Real-Time Demand Curve For Reserves
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Transcript of Real-Time Demand Curve For Reserves
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Real-Time Demand Curve For Reserves
NEPOOL Markets Committee Meeting
01/24/2001
M.S. DePillis
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Basic Concepts
• Price is determined by intersection of bid supply and demand curve.
• If last bidder lies below demand curve, then P is from demand curve.
• Old ex post market flaws are still there.
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Normal Intersection With Bid Supply Curve
Price When Last Bid > D
Q of MW
P of MW
P*
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Highest Bidder Less Than Demand Curve
Price When Last Bid < D
Q of MW
P of MW
P*
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Some Old Flaws• Still works with designation.
• High bids not designated or paid.
Bidder D not paid
Q of MW
A
B
C
D
P*
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Changes to Demand Curve• Change 1: Demand Curve applies
throughout range of TMOR.
• Change 2: "Target" point on Demand Curve changes with UC Conditions.
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Demand Curve Throughout
• Solves discontinuity problem.
• Recognizes that bid determined prices in OP-4 are not competitive market prices.
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New Demand Curve
1/2 2nd Contingency
Q of MW
P of MW
100
50
Zero TMOR
Full 30 Minute Replacement Reserve
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Alternative Solution to Discontinuity Problem
Considered setting OP-4 point to E(ECP)
1/2 2nd Contingency
Old Market Q of MW
Est. ECP1
Est. ECP2
Est. ECP3
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Reasons For Rejection
• Over-pricing (by definition always at or close to OP-4 cap).
• Physical real-time withholding is rewarded (raises demand curve).
• Could have TMOR = E(ECP) =$300 at t1 then TMOR=$40 t2 when further into OP-4.
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Target Point
• Result of discussions with Operations.
• Represents Unit Commitment practice.
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Target Point Adjusted for NY Shared Reserve of 300MW
Q of MW
P of MW
100
50
Zero TMOR
Target Point at 600MW of TMRR
Target Point at 300MW of TMRR
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Other Proposal Changes
• No co-optimization before Phase 1.
• Price Cascading of TMOR Only.
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No Co-optimization Before Phase 1
• Would only apply for about 8 months.
• Would be major rework of SPD.
• Would require significant testing to reduce risk.
• Risk/Benefit ratio not satisfactory.
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Minimal Price Cascading• TMOR price determined by demand
curve is price floor for TMNSR and TMSR.
• TMOR represents willingness to pay for lower quality good.
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Problem With Full Reverse Price Cascading
• Current market instances of high TMNSR prices do not represent economic value except by chance.
• Difficult to argue that TMNSR should be cascaded back to TMSR.
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Unit Commitment and Demand Curves
• Operations still committed to use a demand curve.
• First Step is Observing Effect of NY Sharing Agreement on Unit Commitment and Target Point.
• Will require that long-term reliability is defined and maintained.
• White paper being developed, first draft.
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Proposed New Type of Unit Commitment Analysis
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Unit Commitment and Demand Curve, Continued– "Target" of real-time demand curve would
be derived from process described above.
– Must have action plan in place if demand curve results in measurable and significant deterioration of reliability.
– Not yet ready for rule writing.
– Need to revise Unit Commitment System Operating Procedure to reflect changes.
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Result of Investigating Price of TMOR during OP-4
• Price calculated as follows:
– All observations have TMOR deficiencies.
– All observations are from 5 minute data since start of markets.
– All observations are capped at the 5 minute energy price.
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Result of TMOR Price Study
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Approximately Same Revenue Result
1/2 2nd Contingency
Q of MW
P of MW
100
50
Zero TMOR
72.13