SEMOpx Day-ahead Market Products Stage 3 Progress Report. May 2017

Transcription

1 SEMOpx Day-ahead Market Products Stage 3 Progress Report May 2017

2 Contents 1 Introduction Purpose of the Document IAT STAGES Scope of IAT Structure of IAT Creation of Test Data by SEMOpx Performing Test Simulations Assessment of Results Stage Overview Goal Assumptions Outcome Stage Overview Goal Assumptions Outcome Stage Overview Goal EirGrid Commercial In Confidence. Page 1

3 8.3 Assumptions Outcome Next Steps Disclaimer EirGrid Commercial In Confidence. Page 2

4 1 Introduction EUPHEMIA is the day-ahead pricing algorithm currently in use throughout Europe to perform day-ahead market coupling. It was developed by the Price Coupling of Regions (PCR) initiative, an organisation of European power exchanges. The use of EUPHEMIA for the day-ahead market in the I-SEM is outlined in the SEM Committee s decision on the high level design (HLD) for the I-SEM (SEM A). In order to include the I-SEM in the day-ahead market (DAM) coupling performed by the PCR, it is necessary for SEMOpx to complete tests with the PCR to show that the impact of adding the new market is acceptable. These tests use a test set of data to represent the SEM, and other data, to simulate a period of test dates and assess the effect of this data on the performance of EUPHEMIA. Following this PCR testing, and appropriate assessment of results, the PCR will confirm the DAM coupling arrangements for I-SEM. However, it will not be possible for the PCR to undertake and conclude its testing until closer to I-SEM go-live. This, understandably, creates a period of uncertainty and an issue of confidence for SEMOpx stakeholders as to whether their requirements will be able to be accommodated in EUPHEMIA. To help mitigate the risk to the delivery of I-SEM of not receiving timely PCR approval, SEMOpx is undertaking some early tests of its own against the current version of EUPHEMIA to gain some insight and understanding prior to the formal PCR testing commencing. In particular, as is explained below, SEMOpx will use this interim testing of its own to assist in setting the parameters 1 for the formal PCR tests. SEMOpx is conscious of the importance of setting the parameters to manage this risk. To aid in the decisions on the final parameter settings, these early tests will look at multiple variations for representing the products 2, including both types and number of products represented. It is also hoped that these tests will provide market participants with the confidence they require about which products will be available to them in the I-SEM, thereby allowing them to progress their own I-SEM implementation projects during what would otherwise be a period of great uncertainty. This document outlines the strategy and progress in mitigating this risk and is updated periodically as further iterations of the SEMOpx tests are performed. Additionally these updates will outline any changes to the strategy which are deemed necessary following analysis of results. 1 The parameters to be used for PCR testing refer to any parameters within EUPHEMIA which will need to be set to represent the I-SEM DAM in EUPHEMIA. Primarily, the IAT is focused on the parameters relating to the products including the maximum number of each product. 2 In this context, the term products refers to the types of order (bid or offer) which may be submitted by a participant to SEMOpx for the DAM. As the I-SEM DAM will use EUPHEMIA, the products available will be based on the suite of products available in EUPHEMIA. EirGrid Commercial In Confidence. Page 3

