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Mitigated Offer Cap

Mitigated Offer Cap. Presented to: NATF Date: September 29, 2009 By: Mark Patterson, Manager Market O perations Support (ERCOT). Mitigated Offer Cap.

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Mitigated Offer Cap

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  1. Mitigated Offer Cap Presented to: NATF Date: September 29, 2009 By: Mark Patterson, Manager Market Operations Support (ERCOT) September 29 NATF Meeting

  2. Mitigated Offer Cap • A Mitigated Offer Cap curve is based on Resource’s verifiable Incremental Heat Rate (IHR) Curve and verifiable variable O&M cost as defined in NP4.4.9.4.1. The Mitigated Offer Cap curve will be used in SCED and RUC for mitigation: • The Mitigated Offer Cap is used in SCED Step 2 for mitigation. The Energy Offer Curve in Step 2 is capped at the greater of the Reference LM (from Step 1) at the Resource Node or the appropriate Mitigated offer Cap. • RUC will create proxy Energy Offer Curve to replace the Energy Offer Curve for RUC clearing. The proxy Energy Offer Curved is calculated by multiplying the Mitigated Offer Cap curve by 0.001. Since Mitigated Offer Cap curve is calculated based on verifiable IHR curve and verifiable variable O&M cost, the proxy Energy Offer Curve is also derived from verifiable costs. September 29 NATF Meeting

  3. Mitigated Offer Cap • Verifiable Cost Scenarios: • No start up & min gen but heat rate available • All components of verifiable cost present • No verifiable costs available • Start up and min gen available but no heat rate Heat rate present – mitigated offer cap can be calculated from verifiable heat rate (also implies % FIP, FOP above LSL is available) Heat rate absent – default to min(FIP, FOP) * 14.5 or 10.5 September 29 NATF Meeting

  4. Mitigated Offer Cap • Formulation • Mitigated Offer Cap curve is calculated in two steps: • (1) Calculating verifiable incremental cost curve based on the Resource verifiable incremental heat rate (IHR) curve and verifiable O&M; • (2) Comparing the verifiable incremental cost curve with the production of predefined factors and FIP or FOP to obtain Resource mitigated cap curve. September 29 NATF Meeting

  5. Mitigated Offer Cap • Step 1: Verifiable Incremental Cost Curve (Resource with Energy Offer Curve) • Reference: NP 4.4.9.4.1 (a) (ii) & (b) (ii) • For each point i along the Verifiable Incremental Heat Rate (IHR) Curve, 1≤ i ≤NUM_HR_POINTS, the price ($/MWh) is • Price_SLP_i = [HRATE_SLP_i* (EOC_FIP_PRC* FIP + EOC_FOP_PRC* FOP)/100 + OM_SLP_i]*Multiplier • If the percentage fuel mix is not specified for Resource categories having the option to specify the fuel mix, then the minimum of FIP or FOP shall be used. • If the percentage fuel mix is specified but the sum of the percentages is less than 100%, the remaining percentage (100-Percentage of FIP-Percentage of FOP) should be added to the fuel type with value = min(FIP, FOP). Note: Price_SLP_i: price ($/MWh) at quantity point i in mitigated CAP curve. HRATE_SLP_i: Incremental Heat Rate (MMBTU/MWh) at quantity point i in Verifiable Incremental Heat Rate curve. OM_SLP_i: OM cost ($/MWh) at quantity point i in Verifiable Incremental Heat Rate curve. Multipliers for the Mitigated Offer Caps are based off the resource specific capacity factors calculated by Settlements September 29 NATF Meeting

  6. Mitigated Offer Cap If no EOC Available but verifiable heat rate available then: For each point i (1≤ i ≤NUM_HR_POINTS) along the IHR Curve, the price ($/MWh) is Price_SLP_i =[ HRATE_SLP_i* [(FIP_PERC_ABOVE_LSL* FIP + FOP_PERC_ ABOVE_LSL* FOP + SF_PERC_ABOVE_LSL*SFP)/100+ OM_SLP_i]*Multiplier Note: Price_SLP_i: price ($/MWh) at quantity point i in mitigated CAP curve. HRATE_SLP_i: Incremental Heat Rate (MMBTU/MWh) at quantity point i in Verifiable Incremental Heat Rate curve. OM_SLP_i: OM cost ($/MWh) at quantity point i in Verifiable Incremental Heat Rate curve. Multipliers for the Mitigated Offer Caps are based off the resource specific capacity factors calculated by Settlements September 29 NATF Meeting

  7. Mitigated Offer Cap • Step 2: Mitigated Offer Cap Curve (Cap vs. output level, i.e. $/MWh vs. MW) • Each point on the Mitigated Offer Cap Curve is the greater of • (i) K*min(FIP, FOP) • (ii) Verifiable Incremental Cost Curve in above • Notation: • For a Generation Resource that commences commercial operation after January 1, 2004, K=14.5, otherwise K=10.5 • If the Mitigated Offer Cap curve calculated based on the above formulation is not monotonically non- decreasing, it should be adjusted to monotonically non-decreasing as described in SCED Functional Requirements FR31. September 29 NATF Meeting

  8. Mitigated Offer Cap Questions: How often is the new mitigated offer cap calculated? Every hour, up to hr 1400 the mitigated offer cap calculator will calculate for the remainder of the day, after 1400 through the next day What HSL/LSL values are being used? For SCED telemetered HSL/LSL and for RUC the HSL/LSL comes from COP Is the mitigated offer cap using COP data? See previous answer How many points are there on the curve? The identical number of points as the incremental verifiable heat rate curve provided by Settlements (10 points) Why does 4.4.9.4.1 (a)(i) specify min(FIP, FOP) and not actual???? September 29 NATF Meeting

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