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Evaluation of Proposals for New Rules for Energy Storage

Evaluation of Proposals for New Rules for Energy Storage. Gaelectric Energy Storage T&SC Modification Working Group 23 rd October 2012. Our Objectives.

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Evaluation of Proposals for New Rules for Energy Storage

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  1. Evaluation of Proposals for New Rules for Energy Storage Gaelectric Energy StorageT&SC Modification Working Group 23rd October 2012

  2. Our Objectives • Long-term: a method for registering storage technologies in the SEM that allows them to recover their short-run costs and compete equitably within the market schedule • Today: • Shortlisting possible mechanisms, all requiring evolution of the SEM T&SC • Evaluating them against the TOR criteria • Ideally identifying one for initial review by ABB

  3. Review of Last Workshop • Reviewed existing options within the context of the SEM HLD: • Recovery of short run costs, and a design that insofar as possible • Minimises cost of constraints • Minimises cost of production in dispatch • Allows for transparent BCOP compliance • Market revenues independent of SO dispatch • From the last workshop, other high-level points were noteworthy • Minimisation impact on market systems; unnecessary proliferation of rules • Storage in T&SC should be more than separable fuel production and a generator • Several options could challenge the principles of central commitment • Should not discriminate relative to existing pumped storage rules • Agreed that existing structures needed change, to proceed with the development of further options

  4. The Options • “Full Price Making Storage” – an evolution of existing pumped storage rules with submitted prices and constraint payments • “Availability Feasible Storage Unit” – akin to a stand-alone interconnector unit only in that it locks down availabilities using changing half-hourly commercial offers throughout EA1, EA2 and WD1 for inclusion in ex post runs as Predictable Price Maker (settlement rules would be different) • “Linked Energy Limited Generator” – operation of a Predictable Price Taker Negative Generator informs Energy Limit of separate Generator possible throughout the day

  5. The Criteria • Offering & Scheduling • Commercial Offer data • Technical Offer Data • Other data provision & sharing • Energy Settlement • Calculation of Eligible Availability • Calculation of Capacity Payments • When in generation mode • When in pumping mode • Calculation of Constraint Payments and Charges • Calculation of Uninstructed Imbalance Payments and Charges • Credit & Settlement • Inclusion in the MSP software and uplift • Treatment of Energy Storage Units when under test

  6. Assumptions about All Three Options • All revenues are not dependent on system operator dispatch, or nominated offer from storage operator • If we discuss an energy limit, it is a market-based energy limit • In the Indicative and Initial Pricing: • Price Making Storage: Energy Target at end of Optimisation Time Horizon • Availability Feasible Storage Unit: Energy based on the flows arising from MSQ scheduling • Linked Energy Limited Generator: Energy based on the flows arising from MSQ scheduling of the two different units

  7. More Detail: Full Price Making Storage • “Full Price Making Storage” • As pumped storage, but • Price quantity pairs submitted for the trading day, across the full range of pumping and generation, including no load • Consideration of start-up • Storage scheduling also takes into account cost to generate • Dispatch signals sent to market, constraint payments, make whole payments, uninstructed imbalances, etc. • Consideration of offer price for capacity payment • Capacity payment otherwise handled equivalently, which is energy limited availability to generate, less demand MSQ (see next slide)

  8. Capacity Payment for Storage • We propose that for any option considered, that this eligible availability calculation (or its financial equivalent) is utilised Availability Eligible Generator Availability Gen MSQ MSQ Time (one Trading Day) Eligible Availability (earns CPM) Pump

  9. More Detail: Availability Feasible Storage Unit • “Availability Feasible Storage Unit” • Shares some characteristics with individual Interconnector Unit, but sufficiently different not to take the IU as starting point • Traded by • Price quantity pairs (negative for storage) submitted half-hourly, no load, and with technical offer data • Note that start-up costs again may be an undue complication here • Adjusted by participant for EA1, EA2, WD under BCOP to secure storage and generation availability • Secured storage becomes demand availability in Schedule (see later for eligible availabilty) • Secured generation becomes generator availability in Schedule (see later for eligible availabilty) • Will need to limit secured availability with some proxy for energy limit (see next slide) • Market schedules availabilities as per normal • Submitted meter data, dispatch quantities, with constraint payments, make whole payments • Capacity payments against technical availabilities, and not secured availability, subject to energy limit • As per pumped storage

  10. More Detail: Why Secure Availability? • Why secure availability at all? • Mechanism to ensure the plants energy limits are obeyed • Otherwise, plant could be scheduled to generate all day long • “Availability Feasible Storage Unit” energy limit can be obeyed as: • an adjustment to the secured availability outputs of EA1, EA2 and WD • within the MSP scheduler itself • This moves this option towards “Full Price Maker Storage” anyway, rendering the need to secure availability moot • Offers would move with anticipation of demand pricing • Participant would be managing the availability of the machine throughout the day based on accuracy of those offers, may be overly restrictive

