1. UNDERSTANDING PHYSICAL ASPECTS OF INTERJURISDICTIONAL ENERGY TRADING

Transcription

1 1. UNDERSTANDING PHYSICAL ASPECTS OF INTERJURISDICTIONAL ENERGY TRADING Introduction When you have completed this module, you will be able to explain the types of interjurisdictional trade transactions that can be carried out and the initial steps required to participate in this market. To complete this module, use this workbook in conjunction with the web-based presentation Understanding Physical Aspects of Interjurisdictional Energy Trading, and the Market Participant Interface (MPI) tool simulation. All are available on the IMO website Objectives Outline the process for registering to participate in interjurisdictional energy trade Explain the differences between boundary entities and boundary entity resources Explain intertie congestion and the impact it has on market participants List the three basic transactions involved in interjurisdictional trade Determine how physical bilateral contracts involving interjurisdictional trade are settled References: Market Rules Chapter 7, Market Manual 4: Market Operations, Part 4.2 Submission of Dispatch Data in the Real-time Energy and Operating Reserve Markets Last Revised 05/01/01 Interjurisdictional Energy Trading Page 1

2 1.1 BOUNDARY ENTITIES AND BOUNDARY ENTITY RESOURCES Objectives Identify the information required to register a boundary entity Explain when a boundary entity resource is used in conjunction with a boundary entity Select from a list the components of a boundary entity resource How to Proceed: Read the following pages as you view slides 2 to 8 of the on-line presentation Understanding Physical Aspects of Interjurisdictional Energy Trading Answer the questions at the end of the section to check your understanding Last Revised 05/01/01 Interjurisdictional Energy Trading Page 2

3 Boundary Entities It is important to remember that participating in IJT (interjurisdictional trade) is similar in many ways to participating solely within the market. In fact, any IJT transaction will involve making bids and offers in the market. For example, a market participant seeking to export energy from a generation facility within will have to submit both an offer for that energy into the Real time Energy Market and a corresponding bid to export that energy into another control area. This process is covered in section 3, Bids and Offers from Boundary Entities Boundary Entity - Registration Information Requirements As outlined in Market Rules, ch.7, sec : Intertie identification; Legal requirements: - National Energy Board (NEB) Export Permit; - Energy Board (OEB) Wholesale Licence; Reliability requirements; Market Participant identification; To participate in IJT, the market participant must identify import and export trading information during the registration process. The market participant must identify which of the interties they plan to use in future transactions and whether these transactions will be for import and/or export. Boundary Entity S Spot Market Resources Generator Load (small) Load (large) Registration of a notional facility (refer to Market Rules definition, ch. 11). In the market, any conveyance of electricity must involve a registered facility. In IJT, there is no physical facility to register. The boundary entity is a virtual facility that is registered by the market participant to allow for IJT bids and offers in the same manner as market participants register a physical facility inside. One difference with boundary entities however, is that they do not have pre-identified resources. When market participants register physical facilities within, the registration process creates a resource associated with the physical characteristics of the load or generator, including its tie to the IMO-controlled grid. Boundary entities on the other hand are a virtual resource and can represent load or generation coming from any number of paths through other control areas. This difference has both physical and commercial ramifications. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 3

4 Registration Information Requirements Application for Authorization to Participate PART 7 REGISTRATION OF INTERTIES (TO REGISTER MP S CAPABILITY TO IMPORT/EXPORT) INTERTIE IMPORT EXPORT Quebec Manitoba New York Michigan Minnesota Do you have a relevant National Energy Board (NEB) License/Permit for U.S.-Canada trades? Yes No Do you have the ability to support North American Electricity Reliability Council (NERC) tagging? The market participant must also identify whether they have a relevant National Energy Board License for U.S. Canada trade and the ability to support NERC (North American Electricity Reliability Council) tagging. Once this process is complete, the market participant will have registered a boundary entity for IJT. Yes No Boundary Entity and Boundary Entity Resource Boundary Entity - Resource Characteristics Unique TAX Treatment. Control Area Specific. Phase Shifter Friendly. Infinite Ramping Capabilities. PQ Pair Consistency. A boundary entity resource can be thought of as a virtual generator or a virtual load that sits at the intertie with another control area. A boundary entity resource is associated with a boundary entity. Market participants can offer generation and/or OR (operating reserve) and bid loads from boundary entities in much the same manner as they do from registered facilities (generators and dispatchable loads). In order to facilitate IJT, the IMO has created over 600 boundary entity resources for use by registered market participants. Market participants must identify which boundary entity resource is to be used when placing a bid or offer. This process will be covered in module two Bids and Offers from Boundary Entities. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 4

