Day-ahead ahead Scheduling Reserve (DASR) Market

Day-ahead ahead Scheduling Reserve (DASR) Market

Agenda Implementation Overview of the DASR Market Market Clearing Process Market Clearing Example Performance Compliance Market Settlements Appendix: emkt Screen Shots 2

Roll-out Schedule Date May 2, 2008 May 6, 2008 May 8, 2008 May 12, 2008 May 15, 2008 May 31, 2008 June 11, 2008 DASR Training via Webex Activity emkt Sandbox available for XML testing Overview of Rollout Plan at MIC Market Trials Begin in Sandbox DASR Overview for Demand Resource Submit offers in emkt for June 1, 2008 Market clearing Begin Manual Review at MIC October, 2008 Billing Cycle Market Settlements for DASR 3

Roll-out Schedule Market clearing results will be available in emkt beginning June 1, 2008 PJM will post preliminary DASR rates on PJM.com DASR settlement activity deferred until the fall, after the implementation of MSET DASR Charges DASR Credits Performance Compliance Activity Adjustments to Day-Ahead and Balancing Operating Reserves Charges & Credits for DASR Revenue 4

Resources 5

emkt Sandbox emkt Sandbox address https://esuitetrain.pjm.com/mui/index.htm IMPORTANT: Please make sure your esuitetrain user ids are valid On Tues., May 6 th, 2008 the sandbox is available for XML testing Revised Documentation available XML External Interface Specification (PDF) On Monday, May 12 th, 2008 Market Trials will be conducted. The sandbox is available: For entering data via MUI Viewing market trial results 6

Day-ahead Scheduling Reserve Market The RPM settlement agreement approved by FERC requires implementation of markets and/or market rule changes that address additional reserve products (i.e. supplemental reserve and load following) by June 1, 2008. Reserve Markets Working Group discussed a basic construct for a market based mechanism for the procurement of supplemental, 30-minute reserves on the PJM System and worked create a set of business rules for consideration by PJM stakeholders. The Day-ahead Scheduling Reserve Market was endorsed by the PJM Members Committee without objection on January 24, 2008. Filing (ER08-780) submitted to FERC on March 31, 2008 7

Day-ahead Scheduling Reserve Market Overview The Day-ahead Scheduling Reserve product is : Offer-based market for 30-Minute Reserve that can be provided by both Generation and Demand Resources Market that is designed to clear existing Day-Ahead Scheduling (operating) reserve requirements as defined by reliability standards: (RFC & SERC) Day-ahead, forward market that clears simultaneously with Day-Ahead Energy Market Costs of Day-ahead Scheduling Reserve product will be allocated to real-time load ratio share Purpose: To encourage and incent generation and demand resources to provide the flexible capability to provide 30- minute reserves 8

What is Scheduling Reserve? On a daily basis, PJM must schedule enough capacity to cover the forecast load plus expected sales of energy off the system and operating reserves RFC Day-ahead Scheduling Reserve VACAR Day-ahead Scheduling Reserve 9

Purpose of Reserve Objectives Reserve requirements are values of reserve which enable the system to operate reliably and economically while providing protection against load variations, forecast error and equipment failure. Enables control area to restore tie lines to precontingency state within 10 minutes of a contingency that causes an imbalance between load and generation 10

Reserve Terminology Day-ahead Scheduling Reserve Primary Reserve T < 10 Minutes Secondary Reserve 10 < T < 30 Minutes Spinning Reserve (Synchronized) Quick Start Reserve 11

Day-ahead Scheduling Reserve Effective June 1, 2008, the RFC Day-ahead Scheduling Reserve cleared in the Dayahead Market is 6.25% times RFC Peak Load Forecast @1200. The RFC Day-ahead Scheduling Reserve scheduled in the Reserve Adequacy Commitment is 6.25% times Peak Load Forecast @1800 for RFC. Dominion Day-ahead Scheduling Reserve is based on their share of the VACAR Reserve Sharing agreement and is set annually. The RFC and Dominion Day-ahead Scheduling Reserve Requirements are added together to form a SINGLE RTO Day-ahead Scheduling Reserve Requirement which is scheduled economically across the RTO. 12

PJM Regional Reserves Summary Details of the methodologies to determine the reserve Requirements can by found in PJM Manual M-13 13

emkt 14

MWs 90000 Unit Commitment - 2007 80000 Additional Unit commitment during RA 70000 60000 DA Unit Commitment (DA Demand plus reserve requirement*) at 1400 DA Demand at 1200 (DA Demand, Decs, Exports) PJM RTO Load Forecast at 1600 RTO Load Forecast + Reserve Requirement* 50000 * 2007 Reserve Requirement varied depending on zone 1 3 5 7 9 11 13 15 17 19 21 23 Hour of Day 15

