module 3 day-ahead market - electric reliability council ... · 3. module overview. exit. enter....

Module 3

Day-Ahead Market

3

Module Overview

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Enter

Fundamentals of the Nodal Market

Day–AheadMarket

4

• Identify the timeline and define the purpose of the Day-Ahead Market

• Describe the inputs into the Day-Ahead Market

• Identify the submittal requirements for the Day-Ahead Market offers and bids

• Illustrate the Day-Ahead Market clearing process

• Identify the charges and payments associated with the Day-Ahead Market

Upon completion of this module, you will be able to:

Module Objectives

5

Bids vs. Offers

EnergyLoadZone 4

$40

A Bid is a proposal to buy:

• A Product• At a Location• For a Price

An Offer is a proposal to sell:

• A product• At a Location• For a Price

6

Products bought and sold in the DAM:

Day-Ahead Market

Energy Offers & Bids

Ancillary Service Offers

PTP Obligation Bids

Energy Awards

PTP Obligation Awards

Ancillary Service Awards

Day-AheadMarket

7

DAM Participation is Voluntary & Financially Binding

Day-Ahead Market



PTP Obligation Bids

Energy Awards

PTP Obligation Awards

Ancillary Service Awards

Day-AheadMarket

Some exceptions:

• QSEs with load are financially obligated for Ancillary Services

• Ancillary Service Awards are physically binding

8

0

50

100

150

200

250

300

350

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

$/M

Wh

Hour

Houston Load Zone 7/22/2017

DAM-SPP

Real Time-SPP

Real-Time Prices are Volatile!

Why the Day-Ahead Market?

9

Submit:• Bids & Offers• Self-Arranged AS

Quantities

Update:• COP• AS Trades

DAM involves both QSE and ERCOT activities

Day-Ahead Market Activities Overview


Quantities

Update:• COP• AS TradesQ

SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC

Publish AS Obligations and system conditions

Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

10

ERCOT must publish Ancillary Service Obligations

ERCOT Activities at 6 a.m.


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

11

The required quantity in MW of each Ancillary Service for each hour of the Operating Day ERCOT-wide

• Developed by ERCOT

• Posted to MIS Public Area by 0600

Ancillary Service (AS) Plan

Ancillary Service Plan

12

• AS Plan quantities are assigned to LSEs based on Load Ratio Shares

• Assignments are made by service, by hour

Ancillary Service (AS) Plan


13

• AS quantities are then aggregated to the QSE Level by service, by hour

• Posted to MIS Certified Area by 0600 of the Operating Day

Ancillary Service (AS) Obligation


14

QSE chooses how to fulfill Obligations

Ancillary Service Obligations

Allow ERCOT to procureSelf-Arrange

DAM

15

The net amount of Ancillary Service capacity that the QSE is obligated to deliver to ERCOT, by hour and service type, from Resources represented by the QSE.

Ancillary Service (AS) Supply Responsibility

Ancillary Service Supply Responsibility

16

Ancillary Service (AS) Supply Responsibility

Ancillary Service Supply Responsibility

Self-Arranged AS Quantities+ AS Trades in which the QSE is the Seller+ Awarded AS Offers– AS Trades where the QSE is the Buyer

= Ancillary Service Supply Responsibility

Calculation

17

The AS Resource Responsibility indicates which of the QSE’s Resources will be obligated to provide the AS Supply Responsibility in Real-Time.

Ancillary Service (AS) Resource Responsibility

Ancillary Service Resource Responsibility

18

• Communicated through Current Operating Plan (COP)

Identifies:

• Hour(s) Resource will be providing AS• Type of AS• Amount (MW) of AS

Ancillary Service (AS) Resource Responsibility

Ancillary Service Resource Responsibility

QSE’s AS Resource Responsibility must be arranged by 1430 Day-Ahead:

• After DAM• Before DRUC

19

Ancillary Service – Scenario

• ERCOT assigns part of the AS Plan quantity, by service, by hour, to each LSE based on its Load Ratio Share of seven days ago.

• The ERCOT load for the hour we are using in our example is 50,000 MW.

ERCOT Load

50,000 MW

Scenario

20

• ERCOT uses each LSE’s Adjusted Metered Load to determine Load Ratio Share

Two LSEs:

Ancillary Service

Adjusted Metered Load

LSE “Lazy P” Load= 1000 MW

LSE “Diamond Bar” Load = 1500 MW

P

Scenario

21

Load Ratio Share Calculation:

Ancillary Service

Load Ratio Share =

(LSE ) 1000 MW / 50,000 MW = 2%

(LSE ) 1500 MW / 50,000 MW = 3%

P

Adjusted Metered Load

LSE “Lazy P” 2%

LSE “Diamond Bar” 3%

P

Scenario

22

• QSE 1 Load Ratio Share is sum of both LSEs Load Ratio Shares

• ERCOT will use QSE 1’s Load Ratio Share to determine

• Ancillary Service Obligation for each service, each hour of Operating Day

QSE 1 represents both LSEs

Ancillary Service

Load Ratio Share of QSE 1:

(LSE ) 2% + (LSE ) 3% = 5%P

Scenario

23

ERCOT must publish System Conditions

ERCOT Activities at 6 a.m.


