Congestion Revenue Rights

Transcription

1 Congestion Revenue Rights CRR Basics for Market Redesign and Technologies Upgrade (MRTU) Presentation #2 Roger Treinen June 7 th and 8 th 2007

2 Congestion Revenue Rights Training This non-hands-on training is comprised of three presentations CRR Basics for Market Redesign and Technologies Upgrade (MRTU) Presentation #1 Introduction to the need for Congestion Revenue Rights Definition of Congestion Revenue Right Congestion Management CRR Design within MRTU Examples and CRR Balancing Account Presentation #2 Revenue adequacy Simultaneous Feasibility Test Multi-point CRRs Aggregated Pricing Nodes Shift Factors CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 2 of 122

3 Congestion Revenue Rights Training This non-hands-on training is comprised of three presentations Presentation #3 Overview of the CRR Allocation and Auction Process CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 3 of 122

4 Road Map to this Presentation CRR Basics Presentation #2 Revenue adequacy Define revenue adequacy and state its importance Simultaneous Feasibility Test (SFT) Define certain properties associated with the SFT that ensures revenue adequacy Define the parameters associated with the SFT Full Network Model Constraints Introduce CRR reduction mechanisms Multi-Point CRRs Introduce the Multi-point CRR Aggregated Pricing Nodes Introduce Aggregated Pricing Nodes and how they are used for CRR Sources and CRR Sinks in the CRR SFT process Shift Factors Introduce the concept of the shift factor and how this plays a role in the CRR SFT process CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 4 of 122

5 Revenue adequacy Check the roadmap This section: we explore the concept of revenue adequacy We answer the question of why revenue adequacy is important to holders of CRRs and other Market Participants Next section: we explore the Simultaneous Feasibility Test (SFT) A test that can theoretically ensure revenue adequacy The parameters of the SFT are explored The manner in which infeasibility is removed is provided CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 5 of 122

6 Revenue adequacy Revenue adequacy, for a given hour, is the situation in which Congestion revenue for that hour, as calculated in the IFM, is equal to or greater than the sum of the CRR entitlements for that hour Revenue inadequacy (i.e., a situation in which we do not have revenue adequacy) does not occur because there is too little Congestion revenue; rather it is a problem with too much CRR entitlement In the last presentation (CRR Basics: Presentation #1) the CRR Balancing Account was described This account sets up a process to charge monthly Measured Demand an uplift if insufficient funds are available over a given month Important to minimize any uplift charges CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 6 of 122

7 Revenue adequacy How can the CAISO provide CRRs to Market Participants through CRR Allocations and CRR Auctions and ensure revenue adequacy when the Congestion revenue (that supports the CRR entitlements) is based on Congestion and in turn the level of Congestion and the Congestion pattern are based on the Bids Market Participants submit in the IFM? To even make matters more complicated, the CRRs come in Long-term/TOU, seasonal/tou and monthly/tou terms whereas the level of Congestion and Congestion pattern may change on an hourly basis The answer lies with the Simultaneous Feasibility Test CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 7 of 122

8 Simultaneous Feasibility Test Checking the roadmap Last section: we explored the concept of revenue adequacy This section: we explore the Simultaneous Feasibility Test (SFT), a test that can theoretically ensure revenue adequacy under certain conditions We also explore The parameters of the SFT The manner in which infeasibility is removed Next Section: we discuss the use of the Multi-Point CRR CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 8 of 122

9 Simultaneous Feasibility Test The answer to ensuring revenue adequacy lies with using a Simultaneous Feasibility Test as the cornerstone in the CRR Allocation and CRR Auction processes The idea behind the SFT is to apply this test to CRR nominations (as part of the CRR Allocation process) and to CRR bids (as part of the CRR Auction process) There is a strong connection between the SFT and the IFM Congestion Management process (which clears Congestion and calculates the LMPs) The SFT process is conducted in very much the same way as the IFM in using such items as the Full Network Model (FNM) and Constraints limits CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 9 of 122

10 Simultaneous Feasibility Test The idea behind the application of the test is to take the CRR Source(s) location, the CRR Sink(s) location and MW quantity(s) of the CRR nomination or CRR bid and apply these to the FNM as if they were a Generator(s) and Load(s) The FNM used here is a special FNM but is similar to the FNM used in the IFM The CRR FNM does not have any resistance, thus there are no transmission losses and the total amount injected into the system is equal to the total amount withdrawn from the system Thus, the reason that the PTP CRR has only one MW quantity and the MPT CRR has the constraint that the sum of the MW quantities over the CRR Sources equals the sum of the MW quantities over the CRR Sinks CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 10 of 122

11 Simultaneous Feasibility Test The idea behind the application of the test is (continued) The CRR Source would be modeled as an injection into the FNM just like a Generator with the injection level equal to the MW quantity and at the same time the CRR Sink would be modeled as a withdrawal just like a Load with the withdrawal level equal to the MW quantity This is the reason for the terms CRR Source location and CRR Sink location in the CRR entitlement formulas Before applying the CRR Source injections and CRR Sink withdrawals, all other active components would be removed from the FNM, such as Generators, Loads, imports, and exports After all active components have been removed from the FNM, is it referred to as a passive FNM CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 11 of 122

