Wholesale Electricity Transactions A State Regulatory Perspective

Transcription

1 Wholesale Electricity Transactions A State Regulatory Perspective Presentation to the Oregon Public Utility Commission Steve Johnson, Senior Commission Policy Advisor Washington Utilities and Transportation Commission June 26, 2017

2 Disclaimer This presentation reflects the position of the policy staff of the Washington Utilities and Transportation Commission and NOT the views of the three member commission. Any positions or comments offered by the commission staff regarding this proceeding should be attributed to the staff member and NOT to the UTC. 2

3 Today s Goals The relationship between state regulation and market transactions. What is the Energy Imbalance Market (EIM)? Long-term planning and short-term markets. What does the EIM grow? State prospective for getting value from the EIM. What does the EIM not grow? 3

4 What is an Energy Imbalance Market? It s not Energy Its not a free Market But the good news is: its out of balance 4

5 There is no such place as the Market. It s not Energy Its not a free Market But the good news is: its out of balance 4

6 EIM Mechanics Balancing on shorter time intervals Participants submit balanced schedules for every 5 minute interval i.e. the same function vertically integrated utilities that operate a balancing area perform on an hourly basis. As generation and load deviate from their schedules over the 5 minute intervals, EIM participating resources are paid to fill in the gaps. Ramping to meet gap is capacity not energy 5

7 EIM Free markets molded to the transmission network effects The amount of imbalance energy a participant can sell is dependent on transmission constraints. A market participant s sale of energy transmitted to load affects the flows on the transmission system and therefore the ability of others to make energy sales. Order 888 and 889 effectively prohibits a vertical integrated utility that operates a balancing area from use transmission data to optimizing its merchant side generation dispatch. Approximately half of all EIM benefits for PacifiCorp's eastern BA comes from internal optimization not transactions with CAISO Fast forward from the 1990 s to Berkshire Hathaway Sellers having market power 6

8 Long-term resource planning/acquisition determine the physical resources available for the EIM 7

9 So who will supply ramping capacity and how will they be reward? Let s go back to the resource stack and find out 8

10 Surplus capacity built for peak drives spot market prices to short-run marginal costs Supply and demand determine price Short-run variable cost include: fuel, personnel costs, operating costs- not fixed costs. Wind and solar buildout are driving down energy spot market prices. So if fixed costs of ramping capacity can t be recovered in EIM prices what is the expansion of the EIM doing? 9

11 Mining Versus Farming Extracting the latent ramping capacity in the NW system 10

12 EIM- What does it grow? Simultaneously examining the ability of all resources, their costs, and transmission constraints in a security constrained economic dispatch model is more efficient by virtue of economies of scope. Scale effect of a larger footprint and more resources to choose from. Non-coincidental need for ramping for renewables Larger set of ramping resources to choose from with more lower cost resources Got load? Larger footprint makes more load available to absorb renewables EIM helps to better define hourly needs and prices Hourly or evening block energy trading (not imbalance). Provides conditions for better utility performance. Price of poor load forecasting or generation performance is explicit. Value of realizing more flexibility from generators is explicit. Or are utilities that want to perform better attracted to an EIM? 11

13 EIM- What does it grow? Better transmission operation Better metering of generation and transmission More frequent measurement with the improved metering (reliability) More precise network modeling of transmission system and generation Wider network modeling (classic economies of scope and scale) More frequent system analysis; evaluation of available transmission capacity (economic) Simultaneously examining all resources, their cost, and transmission constraints in a security constrained economic dispatch model is more efficient by virtue of economies of scope. 12

14 EIM- What does it not grow? Short-term commitment of ramping capacity that involves significant opportunity costs Additional EIM participating BAs with low cost ramping resources but with little intra-ba efficiency gains from EIM Resource adequacy for ramping capacity Addition of generation with ramping capacity (longterm resource acquisition) Transmission planning Long-term WECC wide planning (for ramping) Operational cooperation region-to-region 12

15 State prospective on getting value from the EIM Market rule changes Market operator performance Analysis of utility generator ramping capability and performance Short-run load forecasting Short-run variable generation forecasting Changes to bi-lateral trading Fuel consumption and EIM revenues Balancing area performance- NERC standards Modeling EIM revenues and sales to include in rates 12