Comprehensive Shortage Pricing

Transcription

1 Comprehensive Shortage Pricing Mike DeSocio Manager, Energy Market Design New York Independent System Operator Management Committee December 17, 2014 Krey Corporate Center 2014 New York Independent System Operator, Inc. All Rights Reserved. DRAFT FOR DISCUSSION PURPOSES ONLY

2 Agenda Background & Drivers Proposal Benefits Proposal Recap SENY and NYCA Reserve LI Reserve Contribution Shortage Pricing ISO/RTO Comparison Tariff Revisions Timeline Appendix: Supporting Analysis 2

3 Background On June 12, 2014, the BIC recommended that the NYISO work with the Market Issues Working Group to continue to refine both the Scarcity and Shortage Pricing proposals This presentation contains the refined Comprehensive Shortage Pricing Proposal 3

4 Drivers Potomac Economics recommends the NYISO update its market requirement to reflect SENY s and NYCA s 30-minute reserve needs (Q SOM) Create a SENY 30-minute operating reserve zone to reflect the requirements of NYSRC Rule F-R1c Modify the NYCA 30-minute operating reserve requirement to reflect the requirements of NYSRC Rule D-R4 Potomac Economics also recommends adjusting the 30 minute reserve shortage prices to better align with the cost of operator actions 4

5 Drivers The Comprehensive Shortage Pricing proposal is one of the key efforts supporting the NYISO s Fuel Assurance Initiative: Fuel Assurance Initiative Incent Intra-day Operational Flexibility Promote Increased Resource Availability and Performance The NYISO s Efforts Capacity Market Ways to better incent and reflect performance Possible Summer/Winter EFORd Energy Market Comprehensive Shortage Pricing Comprehensive Scarcity Pricing RLS Changes Gas-Electric Coordination EMS Visualization of Gas System Gas Operational Information Sharing Fuel Availability Self Reporting project 5

6 Proposal Benefits Comprehensive Shortage Pricing will enhance NYCA reliability and resource availability, and provide for fuel assurance by: Improving the reflection of operator actions and system conditions in the Day Ahead and Real- Time markets Maintaining pricing consistency with neighboring ISOs/RTOs Promoting Fuel Assurance Resources with day ahead schedules will be rewarded if they make arrangements for fuel and are available to perform in real-time, but face large buy-out penalties if fuel supply arrangements are not made 6

7 Proposal Benefits (2) Increasing performance incentives through improved energy market pricing Improved performance of the generation fleet leads to Installed Reserve Margin reduction 0.5% reduction in IRM results in approximately $200MM in capacity market savings Shifting revenues from the capacity market to the energy market rewards those resources that provide tangible benefit for consumers Generators that are already highly available would also benefit from the stronger price signals Promoting Distributed Resources Stronger prices will promote expansion of distributed resources 7

8 Consumer Cost/Benefits Working with its stakeholders, the NYISO prioritizes and proposes market efficiency improvements These improvements are designed to reduce competitive barriers and ensure the market signals align with operating conditions and have the potential to either reduce or increase energy market prices In order to highlight that these improvements can result in both benefits and costs to consumers, the table below tabulates the estimated consumer costs and consumer benefits from both the Comprehensive Shortage Pricing proposal and recently implemented market design initiative called Coordinated Transaction Scheduling (CTS) Effort 2015 (+benefits/-costs)* 2016 (+benefits/-costs)* Comprehensive Shortage ~ -$125MM (June Dec) ~ -$231MM (Annual) Pricing CTS with PJM (All 4 ~ $125MM (Annual) ~ $125MM (Annual) Interfaces) CTS with ISO-NE (Sandy Pd ~ $0MM (Annual) Only) Net Consumer Impact ~ $0MM ~ -$6MM *All costs and benefits are estimates 8

