Title: Making the Market Work: Market Design Issues from a Market Participants View Thorvin Anderson Calpin
1Making the Market WorkMarket Design Issues from
a Market Participants ViewThorvin
AndersonCalpine Corporation
2Introductions
- Thorvin Anderson, Manager of Market Operations
for ERCOT - Responsible for intra-month utilization of
Calpines portfolio of gas-fired, combined-cycle
generation assets in ERCOT - Member of Wholesale Market Subcommittee of ERCOT
3Introductions
- Calpine Corporation is a major market participant
in ERCOT - 5000 MW by summer 02
- Active in most aspects of ERCOT grid
- QSE
- PGC
- REP
- PM
- Major industrial load provider
- Full-requirements services
4Todays Topics
- What works well in ERCOT
- Areas of improvement, from Calpines perspective
- Creating a true market
5What works well in ERCOT?
- Single control area
- No tagging
- Firm product - all schedules flow
- Ease of bringing new generation online
- Active markets for competitive ancillary services
6What works well in ERCOT?
- Timely implementation of deregulation
- Retail wholesale deregulation
- Successfully implemented specified structure
- Involvement of market participants
7Areas of Improvement Clarity of Rules
- Difficult to ascertain correct or acceptable
approach for market participant to take - Participants often must make decision between
financial rewards and conformance to ERCOT rules - Ambiguity of rules gives rise to inconsistency of
market participant behavior - Difference in approach leads to unlevel playing
field
8Clarity of Rules SCE
- Schedule Control Error
- QSEs shall make a good-faith effort to cause
their Resources to operate to the final Resource
bilateral schedules as converted to a base power
function - Location ERCOT Protocols, Section 6.10.5.1
(Ancillary Services section) - SCE deviation is inevitable, but
- What is tolerable deviation?
- To what lengths should a QSE go to avoid
deviation?
9Clarity of Rules SCE
- Suggestion
- Clarify ERCOTs performance metric for QSEs
acceptable or not. - Develop a market where imbalance is welcome and
cleared at market price so SCE does not matter.
10Clarity of Rules Balancing Energy
- Underscheduling loads shorting Balancing Energy
- Available only to those with load
- Entities with large load can get away with
some, while entities with small loads cannot - Overscheduling loads going long
- Does ERCOT formally prohibit this activity?
- Settlement for this activity is often favorable
- No clear articulation in rules, though behavior
is controversial.
11Areas of Improvement Resource Plan
- Resource plan Non-binding plan used by ERCOT to
predict congestion day-ahead - Reference point used vs. schedule in settling
congestion charges - Reference point used in settling
Resource-Specific deployments
12Areas of Improvement Resource Plan
- Impossible to keep the Resource Plan updated
- Cumbersome manual process
- Operating Period lockout prevents updating
- Resource plan unit-based, not busbar-based
- Too complex
- Not appropriate for combined-cycle
13Areas of Improvement Settlement
- Ambiguous connection between deployments and
settlement - Difficult to make day-after projections
- Myriad service classes overlapping charge types
- Congestion data not real
- Voluminous settlement data available need table
of contents - Reliance on dispute process
14The Settlement Gordian Knot
- Revenues to QSE
- Balancing Up
- Balancing Down
- Instructed Deviation
- Uninstructed Deviation
- OOM
- OOME Up
- OOME Down
- Resource-Specific, non-OOM
- Ancillary Services Capacity
- Ancillary Services Energy
- Resource Imbalance
- Load Imbalance
- TCR Load Ratio Pmts
- TCR Entitlement Pmts
- Costs to QSE
- Balancing Energy Purchased
- Instructed deviation
- Uninstructed deviation
- Ancillary Services Capacity
- Ancillary Services Energy
- CSC Congestion
- OOM Replacement Capacity
- ERCOT Admin Fee
- Mismatch Schedule Fee
- Resource Imbalance
- Load Imbalance
- TCRs
15Example Settlement Challenge 3/29/02
- Gas turbine at CC facility generating 250 MW
- Resource Plan 250 MW
- QSE gets two days worth of OOM deployments,
including a Category 4 for this GT to 150 MW. - QSE receives verbal instruction to ignore
- QSE receives another Category 4 deployment for HE
11, taking unit to 150 MW - No accompanying Category 1 deployment to balance
portfolio - QSE complies with deployment, SCE -100
- Settlement?
- Instructed deviation?
- Uninstructed deviation
- QSE buy at 31.40 BE price?
16Areas of Improvement Layered Services
- Early commitment to pure bilateral market
necessitated layers of products to accommodate
operational concerns - Out-of-Merit Capacity
- Out-of-Merit Energy
- Resource-Specific Deployments
- Categories 1-4
- Congestion charges (shadow prices)
- Instructed deviation
- Uninstructed deviation
17Areas of Improvement Layered Services
- Operational concerns precipitated more rules
- Minimum Balancing Down bid requirements
- Ramps governed by smoothing algorithm
18Areas of Improvement Congestion Mgmt
- Inter-zonal directly assigned since Feb. 15
- Intra-zonal direct assignment plan to be
developed by mid-September - Intra-zonal congestion currently handled by
instructed deviation through resource-specific
deployments
19Areas of Improvement Congestion Mgmt
- Congestion charges effective, but not efficient
- Basis differential often clears in excess of
underlying commodity value - Example Afternoon of 2/26, CSC charges
West-to-North exceeded 1,000/MW for several
15-minute intervals -
- Regulatory risk number and location of zones
determined annually - Bilateral market is slow to trade zonal products
- Forward markets ill-equipped to provide zonal
risk management products
20Areas of Improvement Congestion Mgmt
- Congestion operations
- Line limits capricious set by ERCOT operator on
duty - Difficulty in predicting congestion to manage
day-ahead - Possible alternative Locational Marginal
Pricing (LMP), or something similar
21Making the Market Work
- Is there an energy market in ERCOT?
- No ERCOT-sponsored market
- Balancing Energy is not a market
- Need for realtime and day-ahead spot markets
- Eliminate inefficiencies
- Price transparency
- Allow longs and shorts
- Reference for financial derivative mkts
22Closing Thoughts
- Optimism more going right than wrong
- Beginning of Journey, not End
- Participants committed to successful market,
ongoing improvement - But the situation reminds us once again never
underestimate the importance of market design.
- Utilicast