5 A boundary entity resource reflects whether the transaction is a bid or offer and indicates where the source or sink is located. So, if a market participant wants to offer energy from Minnesota, there is a boundary entity resource that can be used for this purpose. These resources are virtual resources. They do not correspond to specific physical resources in other control areas. In order to allow market participants to make bids and offers which reflect their business transactions, multiple resources have been created for each control area outside. The number of boundary entity resources created reflects the anticipated activity from various control areas. For example, there are more boundary entity resources associated with New York than there are with the Maritimes. In addition to the physical source/sink aspects there are also tax considerations for import and export. Exports to all Canadian provinces will Intertie/Boundary Resource attract GST while transactions to the US are GST Relationship exempt. In order to accommodate the tax BOUNDARY BOUNDARY INTERTIE Number of RESOURCE NAME RESOURCE NAME ZONE Resources (source/import) (sink/export) implications for IJT, the IMO has created specific resources at each relevant location for each type of MICHIGAN & transaction. These resources are denoted with a CA NEW YORK (Canada) or US (United States). MI.StClair.Source.# MI.StClair.Sink.# 40 MI.Ludington.Source.# MI.Ludington.Sink.# 40 NY.Niagara.Source.# NY.Niagara.Sink.# 40 NY.Roseton.Source.# NY.Roseton.Sink.# 40 IN.Rockport.Source.# IN.Rockport.Sink.# 10 IN.MichiganCity.Source.# IN.MichiganCity.Sink.# 10 MD.CalvertCliffs.Source.# MD.CalvertCliffs.Sink.# 40 OH.Gavin.Source.# OH.Gavin.Sink.# 10 PQ.QuebecUS.Source.# PQ.QuebecUS.Sink.# 10 EC.Maritimes.Source.# EC.Maritimes.Sink.# 5 WC.PraireRanges.Source.# WC.PraireRanges.Sink.# 5 Last Revised 05/01/01 Interjurisdictional Energy Trading Page 5

6 Resource Nomenclature MB.WHITESHELL.CAN.SOURCE.01 Manitoba Source - Within Canada Import (Generator) Eastern Canada Maritime Provinces Sink - Export (Disp-Load) EC.MARITIMES.SINK.04 Unique Number Unique Number Each boundary entity resource is composed of three parts: The boundary resource representation Source or sink The identification number of the resource 8 For example: MB.WHITESHELL.CAN.SOURCE.01 is the first of 15 boundary entity resources that can be used to import energy and/or OR across the -Manitoba intertie into from any control area within Canada other than Quebec. When a market participant wishes to submit dispatch data, they must include information on the intertie being used as well as the boundary resource that will be used. Note that the boundary entity resource is limited to certain interties and must be chosen appropriately. It should also be noted that multiple market participants could use the same boundary resource. The participant ID included in the bid or offer will uniquely identify the transaction. The use of the boundary resource during bidding and offering will be covered in the modules on bidding and offering. See module 2, Bids and Offers from Boundary Entities. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 6

7 Skill Check: Boundary Entities and Boundary Entity Resources 1. Which of the following sets describes the information required when registering a boundary entity? a) Interties to be used, prudential requirements, key contacts b) The interties to be used for export and import, the ability to support NERC tags, National Energy Board license c) Location of loads and generation outside the IMO-controlled grid, GST registration number d) Names of registered facilities owned by the market participant, interties to be used for import and export, the ability to support NERC tags, National Energy Board license 2. Which three of the following items are components in the naming of a boundary entity resource? a) The intertie used for the transaction b) The nature of the transaction (import or export) c) The name of the receiving market participant d) The boundary entity resource representation e) The date and dispatch hour for the transaction f) The number of the resource 3. True or False. Boundary entity resources are unique to each market participant. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 7

8 Skill Check- Answers Key: Boundary Entities and Boundary Entity Resources 1. Which of the following sets describes the information required when registering a boundary entity? a) Interties to be used and expected size of imports, prudential requirements, key contacts b) The interties to be used for export and import, the ability to support NERC tags, National Energy Board license c) Typical transaction size, location of loads and generation outside the IMOcontrolled grid, GST registration number d) Names of registered facilities owned by the market participant, interties to be used for import and export, the ability to support NERC tags, National Energy Board license Comment: The only information specific to interjurisdictional trade required when registering is the interties to be used, whether for import and or export and confirmation of the ability to support NERC tags and whether the market participant holds a National Energy Board license for exports to the US. 2. Which three of the following items are components in the naming of a boundary entity resource? a) The intertie used for the transaction b) The nature of the transaction (import or export) c) The name of the receiving market participant d) The boundary entity resource representation e) The date and dispatch hour for the transaction f) The number of the resource Comment: The name of the bidding or offering market participant is added to the boundary entity resource when submitting dispatch data. The name of the receiving market participant is not relevant. The date and time for the transaction are part of the bid or offer. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 8

