Who should calculate the UCAP. Eligibility WG September 12, 2017

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1 Who should calculate the UCAP Eligibility WG September 12, 2017

2 Overview The following materials provide an examination of the question: Who should be responsible for calculating the UCAP for qualified capacity resources? Outline Jurisdictional Review Responsibility for Capacity Determination Consideration of UCAP calculated by the AESO Consideration of UCAP calculated by capacity resource owners Summary of options relative to criteria 1

3 Jurisdictional Review: Responsibility for Capacity Determination MISO determines annual unforced capacity values for all qualified capacity resources, load modifying resources and for all energy efficiency resources.(1) NYISO calculates the amount of Unforced Capacity that resources are qualified to supply to the NYCA for each capability period. The NYISO will use the operating data submitted by each resource in accordance with section 4.4 of the ICAP manual.(2) In UK s Capacity Market system operator carries out central de-rating of capacity resources.(3) ISO-NE: The ISO will calculate the appropriate qualified capacity values for existing resources and notifies market participants. PJM: PJM staff are responsible for the compilation, review and processing of generation unit event and performance records via the Generating Availability Data System (GADS) (1)Resource Adequacy Business Practice Manual/BPM-0110r16/page 12 (2)NYISO Installed Capacity Manual/ Manual 4/ August 2017/ page (3)Department of Energy & Climate Change/ Electricity Market Reform: Capacity Market- Detailed Design Proposals 2

4 Considerations: AESO determining the unforced capacity (UCAP) values Advantages: The AESO is an independent entity. The AESO does not own or operate any power facilities, and does not have a financial stake in the industry. The AESO is responsible for maintaining system reliability. Follows practices from other capacity market jurisdictions. Ensures a common calculation/ approach for each asset. 3

5 Considerations of AESO determining the unforced capacity values Disadvantages: Administratively burdensome to calculate over 115 individual generation units. Errors in UCAP calculation could result in reliability issues as well as legal disputes with capacity providers on the true UCAP values. A dispute resolution process may need to be created for market participants concerned about their assets de-rated eligibility. In the context of a capacity market, a UCAP (unforced capacity) rating represents the amount of capacity that a resource can be expected to provide, on average, during periods of system stress. While the AESO has historical performance data asset owners could be in a better position assessing the future capabilities of their asset. 4

6 Considerations of UCAP calculated by capacity resource owners Advantages: Capacity providers may have the best information for the capabilities of their equipment and are in the best position to establish their UCAP value. A market structure with performance penalties will incent capacity providers to provide a conservative estimate of their asset s true capabilities during performance events. 5

7 Considerations of UCAP calculated by capacity resource owners Disadvantages: Market Participants (MP) may overstate their reliable capacity value (UCAP) because they assess the risk of performance events (and therefore penalties for non-performance) as low. MP may withhold capacity by understating the UCAP (bidding below their reliable generation level, or not participating in the auction at all UCAP 0 MW) to increase capacity prices. Some generation owners might not have access to historical generation data or the ability to calculate accurate UCAP for their units. 6

8 Comparison of Options Relative to Relevant Criteria MP determines UCAP AESO determines UCAP The capacity market should contribute to the reliable operation of the electricity grid, and implementation should be consistent with, and complementary to, existing measures aimed at ensuring reliability The risks of regulatory delay and need for redesign should be minimized. Common practices and lessons learned from other capacity market implementations should be leveraged as much as practicable and applicable. Simple and straightforward initial implementation should be a priority Capacity market mechanisms, outcomes and relevant data should be transparent 7