Presentation on theme: "Demand Side Units in the SEM"— Presentation transcript:
1 Demand Side Units in the SEM SEMOSeptember 2013- Provide and understanding how how DSUs work in the SEM
2 Independent Demand Site The SEMDSUGeneratorsSEMSupply CompaniesGenerators bid into SEM and provide generation to the poolSupply Companies purchase from pool (Suppliers)Supply Customers purchase from supply companies, or directly from the pool if setup as Trading Site Supply Unit (TSSU)Payments flow opposite directionDSUs are classed as generators in the market, and bid in prices and quantities for demand reduction + availabilitySupply CustomersIndependent Demand Site
4 Scheduled vs Dispatched Relates to Market onlyThe most economic dispatchNo system constraints consideredDispatchedRelates to System Operation (SO)SO provide a dispatch instruction in real time to the DSUAccounts for system constraints and security of supply (reserve, transmission and trips)Difference between scheduled and dispatched.Important concept for later
5 DSUs in the SEMDemand Side Units (DSU) must be registered in the Single Electricity Market (SEM)The DSU will submit Commercial Offer and Technical Offer data on a daily basisPayments for capacity, energy and constraints are processed through the SEM.
6 DSU Market Configurations Third Party – Trading SiteRetail Supplier 1Demand Reduction CapabilityDSUTSSUTrading Site Supply UnitDRLoadDSU can either be associated with the Demand Site directly, or as part of an separate TSSU where the demand site enters into an agreement to provide a demand reduction to the DSU who then provides this offering to the market (this arrangement is known as a aggregator DSU).DSU (and associated TSSU where appropriate) must be registered in the SEMLoadSURetail Supplier 2
7 DSU Incentives in the SEM Capacity Payments- based on demand reduction availability- not on whether actually called uponPot of ~ €500 million per year must be paid outPayment per trading period varies based on ‘value’ of capacityLooking at capacity payments (which are the main revenue stream)Payments are given for each ½ hour of every day (assuming availability)Payments vary significantly for a given trading period - from zero to EUR181.Final capacity price based on ‘value’ of capacity ie. Margin, LOLP etc., although the total pot per month must remain the sameMore examples of how capacity payment changes with trading period, month and trading day provide in the appendices – for 2012 values.
8 Capacity Payment Example Availability PeriodDemand Reduction OfferedCapacity Payments per Annum#19am to 7pm every day1 MW~€42,70024 hours per day~€62,400Notes:#1 – based on 2012 Capacity Payment Generator Price (CPGP) values which are a close approximation to Capacity Payments
9 DSU Incentives in the SEM Avoided market charges- For Demand Sites associated with the DSU, whendemand reduction dispatched- Avoids the following chargesSystem Marginal Price (SMP) ~ € 60/MWh #1Capacity Charge ~ € 14.50/MWh #1Imperfections Charge € 4.71/MWh #2Variable MO Charge € 0.698/MWh #2#1 Illustrative values only, based on approximate averages#2 Based on 2012/2013 Regulatory Authorities approved tariffsIncentives from Supplier point of view:Demand Site can avail of charge reduction (Imperfections, VMOC, FMOC, & capacity charges which all relate to procurement of energy through the SEM)SMP: but remember, still incur cost of generation to replace demand drawn from marketCapacity Charge: Paid by suppliers to cover capacity payments to generatorsImperfections Charge: covers Dispatch Balancing Costs, Make Whole Payments and Energy Imbalance ChargesVariable MO Charge: to cover costs of running the marketSMP, Cap Charge, Imperfections and VMOC are all defined as “avoided costs” in the later presentation slides.Capacity Charges paid by Suppliers used to pay Capacity Payments to the DSUImperfections includes dispatch balancing costs i.e.. constraint charges, also energy imbalances etc.
