Capacity Market Design Working Groups

Work plans to SAM 3.0

September 6, 2017

SAM 2.0 – 3.0 Working Group Objectives Energy & Ancillary Services Market Changes

• For the next iteration of SAM, the Energy & Ancillary Market Changes working group intends to achieve the following:

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Energy & Ancillary Services Recommendation

NDV impact and mitigation through new AS product / flexibility incentives through EAS

Self-commitment v. SCED v. SCUC

BDAM, SCED, Co-Optimize, Cost based offers

Outage approvals for all resources

Price cap / floor / shortage pricing

AS through current markets or co-optimized

Exploration

Phase I and II recommendations as part of Roadmap

Energy and Ancillary Services Work Plan to SAM 3.0: Proposed Priorities and Sequencing

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Energy and Ancillary Services Date Session # Topics

Sept. 13, 2017

(Extended 9AM-1PM)

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1. Review objectives in exploring Phase II • SAM 3.0 objectives • Interdependencies and alignments with other work streams

2. Follow up on Phase I items • Conclusion: Offer obligations • Explore Unit commitment • Explore Eligibility Impact

3. Introduction to Phase II – review results of AESO Net Demand Variability study – impacts

Sept. 27, 2017

(Double

9AM-3PM)

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1. Review industry feedback from SAM 2.0 2. Phase I recommendations to be considered in work plan /

documentation 3. Explore Phase II design options

a. Explore Co-optimization / AS offer obligations b. Explore Security Constrained Economic Dispatch and RUC c. Explore Binding Day Ahead Market d. Discuss customer perspectives

Energy and Ancillary Services Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Energy and Ancillary Services

Date Session # Topics

Oct. 11, 2017

8 1. Market Power / Pricing in the Energy Market – Explore design options

a. Scarcity pricing – Price cap / floor b. Shortage pricing c. Alignment with AS market

2. Market Power / Offer obligations

Oct. 25, 2017

9 1. Review final results of AESO Net Demand Variability study including scenarios for mitigation

a. New AS products v. Fleet characteristics – value 2. Explore other market efficiencies

a. Shorter dispatch / settlement model b. RUC

Energy and Ancillary Services Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Energy and Ancillary Services

Date Session # Topics

Nov. 8, 2017

(Double

9AM-3PM)

10 1. Recommendation on overall structure: Phase II Reliability and efficiency issues

a. BDAM, SCED, Co-optimize, Cost based offers, price cap/floor / shortage pricing

b. offer obligations / pricing c. Others

Nov. 22, 2017

11 1. Confirm SAM 3.0 Recommendations a. Discuss further research / details

2. Commence roadmap discussions – for Phase I and II recommendations

3. Review SAM 3.0 interdependencies for next work plan

SAM 2.0 – 3.0 Working Group Objectives Eligibility

• For the next iteration of SAM, the Eligibility working group intends to achieve the following:

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Eligibility

Recommendation Directional Indication

Storage Performance period definition

Demand response including energy efficiency

Planned maintenance in performance requirement?

Interties UCAP/ICAP

Minimum resource size

Resource aggregation

Eligibility Work Plan to SAM 3.0: Proposed Priorities and Sequencing

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Eligibility Date Session # Topics

Sept. 12, 2017

(Extended 9AM-1PM

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1. Revisit ICAP vs. UCAP • Jurisdictional review as compiled by group • AESO presentation on data requirements and availability • Who will calculate UCAP • Introduce UCAP for variable generation

2. Introduce: Is storage a capacity resource? 3. Introduce: Can resources outside of Alberta participate in the

capacity market?

Sept. 26, 2017

(Extended 9AM-1PM)

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1. Review industry feedback from SAM 2.0 2. Revisit Demand Resource participation

Oct. 10, 2017

(Extended 9AM-2PM)

8 1. Demand Resource participation & Storage as a capacity resource continued

2. Introduce: Is Energy Efficiency a capacity resource? 3. Continue: Minimum size threshold 4. Introduce: Can resources aggregate?

