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A Brief Introduction to Southwest Power Pool & its Energy Imbalance Market

A Brief Introduction to Southwest Power Pool & its Energy Imbalance Market

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A Brief Introduction to Southwest Power Pool & its Energy Imbalance Market

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  1. A Brief Introduction to Southwest Power Pool & its Energy Imbalance Market Project 1 Presentation of EE5379 Qiaohui Hu Shun Liang Oct, 2008

  2. Agenda • Introduction to Southwest Power Pool (SPP) • Fast Facts of SPP • SPP Membership • Service Provided by SPP • Overview of EIS Market of SPP • Basic Concepts of SPP-EIS Market • Key Features of SPP-EIS Market • How dose SPP-EIS Market Work • Offer Curves • Locational Imbalance Price (LIP) • Market Application Examples • Some Market Operation Service • Load Forecast • Ancillary Service • Operation Timeline

  3. Section I : Introduction to Southwest Power Pool • Fast Facts of SPP • SPP Membership • Service Provided by SPP

  4. UPDATE Dec 2007 http://www.ferc.gov/industries/electric/indus-act/rto.asp

  5. SPP Fast Facts (2007 Annual Report) • Services Area: 255,000 [square mi] • Customers: 4.5 millions • State Covered: KS,OK,AR,TX,LA,MS,NM • Transmission Voltage Level: 500kV, 345kV, 230kV, 161kV, 138kV, 115kV, 69kV • Transmission Lines: 40,363 mi • Generating Plants: 451 • Peak Demand: 43,034 MW • Installed Cap: 50,392 MW

  6. SPP ’s Membership • 12 Investor-owned Utilities • 8 Municipal Systems • 11 Generation and Transmission Cooperatives • 2 State Authorities • 4 Independent Power Producers • 2 Independent Transmission Companies

  7. Service Provided by SPP • Tariff Administration: SPP administers the Open Access Transmission Tariff and processes an average of 16,000 requests during the winter and 18,000 during the summer. • Reliability Coordination: SPP monitors power flow throughout our footprint and coordinates regional response in emergency situations or blackouts. • Regional Scheduling: SPP ensures that the amount of power sent is coordinated and matched with power received.

  8. Service Provided by SPP (Con.) • Market Operation: SPP recently (Feb, 2007) implemented an Energy Imbalance Services market. SPP monitors resource/load balance and ensures that less expensive power is used to serve load before expensive power, as long as system reliability is met. • Transmission Expansion Planning: SPP ’s planning process seeks to identify system limitations, develop transmission upgrade plans, and track project progress to ensure timely completion of system reinforcements. • Contract Services: SPP provides reliability coordination, tariff administration, and scheduling on a contract basis.

  9. Section II: SPP EI Market Overview • Basic Concepts of SPP-EIS Market • Key Features of SPP-EIS Market

  10. Basic Concepts about “Market” • What is Market? • An interaction between buyers and sellers • What is an “Energy Market”? • An energy market exists when competing generators/suppliers offer their electricity output to customers. • RTO Facilitated Market • Spot energy market required by FERC • Allows participants to offer resources into the market • Designed to promote use of least cost generation for Imbalance

  11. What is “SPP Energy Imbalance Service” Market? • The SPP EIS Market provides asset owners the infrastructure necessary to offer their resources into the marketplace for use in providing Energy Imbalance. • In the EIS marketplace, SPP owns the responsibility of accounting for and financially settling all EIS amounts. • SPP will remain revenue neutral

  12. Key Features of SPP EI Market • Voluntary Offers on Resources Although SPP mandates the energy imbalance to be settled through the market, the participation of resources in the market is voluntary. The decision to submit a bid for the right to supply energy imbalance is the independent decision of each MP. • Locational Imbalance Pricing (Nodal Market) The SPP EI market is locational, in other words, this market is a nodal market. The LIP calculated from SCED represents the least cost to supply next MW load at each specific location, taking into account the marginal cost of energy supply (from the offer curve) and physical aspects of the transmission constraints.

  13. Key Features of SPP EI Market (Con.) • The SPP EI market is designed for energy imbalance only It does not serve as a capacity market. SPP requires that MPs prepare enough capacity to serve their load obligations. However, MPs can take full control of their units by identify their resource as self-scheduled, or they can make resources available for SPP market dispatch. • Energy transmission is still done according to the Open Access Transmission Tariff (OATT) A transmission service reservation must be made in advance to procure the physical right to transfer power from/to different locations in the SPP transmission grid. The transmission service charges are fixed based on the type of service. There is neither congestion fee based on the LIP nor financial transmission rights or other financial hedging tools in the first phase implementation of the EI market. • Transmission Load Relief (TLR) to Manage Congestion In the event of congestion, the self-dispatch unit would follow curtailments from the TLR, whereas the resources offered into the EI market will follow dispatch instruction specified by the SCED.

  14. Benefits of the SPP EIS Market • Asset owners benefit from pooling their resources and gaining access to lower, more transparent pricing. • GenCos benefit by having the option of reducing their generation and buying lower cost energy from the SPP market to serve their load, and by offering their generation into the marketplace for exposure to an increased customer base. • LSEs benefit from more efficient competition among suppliers (generators), which should lower spot energy prices in long run.