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

24

System Conditions posted by ERCOT to MIS:

Publishing

ERCOT Posts… For

Weather assumptions Forecasting system conditions and Dynamic Ratings Processor

ERCOT System, Weather Zone, and Load Zone forecasts Next seven days, by hour

Load forecast distribution factors MPs to estimate Load at the Bus level

Settlement Points List and Electrical Buses Mapping

Current list of Settlement Points that may be used in market processes and transactions

List of active Transmission constraints Indication of likely binding constraints

Forecasted Load Profiles Non-IDR metered customers

Forecasted Distribution Loss Factors and Transmission Loss Factors Each Settlement Interval

Network Operations Model topology* Each hour of the Operating Day

*Available on MIS Secure

25

Next, let’s discuss QSE Activities:

QSE Activities Overview


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

26

QSE Activities Overview

Submit:• Bids & Offers for Energy • Bids for PTP Obligations• AS Offers• Self-Arranged AS Quantities

Update:• Current Operating Plan• AS Trades

QSE

Act

ivity

14301000

27

Submit Three-Part Supply Offers

QSE Activities – Bids and Offers for Energy


Update: • Current Operating Plan• AS Trades

QSE

Act

ivity

14301000

28

• Offer to sell energy from a Generation Resource • Must specify:

• Resource name• First and last hour• Expiration date and time

What is a Three-Part Supply Offer?

Three-Part Supply Offer

Minimum Energy OfferStartup Offer Energy Offer Curve$/MWh

MW

$/Start

$/MWh

29

• Cost to start Resource and reach Low Sustained Limit (LSL)• Actually three separate offers

• Hot Start• Intermediate Start• Cold Start

What is a Startup Offer?



MW

$/Start

$/MWh

30

Cost per MW per hour to operate a Resource at Low Sustained Limit (LSL)

What is a Minimum-Energy Offer?



MW

$/Start

$/MWh

31

These two offers can only be submitted as part of a Three-Part Supply Offer.

Startup & Minimum-Energy Offers



MW

$/Start

$/MWh

32

• Offers must be ≤ 200% of Generic Costs

• QSE must submit percentages of Fuel Index Price (FIP) and Fuel Oil Price (FOP) at LSL to determine Generic Minimum Energy Cost

Start Up and Minimum Energy Offers Caps:



MW

$/Start

$/MWh

33

• QSE may submit verifiable cost data for actual Startup & Minimum-Energy cost

• Then, offers must be ≤ 200% of approved Verifiable Costs

Start Up and Minimum Energy Offers Caps:



MW

$/Start

$/MWh

34

Offer to sell energy at or above a certain price, and at a certain quantity (above Low Sustained Limit)

What is an Energy Offer Curve?



MW

$/Start

$/MWhA QSE may submit just an Energy

Offer Curve, independent of Startup & Minimum Energy Offers

35

• Monotonically increasing offer curve

• Ten price/quantity pairs max

• One MW minimum quantity

• Prices between -$250 and System-Wide Offer Cap (SWCAP)

• Inclusive or exclusive designation relative to DAM Ancillary Service offers from the same Resource

• Percentage of Fuel Index Price (FIP) and Fuel Oil Price (FOP) for generation above LSL

An Energy Offer Curve must include:


Energy Offer Curve$/MWh

MW

36

Where are the Three Parts used?



StartupOffer

MinimumEnergyOffer

EnergyOfferCurve

Day-Ahead Market

RUC-Commitment

Real-Time Dispatch

37

Submit Energy Bids & Energy-Only Offers

QSE Activities – Bids and Offers for Energy


Update:• Current Operating Plan• AS Trades

QSE

Act

ivity

14301000

38

What’s the difference?

Energy Bids & Energy-Only Offers

DAM Energy Bid:

Is a QSE’s willingness to buy energy:

At or below a certain price

At a certain quantity

At a specific Settlement Point in the DAM.

DAM Energy-Only Offer:

• Is a QSE’s willingness to sell energy:

At or above a certain price

At a certain quantity

At a specific Settlement Point in the DAM.

