PSERC

TLR, Reliability and EfficiencyTLR, Reliability and Efficiency

Fernando L. AlvaradoFernando L. AlvaradoProfessorProfessor

Electrical and Computer EngineeringElectrical and Computer EngineeringThe University of WisconsinThe University of Wisconsin

(also: Senior Consultant, LRCA)(also: Senior Consultant, LRCA)

Presentation to the Harvard Electricity Policy GroupMilwaukee, WI, November 18, 1998

www.pserc.wisc.edu

PSERC

ObjectiveObjective

Discuss congestion relief alternativesDiscuss congestion relief alternatives

Describe a problem with the present Describe a problem with the present NERC TLR proceduresNERC TLR procedures

Propose market-efficient alternatives Propose market-efficient alternatives that are compatible with present that are compatible with present institutional structuresinstitutional structures

PSERC

ObservationsObservations

Congestion leads to high spatial Congestion leads to high spatial volatilityvolatilityThis is necessary for economic efficiencyThis is necessary for economic efficiency

However, bad rules can increase volatility However, bad rules can increase volatility and reduce efficiencyand reduce efficiency

Internalizing loop flows leading to zonal Internalizing loop flows leading to zonal prices may result in inefficienciesprices may result in inefficiencies

Efficiency requires adjusting to Efficiency requires adjusting to conditionsconditionsStatic average prices are inefficientStatic average prices are inefficient

PSERC

Congestion relief alternativesCongestion relief alternatives

Market-blindMarket-blindOperators deal with security issues onlyOperators deal with security issues only

Market-awareMarket-awareOperators deal with security but facilitate Operators deal with security but facilitate

markets operationmarkets operation

Pure marketPure marketMarket deals with congestionMarket deals with congestion

PSERC

Congestion management Congestion management optionsoptions

Command and control -- no choices Command and control -- no choices (FAA)(FAA)

As internalized ancillary costs (Uplift)As internalized ancillary costs (Uplift)

By curtailment rules (NERC)By curtailment rules (NERC)

By locational spot pricingBy locational spot pricingSpot pricing (Schweppe, Hogan)Spot pricing (Schweppe, Hogan)

Transmission-only pricing (TCCs, Glavitsch)Transmission-only pricing (TCCs, Glavitsch)

PSERC

The NERC TLR ProcedureThe NERC TLR Procedure

A method for determining who to A method for determining who to curtail and by how muchcurtail and by how much

Based on pre-computed flow Based on pre-computed flow sensitivitiessensitivities

Uses “arbitrary” formulasUses “arbitrary” formulas

PSERC

The procedureThe procedure

Determine amount to curtailDetermine amount to curtailSelect curtailment categorySelect curtailment category

• Firm, non-firm

Determine flow sensitivitiesDetermine flow sensitivitiesIgnore those with less than 5% impactIgnore those with less than 5% impact

Determine transaction sizeDetermine transaction size

Apply formula, determine amount to Apply formula, determine amount to curtailcurtail

PSERC

6 transactions and 4 flowgates6 transactions and 4 flowgates

E DC

A X Y

B

Constraining flowgate

Other flowgates

Firm

Hourly non-firm

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Impact of transactions on flowsImpact of transactions on flows

Transaction AX AE ED XY

A to C 0.85 0.15 0.30 0.15

B to C -0.01 0.01 0.45 0.01

D to C 0.02 0.15 -0.20 0.10

D to X 0.03 0.07 -0.10 0.09

Y to X -0.10 -0.10 0.03 -0.60

E to Y -0.20 -0.10 0.69 0.30

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The curtailment formulaThe curtailment formula

iii

kkknTransactio Initial * PTDF

curtail amount to Total * nTransactio Initial * PTDFamount Curtailed

2

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The curtailmentsThe curtailments

1 2 3 4 5 6 7 8

(1)*(2) 2 /(2TOT)

(3)*(4) (5)*overload/(5TOT)

(6)/(2) (1) - (7)

TransactionID

InitialTransaction

PTDF ImpactOn

Interface

WeightedInterfaceImpact

WeightedInterface

Reduction

ActualInterface

Reduction

CurtailedAmount

NewTransaction

Amount

A to C 150 0.30 45.00 0.40 18.00 20.00 66.67 83.33

B to C 100 0.45 45.00 0.60 27.00 30.00 66.67 33.33

TOTALS 250.00 0.75 90.00 1.00 45.00 50.00 133.33 116.67

PSERC

The problemsThe problems

Phantom schedulesPhantom schedules

Inability to create packaged Inability to create packaged multilateral schedulesmultilateral schedules