  15. “Market” Comparison

  16. Section III: How does SPP-EIS Market Work • Offer Curves • Locational Imbalance Price (LIP) • Market Application Examples

  17. Offer Curves • Used by MOS in determining the most economical dispatch of Market resources - SCED (Security Constrained Economic Dispatch) • Used in the calculation of LIP (Locational Imbalance Pricing) • Price of resource is specified through an offer curve • Curve represented by 2 to 10 monotonically increasing prices. Price may be positive or negative • Submitted by MP for next 7 days • MP may change Offer Curve up to OH-45 minutes

  18. Example of an Offer curve for Market dispatch

  19. Pricing Imbalance Energy in a Constrained System • Imbalance energy is priced depending on which resources are deployed to meet the load requirements. This is known as Locational Imbalance Pricing (LIP) • LIP recognizes that cost may vary at different times and locations based on real-time system conditions. • Constraints on the system can cause price divergence among the various nodes due to the out-of-order dispatch needed to prevent operation limit violations. • With LIP, asset owners know the price per MWh of electricity at various intersections on the system (nodes).

  20. LIP: “Supply” Curve • The supply curve is an aggregation of all MP offer curves in the SPP market. • The following graph is an example of the aggregation of two MP offer curves.

  21. LIP: “Demand” Curve • SPP ’s forecasted market load for the entire footprint, adjusted for: • Self-dispatched generation (subtraction). • Transactions leaving the market (subtraction). • Transactions entering the market (addition). • Demand is assumed to be completely independent of price.

  22. LIP: “Demand” Curve • Forecasted Market Load = Forecasted Load –Self-Dispatched Generation - Transactions Leaving the Market + Transactions Entering the Market. • 20,000MW – 2,000MW + 1,500MW – 2,500MW = 17,000 MW

  23. Supply and Demand • Demand (aggregated load) intersects with supply (aggregated offer curves) to derive the market clearing price. • This assumes an unconstrained system.

  24. How to decide LIP • Here’s an example… • Generator A offers 10 MW@ $15/MWh • Generator B offers 10 MW@ $30/MWh • Generator C offers 10 MW@ $20/MWh • To supply 15 MWh of energy to a load in an unconstrained system, the market selects the most economical generation within current reliability standards. In this case, Generators A and C. • Generator A 10 MW@ $15/MWh • Generator C 5 MW@ $20/MWh • In this case, Generators A and C would both get paid $20/MWh to serve 15 MWh of load Locational. The price is set @ providing the next incremental energy.

  25. EIS Market Application Example 1: No Market Participation • GenA has a bilateral contract with Load A and schedules 200 MWh at $40/MWh to Load A. • It costs GenA $30/MWh to produce the energy. • Generator A has a profit of: • ($40/MWh -$30/MWh) x 200 MWh = $2,000

  26. Example 3: Congestion Scenario LIP = $30/MWh • Gen1 and Load5 have a bilateral contract schedule @ $30/MWH for 100MWH • It costs Gen1 $20/MWh to produce the energy • If no congestion happens, Gen1 ‘s profit will be 100 * (30 -20) = $ 1,000

  27. Gen 1 -100 MWH SCHED. Load 5 100 MWH Gen 1 -90 MWH ACTUAL Load 5 90 MWH Gen 2 -10 MWH ACTUAL Load 5 10 MWH Example 3: Congestion Scenario LIP = $40/MWh • sign represents injection • + sign represents withdrawal

  28. Example 3: Congestion Scenario LIP = $40/MWh EIS @ Gen1 = (10) x($40) = $400 EIS @ Gen2 = (-10)x($40) = $-400 Gen1 pays $400 to SPP SPP pays $400 to Gen2 Gen1 ‘s Profit = (100-10) x(30-20) – 400 = $500 Load is not impacted by Congestion

  29. Section IV: Some Market Operation Service • Load Forecast • Ancillary Service • Operation Timeline

  30. Hourly MP-Level Load Forecast • Used along with the Resource Plan and Ancillary Service Capacity Plan to indicate capacity deficiencies and available energy. • Supports Resource Over/Under Commitment Calculations • Submission Timing • May be submitted up to seven days prior to the Operating Day (OD) • Update Timing • Up to 45 Minutes Prior to the top of the Operating Hour (OH)

  31. What are Ancillary Services? • Ancillary Service requirements are assigned to ensure reliability in the event that a resource becomes unavailable in the SPP footprint. • SPP will calculate & assign each MP within a CA its MW requirements for ancillary services. • Ancillary Services are comprised of: • Operating Reserve – Spinning Reserve Service • Operating Reserve – Supplemental Reserve Service (30 minutes)

  32. Type of Ancillary Service • Down Regulation Service (DRS) • The amount of generation capability set aside above the minimum generation capability to allow the unit to lower in response to regulation needs • Up Regulation Service (URS) • The amount of generation capability set aside below the maximum generation capability to allow the unit to raise in response to regulation needs Room set aside from market dispatch to move the unit up in response to regulation needs

  33. Unit Dispatchable Range

  34. How to calculate A/S in SPP SPP calculates requirements by taking the unit with the greatest maximum MW output and adding 50% of the next greatest unit’s output.

  35. How to calculate A/S in SPP Since CA 1 had a total firm obligation of 1,200 MW and CA 2 had a total firm obligation of 300 MW, their operating reserve obligations are allocated according to that ratio.

  36. Market Operation Timeline