  11. More Detail: Linked Energy Limited Generator • “Linked Energy Limited Generator” • Traded by • Nominated quantity of negative Predictable Price Taker Generator Unit sets storage throughout the day. • Still subject to central dispatch as opposed to autonomous unit, but overall yielding a lower risk of having revenues dependent on system operator dispatch • Constraint payments for negative Predictable Price Taker Generator Unit • Energy limit of energy limited generator unit must be consistent with submitted profile in offer and limitations of storage • Energy limit updated if System Operator moves schedule of Predictable Price Taker Generator Unit • Would need BCOP understanding on adjustment of COD from EA1 through WD • Capacity payments for energy limited generator as per normal • Predictable Price Taker generator unit would pay for scheduled MSQ • Metered generation, dispatch quantities, submitted separately

  12. Evaluate Scheduling

  13. Evaluate EA and Capacity Payment

  14. Evaluate COD and TOD

  15. Evaluate Constraint Payments and Charges

  16. Evaluate Uninstructed Imbalances and Charges

  17. Evaluate Pricing and Uplift

  18. Evaluate Credit Cover, Settlement, Under Test

  19. Combined Evaluation (Gaelectric Initial View)

  20. Combined Evaluation (Gaelectric Initial View) • The Availability Feasible Storage Unit and the Linked Energy Limited Generator both allow the Participant to have a degree of influence over the MSQ or Availability feeding into the MSQ software • The Linked Energy Limited Generator is likely the simplest implementation • The Full Price Maker Storage option has the largest uncertainty around the pricing, but otherwise fits best with the SEM High Level Design • The Availability Feasible Storage Unit is also a relatively complex implementation, but best fits with potential future market design

  21. Gaelectric Proposal • Gaelectric proposes to support development of full Price Maker Storage Proposal • Forward to ABB for Effort to Assess costings and timelines

  22. If the MSP Software Says No • What is the absolutely simplest scenario whereby storage with material SRMC can recover its costs? • Costs are SMP for storing • Costs are material SRMC for running • Let the market run, with storage efficiency > 1, equal to the energy-in, energy-out capability of the machine • Storage submits an offer (start up, no-load, PQ pairs) • What algebraic mechanism can be used to ensure storage covers its costs and earns appropriate inframarginal rent?

  23. The Constraint Payment Storage • Any storage which produces more energy than it consumes due to the addition of a further fuel, will always be scheduled in the market SMP = €20/MWh SMP = €20/MWh MSQ Gen 1.3MWh 1MWh Time (one Trading Day) Pump Revenue = -€20 + €36 = €16; Market will schedule plant with flat SMP

  24. If the MSP Software Says No • As the MSP software assumes the SRMC is zero, more IR will be earned than if we can explicitly include it in the schedule • Take the three scenarios that can occur in a Trading Period • Dispatched but not in schedule • Dispatched and in schedule • Not dispatched but in schedule

  25. Dispatched, but not in Schedule • As per all plant, it should recover its SRMC for periods where dispatch was greater than MSQ • Pays nothing for demand • Receives generation price

  26. Dispatched, and in Schedule • As per all plant, it should earn the SMP and recover its costs • Pays SMP for storage • Receives SMP for generation • Complication 1: • Not guaranteed to recover its SRMC • So you either: • Work out if it did over all periods of simultaneous DQ and MSQ in the Trading Day, and top-up as necessary (an altered make-whole mechanism) • Make a SRMC payment to the generator for it to recover its costs no matter what the recovery of its SRMC (probably too generous)

  27. Make Whole or Paid Costs no Matter What • Given: “As the MSP software assumes the SRMC is zero, more IR will be earned than if we can explicitly include it in the schedule” • It seems reasonable to look at periods of simultaneous DQ and MSQ over a trading day, and work with the limited make whole mechanism where SRMC have not been recovered.

  28. Not dispatched, and in Schedule • As per all plant, it should pay back its offer • Complication 2: • When paying back the offer, there is no guarantee that inframarginal rent earned will cover the SRMC, as it was not included in the scheduler’s consideration • So you may have to limit the returned payment during the period where there was greater MSQ than dispatch, to recover costs.

  29. What‘s the Proposal Then? • Split the settlement of the plant into periods in the day where: • There is dispatch greater than MSQ – pay the offer to the plant • There is market schedule greater than dispatch – pay back the offer, subject to sufficient SMP being earned during that period • There is matched market schedule and dispatch across the trading day • For matched quantities, determine if a make whole payment, calculated over the Trading Day is necessary

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