Ability to play games with contract Ability to play games with contract pathspaths

Possible games with the 5% dropout Possible games with the 5% dropout rulerule

Conflicting curtailment rules for Conflicting curtailment rules for multiple congestionmultiple congestion

PSERC

Phantom schedulesPhantom schedules

1 2 3 4 5 6 7 8

(1)*(2) 2 /(2TOT)

(3)*(4) (5)*overload/(5TOT)

(6)/(2) (1) - (7)

TransactionID

InitialTransaction

PTDF Impact OnInterface

WeightedInterfaceImpact

WeightedInterface

Reduction

ActualInterface

Reduction

CurtailedAmount

NewTransaction

Amount

A to C 200 0.30 60.00 0.40 24.00 30.59 101.96 98.04

B to C 100 0.45 45.00 0.60 27.00 34.41 76.47 23.53

TOTALS 300.00 0.75 105.00 1.00 51.00 65.00 178.43 121.57

PSERC

Consequence of phantom scheduleConsequence of phantom schedule

Transaction A to C benefits at the Transaction A to C benefits at the expense of transaction B to Cexpense of transaction B to CIt can also work the other way aroundIt can also work the other way around

It results in gaming behaviorIt results in gaming behavior

It leads to suboptimal, possibly It leads to suboptimal, possibly unstable, market conditionsunstable, market conditions

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Packaged multilateral tradesPackaged multilateral trades

B to C bilateral transaction Packaged transaction

B to C: 100 MW A to C: 60 MW

D to C: 90 MW

The packaged trade has no negative impact

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The curtailed tradeThe curtailed trade

1 2 3 4 5 6 7 8

(1)*(2) 2 /(2TOT)

(3)*(4) (5)*overload/(5TOT)

(6)/(2) (1) - (7)

TransactionID

InitialTransaction

PTDF ImpactOn

Interface

WeightedInterfaceImpact

WeightedInterface

Reduction

Actual InterfaceReduction

CurtailedAmount

NewTransaction

Amount

A to C 60 0.30 18.00 0.40 7.20 1.05 3.51 56.49

B to C 100 0.45 45.00 0.60 27.00 3.95 8.77 91.23

TOTALS 160.00 0.75 63.00 1.00 34.20 5.00 12.28 147.72

This curtails a desirable packaged trade

PSERC

ConsequencesConsequences

With congestion, optimal trades will With congestion, optimal trades will (almost) always be packaged trades(almost) always be packaged tradesNERC rules will discourage optimal behaviorNERC rules will discourage optimal behavior

NERC rules result in much higher NERC rules result in much higher spatial volatilityspatial volatilityWe have a model that demonstrates thisWe have a model that demonstrates this

There are problems with the present There are problems with the present NERC rules for TLRNERC rules for TLRNodal pricing can lead to optimality, but the Nodal pricing can lead to optimality, but the

NERC rules will not get you thereNERC rules will not get you there

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Another view of curtailmentAnother view of curtailment

250

100(limit: 100)

100 250150

150

250100

price

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Quantity rationing (NERC)Quantity rationing (NERC)

250

100(limit: 100)100

250100

Limit transaction

150 200100

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Transmission pricingTransmission pricing

250

150 200

100

100

(limit: 100)100

250100

price

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Transmission pricing Transmission pricing alternativealternative

It is indeed possible to attain secure It is indeed possible to attain secure operation with price signalsoperation with price signalsThere are practicality/institutional concernsThere are practicality/institutional concerns

• Speed/reliability of response

• Degree of participation

Use ex-ante contractsUse ex-ante contractsCurtailment is, however, compensatedCurtailment is, however, compensated

• The system is voluntary for everyone

PSERC

Recommendations (1)Recommendations (1)

Improve NERC rulesImprove NERC rulesAllow packaged tradesAllow packaged trades

• Phantom trades still possible– System could be efficient if no games are played

or: permit economic signalsor: permit economic signalsFull bid/auction dispatchFull bid/auction dispatch

Use transmission congestion “adders”Use transmission congestion “adders”

• Average charges are inefficient

Explicit Explicit voluntary voluntary trading of TCCstrading of TCCs

Can’t have it both waysin the same time frame

PSERC

Recommendations (2)Recommendations (2)

Enable futures market that permit Enable futures market that permit hedging against spatial volatilityhedging against spatial volatilityCan be done within existing financial market Can be done within existing financial market

structuresstructures

Integrate demand management into Integrate demand management into the picturethe pictureAirlines analogyAirlines analogy