12 Simultaneous Feasibility Test Applying the CRR Source injections and CRR Sink withdrawals would in turn create flows on the FNM The flows are determined through the use of shift factors The only flows present on the system would be a result of the application of the CRR Sources and CRR Sinks The SFT would check the resultant flows against the same transmission constraint limits used in the IFM If the resultant flows did not violate the constraint limits, feasibility is achieved - the test passes Otherwise, the case is infeasible is the case and the test fails CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 12 of 122

13 Simultaneous Feasibility Test What does SFT mean? Simultaneous - applying all CRR nominations or CRR bids and enforcing all applicable Constraints at the same time Feasibility the situation in which the resultant flows are less than or equal to the Constraint limits Test checking to determine if the situation is feasible When infeasibility does occur, a process is applied that reduces the CRR nomination or CRR bid MW quantities until feasibility is achieved A CRR Allocation or CRR Auction process can always contain a SFT to be applied to the CRR nominations and CRR bids, respectively This SFT may use a FNM and Constraint limits that have no association to the IFM This would generally make this SFT worthless and the resultant CRRs may be revenue inadequate Instead, if the following two conditions are satisfied when applying the SFT, revenue adequacy is ensured CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 13 of 122

14 Simultaneous Feasibility Test Theoretically, revenue adequacy is ensured assuming the following two conditions have been met when applying the SFT for establishing feasibility of the CRRs Condition 1: The FNM that is used in the IFM to produce the LMPs is the same as the FNM used in the CRR SFT (this is the general statement) More precisely, the underlying and more stringent condition is that the shift factors used in the IFM to calculate the MCC LMPs are the same shift factors that used in CRR SFT Remember from the LMP discussion in the last presentation that the MCC LMPs are derived from a linear combination of Shadow Prices and shift factors Condition 2: The Constraint limits that are used in the IFM to produce the MCC LMPs are the same that are used in the CRR SFT More precisely, the Constraint limits used in the SFT must be equal to or less than those used in the IFM Both conditions #1 and #2 apply if contingency analysis is performed CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 14 of 122

15 Simultaneous Feasibility Test The significance of the SFT and these two conditions If the CRRs, that are either allocated or auctioned, are feasible with respect to conditions #1 and #2 For each hour of the IFM process in which the CRRs are feasible with respect to conditions #1 and #2, revenue adequacy is ensured This result does not matter on the pattern of Congestion or Bid behavior within the IFM, revenue adequacy is ensured! Practical impact of conditions #1 and #2 Remember that CRRs are allocated on an annual and monthly basis per TOU These processes create CRRs before the funds for these CRRs are generated (via the IFM) Because the IFM process is performed on a daily basis, each day, certain elements associated with conditions #1 and #2 may change making it nearly impossible to always guarantee that CRR feasibility holds under conditions #1 and #2 Conditions #1 and #2 are not necessary conditions for ensuring revenue adequacy, that is, they are not part of an if and only if statement If the conditions are not satisfied, revenue adequacy is not necessarily violated CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 15 of 122

16 Simultaneous Feasibility Test Why does this test work? There is a theorem that lies behind conditions #1 and # 2 and the presentation of that theorem goes beyond the scope of this presentation From a practical point of view, the SFT, under condition #1 and #2, limits the MW quantity associated with either a CRR nomination or CRR bid to a certain level Look at the entitlement formula of the PTP CRR (MCC LMP at the CRR Sink location MCC LMP at the CRR Source location ) MW quantity If the MW quantity is not bound in any way, the entitlement can grow very large when there is Congestion (LMP differences), thus creating a revenue inadequate situation CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 16 of 122

17 Simultaneous Feasibility Test Simultaneous Feasibility Test Simultaneous Feasibility Test How well can we satisfy conditions #1 and #2? Revenue adequacy condition #1 and condition #2 involve the concepts of the FNM shift factors Aggregated Pricing Nodes Constraint limits These four items have not been discussed in much detail to this point in the presentation, but they will be discussed in sufficient detail to serve the purpose of addressing the above question on how well we can satisfy conditions #1 and #2 Let s take a quick detour and go over the FNM and Constraint limits Shift factors and Aggregated Pricing Nodes will be discussed later in this presentation CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 17 of 122

18 Simultaneous Feasibility Test FNM: the concept of the FNM was mentioned in Presentation #1, however it has not yet been fully discussed and defined For purposes of the presentations related to CRR a sufficient amount of information will be presented on the FNM, whereas other training material at the CAISO will cover this topic in more depth CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 18 of 122

19 Simultaneous Feasibility Test FNM: It is sufficient to note the following important facts about the FNM the one that is used in the IFM and the one used in the CRR SFT The FNM used in the IFM process is the most accurate model of the power system used by the CAISO The model is called an alternating current (AC) model The mathematical equation to support the AC FNM are nonlinear The transmission branches contain resistances (losses), reactances and shunt capacitance The relationship of the injection of power at a bus to the change in flow over a given transmission branch is non-linear The voltage magnitudes are not necessarily pre-known at certain buses they may vary depending on loading conditions CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 19 of 122

