Load Granularity Refinements Issue Paper and Pricing Analysis Study. Stakeholder Conference Call August 21, 2013

Transcription

1 Load Granularity Refinements Issue Paper and Pricing Analysis Study Stakeholder Conference Call August 21, 2013

2 ISO Stakeholder Initiative Process We Are Here Page 2

3 Project Stakeholder Meeting Agenda 8/21/13 Time Topic Presenter 10:00 10:10 Introduction & Meeting Objective Tom Cuccia 10:10 10:45 Background and Description of Issues Carrie Bentley 10:45 11:35 Review Pricing Analysis Study Carrie Bentley 11:35 11:55 Cost Considerations and Net Benefits Steve Keehn 11:55 12:00 Wrap-up & Next Steps Tom Cuccia Page 3

4 Goals and scope of initiative Goals for the first phase of the stakeholder process: Determine if the initial study results are sufficient or whether additional analysis is required. Determine whether there is justification to move forward with load granularity refinement at this time. Scope: Review updated pricing studies and market changes. Seek stakeholder feedback on path forward for more granular load aggregation points. Page 4

5 Background September 21, 2006 MRTU FERC Order: LAP-level bidding, scheduling, and settlement for load is acceptable initially. The ISO should file increased LAP granularity by April 1, July 25, 2012 FERC Order: Approved an extension until Q for the ISO to increase LAP granularity. Near-unanimous support from stakeholders not to refine LAP zones. Approved ISO plan to conduct updated pricing studies and stakeholder process after implementation of convergence bidding. Page 5

6 Background Default Load Aggregation Point (DLAP) Currently 4 DLAPs (DLAP for Valley Electric added in 2013). All loads in each IOU service area are settled at the load distribution factor (LDF) weighted average price for the DLAP corresponding to the IOU service area. Generation is settled at the nodal price. Sub Load Aggregation Point (SLAP) There are 23 SLAPs; 1 in the SDG&E LAP, 6 in the SCE LAP, and 16 in the PG&E LAP. SLAPs are used for congestion revenue rights (CRRs), Proxy Demand Resource (PDR), and Participating Demand rules. Custom Load Aggregation Point (CLAP) PDR can be defined by CLAP. Page 6

7 Description of Issues 1. Wholesale pricing 2. Day ahead optimization 3. Congestion hedging 4. Proxy demand resources Page 7

8 Issue 1: Wholesale pricing Wholesale load settles at DLAP. Heterogeneity of prices within the DLAPs. Load in those areas with lower priced nodes see prices that are averaged with areas with higher priced nodes. Retail rate structure determined by CPUC and other LRAs. Outside the scope of ISO initiative. Page 8

9 Issue 1: Price differences- PG&E Percent of days where average SLAP price is higher than PGE DLAP price Year Central Coast East Bay (Bay Area) Fresno Geysers % 69% 29% 50% % 35% 77% 10% % 40% 68% 31% North Valley Peninsula (Bay Area) Sacramento Valley San Francisco (Bay Area) % 93% 15% 99% % 67% 31% 86% % 96% 1% 100% Humbolt Los Paderes North Bay North Coast % 24% 68% 76% % 14% 30% 44% % 3% 39% 47% San Joaquin Sierra South Bay (Bay Area) Stockton % 22% 92% 15% % 29% 70% 36% % 1% 89% 1% Page 9

10 Issue 1: Price differences- SCE SCE SLAPs are mostly in the same direction, with the exception of SCE West SCE West is around 40% of load, so the price affects average significantly more than other SLAPs. Percent of days where average SLAP price is less than SCE DLAP price Year Core (LA Basin) High Desert Low Desert SCE North SCE Northwest SCE West % 1.3% 20.4% 16.3% 38.0% 99.0% % 0.7% 10.8% 20.0% 4.5% 97.7% % 0.0% 1.9% 8.5% 0.0% 99.4% Page 10

11 Issue 2: Day-ahead optimization Load distribution factors (LDF) are used to distribute forecasted load down to the nodal level to perform market optimization. LDFs are based on historical information and dynamically adjusted each hour. Market software solves at the nodal level and constrains clearing at each node in proportion to LDF. At times, this may constrain the optimization and lead to a less efficient day-ahead solution. LSEs could correct systematic errors in part by using Convergence Bidding. Page 11

12 Issue 3: Congestion Hedging Congestion Revenue Rights (CRRs) could benefit from more granular load zones: More granular load aggregation points would allow additional CRRs to be released in tier 1 and tier 2. When determining how many CRRs to release, the Simultaneous Feasibility Test (SFT) applies fixed LDFs to Pnodes. If sink is a DLAP, any binding constraint that affects any constituent Pnode will then limit the CRR award in that tier. A CRR that would sink at a different pnode and not trigger the constraint can t be issued because of the DLAP sink requirement. Page 12

