Price separation observation during Haywards HVDC filter outages commencing 7 March Event No: 3229

Transcription

1 Price separation observation during Haywards HVDC filter outages commencing 7 March 2016 Event No: 3229

2 Version Date Change /3/2016 Initial Issue Position Date Prepared By: System Operator 15/3/16 2 IMPORTANT Disclaimer The information in this document is provided in good-faith and represents the opinion of Transpower New Zealand Limited, as the System Operator, at the date of publication. Transpower New Zealand Limited does not make any representations, warranties or undertakings either express or implied, about the accuracy or the completeness of the information provided. The act of making the information available does not constitute any representation, warranty or undertaking, either express or implied. This document does not, and is not intended to; create any legal obligation or duty on Transpower New Zealand Limited. To the extent permitted by law, no liability (whether in negligence or other tort, by contract, under statute or in equity) is accepted by Transpower New Zealand Limited by reason of, or in connection with, any statement made in this document or by any actual or purported reliance on it by any party. Transpower New Zealand Limited reserves all rights, in its absolute discretion, to alter any of the information provided in this document. Copyright The concepts and information contained in this document are the property of Transpower New Zealand Limited. Reproduction of this document in whole or in part without the written permission of Transpower New Zealand is prohibited. Contact Details Address: Transpower New Zealand Ltd 96 The Terrace PO Box 1021 Wellington New Zealand Telephone: Fax: system.operator@transpower.co.nz Website:

3 1 Summary Haywards filter outages increased the DCCE risk for a given DC transfer The likelihood of price separation was increased, and occurred occasionally throughout the outage period Price separation was higher when the quantity Of NI energy offers were reduced and wind was low High price separation was unforeseen, which may have contributed to its magnitude 6 Appendix 1: What causes high price separation

4 1 SUMMARY A difference in final prices between Benmore (BEN) and Haywards (HAY) nodes (hereafter price separation 1 ) of up to $141/MWh occurred occasionally in the week starting 7 th March, during Haywards filter outages. 4 Haywards HVDC filters F4A and F4B 2 were on an outage between 07:09 on Monday 7 th March 2016 and 17:06 on Thursday 10 th March 2016; this meant that the DC Contingent Event 3 (DCCE) risk was higher than usual for a given DC transfer. Good hydrological conditions in the South Island (SI) have resulted in high DC north transfers recently. These factors combined increased the likelihood that the DCCE would bind 4, causing price separation. Price separation occurred at different times during the outages but was greatest on the morning of the 9 th March 2016, when less low priced NI energy was offered and NI wind generation was low. Bona fide offer reductions and lower wind generation than was scheduled ahead of time meant the extent of this price separation wasn t easily foreseen. 2 HAYWARDS FILTER OUTAGES INCREASED THE DCCE RISK FOR A GIVEN DC TRANSFER The Haywards filter outages meant that the loss of F3B would cause a runback of the HVDC to 139MW 5, when transfer is greater than 139 MW north. This risk is classified as a DC contingent event (DCCE). The DCCE risk in the North Island is usually for the loss of pole 3, in which case the DC will run back to the pole 2 half hour overload limit of 528 MW 6, when transfer is greater than 528 MW north. Therefore, for a given DC transfer, the DCCE risk would be a lot higher during the HAY filter outages than is usually the case (see below). DCCE Description DCCE Risk MW = Loss of additional filter during HAY F4 outages DC transfer Loss of pole 3 in normal circumstances DC transfer Price separation here means a difference in prices above that attributable purely to losses. 2 There are 7 HVDC filters at Haywards in total. 3 The DCCE risk is the greatest amount of lost MW over the DC of any contingent event which limits DC transfer post contingently. This includes filter trippings. 4 Reserves are procured to meet the contingent or extended contingent event - whichever requires the most reserves to cover. This event is said to be the binding risk, or risk setter. 5 This is the received value; the sent value is 140MW MW is the received value.

