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Reserve Proposals

Reserve Proposals. David LaPlante, Vice President, Markets Development March 14, 2001. Summary of Presentation. Describe Objectives of New Reserve Proposal presented to PC on 2/15 Describe How the Proposal would work Compare it to current initiatives

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Reserve Proposals

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  1. Reserve Proposals David LaPlante, Vice President, Markets Development March 14, 2001

  2. Summary of Presentation • Describe Objectives of New Reserve Proposal presented to PC on 2/15 • Describe How the Proposal would work • Compare it to current initiatives • Present a progress report on unit commitment and uplift reduction • Recommendation

  3. Proposal Objectives 1. Assure that reserve requirements are met with the lowest possible production loss. 2. Provide incentive for flexible units and flexible bidding of all units . 3. Reduce Uplift as much as possible 4. Include replacement reserves in reserve markets. 5. Cascade prices in reserve markets.

  4. Alternative Approaches • Participant Committee Proposal described by Jeff Tranen on 2/15 (PC Proposal) • Demand curve for reserves • Other Initiatives: • Three part bidding • Net Commitment Period Compensation

  5. Motivation for PC Proposal • To assure that energy and reserves are met with most efficient combination of energy and fast start resources • Minimize use of inflexible steam units providing reserve, consistent with minimizing total production costs

  6. PC Proposal DescriptionBusiness Process • Commit units to provide energy only to determine most efficient energy units • Determine if this commitment yields adequate reserves. If so, stop • If not, back down fast start resources to provide reserves • Hold units at backed down level and run new commitment to provide sufficient energy and reserves

  7. Proposal Description Reserve Market Pricing • Calculate Lost Opportunity Cost of units backed down to provide reserves in real-time (Real-Time ECP - bid) • Use this bid to price reserves • Note: Units would be held back in energy market to provide reserves but price of reserves not calculated until real time based on actual ECP

  8. Analysis of PC Proposal • Unit Commitment Objective Function. • Minimize energy production costs to meet: • Energy Requirement • Ten-Minute Spin Requirements • Ten-Minute Non-Spin Requirements • Thirty-Minute Requirement • Commitment then checked to see if replacement reserve is met • In recent months no adjustment to commitment needed for replacement reserves

  9. Analysis of PC Proposal • Current commitment objective function meets proposal objective of best use of resources (and as bid characteristics) to provide energy and reserves • Energy and reserves of fast start optimized by unit characteristics

  10. Current Initiatives • Several Initiatives underway to meet same objectives as PC proposal • Net Commitment Period Compensation • Three-Part Bidding • Demand Curve for Reserves

  11. Comparison of PC Proposal and Current Initiatives • Objective 1: Meet energy and reserve requirements at minimum product costs • Current unit commitment procedures do this. It co-optimizes energy and reserve requirements (without an accounting for reserve bid prices) • No need to change commitment process as described in PC Proposal

  12. Comparison of PC Proposal and Current Initiatives • Objective 2: Provide Incentives for Flexible Resources and Flexible Bidding • Both proposals seek to increase revenues in the reserve market • Magnitude of revenues increase in either proposal is uncertain • Current initiatives with NCPC and 3-Part Bidding, incent shorter run times and lower low limits

  13. Comparison of PC Proposal and Current Initiatives • Objective 4 -- Reduce Uplift • The amount of uplift reduction that occurs depends on how successful the proposals are with incenting more flexible unit characteristics. • Other Important Efforts to reduce uplift are underway and have had some success

  14. Comparison of PC Proposal and Current Initiatives • Objective 4: Include Replacement Reserve in 30 Minute Market • New proposal does this by explicitly increasing amount cleared in market • Current initiatives does this by increasing an amount cleared but with a demand curve • New proposal seems more market driven but could increase use of reserve price cap

  15. Comparison of PC Proposal and Current Initiatives • Objective 5: Cascade Prices • New proposal does this fully • Current initiatives limited cascading. Full cascading could be incorporated

  16. Progress Report on Reducing Unit Commitment and Uplift • Steve Whitley has taken several steps to improve commitment and meet proposal objectives: • September 15, 2000: reduction of capacity margin from 1500 MW to 1350 MW • February 2, 2001: New York reserve sharing 1350 MW to 1050 MW • Increased internal focus on uplift reduction • Improved transmission outage scheduling • Improved satellite coordination of security

  17. Progress Report -Replacement Reserves, met without Additional Commitment • Lower Requirement means fewer units needed so additional commitment not needed • Units committed economically or via self-schedules provide needed reserves • This has resulted in lower uplift • Following charts show reduction in uplift. Analysis of available capacity over peak is underway

  18. Recently Declining Uplift

  19. Uplift Since Start of Markets

  20. Implementation • PC proposal - To fully implement concept in PC proposal of a day ahead selection of units in reserves requires a day ahead market of some kind. This would take several months to design and several months to implement • Current Initiatives - 3 to 6 months

  21. Recommendation • Continue with Current Initiatives • Continue work on improving reserve markets • Day-Ahead Concept. • Unit Commitment Demand Curve

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