5 2 Purpose of the Document This document outlines the SEMOpx internal assessments and test (IAT) approach, scope, goals and progress. In this latest release, it has been updated to detail in Section 8 the results of the third stage of testing, adding to the information presented in the previous two releases of the document detailed in Sections 6 and 7. It will be updated further as testing progresses, in order that participants are kept fully abreast of the latest developments. It should be noted that the IAT approach is not designed in any way to forecast or model the I-SEM DAM or any other market segments. While prices, schedules and other data are produced as a result of the IAT, assessment of these values is considered outside of the scope of the IAT and commentary on these results will not be included in this report. While the IAT is intended to inform SEMOpx s decision on the parameters to be used for PCR testing, it will only provide indicative information e.g. the test data is an estimation of the data which may be used in the PCR testing. Furthermore, the IAT does not form part of the PCR testing. The PCR s decision on the coupling arrangements for the I-SEM DAM is subject to their defined testing processes. The IAT is not a substitute for the PCR testing and it does not guarantee any outcome of that testing. In this context, please note the disclaimer in Section 9 of this report. An initial release of the document was published at the end of January 2017, represented as Milestone #61c Publication of report for PCR Change Request against Euphemia V.9.5 in the public Level 2 Milestone Plan for I- SEM. This summarised the outcome of an initial stage of IAT, which was based on an average level of DAM participation. Based upon an assessment of the results of that Stage 1, it was determined that the outcomes were sufficient to proceed to Stage 2 of the IAT, a stress test, where the complexity of the representation of the I-SEM DAM parameters would be expanded. The document was updated on 31 st March 2017 to provide parties with information on the actions SEMOpx took on the back of the results from Stage 2 of the IAT (e.g. any changes to the parameters). The document was further updated on 31 st May 2017 to provide information on Stage 3 of the IAT and further insight into the progress of the testing process. As detailed in later sections, following analysis of the Stage 3 results, SEMOpx are of the view that the current strategy for mitigating the risk associated with the uncertain outcome of PCR testing needs to be revisited. Further to this, the Stage 3 results have indicated challenges in the PCR assessment process beyond the parameters used to represent the I-SEM. Accordingly, this document outlines the issues encountered and the principles SEMOpx feel are appropriate for a revised risk mitigation strategy. 3 IAT STAGES As explained in Section 1 the key priorities of the IAT are to inform the decision on parameters to be entered for the PCR tests and support the decision-making process. Initially, two stages were proposed, namely: EirGrid Commercial In Confidence. Page 4

6 Stage Description Goal 1 Initial Benchmark Confirm data integrity of dataset and act as a benchmark for Stage 2. SEMOpx will represent an average scenario in this stage. 2 Stress Assessment Act as a stressed test with differing numbers of products represented. This stage will look to adapt the benchmark to investigate other representations of the market parameters. Table 1: IAT Stages Depending on the results of Stage 2, further IAT stages may follow in order for SEMOpx to develop the necessary insights to inform the setting of parameters to be used for PCR testing. That is, the results of testing may inform the recalibration of the parameters, which will necessitate additional testing to understand if the updated values achieve the desired results. This reiteration and refinement will be done subject to the timeframe required to complete PCR testing in line with the I-SEM go-live date. Following completion of IAT Stage 2, it was determined that at least one additional iteration would be required and that others would be allowed for as deemed necessary following review of testing results. The revised IAT stages are listed below. Stage Description Goal 1 Initial Benchmark Confirm data integrity of dataset and act as a benchmark for Stage 2. SEMOpx will represent an average scenario in this stage. 2 Stress Assessment Act as a stress test with differing numbers of products represented. This stage will look to adapt the benchmark to investigate other representations of the market parameters. 3 Revised Limit Assessment Act as a test to assess the effects of a revised set of limits as well as the impact to testing results of this revised set. This will adapt the dataset from Stage 2 to investigate a reduced set of limits. Table 2: Revised IAT Stages EirGrid Commercial In Confidence. Page 5

