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Markets Committee Mark Karl, ISO-NE Danielle Powers, ISO-NE January 14-15, 2004

Locational ICAP: Two-Area Market Clearing Examples. Markets Committee Mark Karl, ISO-NE Danielle Powers, ISO-NE January 14-15, 2004. Proposed Capacity Demand Curve. X-axis shows capacity as ratio of 1 in 10 criterion requirement

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Markets Committee Mark Karl, ISO-NE Danielle Powers, ISO-NE January 14-15, 2004

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  1. Locational ICAP: Two-Area Market Clearing Examples Markets Committee Mark Karl, ISO-NE Danielle Powers, ISO-NE January 14-15, 2004

  2. Proposed Capacity Demand Curve • X-axis shows capacity as ratio of 1 in 10 criterion requirement • This curve would be starting point for the demand curve to be applied to all ICAP regions

  3. Example 1 - Hypothetical Two Region Pool Import Constrained Region 1000 MW CTR Rest of Pool Region 6,000 MW Total Capacity Requirement 8,700 MW Supply Available 4,000 MW Total Capacity Requirement 3,000 MW Local Capacity Requirement 3,200 MW Supply Available

  4. Calculation of Regional Requirements and Transfer Limits for Hypothetical Two Region Pool

  5. Capacity Demand Curve for Each ICAP Region Rest of Pool ICAP Region 1 in 10 Level (Demand Curve Scaling Factor = 1) Import Constrained ICAP Region 1 in 10 Level (Demand Curve Scaling Factor = 1)

  6. Example 1 - Clearing Solution for TwoRegions • Clearing engine seeks to minimize the total value of accepted offers, subject to the obligation-price relationship specified by each regional demand curve • Up to 1,000 MW in Rest of Pool transferred to Import Constrained Region. (More would be economic, but would violate limit) • ALL capacity and ALL obligations cleared in region in which they are located. • Strictly speaking, it is not possible to construct a demand curve reflecting transfers because clearing engine does not identify which offers “transfer” • “Shifting” of supply to reflect transfers as shown on following chart can be used to illustrate impact of transfers on regional prices and obligations, however

  7. Supply Curve for Each ICAP Region – with Transfer Actual MW Cleared Rest of Pool ICAP Region 8,700 - 1,000 MW (7,700 MW) Available Resulting Clearing Price 1,000 MW “Shift” Import Constrained ICAP Region 3,200 + 1,000 MW (4,200 MW) Available Actual MW Cleared Resulting Clearing Price 1,000 MW “Shift”

  8. Example 1 - Resulting Regional Clearing Prices • With transfers: • About 6,700 MW clears in Rest of Pool, at a price of just over $2/kw-month. (Scaling Factor = 6,700/6,000 = 1.12) • About 4,200 MW available to the Import Constrained region clears at a price just over $6/kw-month. (Scaling Factor = 4,200/4,000 = 1.05) • All capacity and obligations settled at prices in the ICAP Region in which they are located. • Load in Import Constrained Region pays the Import Constrained Region price for the total purchase requirement • Because 1,000 MW can be imported, the result is load pays the zonal clearing price for 1,000 MW that is located in Rest of Pool • Result is over collection equal to $4 price difference times 1,000 MW transfer capability. Over collection is paid to holders of 1,000 MW of Capacity Transfer Rights

  9. Example 2 - Hypothetical Two Region Pool Import Constrained Region 2000 MW CTR Rest of Pool Region 6,000 MW Total Capacity Requirement 8,700 MW Supply Available 4,000 MW Total Capacity Requirement 2,000 MW Local Capacity Requirement 3,200 MW Supply Available

  10. Example 2: Decreased Local Purchase Requirement/ Additional Transfer Capability • If modeling had shown that only 2,000 MW (down from 3,000 MW previously) of capacity was needed in the Import Constrained Region • The capacity transfer limit would increase to 2,000 MW (up from 1,000 MW) • Increased levels of transfer between regions would clear market • Total level of transfer will depend on offers in each region

  11. Supply Curve for Each ICAP Region – with Transfer MW Cleared Rest of Pool ICAP Region 8,700 - 1,600 MW (7,100 MW) “Available” Resulting Clearing Price 1,600 MW “Shift” Import Constrained ICAP Region 3,200 + 1,600 MW (4,800 MW) “Available” MW Cleared 1,600 MW “Shift” Resulting Clearing Price

  12. Example 2: Resulting Regional Clearing Prices • With transfers: • About 6,600 MW clears in Rest of Pool, at a price of just under $3/kw-month. (Scaling Factor = 6,600/6,000 = 1.10) • About 4,400 MW clear in the Import Constrained Region, at a price just under $3/kw-month. (Scaling Factor = 4,400/4,000 = 1.10) • Only 1,600 MW of 2,000 MW of transfer capability is utilized • Remaining 400 MW of transfer capability is available, but no additional opportunity exists for economic transfers across the interface • Constraint is not binding between regions • Prices in two regions are equal, at a bit less than $3/kw-month • No over collection • All capacity is transferred at the same value • CTRs have no value

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