20 Simultaneous Feasibility Test FNM: for CRR purposes, certain simplifying assumptions are made about the FNM to make it a linear model This linear model is called a DC model All resistances are set to zero (no transmission losses) All voltage magnitudes are set to 1.0 per-unit Reactive power is ignored The flow across a transmission branch is assumed to be a linear function of the bus angles, which are at either end of the branch Power over transmission branch = (angle at sending end angle at receiving end) / (reactance of the transmission branch) This results in a linear model, i.e., the injection of power at a bus to the change in flow over a given branch is a linear relationship (i.e., the shift factor) and this relationship is only dependent upon the reactances of the transmission branches Only active power (MW) flowing over transmission branches can be calculated in the DC FNM CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 20 of 122

21 Simultaneous Feasibility Test Shift factor: up to this point, the only time the concept of the shift factor was presented was in the LMP section back in Presentation #1 This shift factor definition is provided here for convenience SF ji = shift factor for bus i (with respect to the reference location) on constraint j (i.e., the incremental amount of power flow on constraint j when an additional unit of power is injected at bus i and withdrawn from the reference location) Shift factors are dependent upon the FNM from which they are derived Later in this presentation, a much more detailed analysis of shift factors will be provided that includes how to determine shift factors (based on a DC FNM) from bus-tobus and from Aggregated Pricing Node-to-Aggregated Pricing Node injection/withdrawal pairs CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 21 of 122

22 Simultaneous Feasibility Test Aggregated Pricing Nodes (APnodes) have not been explicitly discussed yet It just so happens that most sinks used in defining CRRs are APnodes APnodes are also used in the IFM for bidding purposes Later in this presentation a more detailed discussion of APnodes will be given CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 22 of 122

23 Simultaneous Feasibility Test Constraints: The Constraint limits have been mentioned during Presentation #1, but there has not been any detailed discussion on this topic until now Constraint limits are used in the Real-Time operation of the power system. They are limits placed on observable (measurable) variables in the power system such as Flows on individual or groups of branches Also under contingency analysis Also referred to as Operating Transfer Capability (OTC) For example, the flow limit on Path15 Generation levels in certain areas of the system Voltage levels Relationships between Generation levels, Load levels, voltage levels and branch (or branch group) flows Nomograms CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 23 of 122

24 Simultaneous Feasibility Test Constraints... These limits are boundaries in which the Control Area operators operate the system so that under unforeseen (forced) events such as Generator tripping and transmission branch Outages the resultant disturbance does not cause severe damage to the power system equipment or more importantly crash the system (full or partial area blackout) When events like these happen and the operating point is within the boundary, the Control Area operators can steer the system into a safe operating mode CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 24 of 122

25 Simultaneous Feasibility Test Constraints... The operating boundaries are determined based upon the NERC (National Electric Reliability Council), the WECC (Western Electric Coordinating Council) and CAISO minimum operating reliability criteria (MORC) Because the IFM attempts to ensure that all schedules determined in the IFM are feasible with respect to Real-Time operation, the IFM uses these same Constraints when managing Transmission Congestion CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 25 of 122

26 Simultaneous Feasibility Test Now that we have gone over the FNM and Constraints, let s get back to the question that was posed How well can we satisfy condition #1? Condition #1 stated that the CRR SFT should use the same shift factors that the IFM used to determine MCC LMPs and Congestion revenue Remember that in the CRR SFT the shift factor determines the contribution of a CRR Source or CRR Sink onto a Constraint CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 26 of 122

27 Simultaneous Feasibility Test What shift factors are used in the IFM calculation of MCC LMPs? When calculating MCC LMPs, the IFM actually uses a set of linear equations that relate the active (MW) flow on transmission branches to active injections of Generators and imports and to active withdrawals of export and Loads This linear relationship is derived from linearizing the set of non-linear equations (AC FNM) around a solved solution point of the non-linear equations The process to get to the solution point is iterative Based on the linear equations (linearized), the shadow prices are determined, the shift factors are determined from the linear equation and the MCC LMPs are then determined based on the relationship between the Shadow Prices CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 27 of 122

28 Simultaneous Feasibility Test IFM calculation of MCC LMPs (cont...) In the the calculation of the MCC LMPs, shift factors are derived that may be based on Aggregated Pricing Nodes Near the end of this presentation is a section that describes the impact of the aggregated pricing nodes on condition #1 The linearized set of equations include The voltages magnitude values at the solution point, which may be different than 1.0 per-unit A trigonometrical function value of the bus angle differences that may be different from 1.0 CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 28 of 122

29 Simultaneous Feasibility Test How well can we satisfy condition #1? Identify the areas of possible concern Comparison of IFM shift factors to CRR SFT shift factors (remember that CRR SFT shift factors are based on the DC FNM) There are three areas of potential differences between the IFM and the CRR SFT shift factors (referred to as C1-1, C1-2 and C1-3) C1-1: Linearization vs DC C1-2: Differences in the APnodes used in IFM vs CRR SFT C1-3: Changes in FNM topology or major changes in transmission branch characteristics Let s examine each of the three areas CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 29 of 122