7 4 Scope of IAT As explained above, the IAT is designed to assess the I-SEM parameters in order to allow for timely identification of any potential issues (e.g. errors in test datasets) such that they may be addressed ahead of PCR testing. This will allow for a test dataset to be prepared in advance of the PCR testing and to inform the decision-making process for arriving at suitable parameters to represent the I-SEM. Assessment of multiple datasets will allow for due diligence to be applied by SEMOpx in arriving at the chosen parameters for the PCR testing and mitigate the risk that the PCR approval process takes longer than expected. 5 Structure of IAT An overview of the key steps of IAT is detailed below. 5.1 Creation of Test Data by SEMOpx For each stage of the IAT, SEMOpx will create a set of data to represent the I-SEM DAM. In order to provide a sufficiently large sample to assess the results, at least two years worth of historical data will be used based on the historical period from 01/05/ /04/2016. This data will include orders (bids and offers) which represent all relevant generator and supplier units in the I-SEM; these orders will be based on historical bid and offer data. It will also include representations of each interconnector based on historical capacity, ramping and loss values. While a dataset is required for each stage, the goal is to arrive at an appropriate dataset (i.e. a dataset which is robust in terms of limits) and then use this dataset in future tests in readiness for PCR testing. As the stages progress, SEMOpx may investigate datasets using different parameters for the purpose of assessing varying approaches. 5.2 Performing Test Simulations Once all data is compiled, tests will be performed. As the IAT is not an official test of the PCR, it will not be possible to replicate fully the conditions of the future PCR testing which will be applicable to the I-SEM DAM. As such, any results must be appropriately caveated and read in this context. 5.3 Assessment of Results Once all of the test data for a testing stage has been run through the process, the test results will be extracted and analysed. The analysis will consider the results and whether changes may be required to parameters for future tests. Whilst it is not possible to release these test results due to PCR confidentiality obligations, these reports will indicate the nature of any actions which SEMOpx is taking based upon the results for example, any changes to the parameters. EirGrid Commercial In Confidence. Page 6

8 6 Stage Overview Stage 1 was completed in late 2016; it was primarily designed to act as an initial benchmark and to prepare the process for stress testing in Stage Goal The goal of Stage 1 was to act as an initial benchmark for further testing. It was conducted over the two year historical and one year forecast periods using a set of data consistent with average participation in the DAM. The purpose of this stage was to assess the average scenario as a benchmark. Furthermore, this stage allowed for completion of the process to highlight and address any issues in the creation or conversion processes (i.e. the process applied to convert SEM data into the required format for testing). This was of benefit as, while the tools used to create data had been used in the I-SEM Trialling of EUPHEMIA 3, the tools used had not been used to create a dataset with as many days as required for the IAT or the PCR testing allowing any issues to be highlighted and addressed before they had an impact on the timing of the PCR testing. 6.3 Assumptions The dataset for Stage 1 testing stage was developed to reflect an average level of DAM participation, based on the following assumptions: All units present in the SEM historical day will be represented Each unit will be represented once only There will be a mix of simple, complex block and linked block orders The number of complex and block orders will represent average expected use of these order types o Each unit represented using a complex order will use one order per day o Block orders will cover a period of 8 hours o Each unit represented using linked block orders will use between 3 and 12 depending on the number of price quantity pairs in their commercial offer data (COD) o Complex and linked block orders will be used for baseload and mid-merit thermal units and pumped storage hydro units Values for wind and load will be taken from the respective ex-ante forecast values Other units will be represented using simple orders 3 EirGrid Commercial In Confidence. Page 7

9 6.4 Outcome Following an assessment of Stage 1 of the IAT by SEMOpx, it was decided that the results were sufficient to proceed to Stage 2 of the IAT, as planned. The priority identified for the first iteration of Stage 2 was to expand on complexity of the representation of the I-SEM DAM parameters. While a range of products was used in Stage 1, this represented an average case. SEMOpx, following assessment of the Stage 1 results, decided to expand the number of orders used for Stage 2. This was primarily aimed at increasing the number of complex and linked block orders for the I-SEM. This was expanded to represent hypothetical maxima of these orders in each test day in line with the goal of Stage 2. In order to be comprehensive, Stage 2 was followed by further testing with different maximum numbers of orders included. 7 Stage Overview Stage 2 of the IAT commenced in quarter ; it was primarily to act as an extension to the initial benchmarking as set out in Stage Goal The goal of Stage 2 was to act as an extension to the testing performed in Stage 1. Representing a significant step change in complexity, Stage 2 of the IAT was conducted using a set of data consistent with a higher level of participation in the DAM than that explored in Stage 1. This higher level of complexity reflected a level of participation in the market reflective of a consistent peak level of participation, as opposed to the average level of Stage 1 of the IAT, as well as reflecting potential market growth in order to assess values to be used as maximum limits on products. Furthermore, the goal was to assess if this higher level of participation identified any specific issues with products not seen in the average volumes assessed in the Stage 1 test. The final outcome of Stage 2 was to arrive at the list of expected SEMOpx products from the list of those marked for investigation during the I-SEM Trialling of EUPHEMIA, namely: Simple orders; Complex orders; Block orders; Linked block orders; and Exclusive Group orders. 7.3 Assumptions The key difference between the data used for Stage 2 and that used for Stage 1 was to expand the number of products used per day in order to assess the values required to provide limits which would offer a high level of EirGrid Commercial In Confidence. Page 8