MWs 90000 Unit Commitment after DASR implementation 1200 to 1600 Total RTO DA commitment = Red + (Dotted Blue Solid Blue) 80000 Basis for the DASR Market to schedule reserves in the DA commitment process 70000 60000 RFC Load Forecast when DA bid window closes (1200) RTO DA Demand (DA Demand, Decs, Exports Reserve Requirement* Based on the RFC load forecast when the DA bid window closed (at 1200) 50000 * 2008 Reserve Requirement = 6.25% of RFC peak load forecast + Dominion Reserve Sharing amount (423) 1 3 5 7 9 11 13 15 17 19 21 23 Hour of Day 16

1200 to 1600 A B C D E B Hour X 1/1/08 6/1/08 (RFC = 52,000) 60,000 60,000 Cleared DA Demand for RTO 80,000 80,000 Energy Scheduled Day-Ahead for RTO 80,000 80,000 DA RFC DASR Requirement (RFC Peak Fixed Demand * 6.25%) 3,250 (52,000 * 6.25%) F D * 6.25% RFC DASR Requirement based on LF (6.25%) 4,375 G DA Fixed Demand for RTO RFC Load Forecast @ 1200 70,000 VACAR (Dominion) DASR Requirement 423 423 DASR Requirement Example- Illustrative Day-Ahead Scheduling Reserve Clearing Price H C+G; F+G Total RTO DA Scheduling Reserve Requirement 3,673 4,798 1600 to 1800 I B +H Total Scheduled DA + DA Scheduling Reserve 83,673 84,798 J* PJM RTO Load Forecast @ 1800 95,000 95,000 L RFC Load Forecast @ 1800 75,000 75,000 M L * 6.25% RFC DASR Requirement based on LF (6.25%) 4,688 4,688 N VACAR (Dominion) DASR Requirement 423 423 O M+N RA DASR Requirement for RTO 5,111 5,111 P J+O TOTAL 100,111 100,111 Q P-I RA Additional Reserve Commitments (BOR) 16,438 15,313 Results @ 1600 prior to the Reliability Analysis *Note: Load Forecast values can differ at different times of day 17

How will the DASR Market clear? Day-Ahead Energy Market: - will be cleared utilizing bids and offers of participants along with an reserve requirement Day-Ahead Scheduling Reserve Market: - will be cleared based on the Day- Ahead Scheduling Reserve requirement DASR Offer quantity Is derived via optimization in the DA Commitment process 2008 PJM Reserve Requirement = 6.25% of the RFC Load Forecast + VACAR Reserve Sharing Amount (423MW) 18

When Will the DASR Market Clear? DASR Market will clear simultaneously with the DA Energy Market DASR Offers for the next operating day are submitted by 12:00 pm DASR Results are posted at 1600 in emkt 19

Implementation of DASR Market The Day Ahead market clearing software and emkt user interface are modified for the implementation of the Day- Ahead Scheduling Reserve Market Clearing mechanism To calculate the DA Scheduling Reserve Requirement based on the PJM Load Forecast To economically co-optimize the energy and reserve in the Day- Ahead Market considering lost opportunity costs To allow Market Participants the ability to submit an offer price for Day-ahead Scheduling Reserve Clear the DA Scheduling Reserve Requirement and create a single market clearing price for the RTO The amount of available reserves will be calculated by DA market software using same methodology used prior to implementation of the DA Scheduling Reserve Market 20

Historical Analysis For the period of Aug 2007 February 2008, PJM calculated the following values: PJM Load Forecast @1200 Forecasted RTO Reserve Requirement RFC (Load Forecast * 6.25 %) + VACAR Requirement (423 MW) Using submitted parameters, calculated Available Generation capable of provide DASR No DASR offer prices were simulated Results: Determined how many hours that a deficiency in the required amount of reserve resulted For the period analyzed, there were 5 hours were the quantity of Reserve required was deficient 21

Who will pay for DA Scheduling Reserve? Day-ahead Scheduling Reserve settlement is a zero-sum calculation based on the Day-ahead Scheduling Reserve provided to the market by generation and demand resource owners and purchased from the market by participants. Each Load Serving Entity (LSE) on the PJM system incurs a Day-ahead Scheduling Reserve obligation in kwh based its load ratio share within the RTO times the amount of Dayahead Scheduling Reserve assigned in the RTO. 22