9 3. True or False. Boundary entity resources are unique to each market participant Comment: Any registered market participant with a registered boundary entity can use any boundary entity resource. The information is kept unique during the bid/offer process by adding the market participant identification to the boundary entity resource. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 9

10 1.2 TYPES OF INTERJURISDICTIONAL TRADE TRANSACTIONS Objectives Explain the basic steps involved in bidding or offering into, out of or through the Market Choose from a list the types of interjurisdictional trade transactions that can be carried out in the market Explain the role of NERC tags in interjurisdictional trade and identify when they are used in the bidding/offering process How to proceed: Read the following pages as you view slides 9-18 of the on-line presentation Understanding Physical Aspects of Interjurisdictional Energy Trading Answer the questions at the end of the section to check your understanding Last Revised 05/01/01 Interjurisdictional Energy Trading Page 10

11 What is Interjurisdictional Trade? Export Understanding Physical Aspects of Interjurisdictional Energy Trading Import Wheel-Through There are three basic interjurisdictional trade Transactions: Exporting energy from to another control area Importing energy or OR from another control area into Passing energy from another control area through to a different control area (wheeling) This module contains a brief explanation of these transactions; module 2, Bids and Offers from Boundary Entities will go through these transactions in more detail. Types of Interjurisdictional Trades Export Exports: Market Participants bid to purchase power inside via energy & operating reserve markets. These Bids are as Boundary Entities, indicating the Boundary Entity Resource for the export. The most important thing to remember about interjurisdictional trade is that it is almost identical to participating purely within the market. A market participant wishing to export energy from submits a bid in the Market specifying that their boundary entity resource represents a load at an intertie with another control area. It should be noted that a generator in who wishes to use their own generation to serve a load in another control area cannot make this happen in one transaction. All generation within must be offered into the market. If the offer is successful, the generator will be dispatched. Regardless of what happens to the generator's offer, the load must bid at the intertie as a separate transaction. The success of this transaction is completely independent from the success of the offer to generate. The bid to export or the offer to generate can be accepted independently. Export of Energy From IMO-Administered Markets N.Y. Intertie Zone MWs Exported from External Market (New York Example) Proxy Bus MWs Imported to New York New York The transactions within the market deal only with the energy as far as the intertie. The participant will then have to successfully deal with offering energy into the second control area in order to finish the transaction. This process is covered in more detail in module 2, Bids and Offers from Boundary Entities. Transfer of MWs from one market to the other is achieved when both markets are navigated successfully Last Revised 05/01/01 Interjurisdictional Energy Trading Page 11

12 NY Intertie Zone Understanding Physical Aspects of Interjurisdictional Energy Trading Import of Energy Into IMO-Administered Markets MWs Imported to External Market (New York Example) Proxy Bus MWs Exported from New York New York Transfer of MWs from one market to the other is achieved when both markets are navigated successfully Imported energy will enter the Real-time Market. This is true even if the participant has a physical bilateral contract with a load in, or their own load in. In every case, imported energy simply enters the Real-time market. The load must bid for its energy independently of the import As with exports, the participant must also successfully deal with the second control area to get the energy to the intertie. Unique Wheel-Through Requirements Achieved by separate bid & offer transactions. Bid Wheel-Through Offer Wheel-Through The final interjurisdictional transaction is a wheel-through. In this case the participant is transferring energy from an outside control area, through into a different control area. A wheel-through is simply an import and an export in series. It is essential to remember that once again, the two transactions are independent of each other. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 12

13 Step One - Import of Energy Into IMO-Administered Markets External Market (New York Example) If the offer from the outside control area is successful, the energy offered by the import enters the Real-time Market in. NY Intertie Zone Proxy Bus New York MWs Imported to MWs Exported from New York Transfer of MWs from one market to the other is achieved when both markets are navigated successfully Step Two - Export of Energy From IMO-Administered Markets N.Y. Intertie Zone External Market (New York Example) Proxy Bus New York To complete the wheel-through, the participant must also have a successful bid for load by their boundary entity at the second intertie. Once again, the participant can be successful in either transaction, independent of the other. MWs Exported from MWs Imported to New York Transfer of MWs from one market to the other is achieved when both markets are navigated successfully As with imports and exports, the participant must also successfully deal with the neighboring control areas. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 13