10 flexibility in all offered products, while allowing an assessment of the maximum impact on EUPHEMIA performance that I-SEM would have. Development of the dataset for Stage 2 of the IAT was based on the following assumptions: All units present in the SEM historical day will be represented In order to create the number of orders required to represent this higher level of participation, each unit may be represented more than once using different products (e.g. the same unit represented using a complex order and a set of linked block orders) o Units may be represented multiple times using different values in products o Units may be represented multiple times using different products There will be a mix of simple, complex, block and linked block orders The number of complex and block orders will represent a high level of participation in the market, consistent with a significant stress test condition Values for wind and load will be taken from the respective ex-ante forecast values A number of units will be represented using simple orders. 7.4 Outcome Stage 2 did not highlight any specific issues with products. Following an assessment of Stage 2 of the IAT by SEMOpx, it was determined that the results were sufficient to support the products which SEMOpx expected to offer in the DAM, namely: Simple orders; Complex orders; Block orders; Linked block orders; and Exclusive Group orders. However, the results of Stage 2 were not conclusive about the limits appropriate for the SEMOpx exchange. Following assessment of the Stage 2 results, it was decided that: Additional stages of the IAT were required to assess the limits which will be applicable in SEMOpx for golive; and An initial set of limits should be put into the draft SEMOpx rules and operating procedures to ensure the necessary provision is included in the SEMOpx rules and operating procedures before they are finalised in June 2017 (Level 2 Plan Milestone #118); the values of these limits were expected to be updated at a later date following completion of the PCR testing (Level 2 Plan Milestone #61d). 8 Stage Overview Stage 3 of IAT took place in Q2 of It used a less complex dataset than that used in Stage 2 in order to assess the impact of reducing the number of products on the algorithm s performance. EirGrid Commercial In Confidence. Page 9

11 8.2 Goal The two primary goals of IAT Stage 3 were to: assess the impact of a reduced number of products (compared to Stage 2) on the test results; and use this insight to set an initial set of limits (i.e. maximum number of permitted products per day) for inclusion in the draft SEMOpx rules and operating procedures. To do this, the dataset used was a less complex version (i.e. a set of data using fewer total products per day) of the dataset used in Stage 2. This allowed SEMOpx to assess the impact of the reduced complexity on whether this could provide a sufficient level of confidence in the limits represented by the dataset for inclusion in the draft SEMOpx rules and operating procedures. 8.3 Assumptions Development of the dataset for Stage 3 was based on the following assumptions: The total number of orders would be less than in Stage 2 but more than in Stage 1; Other assumptions used will be consistent with Stage 2; and Testing conditions of Stage 2 will be replicated such that the only change is the number of products being reduced. The purpose of the dataset was to assess the impact to performance from a range of levels of complexity across the three stages in order to gain confidence in an appropriate set of product limits. 8.4 Outcome The Stage 3 results did not provide SEMOpx with sufficient confidence that the limits represented by the datasets in Stage 3 would pass the PCR testing. Accordingly, SEMOpx does not feel that these limit values are appropriate for inclusion in the SEMOpx rules and operating procedures as an initial set of limit values. As an initial set of limits will not be included at this time, the SEMOpx rules and operating procedures will initially mark all product limits as to be determined. As originally planned, the product limit values will be finalised following the PCR testing and the SEMOpx rules and operating procedures will allow for such updates. Furthermore, Stage 3 has highlighted underlying challenges in the PCR assessment process, beyond the parameters being used to represent the I-SEM. Following assessment of the Stage 3 results by SEMOpx, SEMOpx believes that further stages of IAT are highly unlikely to mitigate the risks associated with the PCR assessment process without tackling these underlying challenges. SEMOpx are now of the view that the current strategy for mitigating the risk associated with the uncertain outcome of PCR assessment process needs to be revisited. EirGrid Commercial In Confidence. Page 10