DA Scheduling Reserve Obligations Participants may fulfill their Day-ahead Scheduling Reserve obligations by: Owning Day-ahead Scheduling Reserve resources from which the RTO obtains Day-ahead Scheduling Reserve ; Entering bilateral arrangements with other market participants; or Purchasing Day-ahead Scheduling Reserve from the Day-ahead Scheduling Reserve market. 23

Who Can Provide Reserves? Resources with the ability to provide reserve capability in 30 minutes including primarily: Online Steam generation with capability to increase output from DA dispatch point Offline CTs that can start to provide Reserve Hydro and Pumped Storage Units Dispatchable DSR resources 24

Calculation Available Reserves Generators (Revised) Generators have a must-offer requirement. If available and no offer price is provided, offer price = zero If Online: Minimum of DASR Available MW = (Emergency max Dispatch Pt) or DASR Available MW = (30 * Ramp Rate) If Off-line: And (Cold Startup Time + Cold Notification Time < 30 min) DASR Available MW = Emergency Max 25

Hydro Resources **Revised*** Day-ahead Scheduling Reserve Can be provided by Avail DASR MW Run-of-river Emer.Max - Dispatch Pt Pumped hydro in generating mode Pumped hydro in pumping mode Emer.Max - Dispatch Pt Pump MW 26

DASR Generator Offer Screen The following parameters are Already part of energy offer curve: Ramp Rate Cold Start up & Notification Times Emergency max Value Participant Supplies Offer Price 27

Demand Resources Dispatchable in Real Time Demand Resources DO NOT have a must-offer requirement. Load response resources must be registered in the Economic Load Response program, indicate that they can be dispatchable by PJM in realtime and be able to be reduced within 30 minutes. Demand resources may indicate if they are available to provide Day-ahead Scheduling reserve. Default = unavailable. 28

Demand Resource Requirements Demand resources response controls must be approved by PJM prior to participation in the Day-ahead Scheduling Reserve Market including ability to be dispatched by PJM s Unit Dispatch System. Demand resources providing Day-ahead Scheduling Reserve are required to provide telemetry that is capable of providing metering information at no less than a one minute scan rate. Metering information of demand resources is not required to be sent to PJM in real time. Daily uploads at the end of the day if an event has occurred are sufficient, as the response evaluation is performed after the fact. 29

Demand Resource Requirements Demand resources may be aggregated and offered into the PJM Day-ahead Scheduling Reserve Market as one combined resource if the appropriate telemetry is provided for the aggregated resource. Demand resource participation will be limited to 25% of the RTO Day-ahead Scheduling Reserve Requirement. Demand Resources will be allowed to participate in the Day-ahead Scheduling Reserve Markets if approved by the appropriate Regional Reliability Council. 30

Demand Resources Batch Resources Load response resources that are considered batch load resources as defined in the Synchronized Reserve Market detailed in PJM Manual for Scheduling Operations (M-11) may participate in the Day-ahead Scheduling Reserve market under the same conditions as exist for Synchronized Reserve with respect to having already reduced prior to receiving a PJM dispatch instruction to do so. Such resources must remain off line for the duration of the PJM dispatch request in order to receive the Dayahead Scheduling Reserve market payment. 31

DSR Offers Need to just highlight a little 32

Unit Example 500MW unit that would otherwise be dispatched to full load in Day- Ahead is reduced to 400MW to provide Day-Ahead Scheduling (Operating) Reserve. Unit s offer is $30, Day-Ahead LMP is $50. Today, this unit receives no lost opportunity cost. It simply is paid Day-Ahead LMP for the 400MW. With Day-ahead Scheduling Reserve Market in place, the unit is paid a clearing price that includes the $20 opportunity cost, plus any offer to provide Day-Ahead Scheduling (Operating) Reserve. Units with a dispatchable range based on the DA dispatch point could be cleared as Day-Ahead Scheduling Reserve Off-line CTs with a Day-Ahead Scheduling Reserve offer could be cleared 33

Calculation of Lost Opportunity Cost The Lost Opportunity Cost (LOC) is calculated as the nonnegative difference between the unit s LMP and the incremental cost for increasing or decreasing energy output of the unit (in $/Mwh) DA LMP* Energy Offer Price_2 Energy Offer Price_1 Energy Offer Price_0 Energy DA Scheduling Reserve 0 MW_X MW_2 MW_1 **approximate value of LMP 34