39

• Energy-Only Offers are NOT resource-specific

• QSE does not have to own Resources to offer energy

DAM Energy-Only Offers


In the Day-Ahead Market, the QSE is paid

the Settlement Point Price for their energy

award

In Real-Time, the QSE has a

financial obligation to provide the energy

40

• Proposal to buy energy

• At a specified settlement point

• At or below a specified price

DAM Energy Bids


In the Day-Ahead Market, the QSE is

charged the Settlement Point Price for their

energy award

In Real-Time, the QSE receives a

financial credit for providing the energy

41

• Operating Day

• The Settlement Point

• The expiration time and date of the offer or bid

• Price and quantity for each hour of the offer or bid• Curve• Fixed Quantity Block• Variable Quantity Block

QSE must include:


42

• Operating Day

• The Settlement Point

• The expiration time and date of the offer or bid

• Price and quantity for each hour of the offer or bid• Curve• Fixed Quantity Block• Variable Quantity Block

QSE must include:


Day-Ahead Market Energy-Only Offers:

• Price range must be between -$250.00 and System Wide Offer Cap

• Minimum offer = 1 MW

Day-Ahead Market Energy Bids

• Minimum bid = 1 MW

43

• Offers - Monotonically increasing

• Bids - Monotonically decreasing

Curve with up to 10 Price/Quantity Pairs

Energy-Only Offer and Energy Bid Types

Energy-Only Offer

$ / M

Wh

MW

Energy Bid

$ / M

Wh

MW

44

• Fixed Quantity – All MW or nothing

• Variable Quantity – Up to specified MW

Block with Single Price/Quantity Pair


Fixed Quantity Block

$ / M

Wh

MW

Variable Quantity Block

$ / M

Wh

MW

45

QSE may also expand a Block Bid or Offer to be a Multi-Hour Block



$ / M

Wh

MW


$ / M

Wh

MW

Multi-hour Block? Multi-hour Block?

46

• Fixed Quantity Multi-hour Block:

• Bids 10 MW at $50/MWh for HE 0700-2200.

• Single price, single quantity for all hours in the block

Scenario:

Fixed vs. Variable Multi-hour Blocks

Fixed Variable

Hours: 0700-2200 0700-2200

MW: 10 Up to 10

$/MWh: $50.00 $50.00

Fixed – Must clear all MWs for all hours or none Variable – Must clear all hours or none

Scenario

47

• Variable Quantity Multi-hour Block:

• Bids 10 MW at $50/MWh for HE 0700-2200.

• Single price, single “up to” quantity contingent on the purchase of all hours in the block

Scenario:

Fixed vs. Variable Multi-hour Blocks

Fixed Variable

Hours: 0700-2200 0700-2200

MW: 10 Up to 10

$/MWh: $50.00 $50.00

Fixed – Must clear all MWs for all hours or none Variable – Must clear all hours or none

Scenario

48

• ERCOT will notify the QSE submitting via the Messaging System

• The QSE can then resubmit the offer or bid within appropriate market timeline

If an offer or bid is rejected or invalid:

Validation

If an offer or bid is accepted:

ERCOT will continuously validate offers and bids and continuously display on the MIS Certified Area information that allows any QSE to view its valid offers and bids.

49

Submit Bids for PTP Obligations

QSE Activities – PTP Obligations



QSE

Act

ivity

14301000

50

Congestion Costs

Resource Node

$30/MWh

$30/MWh

$30/MWh

Hub

Load Zone

$40/MWh

$50/MWh

$25/MWh

Price separation across the grid exposes buyers and sellers of energy to

Congestion Costs

51

• Hedge congestion costs in Real-Time Market

• Purchased at DAM price spread

• Settled at Real-Time price spread

Day-Ahead Market PTP Obligations

Hedging Congestion Costs

Source

Hub

Sink

$40/MWh

$50/MWh

$25/MWh

52

• Operating Day

• Source and Sink Settlement Points

• For each hour:

• MW Quantity

• (Sink – Source) price buyer is willing to pay

QSE must include

DAM Point-to-Point Obligation Bids

SourceSettlement

Point

SinkSettlement

Point

PTP Obligation

53

Submit Ancillary Service Offers

QSE Activities – Ancillary Service Offers



QSE

Act

ivity

14301000

54

Offer to supply one or more Ancillary Service Capacities in the Day-Ahead Market or a Supplemental Ancillary Services Market

What is an Ancillary Service Offer?


Type of AS Offer

Reg Up Price / MW

Reg Down Price / MW

Responsive Reserve Price / MW

Non-Spin Price / MW

55

Ancillary Service Offers may be inclusive of Energy Offers

Ancillary Service Offers – Inclusive / Exclusive

AND

Type of AS Offer

Reg Up Price / MW

Reg Down Price / MW


Non-Spin Price / MW

Energy Offer CurveIncremental cost above LSL ($/MWh)

MW

56

Ancillary Service Offers may be exclusive of Energy Offers

Ancillary Service Offers – Inclusive / Exclusive

Type of AS Offer

Reg Up Price / MW

Reg Down Price / MW


Non-Spin Price / MW


MW

OR

57

• DAM assumes the Resource is Off-Line

• Resource can only be awarded AS if the Three-Part Supply Offer is also awarded

• The total capacity awarded must be within the Resource’s limits as specified in the COP

AS Offer linked to a Three-Part Supply Offer:

Linked Ancillary Service Offers

Minimum Energy Offer

Startup Offer Energy Offer CurveIncremental cost above LSL ($/MWh)