Eligibility Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Eligibility Date Session # Topics

Oct. 24, 2017

(Full day 9AM-4PM)

9 First Half of Session: Eligibility 1. Recommendation: UCAP vs. ICAP

• Who calculates UCAP 2. Recommendation: Is storage a capacity resource? 3. Continue: Can resources outside of Alberta participate in the capacity market? 4. Introduce: Delisting 5. Discuss: Interdependency with Market Mechanics:

• Factoring deliverability constraints in UCAP calculation • Selecting resources in out-flow constraints • Selecting resources in in-flow constraints

Eligibility Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

9

Eligibility Date Session # Topics

Oct. 24, 2017

(Full day 9AM-4PM)

9 Second Half of Session: Introduce Performance Period 1. How will the performance period be defined? 2. Terms and conditions of performance 3. Non-performance due to:

• Planned Maintenance • Forced Outages & Derates • Transmission Congestion

4. How will the performance period be defined?

Nov. 7, 2017

(Extended 9AM-2PM)

10 1. Recommendation: Demand Resource participation 2. Recommendation: Is Energy Efficiency a capacity resource? 3. Recommendation: Can resources aggregate to participate in the

capacity market? 4. Recommendation: Minimum Size Threshold 5. Continue: Cost Allocation and Wires vs. Retail Settlement

Eligibility Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Eligibility

Date Session # Topics

Nov. 21, 2017

(Full day

9AM-4PM)

11 First Half: Performance Period & UCAP Proposal 1. Recommendation: Can resources outside of Alberta

participate in the capacity market? 2. Directional Indication: How will the performance period be

defined? • Introduce concept of spot-testing

3. Directional Indication: Is non-performance due to planned maintenance permitted?

4. Review UCAP Proposal • How to allocate a capacity value to storage • Calculation methodologies for new and existing non-

variable and variable resources Second half: SAM 3.0 1. Discuss & Develop SAM 3.0 2. Review SAM 3.0 Summary and Interdependencies

SAM 2.0 – 3.0 Working Group Objectives Market Mechanics

• For the next iteration of SAM, the Market Mechanics working group intends to achieve the following:

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Market Mechanics

Recommendation Directional Indication

Forward period Flexibility in capacity market

Obligation period: new, existing & refurbished assets

Treatment of out-of-market payments and alignment to REP

Rebalancing auctions: number & timing Market power mitigation in capacity market

Auction type Market clearing objective function

Market Mechanics Work Plan to SAM 3.0: Proposed Priorities and Sequencing

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Market Mechanics Date Session # Topics

Sept. 19, 2017

6

1. Continue: Auction design 2. Introduce/continue objective function, minimum volume increments

Oct. 3, 2017

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1. Review industry feedback from SAM 2.0 2. Continue out of market / REP treatment

Oct. 17, 2017

(Extended 9AM-1PM)

8 1. Introduce market power mitigation 2. Directional Indication: Flexibility requirements in capacity

market? 3. Continue auction design

Market Mechanics Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Market Mechanics Date Session # Topics

Oct. 31, 2017

9 1. Recommendation: Forward period 2. Discuss interdependency with Eligibility re. delivery constraints 3. Introduce asset substitution

• General applicability • Locational restrictions? • Minimum time durations? • Owner restrictions? • Volume restrictions?

Nov. 14, 2017

10 1. Recommendation: Obligation period for new, existing and refurbished resources

2. Recommendation: Rebalancing auctions • Number and approximate timing • Flexibility?

3. Continue market power mitigation

Market Mechanics Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Market Mechanics Date Session # Topics

Nov. 28, 2017

(Extended 9AM-2PM)

11 1. Recommendation: Auction type 2. Directional Indication: Treatment of out of market payments 3. Directional Indication: Market power mitigation 4. Directional Indication: Objective function 5. Discuss & Develop SAM 3.0 6. Review SAM 3.0 Summary and Interdependencies

