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Development of CAISO / PacifiCorp Energy Imbalance Market Briefing on CAISO Straw Proposal & Benefit Study Presentation to WECC Market Interface Committee,

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Presentation on theme: "Development of CAISO / PacifiCorp Energy Imbalance Market Briefing on CAISO Straw Proposal & Benefit Study Presentation to WECC Market Interface Committee,"— Presentation transcript:

1 Development of CAISO / PacifiCorp Energy Imbalance Market Briefing on CAISO Straw Proposal & Benefit Study Presentation to WECC Market Interface Committee, July 18, 2013 Jim Price, Senior Advisor, Market Development & Analysis, CAISO Additional info:

2 Presentation overview: PacifiCorp implementation and EIM stakeholder process are in progress (following study of benefits) Page 2 Implementation agreement System testing market simulation FERC review Implementation work Filing FERC review Go live 10/1/2014 tariff language Process Merger Board authorization 11/8/2013 FERC acceptance Filing 4/30/2013 Board authorization 3/20/2013 FERC acceptance 6/28/2013 EIM stakeholder process Stakeholder meetings: 4/11/2013 – Folsom 6/6/2013 – Folsom 7/9/2013 – Phoenix 8/20/2013 – Portland 9/30/2013 – Folsom

3 March 2012, CAISO proposed a scalable approach for implementing Energy Imbalance Market (EIM) Page 3 No critical mass required – each participant can enter EIM when ready Preserves participants autonomy and current practices –Balancing authorities balance and provide their own ancillary services –Balancing authorities can trade bilaterally –Participants retain all physical scheduling rights –Flexible modes of participation are available BAA 1 BAA 2 BAA 3

4 CAISO proposed a scalable approach for implementing Energy Imbalance Market (EIM) Page 4 BAAs network modeling transmission monitoring bidding/self-scheduling intra-hour dispatch settlements

5 Benefits of Energy Imbalance Market Leverages existing CAISO market Enhances reliability through improved situational awareness in CAISO and EIM footprint Captures the benefits of geographical diversity of load and resources Potentially reduces reserve requirements Provides easy entry/exit for EIM participation Page 5

6 Energy Imbalance Market definitions EIM Entity is a balancing authority that enters into the pro forma EIM Entity Agreement to enable the EIM to occur in its balancing authority area (BAA). By enabling the EIM, real-time load and generation imbalances within its BAA will be settled through the EIM. EIM Participating Resource is a resource located within the EIM Entity BAA that is eligible and elects to participate in the EIM. In the 5-minute market, eligible resources may include Generating Units, Physical Scheduling Plants, Participating Loads, Proxy Demand Resources, Non-Generator Resources and Dynamic Schedules. In the 15-minute market, imports and exports that can be scheduled on a 15-minute basis are also eligible to participate. Page 6

7 FERC Order 764 introduces financially binding 15- minute market to real-time market design Page 7 CAISOEIM Day Ahead Schedule 15-Minute Schedule Real-Time Dispatch 15-Minute Schedule Real-Time Dispatch Base Schedule

8 Real-time market processes Hour Ahead Process –CAISO accept block intertie transactions 15-Minute Market: Real-Time Unit Commitment (RTUC) –CAISO unit commitment, incremental AS, energy schedules –EIM energy schedule changes from base schedule 5-Minute: Real-Time Dispatch (RTD) –Energy dispatch within CAISO and EIM footprint Page 8

9 Market input data As needed –Resource operational characteristics –Network model topology –Static contingencies observed Prior to operating hour (T-75 minutes) –Economic bids and hourly base schedules Ongoing –Transmission and generation outages –15-minute base schedules –Load and VER forecasts –Dynamic contingency list –Actual ETC/ATC scheduling limits and ETC uses Page 9

10 Hourly process for real-time market Page 10 No hourly financially binding schedules in real-time Market 1Market 2Market 3Market 4 T-75: Real-Time Bid Submission Deadline T-45: Results from Hourly Process to Accept Block Schedules Published T-20: Intertie Hourly Transmission Profile and Energy Schedule for Market 1 E-Tag Deadline T T = Start of the Hour T-37.5: Start of Market 1 Optimization