MW

$/Start

$/MWh

Cost up to LSL Cost per hour at LSL

58

• DAM assumes the Resource is On-Line

• The total capacity awarded must be within the Resource’s limits as specified in the COP

AS Offer linked to other AS Offers or Energy Offer Curve:

Linked Ancillary Service Offers


MW

59

• Operating Day

To submit an AS Offer, a QSE must include:

Submittal Criteria for AS Offers

60

• Operating Day

• The Resource



61

• Operating Day

• The Resource

• Quantity of MWs offered, and price for each AS type being offered from this same capacity



Type of AS Offer

Reg Up MW $ / MW

Reg Down MW $ / MW

Responsive Reserve MW $ / MW

Non-Spin MW $ / MW

62

• Operating Day

• The Resource


• The expiration time and date of the offer



63

• Operating Day

• The Resource


• The expiration time and date of the offer

• Fixed or variable quantity indicator



Fixed Quantity Block Variable Quantity Block

64

• Can be offered only by a Load Resource

• Single price ($/MW) and single quantity (MW)

• Cannot exceed 150 MW

Fixed Quantity Block Ancillary Service Offer:


Fixed Variable

Hours: 0700-2200 0700-2200

MW: 10 Up to 10

$/MW: $15.00 $15.00

Can be multi-hour blockFixed Quantity Block

$ / M

W

MW

65

• Can be offered by Generation or Load Resource

• Single price ($/MW) and single “up to” quantity (MW)

Variable Quantity Block Ancillary Service Offer:


Fixed Variable

Hours: 0700-2200 0700-2200

MW: 10 Up to 10

$/MW: $15.00 $15.00

Can be multi-hour block

$ / M

W

MW


66

• Price must be between $0 and the System Wide Offer Cap

• The minimum offer amount for each AS product is 0.1 MW

• A single Resource may submit offers for more than one AS

Ancillary Service Offer Limits:



$ / M

W

MW


$ / M

W

MW

67

• ERCOT will notify the QSE submitting an AS Offer

• The QSE can then resubmit the offer within the appropriate market timeline

If an offer is accepted:

• ERCOT will continuously validate AS Offers and continuously display on the MIS Certified Area information that allows any QSE named in an AS Offer to view its confirmed AS Offers.

If an offer is rejected or invalid:

Validation

68

Submit Self-Arranged Ancillary Service Quantities

QSE Activities – Self-Arranged Ancillary Services



QSE

Act

ivity

14301000

69

• All or part by Ancillary Service by hour• Must submit Self-Arranged AS Quantities by 10:00

Impact:

Reduces the amount of each Ancillary Service that ERCOT procures on behalf of the QSE

A QSE may self-arrange its AS Obligations:

Self-Arranged AS Overview

This provision applies to both DAM and SASMs.

70

Options for self-arranged Ancillary Services


Using own Resources

Through AS trades

71

• Up to 100 MW for Responsive and Non-Spin Reserve• Up to 25 MW for Regulation Up and Down• Self-arranged quantity from QSE’s own Resources may not

exceed AS Obligation

Impact:

QSEs are paid for the extra Ancillary Services they provide

A QSE may self-arrange more than its AS Obligations:


This provision applies to both DAM and SASMs.

72

• Limited to -500 MW for each Ancillary Service• Limited in magnitude to net Ancillary Service Trades

Impact:

ERCOT procures extra AS Quantities in DAM on behalf of the QSE.

A QSE may submit negative Self-Arranged AS Quantities:


This provision applies only to DAM; not allowed

in SASMs.

73

• QSE self-arranges portion of AS• ERCOT must procure AS in DAM

For Hour Ending 7:

Self-Arranged AS

Type of AS QSE 1 Obligations

Self-Arranged Hour = 6

Self-ArrangedHour = 7

ERCOT Must Procure in

DAM Hour = 7

Reg Up 50 MW 50 MW 50 MW 0 MW

Reg Down 25 MW 25 MW 15 MW 10 MW

Responsive Reserve 115 MW 115 MW 75 MW 40 MW

Non-Spin 60 MW 60 MW 60 MW 0 MW

Scenario

74

Update Current Operating Plan

QSE Activities – Current Operating Plan



QSE

Act

ivity

14301000

75

• A plan by a QSE reflecting anticipated operating conditions

• Provides accurate information about Resources from a planning perspective

What is a Current Operating Plan (COP)?

Current Operating Plan Overview

COP Business Practice Manual:

http://www.ercot.com/mktrules/bpm/index.html

76

• Day-Ahead Market

• Reliability Unit Commitment

The COP Provides Input into:


The COP is not used in Real-Time Operations.

77

• COPs include operating conditions for each Resource, for each hour in the next seven Operating Days

Timeframe Criteria:


• COPs may be modified up to the end of the Adjustment Period for each Resource

• A QSE has 60 minutes after an event to modify or update its COP to reflect changes in availability of a Resource

78

Any QSE representing a Resource is obligated to submit a Current Operating Plan (COP) for each Resource.