14 Skill Check: Types of Interjurisdictional Trade Transactions 1. True or False. A generator in who wishes to sell energy into New York State must first offer this energy into the Real-time Energy Market. 2. True or False. Since a wheel-through the IMO-controlled grid does not have a net injection or withdrawal to the energy market, market participants need not bid or offer in the Market to wheel-through. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 14

15 Skill Check- Answer Key: Types of Interjurisdictional Trade Transactions 1. True or False. A generator in who wishes to sell energy into New York State must first offer this energy into the Real Time Energy Market. Comment: All imports and exports must come from the market. A generator must successfully offer energy and successfully bid a load at the intertie to export their energy from. The same process is true for importers. 2. True or False. Since a wheel-through the IMO-controlled grid does not have a net injection or withdrawal to the energy market, market participants need not bid or offer in the Market to wheel-through. Comment: Even in cases where the energy is passing through, the market participant must still offer into then bid out of the Real-time Energy market. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 15

16 1.3 INTERTIE ZONE PRICE AND INTERTIE CONGESTION Objectives The meaning of intertie congestion The impact of the location of congestion on the payment of compensation to market participants by the IMO The overall direction of electricity flow across an intertie for a scenario of prices in and intertie zone prices How to proceed: Read the following pages as you view slides of the on-line presentation Understanding Physical Aspects for Interjurisdictional Energy Trading Answer the questions at the end of the section to check your understanding

17 Real Time Operations for Boundary Entities Manitoba Interconnection Features Minnesota Michigan Limited transmission capacity Free-flowing interconnections Regulated interconnections Radial interconnections Quebec New York There are five intertie points with adjacent control areas (Manitoba, Minnesota, Michigan, New York and Quebec). These interties are simply metered transmission lines to these control areas. Like any lines, they are subject to physical limitations. In addition, depending on the status of the IMO-controlled grid, there may be stability issues that force the IMO to place restrictions on flow across a tie line. Congestion Occurs when physical capability of the transmission system cannot meet market requirements Congestion arises when limitations restrict the movement of economical electricity within the province and to and from other control areas. Generators, loads or boundary entity resources that might otherwise have been dispatched may not be dispatched in situations of congestion. In some situations, depending on where the congestion is, market participants may receive compensation for profit lost due to congestion. If congestion within the IMO control area is causing generators or loads to be dispatched differently than they would otherwise have been (in the absence of any physical limitations within ) they will receive constraint payments to compensate them for the difference. This topic is covered in more detail in module 4, Pre-dispatch Processes for Interjurisdictional Energy Trade as well as in the Settlement Statements and Invoices course. If, however, the congestion is due to physical limitations of the interties, there will be no constraint payments made to market participants. Congestion pricing will reflect this situation. (Note the use of Financial Transmission Rights can provide some insurance for these situations. This topic is covered in the Transmission Rights course). The interconnection of control areas allows for the flow of electricity based on economic decisions. Electricity produced by a generator, however, follows the path of least resistance to loads. Meters on the Intertie between adjacent control areas measure the flow of electricity from one area to another. Each control area is responsible for ensuring that only planned imports and exports flow across the tie lines. That is to say each control area must ensure that within its area: Loads + Scheduled Exports = Generation + Scheduled Imports (differences are settled between the markets as inadvertent energy) Last Revised 05/01/01 Interjurisdictional Energy Trading Page 17

18 Real Time Operations for Boundary Entities Import of Energy Into IMO-Administered Markets N.Y. Intertie Zone MWs Imported to External Market (New York Example) Proxy Bus MWs Exported from New York New York Transfer of MWs from one market to the other is achieved when both markets are navigated successfully In the IMO-administered markets, scheduled imports are, for the most part, treated like an internal generator and scheduled exports are treated like dispatchable loads. Offers and bids are added into the inputs used by the algorithm during the pre-dispatch and dispatch process. The algorithm will determine which offers and bids are accepted. (Note, even the unconstrained algorithm will use the physical limitations of the intertie when calculating the optimum solution. See Module 4, Pre-dispatch Processes for Interjurisdictional Energy Trade. While electricity flows from source to sink by the path with the lowest resistance, market participants will seek to purchase electricity where the price is lowest and sell where the price is highest. This means that if electricity can be bought cheaply in another control area and sold in at a profit, market participants will seek to do this. This action would increase supply in and increase demand in the other control area. The result of such action will be to lower prices in and increase prices in the other control area. If there were no physical limitations to the intertie, then action of participants would continue until prices were equal in and the other control area (adjusted for losses, rate exchange and risk). Unfortunately the interties do have limitations and situations may occur where the limits are reached. In these cases, congestion occurs. In a congestion situation, the algorithm will establish an intertie zone price, which is different from the pre-dispatch market clearing price for. Once congestion occurs, the price of the energy in that intertie zone is determined by the offers and bids in the zone. The price will be established by determining the cost of providing one more megawatt of energy within the zone. This topic is covered in more detail in module 4 Pre-dispatch Processes for Interjurisdictional Energy Trade. The use of transmission rights to protect against risk associated with intertie congestion is covered in the Transmission Rights course. In general, comparing the intertie price to the price indicates if congestion is present: Last Revised 05/01/01 Interjurisdictional Energy Trading Page 18