9 Consumer Cost/Benefits Stakeholders requested that NYISO staff determine the costs for a Comprehensive Shortage Pricing implementation of November 2015 The table below highlights these changes in costs and benefits Effort 2015 (+benefits/-costs)* 2016 (+benefits/-costs)* Comprehensive Shortage ~ -$25MM (Nov Dec) ~ -$231MM (Annual) Pricing CTS with PJM (All 4 ~ $125MM (Annual) ~ $125MM (Annual) Interfaces) CTS with ISO-NE (Sandy Pd ~ $0MM (Annual) Only) Net Consumer Impact ~ $0MM ~ -$6MM *All costs and benefits are estimates 9

10 Proposal Recap

11 SENY and NYCA Reserve Proposal The SENY reserve region would have a 30 Minute Total Reserve requirement of 1300MWs Requirement is based on the amount of reserves necessary to restore SENY power flows to within applicable transmission limits following a contingency event SENY reserves will be procured every market day Additionally, the NYCA 30 Minute Total Reserve requirement will be updated to 2620MWs This adjustment ensures NYCA reliability to re-establish minute operating reserves following the loss of single largest supply contingency Consistent with operator actions today, the additional NYCA reserves will be procured every market day to improve market efficiency The NYISO proposes to limit the amount of reserves on LI that can contribute to NYCA, EAST, and SENY reserve requirements 11

12 SENY and NYCA Reserve Proposal Propose to update the NYCA reserve requirement to 2620 MW Potomac Economics 2013 SOM recommendation to: Modify the NYCA 30-minute operating reserve requirement to reflect the requirements of NYSRC Rule D-R4 New York State Reliability Council (NYSRC) rule D-R4 Following a contingency, the ten() minute operating reserve shall be restored within thirty (30) minutes of the time that the contingency occurred, or sooner if possible Following the single largest supply contingency of 13 MW, the NYISO s wholesale market only supplies 655 MW of 30- Minute reserves to restore the -Minute Reserve requirement The NYISO would currently meet NYSRC rule D-R4 criteria by relying on latent capacity The NYISO proposes to add 655 MW of 30-Minute reserves to the current requirement to reflect this requirement in the market solution 12

13 LI Reserve Contribution The NYISO has enhanced its proposal, based on stakeholder comments, to set the maximum LI reserve contribution to each NYCA, EAST, and SENY operating reserve requirement equal to the current LI 30 Minute reserve requirement The current LI 30 Minute reserve requirement varies from 270 MW to 540 MW, depending on the hour Higher quality reserves may still be used to meet the requirement Proposed approach maintains LI in the nesting of NYCA, East, and SENY while ensuring the deliverability of LI reserve 13

14 Proposed Reserve Changes NYCA Wide Reserve Values Total Spinning Reserve 655 MW Total Min Reserve 13 MW 30 Minute Reserve 2620 MW Eastern (East of Central East) Reserve Values * Total Spinning Reserve 330 MW Total Min Reserve 1200 MW * 30 Minute Reserve 1200 MW Southeast New York (SENY) Reserve Values * Total Synchronous Reserve 0 MW Total Min Reserve 0 MW * 30 Minute Reserve 1300 MW * Denotes locational reserve categories that reflect a desire for dispersed reserves but are not operational requirements under the NYSRC reliability rules. Long Island Reserve Values * Total Spinning Reserve 0 MW * Total Min Reserve 120 MW 30 Minute Reserve MW (Reserves provided by LI resources will be limited to this requirement) 14

15 Shortage Pricing Proposal 15

16 Shortage Pricing Proposal 16

17 ISO/RTO Comparison 17

18 Tariff Changes Definitions Open Access Transmission Tariff (OATT) and Market Administration and Control Area Services Tariff (MST) definition sections will be updated Define Southeastern New York (SENY) as a reserve region Specify that 9 Operating Reserve requirements will become 12 Specify new Transmission Shortage Price points and clarify definition 18

19 Tariff Changes MST Rate Schedule 3 Update the Regulation Service shortage pricing points to reflect those on slide 8 MST Rate Schedule 4 Revise to include SENY and update reserve demand curve prices in: Establishing Locational Reserve Prices Calculation of Day-Ahead Market Clearing Prices Calculation of Real-Time Market Clearing Prices Pricing of Operating Reserves During Intervals of Statewide Scarcity Pricing Operating Reserves During Intervals of Southeastern New York Scarcity 19

