Transcript 05. NPRR153_Pricing_Impacts_WMS_May_2013

Implementation of NPRR153
Carrie Bivens
Supervisor, Day-Ahead Market
WMS
May 8, 2013
Summary
• NPRR153 was a nodal parking deck item
• The purpose is to allow Generation Resources to offer their offline Non-Spin in
fixed quantity blocks
– Currently only Load Resources can submit block offers for Ancillary
Services
• It is a straightforward and minor system change to the MMS validation rules,
with an impact analysis between $12 and $16k.
• During project planning, ERCOT recognized and studied that this NPRR could
cause some potentially undesirable pricing outcomes and now seeks
stakeholder guidance
WMS
May 8, 2013
Clearing Price Impact
• Fixed quantity blocks present a challenge to a marginal pricing scheme.
– This issue was discussed extensively as it relates to DAM energy
bids/offers during the MMS requirements approval phase of nodal.
– Fixed quantity block offers do not set the clearing price and are essentially
price-takers once selected in the commitment phase of DAM
• For DAM energy, it is a regular occurrence to be struck below offer price, but
the price differences are usually minimal
• Upon implementation of NPRR153, fixed quantity Non-Spin offers could also
clear below the offer price (and alternatively, fail to clear even when MCPC >
offer price).
– A/S market is less liquid than energy market so the magnitude of the price
drop is likely to be larger (next lower variable offer sets price)
– A/S products are linked together, so pricing impacts carry to other services
– As an offline non-spin award, it will not be eligible for DAM make-whole
payment
WMS
May 8, 2013
Clearing Price Impact
• In an extreme case study performed by ERCOT, the MCPC could be $0 no
matter the offer costs
– This outcome was simulated using a recent production case by converting
all variable non-spin offers to block non-spin offers
• MCPCNon-Spin = Shadow Price of the Non-Spin requirement constraint
– If there are no committed variable offers to adjust with a small change in
the Non-Spin requirement, then an incremental increase to the Non-Spin
requirement would result in no change to the objective function
Offer Price
($/MW)
Non-spin req’t
Offer MW
WMS
May 8, 2013
Clearing Price Impact
• This is an existing potential issue for Load Resources but is not observed
because:
– Currently LRs do not regularly offer Non-Spin, they only participate in the
RRS market which has a 50% procurement limit
– Offers from Generation Resources routinely set the clearing price
WMS
May 8, 2013
Discussion of Options
• Options:
1. Continue work on NPRR153 with existing block offer implementation
2. Choose to not implement NPRR153
3. An alternative implementation with a change in price-setting methodology (and
revise Impact Analysis for NPRR153):
•
Add a pricing run where the block of the marginal offer is removed for clearing purposes
and it is allowed to set the price (economic dispatch is re-solved with the commitment
pattern frozen and the offer as variable MW)
–
Creates inconsistency between dispatch, price and offer/bid values
»
–
Could lead to increased requests for make-whole consideration from both
supply and demand side, once we begin publishing inconsistent results
Co-optimization is impacted
»
Generators would no longer be guaranteed an optimal dispatch among
energy and A/S, once committed
–
This pricing run would be necessary for all hours due to the situation of fixed
quantity block offers that are also multi-hour blocked.
–
More discussion and analysis would be needed if this option is desired
4. Other concepts or ideas?
WMS
May 8, 2013