10 Constraint Payments Ensures DSU is not disadvantaged when either: Scheduled in the market but not dispatched, orDispatched by the SO, but not scheduled in MarketSimilar mechanism to all other generators in the SEMShould not be considered an incentive for participation, just made to ensure DSU is not disadvantagedThis should not be a driver for setting up the DSU, it is to compensate for where dispatch differs from the market schedule only.This mechanism is the same for all generators in the SEM – with DSUs classed as generators too.Eg. Not scheduled, but dispatched. Paid for cost of dispatch at bid price (not market price). No real gain to DSU for this, aside from ‘Avoided Charges’ from SEm
11 Summary of Incentives Net Revenues#1 Capacity Payment#2 ~€42,700 9am to 7pm every day24hr per dayCapacity Payment#2~€42,700~€62,400Avoided Charges#3~€0Constraints#4Notes:#1 – Net Revenues = Payments less cost of Demand Reduction (ie. Bid price)#2 – Based on CPGP for 2012#3 – Assumes not dispatched by SO due to typically higher bid price#4 – Payments at bid price only
12 DSU Obligations in the SEM Submission of Commercial and Technical Offer Data- needed daily (bids, shutdown cost, forecast availability, forecast minimum output,forecast, min stable generation, ramp rates and down times)- conform to Bidding Code of PracticeSettlement- Check and reconcile settlement with bids, demand reduction and availabilityInvoice Payment- DSUs invoiced separately- Payments due to market for:Fixed Market Operator Charge (€ 100 per year per MW capacity)Resettlement- 3 working day payment terms, otherwise default and possible suspensionCredit Cover and Management of Credit Cover- minimum credit cover required ~ € 5000
13 Demand Site Supplier Unit Avoided Charges Payments in the SEMScenarioScheduled in MarketDispatched by TSOA1A2A3A4DSURevenueDemand Site Supplier Unit Avoided ChargesCap#1CapCap #1Most Likely ScenarioScenarios are for DSU with no demand associated with TSSUMost likely scenarios are: A1 and A3 – ie. Scheduled and Dispatched (cost effective), not schedule and not dispatched (not cost effective)In the first two scenarios the DSU is scheduled in the market as it is in merit order (ie. cheap enough).Scenario A1: (second most likely scenario)First scenario it is also dispatched.In this case DSU receives Cap payment, demand site supply unit avoids the costs (imperfections, capacity charges, MOC) for the demand reduction quantityScenario A2:DSU receives cap payment, no avoided charges for demand site supplier unit as demand reduction not activatedScenario 3 and 4 – not scheduled in market as not cheap enough.Scenario A3: (most likely scenario)Not scheduled and not dispatchedDSU gets capacity payment for availability only.No avoided charges by Demand site supplier unit as no demand reductionScenario B4:Not scheduled but dispatched for system reasons (security of supply etc)DSU receives capacity paymentDemand site supplier unit has avoided costs (imperfections, capacity charges, MOC) for the demand reduction quantityNotes:#1–DSU will not receive capacity payments for Demand Reduction that is netted against TSSU for DSU Trading site
14 Example A1: One Trading Day - Scheduled and Dispatched DSU BidBid Price € /MWhDemand Reduction Offered 1 MWAvailable between 9am and 7pmMarket Prices*SMP Averages (excluding 5pm to 7pm) € /MWhSMP (5pm to 7pm) € /MWhCapacity Payment Price (Average 9am to 7pm) € /MWhRelated Charges*Capacity Charges Price (Average 5pm to 7pm) ~ € /MWhOther Charges € /MWh*based on 2012 Trading Period averages. See Appendix B for full detailsMarket Outcome1 MW demand reduction:-Scheduled in market : 5pm to 7pm Dispatched by TSO : 5pm to 7pm forDSU Capacity Payments (Paid by SEM)€= Capacity Payment x DSU Reduction x durationOne advantage of DSU as opposed to WPDRS is that you can declare availability for any date or time (assuming you can comply), not just for the WPDRS season.Also you are paid for availability more so than being called on.Note: if you have a Retail Supply agreement for the demand site then the contract you have may be based on a different tariff and not pass through charges as defined here.Assumptions:DSU Available for 1MW from 9am to 7pmScheduled and Dispatched for 1MW from 5pm to 7pmDSU is marginal unit (ie. Last to be schedule in merit order as highest cost)Capacity Payment Prices based on 2012 Averages per Trading PeriodCapacity Charge Prices based on 2012 Averages per Trading PeriodSMP based on 2012 Averages per Trading Period (except for 5pm to 7pm period)TSSU has no demand. Therefore, no netting occurs.Market Operator and Imperfections Charge assumed to be €5.40/MWhPrices used are for example purposes only, prices change significantly due to a number of factors include availability, demand, seasonality, capacity pot size etc.Supplier Avoided Costs€= Related Charges x Demand Reduction Offered x durationOverall Savings (per Day)€Assumptions:DSU Trading Site Supply Unit has no demand, hence, no netting occursDSU is marginal unit (ie. Last to be scheduled in merit order as highest cost)