19 Real Time Operations for Boundary Entities If the intertie zone price is greater than the MCP, the intertie is export congested. Energy is flowing from to another control area and the intertie is at its maximum scheduling capacity If the intertie price is less than the MCP, the intertie is import congested. Energy is flowing into from another control area and the intertie is at its maximum scheduling capacity If the intertie price is equal to the MCP, there is no congestion. Energy could be flowing into or out of. There is not necessarily a net difference in either direction Last Revised 05/01/01 Interjurisdictional Energy Trading Page 19

20 Real Time Operations for Boundary Entities MODULE REVIEW Module 1: Understanding the Physical Aspects of Interjurisdictional Energy Trading 1. The IMO will compensate market participants for constraints associated with an intertie: a) Only if the constraint is because of restrictions outside the IMO-controlled grid b) Only if the intertie zone price is different from the Hourly Energy Clearing Price c) Only if the constraint is because of restrictions inside the IMO-controlled grid d) Only after a review panel has assessed the financial impact to the participant. 2. True or False. A boundary entity is a virtual resource while a boundary entity resource is a physical generator or load located outside the IMO-controlled grid. 3. True or False. A generator who successfully bids energy to another control area from is guaranteed access to the IMO-controlled grid to move their production to the neighboring control area. 4. State the three components of a boundary entity resource identifier used when placing a bid or offer from outside the control area. 5. True or False. Once a market participant has successfully offered energy into, the IMO will schedule their transaction and then obtain a NERC transaction tag to ensure the energy can move from the other control area into. 6. True or False. A market participant who wishes to move energy through to another jurisdiction can do so by negotiating transmission rights for the IMOcontrolled grid. 7. True or False. A market participant in with a dispatchable load who signs a physical bilateral contract with a vendor in Manitoba must still bid for energy from the Real-time Energy market. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 20

21 Real Time Operations for Boundary Entities MODULE REVIEW- ANSWER KEY Understanding the Physical Aspects of Intertie 1. The IMO will compensate market participants for constraints associated with an intertie: a) Only if the constraint is because of restrictions outside the IMO-controlled grid b) Only if the intertie zone price is different from the Hourly Energy Clearing Price c) Only if the constraint is because of restrictions inside the IMO-controlled grid d) Only after a review panel has assessed the financial impact to the participant Comment: In general participants must use Transmission Rights to hedge against the risk of intertie congestion. Transmission rights are not congestion payments. Congestion payments will only be made if the constraint is but an issue of system stability inside the IMO-controlled grid. Constraints due to intertie limitations do not qualify for congestion payments. 2. True or False. A boundary entity is a virtual resource while a boundary entity resource is a physical generator or load located outside the IMO-controlled grid. Comment: Both boundary entities and boundary entity resources are virtual. Boundary entity resources are designed to provide the IMO with information on which region in North America the source or sink is located. The boundary entity resource is not however associated with any particular physical facility within that region. The boundary entity resource also indicates to the IMO the appropriate tax treatment for the transaction. 3. True or False. A generator who successfully bids energy to another control area from is guaranteed access to the IMO-controlled grid to move their production to the neighboring control area. 4. State the three components of a boundary entity resource identifier used when placing a bid or offer from outside the control area. Comment: Each boundary entity resource is composed of three parts, The boundary resource representation Source or sink The number of the resource Last Revised 05/01/01 Interjurisdictional Energy Trading Page 21

22 Real Time Operations for Boundary Entities 5. True or False. Once a market participant has successfully offered energy into, the IMO will schedule their transaction and then obtain a NERC transaction tag to ensure the energy can move from the other control area into. Comment: The market participant must obtain their own NERC tags and negotiate their own transactions in control areas outside. Their intertie schedule is contingent on fulfilling these requirements. 6. True or False. A market participant who wishes to move energy through to another jurisdiction can do so by negotiating transmission rights for the IMOcontrolled grid. Comment: Moving energy through requires a simultaneous offer into and bid out of. Both transactions are independent of each other.. Last Revised 05/01/01 Interjurisdictional Energy Trading Page 22