30 Simultaneous Feasibility Test C1-1: Linearized vs DC FNM Assuming that both FNMs (the FNM for IFM and FNM for CRR SFT) have the exact set of transmission branches, differences still occur in the shift factors The linearized model incorporates voltages levels that are not necessarily 1.0 per-unit The DC FNM uses 1.0 per-unit The linearized model incorporates aspects of the non-linear relationship of the injections at a bus versus the flow on a branch (this aspect is the trigonometrical function value of the angle differences) In the DC FNM this value is 1.0 Because of the linearization vs DC, there may be a variation between the shift factors used in the IFM and in the CRR SFT CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 30 of 122

31 Simultaneous Feasibility Test C1-2: APnodes in the IFM vs CRR SFT APnodes APnodes create effective shift factors (explanation provided later in this presentation) that are dependent on the allocation factor values of the APnodes If the IFM and the CRR SFT use different APnode allocation factors sets, the corresponding effective shift factors in the IFM and in the CRR SFT will be different C1-3: Changes to FNM topology Changes in the topology between the FNM used in the IFM and the CRR SFT will change the shift factors CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 31 of 122

32 Simultaneous Feasibility Test Exploring revenue adequacy condition #2 Identify the areas of possible concern Condition #2 stated that the CRR SFT should use the same Constraint limits that the IFM used to determine MCC LMPs and Congestion revenue There are four areas of potential differences between the Constraint limits used in the IFM and those used in the CRR SFT (referred to as C2-1, C2-2, C2-3 and C2-4) CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 32 of 122

33 Simultaneous Feasibility Test C2-1: Constraint limits used in the IFM may have a reactive component incorporated into the limit where as the CRR DC FNM ignores reactive power C2-2: Flows in the IFM will contain transmission losses that are not present in the flows in DC FNM C2-3: Constraints in the IFM may contain certain power system parameters that are not present in the DC FNM C2-4: Constraint limits vary day-to-day and hour-tohour in the IFM but from the CRR SFT perspective are constant over the term of the CRR CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 33 of 122

34 Simultaneous Feasibility Test Let s examine each of the four areas C2-1: Reactive power component in the Constraint limit If there is a reactive power component in the limit (e.g., the MVA limit of a transformer) the limit must be transformed to a MW limit This must take place in both the IFM and CRR SFT since both use a linear relationship relating MW injection to MW flow CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 34 of 122

35 Simultaneous Feasibility Test C2-2: Transmission Losses as part of the flow In the IFM, part of the MW flow will contain MW associated with transmission losses A MW flow limit in the IFM is implicitly lowered because a portion of the flow on the line is associated with transmission losses The amount of flow that actually serves the load is slightly lower than the MW flow limit due to the amount of flow associated with the losses CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 35 of 122

36 Simultaneous Feasibility Test C2-3: Constraints in the IFM may contain parameters that are not present in the DC FNM If the Constraints that are enforced in the IFM are purely flow based (even with MVA limits which can be transformed to a MW limit) the Constraints can be used in the CRR SFT If the Constraints in the IFM incorporate Generation levels, voltage levels, Load levels or other non-flow limits, these Constraints must be transformed in some manner to MW flow limits C2-4: Constraint limits in the IFM may change on a frequent basis CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 36 of 122

37 Simultaneous Feasibility Test Further analysis of the seven areas of potential differences (C1-1, C1-2, C1-3, C2-1, C2-2, C2-3 and C2-4) that may affect revenue adequacy conditions #1 and #2 The seven areas can be further classified into 2 categories Differences that are due to modeling, although in many aspects there are also timeframe issues Differences that are due to the timeframes, i.e., differences due to the different timeframes upon which the CRR SFT and the IFM processes apply Category 1: Differences that are due to modeling C1-1: Linearization vs DC FNM C2-3: Constraints in the IFM may contain elements not found in the CRR SFT The analysis provided in the previous slides for C1-1 and C2-3 is sufficient CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 37 of 122

38 Simultaneous Feasibility Test Category 2: Differences that are due to the timeframes This category is comprised of the other five areas: C1-2, C1-3, C2-1, C2-2 and C2-4 All of these areas share the common theme stemming from the different timeframes for the IFM process and the CRR SFT process including the frequencies upon which these processes are performed Let s examine the CRR Allocation and Auction timeframe first and then move on to examine the IFM timeframe CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 38 of 122

39 Simultaneous Feasibility Test CRR Allocation and Auction timeframes The CRR Allocation and CRR Auction process will provide CRRs for terms of: Long-term/TOU, one season/tou and one month/tou When setting up the process for the CRR Allocation or CRR Auction the following data must be used within the SFT process FNM (from which the shift factors are derived) APnodes and their allocation factor sets Constraint limits Given a CRR Allocation or CRR Auction process that will create a bundle of CRRs for a particular term/tou Every CRR created will be tested by an SFT that has the one FNM, one set of allocation factors for each APnode and one set of Constraint limits For certain bundles of CRRs, the process to create these may be performed up to 15 months before the maturity date for some of the CRRs in the bundle (e.g., season 4) and even over 10 years for the Long-term CRRs Multi-period software will be implemented in the future so that for each season/tou with the Long-term period different FNM, Constraint limits and APnode sets can be used CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 39 of 122

40 Simultaneous Feasibility Test IFM timeframe The IFM process also uses FNM APnodes and their allocation factor sets Constraint limits The IFM process performs in the Day-Ahead timeframe However performed on a daily basis with the possibility of changing any one of the elements within the FNM, the allocation factor set and the Constraint limits on an hourly basis Examine the five areas, C1-2, C1-3, C2-1, C2-2 and C2-4 in more detail CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 40 of 122