20 Timeline June 2014 BIC BIC endorsed the NYISO s proposal to continue review and further define recommendations August 26, 2014 December 2, 2014 MIWG Set implementation target on August 26, 2014 of Q Propose SENY and NYCA Reserves Propose LI reserve changes Propose revised shortage prices Address questions/concerns raised by stakeholders Work through tariff changes Provide Consumer Impact Assessment November 12, 2014 BIC Discussed the NYISO s proposal and agreed to provide more time for stakeholders to consider the impacts of the proposal December 2014 BIC/MC Request Approval January Board of Directors Request Approval November Implement Comprehensive Shortage Pricing Changes 20

21 21

22 Appendix: Supporting Analysis for Proposal 22

23 Shortage Pricing 30 Minute start resource bids and start up costs were used to establish an appropriate demand curve price for Minute Total reserve In practice, 30 Minute Reserve resources would be used to free up Minute Reserves and avoid a prolonged Minute Reserve shortage 23

24 Shortage Pricing 24

25 SENY Shortage Pricing Analysis indicates that imputed LBMP revenue is adequate to commit a large SENY steam unit in the Day-Ahead market 3 to 6 hours of run time is necessary to justify starting the unit to maintain the 1300 MW SENY 30 Minute reserve requirement 30 Minute GT unit bid and start up costs were considered to establish a marginal unit clearing price The cost to start a SENY steam unit was amortized over hours to determine where cost to start was equal to revenue 25

26 Reserve Prices Impacts Load hedges exposure to Ancillary Services prices in the DA 26

27 Reserve Prices Impacts In RT, the majority of intervals see Ancillary service clearing prices of $

28 Market Reserve Shortages The following slides illustrate the frequency that the real-time market was unable to procure enough reserves or regulation to meet the market requirements At no point was the NYISO in violation of minimum reliability criteria, however, the market was unable to provide sufficient resources to meet minimum reliability criteria Additionally, these slides highlight that shortages occur throughout the year and are not solely peak load period issues 28

29 Market Reserve Shortages 700 Frequency of Market Reserve and Regulation Shortages (2013) Count of Shortage Intervals SPIN REGULATION Month 29

30 Market Reserve Shortages 1200 Frequency of Market Reserve and Regulation Shortages (2014) Count of Shortage Intervals SPIN REGULATION Month 30

31 Market Reserve Shortages 14 Frequency of Market Reserve and Regulation Shortages (7/18/2013) 12 Count of Shortage Intervals REGULATION Month 31

32 Market Reserve Shortages 30 Frequency of Market Reserve and Regulation Shortages (9/11/2013) 25 Count of Shortage Intervals REGULATION Date and Hour 32

33 Market Reserve Shortages 25 Frequency of Market Reserve and Regulation Shortages (1/3/2014) 20 1 Count of Shortage Intervals SPIN REGULATION Date and Hour 33

34 Market Reserve Shortages 25 Frequency of Market Reserve and Regulation Shortages (1/7/2014) 20 1 Count of Shortage Intervals SPIN REGULATION /7/2014 2:00 2 1/7/2014 3:00 3 1/7/2014 8:00 6 1/7/2014 9: /7/2014 :00 1 1/7/ :00 5 1/7/ :00 8 1/7/ :00 1/7/ :00 7 1/7/ :00 9 1/7/ : /7/ :00 1/7/ :00 Date and Hour 34

35 Market Reserve Shortages 20 Frequency of Market Reserve and Regulation Shortages (1/8/2014) Count of Shortage Intervals SPIN REGULATION 30 Date and Hour 35

36 Market Reserve Shortages 14 Frequency of Market Reserve and Regulation Shortages (7/22/2014) 12 Count of Shortage Intervals REGULATION Month 36