc. 28 Conditions at t=2 Local Load = 310 GenA 30R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 310 L Res = 100 Local LMP = $70 L RCP = $15 Limit = 200 Actual = 180 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is satisfied Re-dispatch of Interface – similar to Gen opportunity cost Reserve Zone

29. Presentation Title © 2005 ISO New England Inc. 29 Conditions at t=3 Local Load = 351 GenA 70R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 351 L Res = 99 Local LMP = $105 L RCP = $50 Limit = 200 Actual = 181 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is violated Reserve Zone

30. Presentation Title © 2005 ISO New England Inc. 30 Conditions at t=4 Local Load = 371 GenA 71R=29 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 371 L Res = 79 Local LMP = $120 L RCP = $50 Limit = 200 Actual = 200 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is violated Reserve Zone

31. Presentation Title © 2005 ISO New England Inc. 31 Reserve Shortages Previous example shows local reserve shortage and use of local RCPF Similar concept employed for system reserve shortages Typical condition would begin with a shortage of TMOR followed by shortage of TMNSR, and in extreme cases, a shortage of TMSR. Under this scenario, system TMOR RCPF would be violated first followed by system TMNSR RCPF and finally system TMSR RCPF

32. Presentation Title © 2005 ISO New England Inc. 32 Reserve Shortages (cont) Frequency of System Reserve Shortages –Reference: Analysis of Historical Reserve Shortages White Paper Historical analysis indicates that the Control Area has experienced a deficiency in Operating Reserves (TMOR) in real time approximately 0.26% of time. Of the total Number of deficient conditions (24), five resulted in a deficiency of TMNSR, and of the five, three may have resulted in a deficiency of TMSR.

33. Presentation Title © 2005 ISO New England Inc. 33 Reserve Shortages (cont) Historical information does not exist to perform similar analysis of locational reserve shortage conditions. The ISO is continuing to investigate the feasibility of producing such an analysis.

34. Presentation Title © 2005 ISO New England Inc. 34 Discussion and Questions