11 15-Minute market timeline under FERC Order 764 Page 11 Honor intra-hour 20 minute e-Tag submission to avoid seams issues Financially Binding Market 2 T-5: Market 2 Energy Schedule E-Tag Deadline T-22.5: Self Schedule Changes for Market 2 T-7.5: Market 2 Energy Schedule Awards T T-22.5: Market 2 Optimization Starts 37.5 Minutes 20 Minutes T = Start of the Hour

12 RTD Market Timeline under FERC Order 764 Page 12 No changes to RTD 5-minute dispatch RTD provides operational instruction to all generation and demand response resources Financially Binding Market 1Market 2 T+15 RTD 4RTD 2RTD 6 T+7.5: RTD 4 Optimization Starts T+12.5: RTD 4 Dispatch, RTD 5 Optimization Begins T+15 RTD 3RTD 5 T = Start of the Hour 7.5 Min

13 Establishment of Load Aggregation Points (LAP) EIM Entity defines the LAPs within its BAA –For example, internal to the CAISO LAPs are defined by utility service territories –The number of LAPs must be weighed against the availability of multiple granular load forecasts CAISO will determine Load Distribution Factors (LDFs) using its state estimator –CAISO uses LDFs to distribute LAP forecast to individual nodes within the network model –CAISO publishes LDFs used in the day-ahead market process three days after the trade date Page 13

14 Load forecasting Load forecast by LAP should: –Be the net of behind the meter generation –Include losses Two options for load forecast for establishing base schedule: –Use ISO forecast –Use EIM Participant forecast, but subject to under-scheduling charges when errors exceed 4% threshold Page 14

15 Base schedule should be balanced prior to start of real-time market Load forecast from prior slide Resource plans: base schedules –Self-scheduled resources –Intertie schedules –Base generation schedules Resource plans also include: –Ancillary services reservations protected from dispatch –Operational characteristics (e.g., ramp rate) –Economic Bids Page 15 = Base schedule must be balanced or they will be adjusted prior to start of EIM.

16 Market optimization uses the economic bids submitted at T-75 minutes CAISO will provide advisory feedback on schedules up to the binding 15-minute market, so base schedules can be developed without congestion 15-minute process builds on FERC Order No. 764 –Multi-interval Security Constrained Unit Commitment, with 15- minute interval granularity –Imbalance energy = difference between base schedule and 15- minute schedule 5-minute dispatch process –Multi-interval Security Constrained Economic Dispatch, with 5- minute interval granularity –Imbalance energy = difference between 15-minute schedule and 5-minute dispatch Page 16

17 Congestion management CAISO will manage congestion in EIM by automatically activating constraints, before flows approach capacity –This allows the EIM dispatch to try and resolve the congestion –Alerts the EIM Entity that they may be required to initiate UFMP –Once activated, constraint will be enforced to maintain flows below the limit EIM will coordinate with WECCs Unscheduled Flow Mitigation Procedure (UFMP) and Enhanced Curtailment Calculator (ECC) –If EIM Entity initiates UFMP, CAISO will reflect the affected schedules in EIM dispatch, and enforce constraint limits as requested by RC. Page 17

18 EIM Entity identifies resource constraints to address reliability issues which cannot be modeled CAISO will not issue exceptional dispatch instructions to EIM Entity resources CAISOs dispatch will reflect reliability constraint within EIM area until the base schedule can be updated Any resource constraint for reliability will be settled at the EIM LMP Page 18

19 Publication of schedules 15-minute base schedules and energy schedules will be published to SCs through CAISO Market Results Interface (CMRI) 5-minute dispatch instructions will be communicated to the EIM Entity and the SCs Net scheduled interchange will change every five minutes through the Dynamic Schedule to ensure AGC control accuracy for the CAISO and EIM Entity Page 19

20 Publication of prices and other information Locational marginal prices for 15-minute market and RTD will be published on OASIS for all nodes and LAPs. Binding transmission constraints and shadow prices will be published on OASIS –LMP marginal cost of congestion component reflects congestion contribution from binding network constraints Additional market data that requires an NDA is published on CMRI Page 20

