Energy Markets - The Basics

Transcription

1 Disclaimer This training presentation is provided as a reference for preparing for the PJM Certification Exam. Note that the following information may not reflect current PJM rules and operating procedures. For current training material, please visit: PJM 2014

2 Energy Markets - The Basics Interconnection Training Program Module EM1 Winter,

3 Objectives At the completion of this training session, you should be able to: Understand the history leading up to the creation of PJM s Markets Identify the markets facilitated by PJM Understand the function and need for Market Monitoring Identify the basic concepts of bilateral transactions Identify the basic components of creating an external transaction 2

4 Agenda Review background info and history leading up to energy markets FERC Open Access Initiative PJM Markets Independent Market Monitor (IMM) Transactions/Interchange Scheduling 3

5 Background - Vertically Integrated Utilities Prior to de-regulation, many utilities were set up to handle all functions involved in supplying electricity Generation Transmission Distribution Many also performed Control Area functions Integrated Electric Utility Power Generation Transmission Owner Distribution Consumers 4

6 Background - Bilateral Transactions Between Control Areas As Control Areas became interconnected, opportunities arose to enter into bi-lateral contracts to purchase power cheaper than it could have been produced internally. B C $40 A $20 For example, Control Area C would incur cost of $40 to produce block of 100mw. Instead a bilateral contract with A is entered into. All parties (including B) would have to coordinate together on such things as: start/stop times, reliability of deal, etc. Other charges would be involved, including a Transmission or wheeling charge from Control Area B 5

7 Background - Power Pools and Economic Dispatch Economic Dispatch Companies pooled their generation together and allowed another entity (PJM) to centrally dispatch the system as a whole. All companies submitted their unit costs (based on a standardized formula). For an increase in load in one company, PJM would signal the most economical unit to move, even if it is owned by another company. A Split Savings Settlements would occur based on split saving methodology. For instance, if Company A could have served it s own load with it s own unit s at $40, but instead PJM dispatched Company B to served the load at $20, the companies would split the savings, A would pay $30 (saving $10), B would get paid $30, making a $10 profit. B 6

8 Old Electric Supply Chain Power Generation Power Generation Transmission Owner Distribution Consumers PJM served as power pool and Control Area operator, coordinating transmission operation and generation dispatch between companies Transmission Owner Distribution Consumers 7

9 Background - Interchange PJM would also make energy sales and purchases with other control areas on behalf of Member Companies Emergency Economy A, Economy B, Reserved Economy Member Companies could also enter into bilaterals with other areas, coordinating with PJM as the Control Area operator Today, PJM does not buy and sell energy on the interchange market, except in an emergency 8

10 Agenda Review background info and history leading up to energy markets FERC Open Access Initiative PJM Markets Independent Market Monitor (IMM) Transactions/Interchange Scheduling 9

11 Deregulation - FERC The Federal Energy Regulatory Commission is an independent regulatory agency within the Department of Energy (DOE) Regulates the transmission and wholesale sales of interstate commerce The Commission's legal authority comes from: Federal Power Act of 1935 Public Utility Regulatory Policies Act of 1978 Energy Policy Act of

12 Significant FERC Orders Order 888 Opened the grid - utilities to file open access non-discriminatory tariffs Provided for recovery of stranded costs Opened membership to PJM Encouraged others to develop ISO s (Independent System Operator) Order 889 Development of OASIS (Open Access Same time Information System) ATC (Available Transfer Capability) to be posted Means to allow all authorized entities (including Power Marketers) to make reservations for use of the transmission system Established Code of Conduct standards The start of the separation of Generation and Transmission Dispatchers 11

13 Impacts of Deregulation Extra transmission capability must be made available to others Generation can be sold at market prices Retail Access - State Customer Choice Programs PJM becomes an ISO, administers OASIS and transmission tariff on behalf of Transmission Owners 12

14 Changes in the Electric Supply Chain Power Suppliers PJM - RTO Local Distribution Companies Load Serving Entities Power Generation Independent Power Producers Other Suppliers Transmission Owners Distribution Consumers Marketers Power Exchange 13

15 Agenda Review background info and history leading up to energy markets FERC Open Access Initiative PJM Markets Independent Market Monitor (IMM) Transactions/Interchange Scheduling 14

16 PJM Mission and Market Goals Maintain the safety, adequacy, reliability and security of the power system Create and operate a robust, competitive, and non-discriminatory electric power market Ensure that no member or group of members has undue influence Market Flexibility - Customers require the ability to choose from a variety of participation options Market Information - Release of timely market information is critical to market success Market Incentives - Must efficiently deal with transmission congestion management issue Market Adaptation - Market rule changes are common - sequential implementation of new markets 15