SAM 2.0 – 3.0 Working Group Objectives Adequacy & Demand Curve Determination

• For the next iteration of SAM, the Adequacy & Demand Curve Determination working group intends to achieve the following:

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Adequacy & Demand Curve

Recommendation Exploration

Seasonal capacity requirement

Reliability modelling inputs and methodology

Principles for the demand curve parameters Demand curve parameters

Framework for CONE estimation

Adequacy & Demand Curve Work Plan to SAM 3.0: Proposed Priorities and Sequencing

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Adequacy & Demand Curve Date Session # Topics

Sept. 20 2017

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1. Revisit Seasonality • Discuss additional information • Test workgroup alignment

2. Revisit Demand Curve Parameter • Discuss Brattle scope of analysis

3. Revisit Reliability Model • Finalize scope of methodology & inputs review

Oct. 4, 2017

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1. Review industry feedback from SAM 2.0 • Re-validate long-term work plan

2. Initial discussion: Framework for CONE estimation • Options for key components (inputs, methodology,

process, governance) 3. Initiate Demand Curve Parameters

• Principles: Develop principles to setting demand curve parameters

Adequacy & Demand Curve Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Adequacy & Demand Curve

Date Session # Topics

Oct. 10, 2017 (Added

2PM-4:30PM)

8 1. Revisit Demand Curve Parameters • Analysis: Review Brattle Demand Curve Analysis

Oct. 18, 2017

(Full day 9AM-4PM)

9 1. AESO Reliability Model methodology & inputs 2. Recommendation: Seasonal reliability requirement

Nov. 1, 2017

10 1. Revisit Framework for CONE estimation 2. Revisit Demand Curve Parameters

• Follow up Analysis: Review Brattle Demand Curve Analysis • Principles: Develop principles to setting demand curve

parameters

Adequacy & Demand Curve Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Adequacy & Demand Curve

Date Session # Topics

Nov 15, 2017

11 1. Revisit Demand Curve Parameters: • Recommendation: Accept principles to demand curve

parameters 2. Revisit AESO Reliability Model methodology & inputs II

Nov 29, 2017

12 1. Recommendation: Reliability methodology & inputs II 2. Recommendation: Framework for CONE estimation 3. Review SAM 3.0 Summary and Interdependencies 4. Review SAM 3.0 to 4.0 Work plan

SAM 2.0 – 3.0 Working Group Objectives Procurement & Hedging

• For the next iteration of SAM, the Procurement & Hedging working group intends to achieve the following:

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Procurement & Hedging

Recommendation Exploration

Net Settlement Instructions (NSI) Settlement

Self-supply Billing and credit requirements options/alignment

Procurement and Hedging Work Plan to SAM 3.0: Proposed Priorities and Sequencing

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Procurement and Hedging Date Session # Topics

Sept. 21 2017

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1. Review interdependencies and alignments with other work streams

2. Capacity Market Net Settlement Instructions 3. Final work plan for semester 2 (SAM 2.0 to SAM 3.0)

Oct. 5, 2017

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1. Review industry feedback from SAM 2.0 2. Self-supply design principles

a. What is Self-supply? b. Reliability margin determination on self-supplied load c. Who is able to self-supply? d. How and when are self-supply arrangements registered and evaluated? Can self-supply opt in and out over time (different base auctions)?

3. Capacity NSIs

Procurement and Hedging Work Plan to SAM 3.0: Proposed Priorities and Sequencing (cont.)

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Procurement and Hedging Date Session # Topics

Oct. 19, 2017

8 1. Recommendation: Self-supply 2. Recommendation: Capacity NSIs

Nov. 2, 2017

9 1. Capacity Market Settlement a. When is the load allocation determined b. Settlement period c. Application of Penalties (eligibility dependency) d. Billing

Nov. 16, 2017

10 1. Capacity Market Settlement a. Input from dependent work-streams b. Settlement timelines and structure (billing determinants) 2. Capacity Market Credit requirements

Nov. 30, 2017

11 1. Review SAM 3.0 summary and interdependencies 2. Capacity Market Settlement and Credit continued