Energy Imbalance Market (EIM) Benefits and Challenges

Transcription

1 Energy Imbalance Market (EIM) Benefits and Challenges PUC Webinar Jeffrey Nelson & Paul Nelson* September 16, 2013 * Disclaimer: Content and opinions represent those of the authors and not necessarily Southern California Edison

2 SCE supports an EIM framework as a larger pool of resources allows for improved system operation which reduces costs Locational Marginal Price (LMP) markets produce an efficient dispatch and provide benefits to the local market and the market at large A larger, more diversified market should allow for increased integration of variable Energy Resources (VERs) while lowering integration costs and maintaining reliability The CAISO is in the best position to address issues and actually implement a fully integrated EIM that includes California and other States SCE has been an active participant in CAISO s stakeholder process 1

3 Design challenges occur due to differences between CA/CAISO and other balancing authorities CAISO has a day-ahead (DA) LMP optimization unique to the West EIM proposal has no DA market, which creates problems with convergence bidding CA GHG compliance complicates market design Price formation Reporting & compliance Resource leaning concerns Uplift cost allocation Transmission rate design SCE recommends phased implementation to realize benefits Phase 1: Separate optimization for CAISO & EIM Entity Phase 2: Joint optimization for CAISO+EIM after successful phase 1 and resolution of outstanding design issues 2

4 Lack of a day-ahead market for EIM creates problems with convergence bidding SCE questions if prices in CAISO (DA) and CAISO + EIM (RT) can properly converge (without uplift) EIM transmission limits not enforced DA Prices in CAISO may change when EIM market is attached to the CAISO market footprint If predictable can be exploited CAISO s DMM recognizes uplift issue and offers solution to uplift costs related to EIM transmission constraints Other issues remain Only CAISO customers are allocated uplifts associated with convergence bidding Yet the presence of EIM may create these uplift costs Uplift allocation needs additional refinement 3

5 CA GHG policy creates pricing and compliance complications EIM proposal creates two prices at each node outside of CA One price with GHG, and a second local price without GHG Untested price formation approach Current EIM proposal allows only non-ca resources bid an explicit GHG component SCE recommends bidding restrictions on GHG component to reflect costs incurred GHG bids ($/metric ton) limited between 0 150% of index price Only one value per day per resource Only units incurring CARB GHG obligations should be allowed to bid GHG Resources are deemed to export into CA based on costminimization/accounting rather than physical flows Resources will not know in advance they have been deemed to export and will have a reporting obligation CAISO will notify resources the quantity of MWh exported to CA 4

6 The balance between sharing generation diversity while preventing resource leaning is tricky A benefit of EIM is to utilize available resources in a larger area; if your neighbor has extra, why not buy it? CA has a resource adequacy requirement that load servicing entities must obtain CAISO and stakeholders are concerned EIM Entities may lean on CA for resource adequacy, especially flexible resources CAISO proposal has a process to test if the EIM Entity has sufficient flexible resources to meet their expected net load variation Another option is to curtail flows when resources are needed for the sending balancing authority area i.e. non-firm exports 5

7 SCE looks forward to the mutual benefits of a successful EIM implementation A phased approach should help ensure success and help obtain benefits quickly Phase 1: Separate optimizations for EIM Entity and CAISO Uses existing CAISO price optimization methodology Allows time to test that the EIM Entity and CAISO s processes are working efficiently Complex issues of price formation with GHG, Convergence Bidding, transmission pricing, resource adequacy, and uplift between the CAISO and EIM would not be implemented in this Phase Phase 2: Joint Optimization of CAISO + EIM SCE is optimistic issues can resolved in the near-term 6