17 PJM s Operational Markets Day-Ahead Energy Market (June 1, 2000) Real-Time Energy Market (April 1, 1997) Capacity (January, 1999) RPM (June 2007) Financial Transmission Rights (June 1, 1999) Ancillary Services Markets Regulation (June 1, 2000) Synchronized Reserves (December 1, 2002) Day-ahead Scheduling Reserves (June 2008) Black Start Services (December 1, 2002) Reactive Services Cost Based Services 16

18 Options for Energy Supply Bilateral Transactions Self-schedule own resources PJM Spot Market Load Serving Entities Obtain energy to serve customers Industrial Commercial Residential 17

19 Agenda Review background info and history leading up to energy markets FERC Open Access Initiative PJM Markets Independent Market Monitor (IMM) Transactions/Interchange Scheduling 18

20 Market Monitoring Plan Monitor compliance with rules, standards, procedures and practices of PJM. Monitor actual or potential design flaws in rules, standards, procedures and practices of PJM. Monitor structural problems in the PJM market that may inhibit a robust and competitive market. Monitor the potential of Market Participants to exercise undue market power. Access to all data collected by PJM. Requests for additional data. 19

21 Independence: Goal of MMU PJM Board of Managers Federal Energy Regulatory Commission PJM Members Committee Markets Committee Planning Committee Operating Committee Monitoring Analytics The PJM IMM does not report through the PJM Members Committee but rather directly to the PJM Board and to FERC Market Monitoring Plan is not subject to modification by PJM members PJM Market Monitoring Plan: Attachment M of the PJM Tariff 20

22 State of the Market Report Market Monitoring Unit s annual assessment of the competitiveness of the PJM markets Analyzes market structure, participant behavior, market performance Provides details, charts, and graphs of various market activities and prices 21

23 Agenda Review background info and history leading up to energy markets FERC Open Access Initiative PJM Markets Independent Market Monitor (IMM) Transactions/Interchange Scheduling 22

24 Internal/External Transactions Transactions can be classified as either Internal or External External Transaction crosses the RTO borders Either an Import, Export, or Wheel Tools used to manage Oasis EES (Enhanced Energy Scheduler) NERC Tagging Software Internal An IBT or Internal Bilateral Transaction between two participants within the PJM footprint Tools used to manage eschedules 23

25 Internal Bilateral Used to report Internal Energy Schedules to PJM RTO For Bilateral Energy Transactions that do not cross PJM Energy Market boundaries (does not affect PJM dispatch operations) Can be used between PJM and ComEd Control Areas Also accommodates Wholesale and Retail Choice load responsibilities and Merchant Generation revenue meter data Shifts financial responsibility for scheduled MWh from Seller to Buyer at the specified source/sink Buyer pays congestion and losses when source differs from sink (buyer is typically the network transmission customer) 24

26 Modeling of an Internal Bilateral Transaction Source looks like load for seller Scheduled Load B Transaction C Sink looks like generation for buyer Scheduled Generation Source Sink Seller Generation Buyer Load 25

27 Internal Bilateral Scheduling Options Seller or Buyer enters scheduled MWh Unilateral or Bilateral confirmation of schedules Day-ahead or Real-time pricing File Upload or Manual entry MWh increments accepted 26

28 Functions Two Parties establish a contract using eschedules Develop a MW schedule associated with contract Examine billing reports as desired. Opposite party confirms MW schedule if required 27

29 External Transactions 28

30 Scheduling Tools: OASIS

31 The Basics: EES EES: Enhanced Energy Scheduler Used to make Ramp Reservations Used to submit PJM specific Information Can be used to submit OASIS requests Can be used to view Ramp 30

32 The Basics: Ramp Ramp: Change in Net Interchange Limited to Control RTO ACE Variable Limit Standard Ramp Limit =1000mw every 15 min. 31

33 The Basics: Ramp Reservation Ramp Reservation: Reserved in EES First-come, First-serve Not a schedule Expires if not scheduled against 32

34 The Basics: NERC Tag NERC Tag: Common Tracking Number IDC* / TLR* When linked to a Ramp Reservation, becomes a schedule IDC: Interchange Distribution Calculator TLR: Transmission Loading Relief MORE TO COME! 33

35 The Basics: NERC Tag Why NERC Tagging is needed: NPPD MISO PJM Contract Path Actual Flow TVA 34

36 NERC Tags and EES In response to industry trends - PJM moves to using NERC tags to feed EES Market participants can schedule in PJM through NERC tag Eliminates double entry of schedule data EES still available to reserve ramp 35

37 Summary Interconnection of utilities, FERC Orders 888 and 889 led to the creation of markets and increased numbers of market participants. Rather than bilateral transactions under a traditional vertically integrated utility concept, load serving entities now could take part in markets, use their own generation to supply their load or purchase energy bilaterally from other market participants. The goal of the Market Monitoring Unit is to ensure competitive energy markets and limit market power concerns. eschedules facilitates internal bilateral transactions EES, OASIS and NERC tagging facilitate external energy transactions. 36

38 Questions? 37