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Energy Storage Resource Participation in the Market: Caps and Floors Considerations

Discussing general principles, EOC caps for make-whole calculation, problems with previous day DAM prices, DAM algorithm changes, and a possible solution for managing energy storage participation in the market effectively.

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Energy Storage Resource Participation in the Market: Caps and Floors Considerations

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  1. CAES Caps & Floors Shams Siddiqi, PhD shams@crescentpower.net ETWG meeting January 31, 2013

  2. General Principle • Resources should be able to offer into the DAM without being unreasonably disadvantaged due to Startup & LSL caps • Caps need to be high enough to recover operating costs under historical market conditions • Caps need to be high enough such that Resources do not receive inappropriate awards in the DAM that cannot be operational met

  3. EOC Caps for Make-Whole Calc. • Energy Offer Curve (EOC) Caps for Make-Whole Calculation Purposes may be based DAM prices • In most days of charging during off-peak hours only, this would adequately reflect costs • In days where this does not reflect costs (e.g. days where prices are much higher than historical average), there needs to be a mechanism by which the ESR can recover actual costs

  4. Problems using Previous day DAM Prices • Previous day (2/2/11) West Hub DAM price average was $68/MWh • Average WH RTM price on 2/2/11 was $779/MWh with hours at SWOC (average WH RTM price on 2/1/11 was $26/MWh) • LSL cap based on historical average would be too low to manage offers in DAM for 2/3/11 • With low LSL cap, ESR may be awarded in non-peak hours – not just peak • This outcome would be bad for ESR as well as market – violate storage limits

  5. DAM Algorithm Changes • One way to alleviate this problem would be for ESRs be able to offer into DAM: • Current storage levels with costs • Conversion efficiency and costs • Max and min storage levels • Then DAM algorithm would need to be modified to optimize ESR awards taking into account the cost of charging • LSL caps less of a problem with these changes

  6. Possible Solution • EOC cap based on historical average DAM prices plus adders for conversion costs with mechanism to recover actual costs • Startup cap based on hydro and LSL cap based on highest DAM or RTM prices plus adder • With this solution, ESRs can manage their participation in DAM with higher LSL cap but likely forgo make-whole payment with lower EOC cap

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