41 Simultaneous Feasibility Test C1-2: APnodes in the IFM vs CRR SFT APnodes An example, the allocation factors used in the Default Load Aggregation Points are based on Load Distribution Factors, which may change on a daily basis because the actual load variation within the Default Load Aggregation changes over time Because the APnodes create effective shift factors, different allocation factor sets will create different effective shift factors This creates the high possibility for using different effective shift factors in the CRR SFT as opposed to the IFM However, there is a way to avoid this particular discrepancy Do not explicitly use the APnode MCC LMPs from the IFM in the CRR entitlement formula Re-calculate APnode prices using CRR SFT allocation factors and MCC LMPs from the IFM at the bus level The above fix is really assuming the set of shift factors derived from the linearized set of equations and the set of shift factors derived from the DC FNM are equivalent on the bus-to-bus level Pricing the CRR entitlements on the CRR SFT APnode allocation factors will minimize the revenue adequacy risk that is due to this issue CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 41 of 122

42 Simultaneous Feasibility Test C1-3: Changes in FNM topology The topology in the FNM that is used in the IFM may change quite frequently, day-to-day and hour-to-hour Transmission facilities may be taken out of service for maintenance (Scheduled Outage) Transmission facilities may have been forced out of service by some unforeseen event (Forced Outage) New Transmission facilities may be built and energized All of these events can create a topology differences between the FNM used in the CRR SFT and the FNM used in the IFM and thus leading to different sets of shift factors CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 42 of 122

43 Simultaneous Feasibility Test C2-1: Reactive power component in the Constraint limit The MVA limit must be transformed into a MW limit The process used to perform this transformation takes into consideration the power factor of the power flowing on the Constraint and this is dependent on the Energy Bids The power factor may change on an hour-to-hour basis Changes in the power factor on an hour-to-hour basis will create differences between the converted limits that are used in the CRR SFT and those used in the IFM process CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 43 of 122

44 Simultaneous Feasibility Test C2-2: Transmission Losses The MW flow limit must be reduced to take into account the implicit reduction of the constraint due to losses in the IFM MW flow limits will be reduced based on max losses on each facility defined within the Constraint limit Process may be too liberal, i.e., not enough reduction in the MW flow limit Flow on branches will also includes loss power that is dissipated as losses on other lines Changes in the losses on an hour-to-hour basis will create differences between the converted limits that are used in the CRR SFT and those used in the IFM process CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 44 of 122

45 Simultaneous Feasibility Test C2-4: Constraint limits in the IFM may change on a frequent basis Many of these limits are dependent upon other system parameters that may vary hourto-hour Note, that some of the parameters may not be in the CAISO Control Area The Constraint limits can vary hourly Because of the variability in the Constraint limits used in the IFM process, there will be differences between limits used in the IFM and limits used in the CRR SFT CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 45 of 122

46 Simultaneous Feasibility Test Recap of the analysis of revenue adequacy conditions #1 and #2 To recap, the CRR SFT process and IFM process both use the following set of input data elements FNM APnodes with their allocation factors sets Constraint limits Based upon the analysis of revenue adequacy conditions #1 and #2, these data elements may be changing on an intra-crr term basis as they are used in the IFM process, thus creating a situation where the corresponding elements may not be meeting the requirements of conditions #1 and #2 the CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 46 of 122

47 Simultaneous Feasibility Test Recap of the analysis of revenue adequacy conditions #1 and #2 Thus, the FNM, APnodes with their allocation factors sets and Constraint limit sets that are used in the CRR SFT must be determined with care One measure to help minimize any potential difference is already built into the process In the annual process only 75% of the transmission capacity will be made available Doing so limits the creation of CRRs which may turn out to be infeasible (from the perspective of the FNM used in the IFM process) due to an unscheduled outage CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 47 of 122

48 Simultaneous Feasibility Test Modeling of CRR Obligations and CRR Options in the SFT process One important item to note about the modeling of the different entitlement types, i.e., CRR Obligations and CRR Options The discussion so far has not made any distinction between a CRR nomination or CRR bid being an CRR Obligation or CRR Option However, there is a major difference in applying the SFT to CRR Obligations as compared to applying the SFT to CRR Options CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 48 of 122

49 Simultaneous Feasibility Test CRR Obligations, CRR Options and the SFT When applying the SFT to CRR Obligations or CRR Options, the contribution from each MW quantity is reflected onto each Constraint via the corresponding shift factors It may turn out that some of the CRR nominations or CRR bids have a negative impact on the Constraint, i.e., the CRR nomination or CRR bid is providing counter-flow It turns out that to ensure revenue adequacy, CRR Options must not be allowed to provide any counterflow There is theory that lies behind this extra condition that is beyond the scope of this presentation CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 49 of 122

50 Simultaneous Feasibility Test CRR Obligations, CRR Options and the SFT From a practical point of view, the reason for this is that if for a CRR Option, (MCC LMP CRR Sink location < MCC LMP CRR Source location) the holder does not need to exercise the CRR Option and pay the CAISO However, by letting the CRR Option provide counterflow in an SFT an equivalent amount of CRR Obligation or even CRR Option can be cleared in the CRR SFT in the opposite direction In this case those CRR Obligations or CRR Options would have the MCC LMP CRR Sink location > MCC LMP CRR Source location and would be paid by the CAISO It turns out that these extra CRR Obligations and CRR Options could create entitlements that exceed the Congestion revenue CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 50 of 122