DASR Clearing Process DASR Clearing Process Is a simultaneous, least-cost optimization with the energy market as part of the Day-Ahead Market mechanism. The Day-ahead Scheduling Reserve Requirement will be calculated based on the PJM RTO load forecast for the upcoming operating day. Will result in an hourly RTO clearing price for Dayahead Scheduling Reserve for the next day, A non-zero clearing price can result even reserves are not deficient 35

DASR Clearing Price The Day-ahead Scheduling Reserve Market clearing price is set equal to the merit order price of the highest cost Day-ahead Scheduling Reserve resource necessary to meet the remaining requirement. Resource merit order price ($/MWHr) Resource Day-ahead Scheduling Reserve offer = + Resource Day-ahead Scheduling Reserve opportunity costs Both generator startup costs and demand resource shutdown costs are divided over the expected commitment period for the resource, as part of the market clearing process. Neither of these costs are including in the clearing price. Day-ahead Scheduling Reserve start-up costs are defined as applicable generator startup costs required to provide Day-ahead Scheduling Reserve or demand resource shutdown costs required to provide Dayahead Scheduling Reserve. 36

Simplified Market Clearing Example Unit Type Startup + Notif. Time Energy Offer Price Eco Min MW Eme Max MW DA LMP DA Energy MW Award A ST 60 min $30 10 MW 50 MW $40 50 MW B ST 120 min $40 20 MW 60 MW $40 50 MW C CT 60 min $100 20 MW 20 MW $40 0 MW Unit B Sets DA LMP D CT 25 min $80 0 MW 50 MW $40 0 MW E CT 20 min $90 30 MW 30 MW $40 0 MW F ST 180 min $20 30 MW 50 MW $40 50 MW Units B, D, & E Available for Reserve DA Demand Load Forecast DASR Requirement = 7% 150 MW 200 MW 14 MW 37

Market Clearing Example : Offer Parameters Unit Type Startup + Notif. Time Ramp Rate (MW/min) Energy Offer Price A ST 60 Min 3 $30 10 MW 50 MW $1 Eco Min MW Eme Max MW DASR Offer Price B ST 120 min 1 $40 20 MW 60 MW $2 C CT 60 Min 10 $100 20 MW 20 MW $5 D CT 25 Min 1 $80 0 MW 50 MW $3 E CT 20 min 3 $90 30 MW 30 MW $10 F ST 180 min 5 $20 30 MW 50 MW $6 Note: DASR Offer quantity Is derived 38

Market Clearing Example: Simultaneous Clearing Results Unit Type Startup + Notif. Time Ramp Rate (MW/ min) Energy Offer Price Disp Pt MW DASR Quantity A ST 60 min 3 $30 10 MW 50 MW 0 MW $1 $10 $11 Eme Max MW DASR Offer Price Opp. Cost DASR Offer Price + Opp. Cost DA Energy MW Award DASR MW Award 50 MW 0 MW B ST 120 min 1 $40 20 MW 60 MW 10 MW $2 $0 $2 50 MW 10 MW C CT 60 min 10 $100 20 MW 20 MW 0 MW $5 $0 $5 0 MW 0 MW D CT 25 min 1 $80 0 MW 50 MW 50 MW $3 $0 $3 0 MW 4 MW E CT 20 min 3 $90 30 MW 30 MW 30 MW $10 $0 $10 0 MW 0 MW F ST 180 min 5 $20 30 MW 50 MW 0 MW $6 $20 $26 50 MW 0 MW DA Demand Load Forecast DASR Requirement = 7% 150 MW 200 MW 14 MW 39

Market Clearing Example: Summary of Results Least Cost Solution: Unit B (ST) sets price in DA Market Unit B (ST) with flexible range and low opportunity cost is committed to provide DASR Unit D (CT) with low opportunity cost is committed to provided DASR Unit D (CT) sets price in DASR Market 40

How will resources provide Day-Ahead Scheduling Reserve? Unlike Synchronized Reserves, the Day-Ahead Scheduling Reserve Requirement is not maintained in Real Time There are no Day-ahead Scheduling Reserve events for resources to respond Resources will be responding to normal PJM dispatch instructions Those resources receiving a day-ahead award for Day-ahead Scheduling Reserve would receive the hourly clearing price for the awarded MW amount as long as they were capable of providing the reserve in real time as scheduled Performance will be measured after the fact No Penalty for non-performance (penalty = forgone revenue) 41