21 Ancillary service requirements EIM Entity remains responsible for meeting ancillary services requirements per NERC and WECC, dispatching contingency reserves, and managing load reductions Reserve sharing schedules –EIM Entity is responsible for their share of DCS compliance –EIM Entity deploys operating reserves and regulation in conformance with NERC, WECC, and reserve sharing group policies –If reserves are dispatched, they will be subject to EIM imbalance settlement until reflected in the base schedule –Capacity to meet reserve sharing obligations is included in the resource plans used for base schedules. The capacity is protected for dispatch through EIM. Page 21

22 EIM settlement Instructed imbalance energy settled in two tiers at the relevant LMP: –15-minute instructed imbalance energy –5-minute instructed imbalance energy Uninstructed imbalance energy treatment based upon meter granularity –Generation, participating load, and dynamic resources that are metered in 5-minute intervals settle at relevant interval LMP –Non-participating load settles at the volumetric hourly weighted average LMP for the LAP based upon the difference between the load forecast and the actual use Allocation of uplift costs will track costs within EIM Entities and minimize comingled charges to the extent possible. Page 22

23 EIM accounting Unaccounted-for energy –Net energy delivered into UDC adjusted for service losses –EIM Entities need to define UFE service areas within footprint Inadvertent energy –CAISO will maintain a dynamic schedule to track energy between EIM Entities and CAISO The hourly energy will be updated on the e-Tag within 60 minutes of the end of the operating hour –EIM Entity responsible for tracking and administering payment for inadvertent energy via WECC process Settlement metering is required for generators. Options: –CAISO Metered Entity –Scheduling Coordinator Metered Entity Page 23

24 EIM administration Administrative Costs –Administrative rate if $0.19 per MWh volume as calculated by: Generation = max (5% of gross generation, generation imbalance energy), plus Load = max (5% gross load, load imbalance energy) –Startup costs equal $0.03 times an EIM Entitys total annual energy usage Forecasting Services –CAISO load forecast is included in Administrative Rate –VER forecasting available for $0.10 per MWh Dispute resolution is through Customer Inquiry, Dispute and Information (CIDI) Market monitoring provided by CAISO Page 24

25 Transmission Service Since initial transfer capability between CAISO and PacifiCorp will be limited and as-available, initial design proposes no charge for transmission for EIM dispatch EIM stakeholder process will continue discussion of transmission rate design for EIM transfers Page 25

26 CAISO is committed to ensuring EIM design will properly account for GHG costs Entities that import energy to California have obligation to surrender compliance instruments to CARB The net incremental transfer to CAISO from EIM will be tracked through e-Tag for dynamic schedules The market optimization will consider GHG costs Page 26

27 Other design items Parallel stakeholder initiative will address governance, with white paper published by August 13 for discussion starting at August 20 stakeholder meeting in Portland Process for new EIM Entities: –Interested parties are encouraged to engage as early as possible –Future implementations may occur on an annual commitment cycle with month lead time, reflecting significant network modeling changes and alignment with CAISOs spring and fall software release cycle –Implementation agreement filed with FERC will establish specific schedule and start-up payment ($0.03/MWh of annual energy) Page 27

28 Analysis of EIM Benefits

29 Page 29 E3 quantified 4 benefits of PacifiCorp-CAISO EIM Interregional dispatch savings, by realizing the efficiency of combined 5- minute dispatch, which would reduce transactional friction (e.g., transmission charges) and alleviate structural impediments currently preventing trade between the two systems; Intraregional dispatch savings, by enabling PacifiCorp generators to be dispatched more efficiently through the ISOs automated system (nodal dispatch software), including benefits from more efficient transmission utilization; Reduced flexibility reserves, by aggregating the two systems load, wind, and solar variability and forecast errors; and Reduced renewable energy curtailment, by allowing BAs to export or reduce imports of renewable generation when it would otherwise need to be curtailed. (GridView simulations first estimated economic imports to CAISO using projected solar, wind, & load profiles, then fixed the imports as a minimum and observed renewable curtailments using actual profiles.)