13 Issue 3: Congestion Hedging CRR issues with more granular load zones: Many LSE s hold long-term CRRs that sink at the DLAP level. Convergence Bidding: In conjunction with CRR s to improve hedging performance. Increase in hedging MWs. Increase in hedging accuracy. Page 13

14 Issue 4: Proxy demand resource PDR already settles at the nodal level, so further load granularity would not incent additional wholesale DR: Disaggregation may or may not allow PDR to bid as local capacity, depending on how load zones were determined. More granular loads may help mitigate gaming concerns: LSE paying the DLAP price for energy in the day-ahead while demand response, in the form of PDR, gets paid the nodal price to curtail. The MSC noted some gaming concerns in the case when demand response dispatches are not settled at the same location as the underlying demand schedules. Page 14

15 Pricing Study Summary Historical review of DLAP prices and SLAP prices from January 2011 to June While the price difference between the PG&E DLAP and SLAPs has remained fairly constant, the SCE area has seen an increase in the divergence between the average DLAP and SLAP prices. Price differences remain relatively small. Page 15

16 PG&E and SCE broken into large and small SLAP areas PG&E SCE Group 1 - Large Group 2 - Small Group 1 - Large Group 2 - Small East Bay (Bay Area) Sacramento Valley Core (La Basin) SCE North South Bay (Bay Area) Stockton SCE West SCE Northwest Fresno Peninsula (Bay Area) High Desert Los Paderes Central Coast Low Desert San Francisco (Bay Area) North Valley North Bay Geysers Sierra North Coast Humbolt San Joaquin

17 PG&E average price differences by year, by group Year Avg. LMP 2011 $ $ $39.70

18 SCE average price differences by year, by group Year Avg. LMP 2011 $ $ $43.80

19 Average differences by year: Off-peak

20 Average differences by year: Peak

21 Impact of single day on average Removing a single day in January 2013 during which the Gates-Midway 500kV line went on a forced outage from around 10:00 AM to 8:00 PM caused the average price difference during peak hours for the entire 6 months of 2013 to drop by almost $.75 in SCE DLAP. Removed 20 days over three years with the highest LMPs and reran averages. Page 21

22 Average differences by year, outliers removed: Peak

23 Impact of LMP on average Price differences between SLAP and DLAP may simply be due to increase in LMP. We divide difference between SLAPs and DLAPs by the LMP to get an average percent difference. The increasing trend for the most part disappears. Page 23

24 Average differences by year as percent of LMP: Peak Due to combination of higher price differences and lower LMP. Page 24

25 Group 2 SLAP historical average peak hour price differences for SCE

26 Group 2 SLAP historical average peak hour price differences as percent of LMP for SCE

27 Group 2 SLAP price buckets for SCE

28 Cost considerations section Implementing more granular DLAPs would impose costs on the ISO and load serving entities (LSE) ISO and MP settlement systems MP billing systems to retail customers MP load forecasting would need to be more granular and ISO and MP system would need to be modified to allow submission of more granular load forecasts CRR process would need to change ISO CRR auction, tracking and settlement systems Existing long term CRRs that sink at DLAPs Page 28

29 Net Benefits Net benefits are calculated as the difference between: Benefits of increased DLAP granularity net of any benefits that can achieved today through other methods (such as convergence bidding), and Cost of implementation plus any savings in costs from not having to use other methods (such as convergence bidding). Need to assess how these net benefits compare to those of other initiatives the ISO is undertaking or could undertake in the near future. Page 29

30 Other ISO Initiatives that may impact locational price differences FERC Order 764 changes Spring minute market EIM Fall 2014 Full Network Model Expansion Fall 2014 Contingency Modeling Fall 2014 Flexible Ramping Product 2015 Page 30

31 Interactions with other initiatives How would increased load granularity interact with other initiatives? May increase complexity of other initiatives and thus increase risks or potential for unintended consequences Other changes may impact potential benefits of increased DLAP granularity What do market changes from other initiatives mean for pricing study results? Page 31

32 Next steps Date August 9, 2013 August 21, 2013 September 4, 2013 September 17, 2013 September 27, 2013 October 11, 2013 Event Post Issue Paper and Study Stakeholder Call Stakeholder Comments Due Draft Final Proposal and Study Posted Stakeholder Call on Draft Final Proposal Stakeholder Comments Due Stakeholders should submit written comments by September 4 th, 2013 to LGR@caiso.com. Contact: Carrie Bentley cbentley@caiso.com Steve Keehn skeehn@caiso.com Page 32