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Day-Ahead and Real-Time LMP Divergence in NEMA: November 2004 through February 2005

Day-Ahead and Real-Time LMP Divergence in NEMA: November 2004 through February 2005. Robert Ethier NEPOOL Markets Committee March 29, 2005. Outline. In recent months, we have seen significant DA congestion in NEMA that does not materialize in real-time This is observed only intermittently

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Day-Ahead and Real-Time LMP Divergence in NEMA: November 2004 through February 2005

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  1. Day-Ahead and Real-Time LMP Divergence in NEMA: November 2004 through February 2005 Robert Ethier NEPOOL Markets Committee March 29, 2005

  2. Outline • In recent months, we have seen significant DA congestion in NEMA that does not materialize in real-time • This is observed only intermittently • Causes: • Timing of Commitments • Interface Limits • Lack of Virtual Transactions and Price Sensitive Demand • Expected Going-Forward Improvements

  3. Monthly Average Day-Ahead and Real-Time Congestion Differences in NEMA, January 2004 to February 2005

  4. Monthly On-Peak FTR Prices, ISO-NE Hub to NEMA ($/MWh), January 2004 to February 2005

  5. Focus on Days with Large DA Congestion • Days identified by DA minus RT congestion difference greater than $25/MWh • Evaluate commitments within and after the Day-Ahead Market • Compare transfer limits

  6. Day-Ahead Minus Real-Time Congestion* in NEMA, November 2004 to February 2005 ($/MWh) 1/11 1/22 - 1/25 12/16, 12/17, 12/20 2/26 12/28, 12/29 11/2, 11/6, 11/9, 11/14 1/17 12/10 * Congestion equals DA NEMA congestion component minus RT NEMA congestion component

  7. Day-Ahead and Real-Time Average Hourly Commitments in NEMA, by Type, January 2004 to February 2005 Day-Ahead Post-Day-Ahead(RAA and Real-Time)

  8. Second Contingency Proxy Transfer Limits • Account for second contingency limitations and incorporate thirty-minute actions • Identify the maximum interface transfer possible while maintaining thirty-minute recovery from a contingency • Calculated for both day-ahead and real-time dispatch • Based on interface limits and available 30 minute area response • 30 minute response varies with on-line generation

  9. Second Contingency Proxy Transfer Limits • Line and Generator: Proxy interface transfer limit = Second Contingency Interface Limit – Largest Area Generator Contingency + 30 Minute Area Response • Two Line Contingencies: Proxy Interface Limit = Second Line Contingency Interface Limit + 30 Minute Area Response • 30 Minute Area Response = Quick Start Generation + 30 Minute Spinning Reserves + Load Shedding • These equations are from the January 25, 2005 presentation to the MC on reliability commitments

  10. Real-Time Second Contingency Proxy Limits as a Percentage Increase Over Day-Ahead Limits for the Boston Import Interface, January 2004 to February 2005 > 0% means the RT limits exceeds the DA limit NOTE: % Difference = (RT-DA)*100/DA

  11. DA and RT Generation and Interface Limits in NEMA for Selected Days and the Annual Average

  12. DA and RT Generation and Interface Limits in NEMA November 2004 to February 2005

  13. Day-Ahead Load Cleared as a Percentage of Real-Time Load

  14. Virtual Trading, Price Sensitive Demand and LMP Divergence • Virtual trades or shifts of Day-Ahead load to Real-Time should arbitrage price differences, lowering DA prices when Real-Time congestion is not expected • On the days identified on slides 11 and 12 above, a cleared increment in NEMA would have made, on average, $57/MWh during the hour of greatest divergence on each of the selected days • Demand shifts would face the same opportunities • This ignores OR charges • Expected OR charges likely dissuade virtual traders or movement of Day-Ahead load to Real-Time • Recent rule change in RT RMR ORC allocation should help

  15. Real-Time OR RMR Charges in NEMA Per $/MWh of Deviations, January 2004 to February 2005

  16. Cleared and Submitted Increment Offers in NEMA, January 2004 to February 2005

  17. Expected Going-Forward Improvements • Reduce charges faced by Real-Time deviations to improve arbitrage • Implement the COO Report’s RMR and VAR action plan to reduce ISO commitments • Evaluate moving more reliability commitments into the day-ahead market

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