51 Simultaneous Feasibility Test Reduction of the CRR MW quantity to obtain feasibility Review of where we are in the presentation We just covered the conditions for ensuring revenue adequacy We saw that the conditions assume feasibility of the CRRs The CRRs must be feasible with respect to conditions # 1 and #2 to be revenue adequate What needs to happen if the CRR nominations or CRR bids are infeasible? The corresponding MW quantity needs to be reduced to achieve feasibility CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 51 of 122

52 Simultaneous Feasibility Test The SFT and the reduction mechanisms are combined into an optimization formulation Remember that the SFT process is to apply the CRR Source(s) and CRR Sink(s) (from either CRR nominations or CRR bids) to the FNM to determine the result flows and then those flows are compared to Constraint limits Optimization formulation is comprised of two elements Objective function, which is either maximized or minimized Constraints, which cannot be violated for the optimization process to solve CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 52 of 122

53 Simultaneous Feasibility Test Objective Function Consists of control variables These are the variables that change to make sure the Constraints are not violated and change to either maximize or minimize the objective function The CRR nominations and CRR bids are the control variables Maximizing or minimizing the objective function dictates which CRR nominations or CRR bids will be reduced under the condition of infeasibility Constraints The Constraints includes the transmission Constraints to ensure simultaneous feasibility Consistent with those used in the IFM Shift factors are used with the control variables to determine the resultant flows on each Constraint and this flow is compared to the Constraint limit In addition to the Transmission Constraints, other constraints are also added into the optimization formulation CRR nomination and CRR bid MW quantity 0 CRR balancing constraints for PTP CRRs and MPT CRRs Source(s) MW quantity = Sink(s) MW quantity CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 53 of 122

54 Simultaneous Feasibility Test This optimization formulation is used in both the CRR Allocation and CRR Auction process The objective function is slightly different in each The Constraints are the same The objective functions in the CRR Allocation and CRR Auction process CRR Allocation: the objective function used in the CRR Allocation process is to maximize allocated CRR MW amounts Because the objective function is linear and the Constraints are linear (the flow on the Constraints are linear with respect to the control variables), the optimization formulation equates to a Linear Programming problem A simple example is provided next CRR Auction: the objective function used in the CRR Auction process is to maximize the bid based value of the awarded CRRs An example is not provided CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 54 of 122

55 Simultaneous Feasibility Test Let s go over a simple example that illustrates the objective function in the CRR Allocation process Assume a certain DC FNM (next slide) Assume there are two CRR nominations, CRR1 and CRR2 and one enforced Constraint on the branch that connects buses A and B from the FNM Objective Function Maximize (CRR1 MW quantity + CRR2 MW quantity) This objective function is maximizing the MW quantities allocated CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 55 of 122

56 Simultaneous Feasibility Test CRR1 Source Example DC FNM Bus Bus 1 Bus 2 Transmission line CRR1 Sink CRR2 Source Bus 3 Bus A Branch AB Bus B Bus 4 CRR2 Sink CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 56 of 122

57 Simultaneous Feasibility Test Example DC FNM showing only the relevant buses and branches CRR1: 100 MW PTP CRR nomination from Bus 1 to Bus MW Bus 1 Shift Factor = 10% Bus MW Bus A Branch AB OTC = 35 MW Bus B CRR2: 200 MW PTP CRR nomination from Bus 3 to Bus MW Bus 3 Shift Factor = 15% Bus MW OTC = Operating Transfer Capability CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 57 of 122

58 Simultaneous Feasibility Test CRR1: 100 MW PTP CRR nomination from Bus 1 to Bus 2 CRR2: 200 MW PTP CRR nomination from Bus 3 to Bus 4 Flow on Branch AB (from Bus A to Bus B) MW quantity Shift factor CRR1: % = 10 MW CRR2: % = 30 MW Total flow on the Branch AB (from Bus A to Bus B) 10 MW + 30 MW = 40 MW > 35 MW OTC Feasibility is violated, the SFT fails Need to reduce the flow on the Constraint by 5 MW to relieve overload CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 58 of 122

59 Simultaneous Feasibility Test Let s explore the different alternatives for relieving the overload and see the impact of each alternative on the objective function There are three alternatives Use only CRR1 to relieve the Constraint overload Use only CRR2 to relieve the Constraint overload Use a combination of CRR1 and CRR2 to relieve the Constraint overload CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 59 of 122

60 Simultaneous Feasibility Test What if the MW quantity from CRR1 is reduced Let s first start by understanding the impact that CRR1 has (i.e., a change in the MW quantity of CRR1) on the flow on the Constraint If the MW quantity from CRR1 is increased by 1 MW what is the increase to the flow on Branch AB 1 MW 10 % = 0.1 MW If the MW quantity from CRR1 is decreased by 1 MW what is the decrease to the flow on Branch AB (-1 MW) 10 % = MW To get 5 MW off of Branch AB reduce the MW quantity from CRR1 by 50 MW 5 divided by 10% = 50 MW Need to reduce the MW quantity from CRR1 by 50 MW so that the resultant flow is equal to the Constraint limits Resultant flow on Branch AB (100 50) 10% % = 35 MW CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 60 of 122

