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Forward Reserve Market Analysis and Optimization Strategies

Explore auction and settlement results, issues, and upcoming dates in the NEPOOL market. Learn about concrete investments, self-selection mechanisms, and performance drivers. Gain insights into market optimization and settlement analysis.

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Forward Reserve Market Analysis and Optimization Strategies

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  1. Forward Reserve Market Experience and Issues Mario DePillis NEPOOL MC 4/14/04

  2. Outline • Auction result analysis • Settlement result analysis • Issues and upcoming auction dates

  3. Auction Result Analysis

  4. Analysis of First AuctionIn Compliance Filing • Concrete investments made to shoulder energy price risk • Initial evidence shows performance was a primary driver of the clearing price • Evidence shows self-selection mechanism worked

  5. Concrete Investments • Addition of oil-fired capability • Purchase of firm gas • Relaying of electronic dispatch signals to a station previously receiving only voice commands • Addition of evening shift to staff plant through 23:00

  6. Performance Was A Primary Price Driver Volume Weighted Offers for 10-Minute Forward Reserve, Successful Offers Only

  7. Self-Selection Worked • Self-selection designed to get “natural peakers” by setting appropriate heat rate • Offers from fuel efficient combined cycles were too high to win auction • None of accepted units would trip MMU screens • Four accepted units had marginal costs that were close to strike price

  8. Self-Selection Worked

  9. Auction Optimization Note • Auction minimizes total bid cost • Resource is always selected in market (10 or 30) where it will contribute most to reducing costs • Resource is always selected in the market its offer earns the most • Auction price 10-Min. = 30-Min. • 1 MW is offered 1 cent lower in 30-Min. than in 10-Min. market • Result: 1 MW is designated in 30-Min. market

  10. Settlement Result Analysis

  11. Cold Snap 2004 Results

  12. Greater Availability Incentive

  13. Penalties By Type

  14. Issues and Auction Dates

  15. Failure To Reserve Vs. Failure To Activate Frequent: unit never starts when called and then deemed unavailable • System Operator notices failure • Confers with plant operator • System Operator places unit in “off-line and unavailable” mode = Unit Control Mode 1 • Real-time failure becomes Failure-to-Reserve

  16. Some Participant Errors • Failure to review daily report on FRM results by unit • Out of date Claim-10, Claim-30 values • These determine how much off-line reserve is counted on unit • See www.iso-ne.com/smd/Frequently_Asked_Questions/Special_Notice_for_C10_and_C30.doc • Declaring 2 hour min-down time • Not verifying plant characteristics with plant managers

  17. Summer Auction For 18 month auction calendar see: www.iso-ne.com/smd/forward_reserve_market_information

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