1 / 10

DSWG LaaR Bidding Update

This update provides information on recent LaaR bidding behavior and the formation of a task force to evaluate long-term solutions. The task force has identified eight potential solutions, including collateralization for negative bids and modification of the market clearing engine.

hmcduffie
Download Presentation

DSWG LaaR Bidding Update

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DSWG LaaR Bidding Update February 3, 2006

  2. Recent LaaR Bidding Behavior • Current limit for LaaR provided RRS in ERCOT 50% or 1,150 MW per hour (ERCOT nominates percentage limit monthly) • REPs can self arrange 50% of their Responsive Reserve obligations with LaaR Responsive • LaaRs that are not self arranged can participate in the Daily ERCOT auction • LaaRs are selected by bid price; to be selected they are required to bid aggressively

  3. Special Task Force Formed • A Special Task Force was assembled to evaluate and propose long term solutions • Team consists of a range of market participants including: • Mary Anne Brelinsky – Reliant • Keith Emery – Tenaska • Clayton Greer – Constellation • Randy Jones – Calpine • Steve Krein – ERCOT • John Lightbourn – TXU • Task Force met twice and identified eight potential long term solutions • Mark Patterson – ERCOT • Malcolm Smith – Energy Data Source • Randa Stephenson– TXU • Michael Walker – Exxon • Scott Wardle – Oxy Chem • Fred Young – Air Liquide

  4. Long Term Solutions Evaluated Team reviewed eight potential long term solutions: • Revise settlement process and how defaults are processed • Revise credit provisions to require protection prior to bidding and create ability to monitor real time • Shift credit risk to Resources rather than QSEs • Create two separate markets, one for LaaRs and one for Gen • Maintain a single market clearing engine, but when LaaR is oversubscribed post separate clearing prices for LaaR and Gen • Pay all ancillary services as bid (both Gen and LaaR) • Modify current award mechanism for LaaRs; LaaRs offered at a price below MCPC are awarded • Eliminate sunset date on short term solution and modify system to reject negative offer prices

  5. The Elite Eight

  6. The Final Four

  7. 2. Collateralization for Negative Bids Proposed Solution: Modify the ERCOT EAL credit program. EAL calculation would capture negative bidding by QSE and incorporate into QSE credit requirements. Solution creates a similar process as TEL but based on bidding behavior not clearing price. Negative bidding behavior could require 5 to 10 QSEs to post additional credit collateral based on their EAL calculation. QSE is responsible for establishing their own credit requirements with LaaR. Pros: • Credit based Solution that does not significantly impact market design • Similar process to Balancing Energy requirements now in place Cons: • Reduces but does not eliminate possible market disruption by negative clearing bid since EAL looks back on average 20 days historical behavior (during which negative bidding may not have taken place so "no" or "minimal" credit is required) • Possible reduction in LaaR participation in ERCOT auction from QSEs without collateral sufficient to support large negative bids.

  8. 4a. Modified Market Clearing Engine - Separate Bid Stacks and MCPCs Proposed Solution: Creates two different Responsive Reserve services, one provided by LaaR and one supplied by Gen. Separate clearing price for LaaR and Gen. Pros: • Recognizes that RRS supplied from Gen provides a different reliability service than RRS from LaaR • Market based solution; bids reflect cost to provide service Cons: • Requires market participants to manage two MCPCs for Responsive Reserve and makes settlement more complex • Could result in lower LaaR participation if LaaR MCPC is consistently lower than Gen clearing price • Expected to have significant costs to implement • Market power issues need to be addressed • May require alternate solution to secondary market if LaaRs are not fully subscribed

  9. 5. Single RRS Bid Stack with LaaR and Gen MCPCs if Oversubscribed Proposed Solution: Solution leverages ERCOT's existing clearing engines. If LaaRs are fully subscribed a separate MCPC price for LaaR would be posted. To the extent the market is not oversubscribed only one MCPC for both LaaR and Gen is cleared. Pros: • Periodically would have two separate RRS MCPCs; likely to result in a short term reduction in market RRS costs • Need for secondary RRS solicitations unlikely • Market based solution; bids are more reflective of cost to provide service Cons: • Requires market participants to manage two MCPCs for Responsive Reserve and makes settlement more complex

  10. 7. LaaR RRS Offered Below MCPC is Prorated when Market Oversubscribed Proposed Solution: Solution awards all LaaRs offered below the cleared MCPC and removes any incentive to submit negative bids. Solution was originally proposed by the Demand Side Working Group via PRR619 and was rejected by TAC in November. Pros: • Impact on ERCOT and Market Participants’ systems is minor and cost to implement is expected to be less than $50 K • Eliminates the incentive for LaaRs to bid negative • Need for secondary RRS solicitations unlikely Cons: • Requires QSEs to closely monitor LaaR awards and ensure that LaaRs “unarm” as required

More Related