30 Page 30 Interregional Dispatch and Flexibility Reserve Benefits: modeling approach used production simulation

31 Page 31 Intraregional Dispatch Savings PacifiCorp 2017 savings = CAISO 2009 savings 1 * PAC 2017 peak load CAISO 2009 peak load PacifiCorp 2017 savings = $105 MM * 10,079 MW = $23 MM yr45,486 MWyr or 1.Refer to Frank A. Wolak, 2011, Measuring the Benefits of Greater Spatial Granularity in Short-Term Pricing in Wholesale

32 Page 32 Assumption Low transfer capability Medium transfer capability High transfer capability Low Range High Range Low Range High Range Low Range High Range Maximum hydropower contribution to contingency and flexibility reserves* 25%12%25%12%25%12% Share of intraregional dispatch savings achieved 10%100%10%100%10%100% Share of identified renewable energy curtailment avoided 10%100%10%100%10%100% *Percent of nameplate capacity for each project A range of assumptions were considered with focus on making low end conservative Low and high range assumptions under low (100 MW), medium (400MW), and high (800MW) transfer cabability

33 Page 33 Benefit Category Low transfer capability Medium transfer capability High transfer capability Low Range High Range Low Range High Range Low Range High Range Interregional dispatch $ 14.1$ 11.0$ 22.3$ 17.7$ 22.4$ 17.8 Intraregional dispatch $ 2.3$ 23.0$ 2.3$ 23.0$ 2.3$ 23.0 Flexibility reserves $ 4.0$ 20.8$ 11.0$ 51.3$ 13.4$ 77.1 Renewable curtailment $ 1.1$ 10.8$ 1.1$ 10.8$ 1.1$ 10.8 Total benefits $ 21.4$ 65.6$ 36.7$ 102.8$ 39.2$ Significant benefits observed using range of assumptions Low and high range annual benefits (Million 2012$) under low (100 MW), medium (400MW), and high (800MW) transfer capability

34 Page 34 Conclusions: Significant benefits for PacifiCorp and ISO exist under an EIM, based on conservative assumptions. Higher range of potential benefits exist depending on transfer capability and operational conditions. Low and high range annual benefits (million 2012$)

35 Page 35 Attribution of EIM benefits to PacifiCorp in 2017 Benefit Category Low transfer capability Medium transfer capability High transfer capability Low Range High Range Low Range High Range Low Range High Range Interregional dispatch $ 7.0$ 5.5$ 11.2$ 8.9$ 11.2$ 8.9 Intraregional dispatch $ 2.3$ 23.0$ 2.3$ 23.0$ 2.3$ 23.0 Flexibility reserves $ 1.2$ 6.1$ 3.2$ 14.9$ 3.9$ 22.5 Renewable curtailment $ 0.0 Total benefits $ 10.5$ 34.6$ 16.7$ 46.8$ 17.4$ 54.4 Note: Attributed values may not match totals due to independent rounding. Low and high range benefits attributed to PacifCorp (Million 2012$) under low (100 MW), medium (400MW), and high (800MW) transfer capability

36 Page 36 Attribution of EIM benefits to CAISO in 2017 Benefit Category Low transfer capability Medium transfer capability High transfer capability Low Range High Range Low Range High Range Low Range High Range Interregional dispatch $ 7.0$ 5.5$ 11.2$ 8.9$ 11.2$ 8.9 Intraregional dispatch $ 0.0 Flexibility reserves $ 2.8$ 14.7$ 7.8$ 36.4$ 9.5$ 54.6 Renewable curtailment $ 1.1$ 10.8$ 1.1$ 10.8$ 1.1$ 10.8 Total benefits $ 10.9$ 31.0$ 20.0$ 56.0$ 21.8$ 74.3 Note: Attributed values may not match totals due to independent rounding. Low and high range benefits attributed to CAISO (Million 2012$) under low (100 MW), medium (400MW), and high (800MW) transfer capability

