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NPRR 385

NPRR 385. Negative Price Floor Discussion for 09/14/2011 WMS Meeting. NPRR 385 Negative Price Floor Proposal. NPRR385 proposes the implementation of an administrative Real-Time Settlement Point Price floor of negative $251/MWh for Resource Nodes, Hubs and Load Zones.

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NPRR 385

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  1. NPRR 385 Negative Price Floor Discussion for 09/14/2011 WMS Meeting

  2. NPRR 385 Negative Price Floor Proposal • NPRR385 proposes the implementation of an administrative Real-Time Settlement Point Price floor of negative $251/MWh for Resource Nodes, Hubs and Load Zones. • The price floor will not apply in the CRR auction or DAM • The price floor is applied after-the-fact in Real Time Settlements • The RT 5 minute LMPs and SPPs computed by SCED and published in Real Time will not be adjusted to show the application of the LMP floor.

  3. Negative Price Events • Negative prices at Resources Nodes signal that system conditions require a reduction in the amount of energy injected by Generation Resources. This condition can arise in Real Time as the result of two different scenarios: • A system-wide event that occurs when the system load decreases below the aggregated Generation Resource Low Sustained Limit (LSL). This event represents a system-wide over supply of generation that must be corrected to assure that the system frequency does not exceed the high limit. • A specific local event on the transmission network arising from network transmission congestion that occurs when it is not possible for SCED to Dispatch Generation Resources to produce sufficient counter flow on a network transmission constraint to prevent a violation. • Refer to the ERCOT comments on NPRR 385, dated 08/01/2011, for details regarding negative price events and ERCOT overall concerns regarding the use of an LMP cap.

  4. ERCOT Observation • The Shadow Price Caps already set a negative price floor for those negative price events that arise because of local transmission congestion. • Under the revised ERCOT Shadow Price Cap procedure pending Board approval, the Shadow Price Cap that will apply to a transmission constraint creating the negative prices in Real Time will be either the Generic Shadow Price Caps or the Holistic Shadow Price Cap. • Depending on shift factor impacts, the Holistic Shadow Price Cap would result in a $2,000.00 Shadow Price Cap on the constraint. All else being equal, the affect on negative LMPs should be (−$2000.00 * Shift Factor Impact + System Lambda). • The use of Shadow Price Caps to limit the impact of congestion on LMPs results in the symmetric treatment of Shadow Price Caps with regard to the determination of positive and negative LMPs and maintains relative price signals for the optimum Generation Resource dispatch in Real Time. • The use of Shadow Price Caps to manage the limits on LMPs results in no changes to Settlement Payments and Charges. • ERCOT analysis estimates that had a − $251.00/MWh LMP/SPP floor been in place during the period 12/2010 through 07/2011, the ERCOT Market’s Revenue Neutrality charges would have been increased by approximately $6.5 M.

  5. ERCOT Recommendation • ERCOT recommends that further review of this NPRR be conducted by the appropriate stakeholder committees to allow consideration of the following: • The discussions related to the Holistic Shadow Price Cap methodology and the approval of the revision of the ERCOT Shadow Price Cap procedure pending at the Board; and • The potential need to provide supporting analysis demonstrating that the additional step of setting negative LMP or SPP caps in addition to Shadow Price Caps is necessary to support Resource Adequacy price signals.

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