61 Simultaneous Feasibility Test What if the MW quantity from CRR2 is reduced Go through a similar process that was applied to CRR1 To get 5 MW off of Branch AB the amount of the MW quantity from CRR2 needs to be reduced by 5 divided by 15% = MW Resultant flow on Branch AB % + ( ) 15% = 35 MW CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 61 of 122

62 Simultaneous Feasibility Test The two alternatives Reduce the MW quantity from CRR1 by 50 MW Objective function = CRR1 MW quantity + CRR2 quantity MW = (100 50) = 250 MW or Reduce the MW quantity from CRR2 by MW Objective function = CRR1 MW quantity + CRR2 MW quantity = ( ) = MW CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 62 of 122

63 Simultaneous Feasibility Test Since MW > 250 MW the maximum allocation of CRR MW quantities happens in the alternative where the MW quantity from CRR2 is reduced by MW CRR2 is more effective than CRR1 in alleviating the Constraint violation CRR2 is more effective because to reduce the overloaded amount on the Constraint (5 MW), the amount the MW quantity reduced from CRR2 (33.33 MW) is less than the amount of MW quantity reduced from CRR1 (50 MW) MW < 50 MW This happens because the shift factor associated with CRR2 is larger than the shift factors associated with CRR1 for the same Constraint Any reduced combination of the MW quantity from CRR1 and the MW quantity from CRR2 to alleviate the Constraint will result in a value of the objective function less than MW CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 63 of 122

64 Simultaneous Feasibility Test Manageable process With only one Constraint overloaded Reduce the CRRs in the order of the largest to smallest shift factor values until the Constraint is not overloaded If multiple CRRs with same shift factors Pro rata based on nominated MW quantity Non-manageable process With more than one Constraint overloaded Reduction of CRR MW quantities may increase or decrease flows on other Constraints May create additional overloads Difficult to use shift factor example to easily understand reduction order Linear Program will maximize CRR MW allocation while alleviating all Constraint violations CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 64 of 122

65 Simultaneous Feasibility Test If for a given CRR Allocation or CRR Auction Process, there are fixed CRRs these CRRs will be modeled on the FNM For example, under the monthly CRR Allocation Process for the month of January, on-peak, tier 1, those CRRs allocated in tiers 1, 2 and 3 in the season 1 on-peak and those auctioned in season 1 on-peak will be modeled as fixed during the SFT The fixed CRRs effectively Reduce available capacity in certain directions Create counter-flow capacity in the opposite directions (assuming CRR Obligation type) If the fixed CRRs are infeasible, the limit on each violated constraint will be adjusted upward to a point that just removes the violation These limits are referred to as soft limits CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 65 of 122

66 Multi-Point CRRs Checking the roadmap Last section: we explored the Simultaneous Feasibility Test including the reduction mechanisms This section: we explore the Multi-Point CRR in the CRR Allocation process and why it may be useful Next Section: we discuss the use of Aggregated Pricing Nodes CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 66 of 122

67 Multi-Point CRRs Multi-point CRRs Generalization of the PTP CRR Effectively consists of two or more PTP CRRs One or more CRR Source points One or more CRR Sink points In the Allocation only one sink is allowed At least two CRR Source points or at least two CRR Sink points Total CRR Source MW quantity = total CRR Sink MW quantity (balancing constraint) Offered only as CRR Obligations The strength of the MPT is in the CRR nomination or CRR bid process in which the balancing constraint of the MW quantity is not initially enforced The balancing constraint is enforced in the optimization CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 67 of 122

68 Multi-Point CRRs Why have a MPT? Suppose a Market Participant submits a PTP CRR nomination into a CRR Allocation What if this PTP CRR nomination was applied to the FNM (via the SFT process) and not all of the MW quantity was feasible? Answer: the MW quantity of PTP CRR nomination would be reduced until feasibility was reached If the nomination process is a one-shot process, there would not be a second round to try to pick-up the amount that was reduced by submitting another PTP CRR nomination with a possibly different source/sink pattern CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 68 of 122

69 Multi-Point CRRs What if this amount of reduction could be picked up by another CRR Source, i.e., picked-up by a different CRR Source but the same CRR Sink? The market participant would be allocated more total MW quantity, although not all of it was for the original CRR This is especially useful when the Market Participant is restricted to using particular CRR Sinks (maybe just one particular CRR Sink), but is not so restricted in the CRR Sources they may use The purpose of the MPT is to provide flexibility (through the allocation process) to clear as much of the total CRR nominated MW quantity as possible CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 69 of 122

70 Multi-Point CRRs In a MPT CRR nomination (within an Allocation), there can be multiple CRR Sources but only one CRR Sink Each CRR Source is assigned a relative priority by the submitter The priority gives the preference of which CRR Sources should be used first to try to balance with the CRR Sink Satisfying the MPT balancing constraint There will be two priorities for the CRR Sources Primary and backup If the most preferred CRR Sources cannot be used to balance the MW quantities with the Sink MW quantities because of Constraint violations, the less preferable CRR Sources are used and so on CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 70 of 122