15 Example A3: One Trading Day - Not Scheduled and Not Dispatched DSU BidBid Price € 150/MWhDemand Reduction Offered 1 MWAvailable between 9am and 7pmMarket Prices*SMP Averages (entire day) € /MWhCapacity Payment Price (Average 9am to 7pm) € /MWhRelated Charges*Capacity Charges Price (Average 5pm to 7pm) ~ € /MWhOther Charges € /MWh*based on 2012 Trading Period averages. See Appendix B for full detailsMarket OutcomeNot ScheduledNot DispatchedDSU Capacity Payments (Paid by SEM)€= Capacity Payment x DSU Reduction x durationOne advantage of DSU is that can declare availability for any date or time (assuming you can comply)Also you are paid for availability more so than being called on.Assumptions:DSU Available for 1MW from 9am to 7pmNot Scheduled and Not DispatchedCapacity Payment Prices based on 2012 Averages per Trading PeriodCapacity Charge Prices based on 2012 Averages per Trading PeriodSMP based on 2012 Averages per Trading PeriodTSSU has no demand. Therefore, no netting occurs.Market Operator and Imperfections Charge assumed to be €5.40/MWhPrices used are for example purposes only, prices change significantly due to a number of factors include availability, demand, seasonality, capacity pot size etc.Supplier Avoided Costs€= Related Charges x Demand Reduction x durationOverall Savings (per Day)€Assumptions:DSU Trading Site Supply Unit has no demand, hence, no netting occursDSU is marginal unit (ie. Last to be scheduled in merit order as highest cost)
16 Registering a DSU#1 in the SEM ( 1 of 3) Two parts:Party registration; andUnit registrationParty Registration requirements include:Accession Deeds x2Completed Application FormAccession Fee €Party registration may only be needed if not already a Party in the SEM and want to become DSUParty and Unit Applications are separate (but can be concurrent)To Register for Accession to the Market as a Party to The Trading and Settlement Code and the framework agreement the following must be submitted:Two copies of the Accession Deed signed by two company directors or a company director and a company secretary. Please note if party based in ROI a company stamp or seal is also requiredA completed application form - All application details should be compliant with your LicenceAccession Fee – current fee details available atSEMO Customer Service will notify you of your Party Registration Status and on completion you will be sent a certified copy of your executed Accession Deed#1 – Details are relevant for registering a DSU in the SEM. Demand reduction being contracted to an Aggregator DSU does not require any interaction with the SEM, only with the Aggregator
17 Registering a DSU in the SEM (2 of 3) Unit Registration requirements include:Registering Party must hold an electricity supply licenceCompleted Participation NoticeParticipation Fee €Evidence of SO agreementsConnection Agreement extractsProof of TUoSForecast for Credit CoverBank Account DetailsUnit Registration Data including Technical Offer DataAgain only need if want to setup an individual DSU yourself.In order for a party to participate in the Pool in respect of any unit, a party must register that unit in accordance with the T&SC.In order to complete unit registration a completed registration pack must be submitted consisting ofA Completed Participation NoticeParticipation Fee - current fee details available atUnit Registration Spreadsheet – This is unique to the unit type, select the relevant spreadsheet only, either Interconnector, Generator or SupplierFinance Spreadsheet – For Banking and VAT detailsCollateral Spreadsheet – This is an estimate of the Market Participants forecast demand for the initial exposure period. To enable credit cover calculations to be performedNote: There is currently an outstanding issue with the granting of supply licences for DSUs in Northern Island, this is being worked through by the NIAUR.
18 Registering a DSU in the SEM (3 of 3) Application must be submitted at least 60 working days in advance of proposed effective dateTechnical testing is required to interface to Market SystemCredit Cover must be in place 5 work days before effective date.A final meeting will take place with SEMO, MDP , SO and Participant to make sure all registration requirements are in place and to agree a Final Effective Date.Commencement Notice issued only once registration requirements completeNo Payments for units prior to Commencement DateStart early – the process can take up to 60 days or more due to need to align setup for Meter Data Providers, System Operators, SEMOSEMO Customer Services manages all applicants through the process.SEMO liaises with the appropriate System Operators and Meter Data Providers. When an effective date has been agreed with all parties, SEMO will issue a Commencement Notice. From that date onwards the unit registered can trade in the market.Each of the steps in the registration process are interactive and dependant on the actions of the two parties to the registration process:The Market Operator and the ApplicantCredit Cover based on example of TSSU, DSU and Netting Gen Unit = ~1k + 5k + 1k =€7k. This is not a charge but collateral held against payments
19 Contact Details SEMO may be contacted on: email@example.com Phone NI:ROI:
20 Document DisclaimerEvery care and precaution is taken to ensure the accuracy of the information provided herein but such information is provided without warranties express, implied or otherwise howsoever arising and EirGrid plc and SONI Limited to the fullest extent permitted by law shall not be liable for any inaccuracies, errors, omissions or misleading information contained herein.
21 Appendix A – Capacity Prices Further examples of how capacity payments differ per day, season and trading period.
22 Appendix BExample A1: One Trading DayScheduled and Dispatched
23 Example A1: One Trading Day - Scheduled and Dispatched
24 Example A3: One Trading Day Not Scheduled & Not Dispatched Appendix CExample A3: One Trading Day Not Scheduled & Not Dispatched
25 Example A3: One Trading Day - Not Scheduled & Not Dispatched