12 This revised strategy will need to: Address the challenges being faced in the PCR assessment process; Take account of the time constraints relating to market readiness for I-SEM go-live by providing participants with the necessary certainty they need when they need it; Take a multi-lateral approach to explore all avenues (e.g. SEMOpx representation on the NEMO Committee) available to resolve the issue including avenues available through co-operation with its service providers and the RAs; and Provide the best available solution for I-SEM go-live. The SEMOpx preferred solution remains an approach using the range of products outlined in section 7.4; however, it will be necessary for SEMOpx to assess both a reduced range of products and the numbers of each product. The purpose of this assessment is to find an appropriate balance between: Ensuring exchange members have a sufficient range of products to provide a functional day-ahead market for I-SEM go-live; and Ensuring that SEMOpx has a high degree of confidence that this range of products will receive PCR approval. 9 Next Steps SEMOpx will work to develop a revised strategy for progressing the SEMOpx DAM products. This will be aimed at developing the best approach to provide confidence in the SEMOpx products ahead of I-SEM go-live. This strategy will be communicated to market stakeholders through the appropriate I-SEM participant engagement forums (e.g. PMG meetings, stakeholder meetings etc.). This strategy will comprise of four key components: 1. Governance Process: SEMOpx will develop a strategy that appropriately escalates the issue of PCR change request assessment to the appropriate European governance committees including, inter alia, the PCR Committee and the NEMO Committee; 2. DAM Product Set for Go-live: SEMOpx will further investigate the appropriate product range for go-live and strategy for developing that range of products over time. SEMOpx will engage with the RAs and other stakeholders, as appropriate, in this process; 3. SEMOpx Rules and Operating Procedures: SEMOpx will continue to develop the SEMOpx rules and operating procedures on the basis that product limits will be determined at a later point following further investigation. SEMOpx will present the SEMOpx rules to the RAs for approval as scheduled, with limit values marked as to be determined ; and 4. Level 2 Milestones: SEMOpx will work with the RAs to introduce appropriate new milestones into the Level 2 Milestone Plan to provide visibility for all interested parties of the timings for upcoming activities and deliverables. These additional milestones will be progressed through the standard change control process. EirGrid Commercial In Confidence. Page 11

13 10 Disclaimer The Information is provided as is and no representation or warranty of any kind, express or implied, is made in relation to the Information and all such representations or warranties, express or implied, in relation to the Information are hereby excluded to the fullest extent permitted by law. No responsibility, liability or duty of care to you or to any other person in respect of the Information is accepted, and any reliance you or any other person places on the Information is therefore strictly at your own or their own risk. In no event will liability be accepted for any loss or damage including, without limitation, indirect or consequential loss or damage, arising out of or in connection with the use of the Information. By using or relying on the Information, you automatically consent to the terms and conditions of this disclaimer. In the event that the Information is provided by you, in whole or in part, to a third party for whatever reason you shall ensure that this disclaimer is included with the Information and brought to the attention of the third party. Copyright Notice All rights reserved. The entire publication is subject to the laws of copyright. This publication may not be reproduced or transmitted in any form or by means, electronic or manual, including photocopying without the prior written permission of EirGrid plc. EirGrid Plc 2017 The Oval, 160 Shelbourne Road, Ballsbridge, Dublin 4. Ireland. EirGrid Commercial In Confidence. Page 12