System market power. Department of Market Monitoring. Market Surveillance Committee Meeting General Session June 7, 2018

Transcription

1 System market power Department of Market Monitoring Amelia Blanke, Manager, Monitoring and Reporting Market Surveillance Committee Meeting General Session June 7, 2018

2 Annual report recommendation DMM has recommended that the ISO begin to consider various actions that might be taken to reduce the likelihood of conditions in which system market power may exist and to mitigate the impacts of system market power 2017 Tight system conditions in real-time Day-ahead market showed signs of being less competitive Not structurally competitive in some hours; record high prices 2018 Conditions likely to allow for additional potential for system market power lower hydro less gas generation (~800 MW compared to summer 2017) more generation controlled by net sellers (>3,750 MW) 2019 Conditions exacerbated by FERC Order 831 compliance and ISO proposals to increase bid caps

3 Capacity additions/retirements (MW) Significant amounts of gas generation being retired, while most new generation is from solar. 6,000 5,000 4,000 3,000 Retirements New generation Net yearly total 2,000 1, ,000-2,000-3,000-4,

4 Resource adequacy requirements sometimes falling short of actual operational demand in key hours.

5 Total imports offered (MW) (HE 19) Imports offered into CAISO day-ahead and real-time market declining sharply during high loads. 11,000 Net import offer (DA) 10,000 9,000 8,000 7,000 6,000 Jun-19 Jul-06 5,000 Aug-01 4,000 Jun-01 Jun-06 Jun-11 Jun-16 Jun-21 Jun-26 Jul-01 Jul-06 Jul-11 Jul-16 Jul-21 Jul-26 Jul-31 Aug-05

6 Bid price ($/MWh) Competitively priced system level supply limited on high load days in $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 -$100 -$200 June 18 June 19 June 20 June 21 Day-ahead market supply (HE 20) 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Cumulative incremental MW

7 Indicators of market power Structure Pivotal suppliers System residual supply index (RSI) Conduct Supply bids Bid price vs. marginal cost Hockey stick bidding Impact Market prices vs. marginal costs

8 Structural measures of market power Pivotal supplier test: If supply is insufficient to meet demand with the supply of any individual supplier removed, then this supplier is pivotal. Residual supply index. The residual supply index is the ratio of supply from non-pivotal suppliers to demand. A residual supply index less than 1.0 indicates an uncompetitive level of supply. Example: Demand = 100 MW Total Supply = 120 MW (30 MW pivotal supplier) RSI = (120 MW 30 MW) / 100 MW =.9 Oligopoly: Consider degree to which 2 or 3 suppliers are jointly pivotal.

9 DMM s System RSI calculation (day-ahead) Supply All internal supply bid into the day-ahead market Imports scheduled/bid into the day-ahead market Demand Actual system load, plus Ancillary services requirements Virtual supply/demand bids are excluded

10 Residual supply index for system energy System RSI calculation for day-ahead market (2017) Single pivotal supplier test (RSI1) 2017 Two pivotal supplier test (RSI2) 2017 Three pivotal supplier test (RSI3) Hours

11 Residual supply index for system energy Results for 2017 with more than 3,750 MW of gas generation reassigned to different suppliers as reported in June Single pivotal supplier test (RSI1) 2017 Two pivotal supplier test (RSI2) 2017 Three pivotal supplier test (RSI3) 2017 RSI1 with SC change RSI2 with SC change RSI3 with SC change Hours

12 Number of hours Potentially pivotal suppliers (2017 results) >20 Number of potentially pivotal suppliers (RS3)

13 Bid price vs default energy bids for gas resources Net buyers (June 21, 2017)

14 Bid price vs default energy bids for gas resources Net sellers (June 21, 2017)

15 Import bids June 21, 2017

16 Comparison of system marginal energy cost to highest cleared default energy bid segment

17 Price ($/MWh) Comparison of CAISO day-ahead prices with bi-lateral day-ahead prices (peak hours) $180 $160 $140 $120 System marginal energy price Palo Verde Mid-Columbia $100 $80 $60 $40 $20 $ July August September

18 Correlation of system marginal energy price with RSI3

19 Discussion Additional metrics or analysis? MSC recommendations for mitigation? Impact on proposed market changes? Other ideas?