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Forward Reserve Market Experience and Issues. Mario DePillis NEPOOL MC 4/14/04. Outline. Auction result analysis Settlement result analysis Issues and upcoming auction dates. Auction Result Analysis. Analysis of First Auction In Compliance Filing.
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Forward Reserve Market Experience and Issues Mario DePillis NEPOOL MC 4/14/04
Outline • Auction result analysis • Settlement result analysis • Issues and upcoming auction dates
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
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
Performance Was A Primary Price Driver Volume Weighted Offers for 10-Minute Forward Reserve, Successful Offers Only
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
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
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
Some Participant Errors • Failure to review daily report on FRM results by unit • Out of date Claim-10, Claim-30 values • These determine how much off-line reserve is counted on unit • See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
Summer Auction For 18 month auction calendar see: www.iso-ne.com/smd/forward_reserve_market_information