37 Page 37 Interregional dispatch savings assumptions Benefit Category Assumptions (conservative, moderate, aggressive) Rationale Interregional dispatch Conservative- Moderate E3 limited PacifiCorp-ISO transmission transfer capability in the low transfer capability scenario to 100 MW, which limited EIM benefits E3 used hurdle rates to inhibit interregional trade in Benchmark Case (moderate assumption) Hourly cost differences between natural gas-fired generators are understated in production simulation models due to the use of uniform heat rates assumptions and normalized system conditions; these models understated EIM benefits

38 Page 38 Intraregional and intra-hour assumptions Benefit Category Assumptions (conservative, moderate, aggressive) Rationale Within hour dispatch ConservativeProduction simulation analysis modeled at hourly level, omitting potential benefits of sub-hourly dispatch (other studies indicate that these benefits could be substantial) Intraregional dispatch Conservative -Moderate E3 calculated nodal dispatch savings by scaling estimated ISO peak load- normalized savings by PacifiCorp peak load (moderate assumption); E3 assumed only 10% of these savings materialize for low range (conservative assumption)

39 Page 39 Flexibility reserve assumptions Benefit Category Assumptions (conservative, moderate, aggressive) Rationale Flexibility reserves ConservativeE3 limited PacifiCorp-ISO transmission transfer capability in the low transfer capability scenario to 100 MW, which limited EIM benefits E3 included operating cost only; no capacity cost savings are included, which limited EIM benefits E3 allowed 25% of total hydropower capacity to contribute to flexibility reserves in the low range estimates, which limited EIM benefits E3 did not require lock-down of dispatch 45 minutes prior to the operating hour, as done in other studies, which would have raised the quantity of reserves required and increased EIM benefits

40 Page 40 Renewable curtailment assumptions Benefit Category Assumptions (conservative, moderate, aggressive) Rationale Renewable curtailment ConservativeE3 did not evaluate renewable curtailment for PacifiCorp. Which limited EIM benefits In low range estimate, e# assumed wind and solar not producing significant over- generation (conservative assumption) Production simulation models understate the frequency with which low net load/high generation events occur due to their use of idealized operating assumptions; these models limit EIM benefits

41 Page 41 Hurdle rates between PacifiCorp-ISO to reflect removal of impediments to trade under EIM *No CO2-related hurdle rate is applied to ISO exports to PACW because CO2 permit cost under AB32 is directly modeled in the dispatch for generators located inside California.

42 Page 42 Gas prices based on prices used in long term procurement proceeding Area2017 PACE_ID$3.99 PACE_UT$3.81 PACE_WY$3.95 PACW$3.91 PG&E_BAY$4.09 PG&E_VLY$4.09 SCE$4.18 SDG&E$3.96 (in 2012$/MMBtu)

43 Page 43 Flexibility reserve assumptions

44 Page 44 Flexibility reserve assumptions 10-minute flexibility reserves by transfer scenario, Standalone & EIM Cases PacifiCorp-CAISO Transfer Minimum Reserve Holdings (MW) Standalone (no EIM)2, MW, with EIM1, MW, with EIM1, MW, with EIM1,583 Area Average Regulation Up (MW) Average Load Follwing Up (MW) PacifiCorp East PacifiCorp West45146 PacifiCorp Combined CAISO2761, minute flexibility reserve detail for 2017, Standalone Case (no EIM)

45 Page GWh curtailment potential based on comparison of two simulation runs: First run (representing unit commitment based on forecasted needs), projected solar, wind, and load profiles were used to estimate economic imports into ISO. Second run (representing real-time dispatch), actual solar, wind, and load profiles were used along with minimum import limits set to the level of economic imports from the first simulation. Curtailment occurred in second run represents conservative estimate of renewable curtailment.

46 Page 46 $90/MWh avoided cost of curtailment based on: 1.Renewable energy certificate (REC) value, assumed to be $50/MWh; 2.Production tax credit (PTC) value of $20/MWh; and 3.Avoided production cost of the thermal unit that an EIM enables to dispatch down, estimated to be $20/MWh.


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