71 Multi-Point CRRs Example: MPT CRR nomination with one CRR Sink and five CRR Sources CRR Sink MW quantity Sink1 100 The total MW quantity associated with the CRR Sources may be greater than the total MW quantity associated with the CRR Sinks Priority 1 is the primary priority and priority 2 is the backup CRR Source MW quantity Priority Source Source Source Source Source Totals 190 CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 71 of 122

72 Multi-Point CRRs The CRR Allocation process will attempt to first serve (satisfy the balancing constraint) the CRR Sink by either Source1 or Source2 (both priority 1) If there is a Constraint violation, then the CRR Allocation process will attempt to use the backup sources If the CRR Sink still cannot be fully served, the CRR Sink MW quantity will be reduced so that the balancing constraint will be satisfied CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 72 of 122

73 Multi-Point CRRs Example: Final or cleared MPT CRR Total CRR Sink MW quantity (100 MW) equals total CRR Source MW quantity (100 MW) Priorities are not listed because they are not needed nor used after the MPT CRR has cleared through the SFT The CRR Source(s) MW quantities and CRR Sink MW quantities now are fixed Sink MW quantity Sink1 100 Source MW quantity Source1 50 Source2 42 Source3 8 Source4 0 Source5 0 CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 73 of 122

74 Aggregated Pricing Nodes Checking the roadmap Last section: we discussed the Multi- Point CRR This section: we explore Aggregated Pricing Nodes Next Section: we discuss the details of shift factors CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 74 of 122

75 Aggregated Pricing Nodes Aggregated Pricing Nodes (APnode) A group of Pricing Nodes (PNodes) that may represent such items as a Load Aggregation Point or a Trading Hub A Pricing Node is a location in the FNM for which a price is determined For purposes of the CRR SFT, the Pricing Node location is equivalent to a bus The main purpose of an APnode is that it represents physical scheduling resources in the IFM that connect to the FNM at more than one location For example Default Load Aggregation Points (hundreds of PNodes) Generation Aggregation Points for Generator resources that connect to the FNM at one than one location Through the IFM an LMP is determined for each of the different APnodes that are Bid in into the IFM APnodes can also be defined for non-bid purposes An EZ Gen Trading Hub is not Bid in into IFM, but an LMP is determined for this Hub The CRR Sources and CRR Sinks are modeled as either PNodes or APnodes in the CRR SFT process CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 75 of 122

76 Aggregated Pricing Nodes Two Attributes of Aggregated Pricing Node A set of two or more PNodes Each PNodes provides a mapping back to the underlying FNM An LMP is calculated by the IFM for each PNode in this set A set of allocation factors, one allocation factor for each PNode These are also called Load (Generator) Distribution Factors for Load (Generator) Aggregation Points Weighting factors for the EZ Gen Trading Hub For the CRR SFT, they are generally called allocation factors The properties of the allocation factors are Each allocation factors is greater than or equal to 0.0 Each allocation factors is less than or equal to 1.0 The allocation factors for a particular APnode sum to 1.0 CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 76 of 122

77 Aggregated Pricing Nodes Modeling of APnodes in the CRR SFT As noted in the first part of the SFT discussion, CRR Sources and CRR Sinks from CRR nominations or CRR bids are applied to the FNM just like they were Generators, import, exports or Load Bids from the IFM APnode as a CRR Source or CRR Sink in the CRR SFT CRR Source or CRR Sink has an associated MW quantity APnode has the set of underlying PNodes (buses) and allocation factors CRR Source is a set of injections into the FNM Injection at each of the underlying PNodes within the APnode Value of injection at each PNode is (CRR Source MW quantity) (allocation factor for that PNode) CRR Sink is a set of withdrawals out of the FNM Withdrawal at each of the underlying PNodes within the APnode Value of withdrawal at each PNode is (Sink MW quantity) (allocation factor for that PNode) Look at an example of an APnode with six PNodes that is used as a CRR Sink CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 77 of 122

78 Aggregated Pricing Nodes Bus that is also a PNode APnode example with a grouping of 6 PNodes Bus Transmission line CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 78 of 122

79 Aggregated Pricing Nodes Mappings from the CRR Sink MW quantity to the MW values placed on the underlying PNodes by allocation factors. These MW values are withdrawals for the CRR Sink 10% 20% 5% APnode 40% 10% allocation factors 15% Note that the allocation factors sum to 100% CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 79 of 122

80 Aggregated Pricing Nodes Use this APnode as a CRR Sink with a MW quantity of 100 MW 100 MW APnode maps to underlying PNodes These arrows represent the withdrawals from the FNM % = 20 MW % = 40 MW % = 10 MW % = 10 MW 100 5% = 5 MW % = 15 MW CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 80 of 122

81 Shift Factors Checking the roadmap Last section: we discussed Aggregated Pricing Nodes (APnodes) and they are used to model CRR Sources and CRR Sinks in the SFT This section: we finish up by exploring the concept of the shift factor and the concept of the effective shift factor that comes about when the CRR Sources and/or CRR Sinks are modeled with APnodes CRR Basics #2, June 7 & 8, 2007, R. Treinen Page 81 of 122