Operating Scenarios Measuring Response Revised Unit is Online & Following PJM Dispatch with Day-ahead Scheduling Reserve Award 1. Eco Min <= (Emergency Max DASR Market Award) ***Resource can be self-scheduled with dispatchable range. Resource is paid DASR Clearing Price X DASR Market Award IMPORTANT! Those resources receiving a day-ahead award for Day-ahead Scheduling Reserve, that have a Real-time dispatchable range that is less than the resource s Day-ahead dispatchable range become ineligible to receive a Day-ahead Scheduling Reserve Market payment. 42

Operating Scenarios - Measuring Response Unit is Offline and requested to start by PJM with Day-ahead Scheduling Reserve Award 1. Start time + notification time of less than or equal to 30 minutes 2. Requested to start during one of the hours for which the award was received 3. The unit completes startup within specified startup and notification time from the time the PJM operator issued the instruction. Resource is paid DASR Clearing Price X DASR Market Award IMPORTANT! Those resources receiving a day-ahead award for Day-ahead Scheduling Reserve, that have a Real-time dispatchable range that is less than the resource s Day-ahead dispatchable range become ineligible to receive a Day-ahead Scheduling Reserve Market payment. 43

Measurement of Demand Resource Response For Demand Resources, measurement is the difference between the demand resource s MW consumption at the time a resource is requested by PJM dispatch to reduce and its MW consumption after 30 minutes of the request. In order to allow for small fluctuations and possible telemetry delays, demand resources consumption at the start of the event is defined as the greatest telemetered consumption between one (1) minute prior to and one (1) minute following the issuance of the dispatch instruction. Similarly, a demand resource s consumption thirty minutes after the dispatcher request is defined as the lowest consumption measured between twenty nine (29) and thirty (31) minutes after the start of the request 44

Interaction of Reserve Market Products Resources can be capable of providing all three reserve products: Synchronized Reserve, Regulation, and Day-ahead Scheduling Reserve All three cannot be provided simultaneously, only two products, at most Day-ahead Scheduling Reserve + Regulation Day-ahead Scheduling Reserve + Synchronized Reserve Day-ahead Scheduling Reserve + Sync Reserve + Regulation YES YES NO 45

Market Settlements Costs for Day-ahead Scheduling Reserves are allocated according to load ratio share. Similar to the Regulation and Synchronized Reserve markets, each Load-Serving Entity would carry an obligation to purchase Day-ahead Scheduling Reserve equal to its load ratio share of the RTO requirement Charges are based on the MW obligation carried by each LSE. 46

DASR Charges Day-ahead Scheduling Reserve charges for each participant are equal to: 1. The hourly Day-ahead Scheduling Reserve clearing price times the MW of Day-ahead Scheduling Reserve that which is purchased from the market plus; 2. the participant s share of any unrecovered costs incurred by assigned Day-ahead Scheduling Reserve resources over and above the Day-ahead Scheduling Reserve clearing price plus; 3. the participant s share of any unrecovered costs incurred by those resources PJM committed for the sole purpose of providing Day-ahead Scheduling Reserve 47

Operating Reserves Accounting The implementation of Day-Ahead Scheduling Reserve Market will impact Operating Reserves Accounting 1. Revenue from the Day-ahead Scheduling Reserve Market will be applied against balancing operating reserve credits that correspond to the hour that the revenue was earned (similar to the Regulation and Synchronized Reserve Markets). 2. Costs will shift from Day-Ahead Operating Reserve Accounting Why: Some units that were originally made whole in DA market, that received DA Operating Reserve Credits, are now scheduled for the DA Scheduling Reserve Market and receive DASR Credits based on the DASR market clearing price 3. Costs will shift from Balancing Operating Reserve Accounting Why: Some units that were originally scheduled as part of the Reliability Analysis, that receive Balancing Operating Reserve Credits, are now scheduled for the DA Scheduling Reserve Market and receive DASR Credits based on the DASR market clearing price. 48

Appendix emkt User Interface 49

emkt: Market Results A/S Prices 50

emkt: DA Scheduling Reserve Results Note: On Day 1, DASR will Only clear for RTO, not by area 51

emkt: DA Scheduling Reserve Award 52

emkt: DA Scheduling Reserve Offers 53

emkt: DA Scheduling Reserve Bilaterals 54

emkt: Day-ahead Scheduling Reserve Offer (DSR) 55

emkt:da Scheduling Reserve Updates (DSR) 56

emkt: DA Scheduling Reserve Award (DSR) 57

emkt: DA Scheduling Reserve Bilaterals (DSR) 58

References PJM Day-ahead Scheduling Reserve Market Business Rules http:///markets/energy-market/downloads/day-ahead-scheduling-business-rules-v6.pdf 59