To submit a COP, a QSE must include:

• The Name of the Resource

• Expected Resource Status

• Low/High Sustained Limit (LSL / HSL)

• Low/High Emergency Limit

• Capacity for Ancillary Service Types

Submittal Criteria for COP

79

• Combined Cycle Generation Resources (CCGRs)

• Wind-Powered Generation Resources (WGRs)

• Photovoltaic Generation Resources (PVGRs)

Three types of Resources have special submittal criteria


80

• A registered configuration of a Combined Cycle Train

• Offered as a single Resource

Combined Cycle Generation Resource (CCGR):


CCGR 1

Combined Cycle Train

ST1 GT1 GT2 GT3

CCGR 2

CCGR 3

QSE must submit a COP for each registered CCGR

81

• For the first 168 hours, ERCOT will set COP HSL equal to the Short-Term Wind Power Forecast

• QSE may override to a lesser value

Photovoltaic Generation Resource (PVGR):

• For the first 168 hours, ERCOT will set COP HSL equal to the Short-Term Photovoltaic Power Forecast

• QSE may override to a lesser value

Wind-Powered Generation Resource (WGR):


82

• ERCOT will notify the QSE submitting the COP

• The QSE must then resubmit the COP as soon as possible

If a COP is found to be invalid:

Validation

83

• The COP must identify sufficient Resource capacity to fulfill Ancillary Service Supply Responsibility for each hour.

• ERCOT will notify a QSE if AS capacity designated in the COP for any service type is less than the QSE's AS Supply Responsibility for that service type.

COPs and Ancillary Services (AS):

Validation

QSEs must correct deficiencies in their COP within one hour after

being notified by ERCOT

84

Determine Source of Self-Arranged Ancillary Services

QSE Activities – Current Operating Plan and/or AS Trades



QSE

Act

ivity

14301000

85

By 1430, QSE must notify ERCOT how Self-Arranged Ancillary Service quantities will be supplied

Source of Self-Arranged Ancillary Services

Using own Resources? Update COP

Through AS trades? Report Trade Seller will update

their COP

86

ERCOT executes the DAM clearing process

ERCOT Activities at 10:00 a.m.


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

87

DAM Clearing Process


Ancillary Service Offers & Self-Arranged Qtys

PTP Obligation Bids

Awarded Energy Offers & Bids

Awarded PTP Obligation Bids

Awarded Ancillary Service

Offers

Day-AheadMarket

Economically & simultaneously clears Offers and Bids

Network Operations

Model

88

• Security constraints

• Power Balance constraint

• Transmission constraints

• Resource constraints

• Linked Offer constraints

• Block Offer and Bid constraints

• Ancillary Service Requirements

Subject to the following constraints:


89

• Used to distribute bids and offers at Load Zones

• MWs are distributed to electrical buses based on historical power flows

• Allows DAM to model bids as MW withdrawals and offers as MW injections

Impact

• Award volumes• DAM prices

Load Distribution Factors


90

DAM Bids: 10,000 MWScenario


Bus C0%

Bus A2500 MW

25%

Bus B6000 MW

60%

Bus D1500 MW

15%

Load Distribution Factors for DAM are chosen based on “cold,” “mild,” or “hot”

proxy days.

91

• Used to distribute bids and offers at Hubs

• MWs are distributed uniformly to all energized Hub buses in each Hub

• Allows DAM to model bids as MW withdrawals and offers as MW injections

Impact

• Award volumes• DAM prices

Hub Distribution Factors


Hub

Hub

Hub

Hub

92

Day-Ahead Market Objective:


Bid-based Revenues Offer-based Costs

Offer-based Costs: Sum [Offer Price * Cleared Offer Quantity]

Bid-based Revenues: Sum [Bid Price * Cleared Bid Quantity]

Maximize [Bid-based Revenues - Offer-based Costs]

In this step, DAM uses Bid Prices and Offer Prices, not clearing prices

93

Why do it this way?


Objective Value

$/MWh

MW

Bids

Offers

Solution

94

Co-Optimizes Energy and Ancillary Services




PTP Obligation Bids




Offers

Day-AheadMarket

Network Operations

Model

95

For HE 1300 ERCOT needs to procure:

DAM Co-optimization

Bids OffersMW Energy MW Energy RegUp RRS

QSE A 2 $25.00 $10.00 $5.00QSE B 2 $30.00 $11.00 $9.00QSE C 1 $50.00

Three QSEs submitted Offers and Bids as follows:

• 1 MW of Regulation Up (RegUp) and; • 1 MW of Responsive Reserves (RRS)

Scenario

96

A Few Potential SolutionsScenario

DAM Co-optimization

Energy RegUp RRS

QSE A $25.00 $10.00QSE B $9.00

Energy RegUp RRS

QSE A $25.00 $5.00QSE B $11.00

Energy RegUp RRS

QSE A $10.00 $5.00QSE B $30.00

Bid-based Revenues – Offer-based

Costs

$50 – $25 – $10 – $9 = $6

Case 1

Case 2

Case 3


Costs

$50 – $25 – $11 – $5 = $9


Costs

$50 – $30 – $10 – $5 = $5

97

Determine Energy PriceScenario

DAM Co-optimization

Energy RegUp RRS

QSE A $25.00 $5.00QSE B $11.00

Offers AwardedOffers ProvidedMW Energy RegUp RRS

QSE A 2 $25.00 $10.00 $5.00QSE B 2 $30.00 $11.00 $9.00

• Cost of additional increment of Demand

• How would Day-Ahead Market clear additional MW?