5 3 THE LIKELIHOOD OF PRICE SEPARATION WAS INCREASED, AND OCCURRED OCCASIONALLY THROUGHOUT THE OUTAGE PERIOD A higher DCCE risk for a given DC transfer meant the DCCE was more likely to set the risk leading to price separation between BEN and HAY (see appendix what causes high price separation). Good hydrological conditions in the South Island led to increased lowpriced SI energy offers. These factors combined meant that it was likely the DCCE would become, or at least close to, binding. The DCCE binding lead to price separation at different times during the outage period, as shown below. $/MWh Price Separation During Filter Outages BEN Price HAY Price 0 7/03 06:00 7/03 18:00 8/03 06:00 8/03 18:00 9/03 06:00 9/03 18:00 10/03 06:00 10/03 18: PRICE SEPARATION WAS HIGHER WHEN THE QUANTITY OF NI ENERGY OFFERS WERE REDUCED AND WIND WAS LOW High price separation occurred on the morning of the 9 th March 2016, when low NI wind and lower NI energy offers combined with increased low-priced SI generation offers and a higher DCCE risk (for a given DC transfer). The greatest price separation of $141/MWh occurred at 0800 on the 9 th March For this period, NI Fast Instantaneous Reserve (FIR) offers were fully utilised either as FIR or energy, and only higher-priced North Island energy offers remained un-cleared (see offer stacks/ supply curves below. Note, the co-optimised stack excludes those offers which have cleared for an alternative product or otherwise constrained, e.g. offers cleared for energy are excluded from the co-optimised FIR stack).

6 FIR offer price ($/MW availability) Energy offer price ($/MWh) PRICE SEPARATION OBSERVATION DURING HAYWARDS HVDC FILTER OUTAGES COMMENCING 7 $300 $250 $200 $150 Reserve offered (co-optimised) Final pricing - FIR Reserve offered (not co-optimised) Reserve requirement Energy and reserve co-optimisation meant that we had effectively run out of reserves as it was all being used for energy $300 $250 $200 $150 Final pricing - energy Energy offered (cooptimised) Energy offered (not co-optimised) Energy requirement $100 $100 $50 $50 6 $ FIR offer quantity (MW) $ Energy offer quantity (MW) 5 HIGH PRICE SEPARATION WAS UNFORESEEN, WHICH MAY HAVE CONTRIBUTED TO ITS MAGNITUDE The forward looking schedules were not consistently good indicators of the extent of price separation which eventuated in final pricing. This was particularly true when price separation was at its worst in final pricing the 0800 trading period on the 9 th March A comparison with the last forward looking schedule published prior to gate closure for that trading period (the 0530 NRSS) highlights the difficulty in foreseeing, and hence affecting the degree of, price separation. The table below shows the two major contributing factors NI bona fide 7 energy offer reductions and significantly less wind generation than was forecasted and their effect on price separation NRSS Final Pricing Difference (Final Pricing less NRSS) NI energy offered (excl. intermittent gen8) under $100/MWh 3133 MW 2931 MW -202 MW NI wind 206 MW 98 MW -108 MW Price separation $24/MWh $141/MWh $117/MWh 7 Offer reductions can be made within the gate closure period if for a bona fide physical reason. 8 NRS schedules include intermittent generation as offers, whereas final pricing includes intermittent generation as negative load. Intermittent generation offers have thus been subtracted from the NRSS offers to enable comparison with final pricing offers.

7 Appendix 1: WHAT CAUSES HIGH PRICE SEPARATION The next MW of energy at Haywards will usually come from the same place as the next MW of energy at Benmore, with only a small difference in their marginal prices due to losses across the DC. When the DCCE is the binding risk there will be some degree of price separation greater than that attributable to losses. For instance, if the next MW at Haywards and Benmore came from the same place in the South Island, their prices would differ due to the cost of the additional MW of reserves required to transfer that MW of energy to Haywards, across the DC. Alternatively, it might be cheaper to supply the next MW at HAY from the NI, but still supply the next MW at BEN from the SI. In this case, their prices will differ according to the difference in offer prices of the respective marginal generators from each island. 7 Price separation will be the lesser of the difference between the offer prices of respective marginal generators in each island and, if those generators are the same, the price of reserves. The extent of price separation will therefore depend on the structure of offers, as well as the energy and reserve requirements. The conditions for high price separation are High offer price difference between the next cheapest generators in each island High prices for NI reserves The former depends on the NI and SI load and energy offers, which also determine DC transfer and hence NI reserve requirements. The latter depends on these NI reserve requirements along with reserve offers. Price separation is more likely to be high when it is unforeseen. This is because some participants will be incentivised to prevent high price separation. Factors affecting the predictability of price separation include late or bonafide offer changes, variable wind generation, unplanned outages, and inaccurate scheduled load.