98

Scenario

DAM Co-optimization

Energy RegUp RRS

QSE A 1MW @$25.00 $5.00QSE B 1MW @$30.00 $11.00

Clearing Additional MW of Energy

Offers MW Energy RegUp RRS

QSE A 2 $25.00 $10.00 $5.00QSE B 2 $30.00 $11.00 $9.00

Increases cost by $30

Energy RegUp RRS

QSE A 2MW @$25.00QSE B $11.00 $9.00

Increases cost by $29

Energy Price is $29

99

Scenario

DAM Co-optimization

Clearing Additional Ancillary Services

Offers MW Energy RegUp RRS

QSE A 2 $25.00 $10.00 $5.00QSE B 2 $30.00 $11.00 $9.00

Energy RegUp RRS

QSE A $25.00 1 MW @ $5.00QSE B $11.00 1 MW @ $9.00

Responsive Reserve Price is $9

Energy RegUp RRS

QSE A $25.00 $5.00QSE B 2 MW @ $11.00

Regulation Up Price is $11

100

In summary . . .Three QSEs submitted Offers and Bids as follows:

Scenario

DAM Co-optimization

QSE A sells 1MW of Energy @ LMP of $29 and 1MW of RRS @ MCPC of $9

QSE B sells 1MW of RegUp @ MCPC of $11

QSE C buys 1MW of Energy @ LMP of $29

Bids OffersMW Energy MW Energy RegUp RRS

QSE A 2 $25.00 $10.00 $5.00QSE B 2 $30.00 $11.00 $9.00QSE C 1 $50.00

101

Also clears Energy and PTP Obligations simultaneously




PTP Obligation Bids




Offers

Day-AheadMarket

Network Operations

Model

102

• MW injection at Source

• MW withdrawal at Sink

• Clearing requires Transmission Capacity

Modeling of PTP Obligation Bids in DAM


Source Settlement

Point

Sink Settlement

Point

Energy injection

Energy Withdrawal

PTP Obligation

103

Introducing a simple model ...Examples

DAM Clearing with Energy and PTP Obligations

= Settlement Point

C

D

100 MW

100 MW

100 MWBA

MW = Transmission Capacity

104

Energy Transactions with Transmission Limits

Example 1


QSE Product Bid or Offer Location MW Price Award

QSE 1 Energy Offer A 100 $20 90 MW

QSE 2 Energy Offer C 60 $30 0 MW

QSE 3 Energy Bid D 90 $40 90 MW

Bid-based Revenue – Offer-based Cost (Objective Value)

(90 × $40) – (90 × $20) = $1800

(90 × $40) – (30 × $20) – (60 × $30) = $1200

Prices

LMPA = $20 LMPB = $20 LMPC = $20 LMPD = $20LMPDLMPCLMPBLMPA

105

In summary . . .Example 1


Result MW Price

QSE 1 sells Energy at A 90 $20

QSE 2 sells no Energy at C 0 $20

QSE 3 buys Energy at D 90 $20

106

Energy Transactions with Transmission Limits and PTP Obligations

Example 2


QSE Product Bid or Offer Location MW Price Award

QSE 1 Energy Offer A 100 $20 70 MW

QSE 2 Energy Offer C 60 $30 20 MW

QSE 3 Energy Bid D 90 $40 90 MW

QSE 4 PTP Obl Bid A to B 30 $20 30 MW

Bid-based Revenue – Offer-based Cost (Objective Value)

(30 × $20) + (90 × $40) – (70 × $20) – (20 × $30) = $2200

(10 × $20) + (90 × $40) – (90 × $20) – (0 × $30) = $2000Clear some PTP

Clear all PTP

Prices

LMPA = $20 LMPB = $30 LMPC = $30 LMPD = $30LMPDLMPCLMPBLMPA

107

In summary . . .Example 2


Result MW Price

QSE 1 sells Energy at A 70 $20

QSE 2 sells Energy at C 20 $30

QSE 3 buys Energy at D 90 $30

QSE 4 buys PTP Obligations from A to B 30 $10

(Sink – Source)

108

After DAM solves, ERCOT communicates Awards




PTP Obligation Bids




Offers

Day-AheadMarket

109

ERCOT must communicate DAM Awards by 1330

ERCOT Activities at 1:30 p.m.


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

110

DAM Awards

By 1330, ERCOT Awards… From …

Energy Sales Three-Part Supply Offers & Energy Offer Curves

Energy Sales DAM Energy-Only Offers

Energy Purchases DAM Energy Bids

PTP Obligations PTP Obligation Bids

Ancillary Services Ancillary Service Offers

111

• Day-Ahead Settlement Point Prices by Settlement Point

• Day-Ahead LMPs for each Electrical Bus

• Energy bought and sold in DAM by Settlement Point

• PTP Obligations cleared in DAM by Settlement Point

• Ancillary Services

• Day-Ahead MCPC for each type of AS

• Quantity of AS Offers received in DAM (MW)

• Aggregated AS Offer Curve of all AS Offersfor each type of AS

ERCOT postings for each hour:

DAM Results - Postings

112

• ERCOT monitors Market for errors:

• Day-Ahead MCPCs • Hourly LMPs

• ERCOT “Flags” questionable prices before posting

Finalized Day-Ahead Market Prices

Postings – Finalized Market Prices

DAM Prices are final at 10:00 on the second

Business Day after the Operating Day.

113

Summary of DAM Activities


Quantities



Quantities


SEAc

tivity

ERC

OT

Activ

ity

DAM DRUC


Begin DAM

Execution

CommunicateDAM

Awards

0600 1000 1330 1430

Day-Ahead Market Credit Limits

115

• Entity that is also a QSE and/or a CRR Account Holder

• Responsible for managing Available Credit

Introducing ... The Counter-Party

116

The Rest of the Credit Picture

CounterParty

CRRAccount

HolderQSE

Maintains Secured Collateral with ERCOT

Day-Ahead Market

Credit Limit

CRR Auction

Credit Limit

Available credit is shared

117

Available Credit

CreditExposure

UnsecuredCredit

SecuredCollateral

AvailableCredit Counter-Party posts

Secured Collateral to make credit available to

its QSEs and CRR Account Holders

118

Available Credit

UnsecuredCredit

SecuredCollateral

QSE Credit Exposure satisfied by Secured and

Unsecured Credit

Credit Exposure from owning CRRs satisfied

only by Secured Collateral

CreditExposure

CRR CreditExposure

QSE CreditExposure

AvailableCredit

119

ERCOT Calculates Counter-Party’s Available Credit Limit for DAM (ACLD)

Day-Ahead Market Credit Limit

QSE CreditExposureUnsecured

Credit

SecuredCollateral

CRR CreditExposure

AvailableCreditLimit

(ACLD)

AvailableCreditLimit

(ACLD)

Credit lockedfor Auction

QSE gets 90% of ACLD as

DAM Credit Limit

QSE gets 90% of ACLD as

DAM Credit Limit

120

Bids and Offers are checked against Available Credit upon submission

Credit Requirements for Day-Ahead Market

Energy Bids &Offers

PTP Obligation Bids

Ancillary Service Obligations not Self-Arranged

Credit Exposure less than 90% ACLD?

Day-AheadMarket

Accepted in order received

Rejected Bids or Offers may be revised

and resubmitted before 10:00

121

• Energy Bids: Volume * Bid Price

• Energy Only Offers: Volume * (Historical RT – DAM price difference)

• PTP Obligation Bids: Volume * (Bid price + Historical RT exposure)

• AS Obligations: Volume not Self-Arranged * Historical MCPC

In general, Credit Exposure is calculated as follows:


90%

AS Obligations

ACLD

PTP Obligation Bids

Energy Only Offers

Energy BidsNo credit exposure:• Three Part Supply Offers• Ancillary Service Offers

122

• Energy Bids • Exposure may be reduced • Based on recent DAM activity

• Energy Offers • May provide offset • Only for offers likely to be awarded

• PTP Obligation Bid exposure • Reduced for expiring CRRs• Same Source and Sink

In some cases, Credit Exposure may be adjusted


123

e-Factors for DAM Credit Exposure

e-Factor Range of Values Where used

e1• Begins at 1

• Approaches 0 if QSE’s value of cleared offers consistently exceeds cost of cleared bids

Energy Bid Credit Exposure

e2

Default is 0

If Counter-Party requests ”Favorable” e2*:

• Begins at 0

• Approaches 1 if the QSE typically has more cleared bids than cleared offers

Energy Only OfferCredit Exposure Offset

e3 Currently = 1 Energy Only OfferCredit Exposure

* Details in Protocol Section 4.4.10

e-Factors are based on QSE’s Day-Ahead Market Activities for most recent 30 days

124

Exposure Price = Bid Price, when e1 = 1= P85(DASPP), when e1 = 0

When Bid Price > 85th percentile of recent DASPPs:

Credit Adjustments for Energy Bids

$26

$28

$30

$32

$34

$36

$38

$40

$42

$44

$46

$48

$50

Occ

urre

nces

P85(DASPP) = 85th percentile of hourly DASPP for the previous 30 days

125

Exposure Price = e3 * P90(Max[0, RTSPP-DASPP])– e2 * P45(DASPP)

When Offer Price ≤ 50th percentile of Recent DASPPs:

Credit Adjustments for Energy Only Offers

$26

$28

$30

$32

$34

$36

$38

$40

$42

$44

$46

$48

$50

Occ

urre

nces

Exposure reduction may offset other QSE

exposure in DAM

126

When Offer Price ≤ 45th percentile of recent DASPPs:

Credit Adjustments for Three Part Supply Offers

Applies to each MW portion of

Energy Offer Curve$2

6$2

8$3

0$3

2$3

4$3

6$3

8$4

0$4

2$4

4$4

6$4

8$5

0

Occ

urre

nces

Overall exposure reduced by (Offer MW) * P50(DASPP)

127

For a given hour in DAM . . .

Credit Adjustments for PTP Obligation Bids

BASource Sink

CRR Settles for CRR Account Holder

QSE submits PTP Obligation Bid

= 90% of Bid Price * (Min[Bid MW, CRR MW])Exposure Reduction

128

DAM Credit Reports on Market Information System

DAM Aggregate Credit Exposure

Posted after each DAM

DAM Remaining Available Credit Limit

Posted every 15min before DAM

129

Finding Credit Reports on MIS

Day-Ahead Market Financial Impacts

131

DAM determines optimal clearing of Bids and Offers




PTP Obligation Bids




Offers

Day-AheadMarket

132

Day-Ahead Market Energy and AS Settlements




Offers



Offers


Hourly Settlement = Price * Quantity • Price: Settlement Point Price (SPP)• Quantity: Awarded MW

Hourly Settlement = Price * Quantity• Price: Market Clearing Price for Capacity

Quantity: Awarded MW


Hourly Settlement = Price * Quantity• Price: SPPsink – SPPsource

• Quantity: Awarded MW

133

• DAM Clearing Engine produces LMPs

• Settlement Point Prices formed from LMPs

Settlement Point Prices (SPPs)

DAM Energy Prices

Resource Nodes

Load Zones

Hubs

Resource Node SPP = LMP

Load Zone SPP = Load-weighted Ave (LMPs)

345 kV HubSPP = Simple Ave (HUB bus LMPs)

… calculated for each hour

134

MCPCRU – Regulation-Up

MCPCRD – Regulation-Down

MCPCRR – Responsive Reserve

MCPCNS – Non-Spin Reserve

Each Ancillary Service has a Separate Market Clearing Price for Capacity (MCPC)

DAM Ancillary Service Prices

ERCOT System

… calculated for each hour

135

Two parts to Day Ahead Make-Whole Settlements:

Day-Ahead Make-Whole Settlements

Day-Ahead Make-Whole

Payment


Charge

136

Why Make Whole Payment?


• LMPs and MCPCs represent incremental costs

• May not cover Startup and Minimum Energy Costs

137

Day-Ahead Make-Whole Payment

Energy Revenue+

AS Revenue

$Incremental Energy Costs

Minimum Energy Costs

Startup Costs

Revenues Received Costs Incurred

DAM Guaranteed Amount

138

What if revenues are less than costs?

Day-Ahead Make-Whole Payment

Make-Whole Payment

Energy Revenue+

AS Revenue

$Incremental Energy Costs

Minimum Energy Costs

Startup Costs

Revenues Received Costs Incurred

Resource must run to be eligible

139

Make-Whole Charge allows Revenue Neutrality



Payment


Charge

140

Charged to each QSE with cleared bids

Day-Ahead Make-Whole Charge

*( ) ( )Total DAM Make-Whole Payments ERCOT - Wide

DAM Energy PurchaseRatio Share

OR

*( ) ( )Total DAM Make-Whole Payments ERCOT - Wide

A QSE’s DAM Energy Purchase

Total DAM Energy PurchasesERCOT - Wide

141

Calculating Make-Whole ChargesScenario

Day-Ahead Make-Whole Charge

• Total DAM purchase: 100 MW

• Total Make Whole: $100

QSE Name QSE DAM Purchase

QSE DAM EnergyPurchase Ratio

Share

QSE Day-Ahead Make-Whole Charge

QSE 1 20 MW 20 MW / 100 MW $20

QSE 2 40 MW 40 MW / 100 MW $40

QSE 3 10 MW 10 MW / 100 MW $10

QSE 4 30 MW 30 MW / 100 MW $30

142

• Payments due and Charges incurred

• Posted to MIS Certified Area

Day-Ahead Market Settlement Statements

Settlement Timeline

OperatingDay

Day 2Day Ahead

DAM Statement

Day 1

143

• The timeline and purpose of the Day-Ahead Market

• Various inputs into the Day-Ahead Market

• Submittal requirements for the Day-Ahead Market offers and bids

• The Day-Ahead Market clearing process

• Charges and payments associated with the Day-Ahead Market

You have learned about:

Module Summary

Module Conclusion

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