Market Overview in Electric Power Systems Market Structure and Operation Introduction Market...

Market Overview in Electric Power

Systems

Market Structure and Operation

Introduction

Market Overview

Market Overview in Electric Power Systems

Mohammad Shahidehpour

Department of Electrical and Computer Engineering Department of Electrical and Computer Engineering Illinois Institute of TechnologyIllinois Institute of Technology

March 2002


Systems


Introduction

Market Overview

Introduction

Restructuring:

Decomposition of the three components of the electric power industry

Separation of transmission ownership from transmission control

Creation of a competitive electricity market


Systems


Introduction

Market Overview

Introduction

0

100

200

300

400

500

600

700

800

900

1994 1995 1996 1997 1998 1999

Ter

raw

att h

ours

(T

Wh)

Source: PA consulting


Systems


Introduction

Market Overview

Introduction

0

100

200

300

400

500

600

700

800

900

1998 1999 2000

Co

ng

esti

on

Co

sts

($

Mil

lion

s)

CA NY PJM NE

Source: PA Consulting


Systems


Introduction

Market Overview

Introduction

0

500

1,000

1,500

2,000

2,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

(Mill

ion

s 19

90$)

400

420

440

460

480

500

520

540

560

(Gig

awat

ts)

Transmission Investment (millions 1990$) System Peak Demand (Gigawatts)

Source: PA Consulting


Systems


Introduction

Market Overview

Introduction

Schedules

ISO

Schedules

Bids

Bids

GENCOs

Market Forecasting

MarketOperation

Market Monitoring

Forward Market: SCUC

Ancillary Services Auction

Transmission Pricing

Market Power

Forecasting

Load Forecasting

Price Forecasting

Bidding Strategy

Risk Management

PBUC

Arbitrage

Market Power & Gaming

Asset Valuation &

Risk Analysis

Markets Energy Ancillary Services Transmission

Load Forecasting

Price Forecasting

Congestion Management


Systems


Introduction

Market Overview

Introduction

Markets Strategies:

Reduce the cost of electricity utilization (primary motive for restructuring)

Enhance the security of power system through economical means


Systems


Introduction

Market Overview


Market Operators: ISO, PX

Market Participants: Genco, Transco, Disco, Retailco, Aggregator, Marketer, Broker, Customer

Market Structure


Systems


Introduction

Market Overview

Two sets of forecasted information:

• Load

• Electricity price Market Overview

Overview of the Market

Information Forecasting


Systems


Introduction

Market Overview

Basis for price forecasting Most important price driver

Load forecasting applications:Unit Commitment,Power System Security, Generation Reserve Allocation, Market Behavior.

Market Overview

Load Forecasting


Systems


Introduction

Market OverviewMarket Overview

Load Forecasting


Systems


Introduction


Load Forecasting


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Introduction


Load Forecasting

0 100 200 300 400 500 600 700 800

1000

1200

1400

1600

1800

2000

2200

2400

Time (Hour)

Load

(M

W)

Forecast

Actual


Systems


Introduction

Market Overview

Price forecasting is of utmost importance to GENCOs. The price signal reflects the market situation and would lead every action that GENCOs may take.

Market Overview

Price Forecasting


Systems


Introduction


Price Forecasting

0 200 400 600 800 0

50

100

150

Time (Hour)

Pric

e ($

/MW

h)

Actual Price Forecasted Price


Systems


Introduction


Price Forecasting

1 2 3 4 5 x 104

0

50

100

150

200

Load (MW)

Pric

e ($

/MW

h)


Systems


Introduction


Price Forecasting

Probability Distributionof Load Forecast

Probability Distributionof Price ForecastANN

Others

Simulation of the actual system dispatch with system operating requirements and constraints can provide insight on price.

Potential price drivers such as line limits, line outages, generator outages, load patterns and bidding patterns can be identified through sensitivity analysis.


Systems


Introduction

Market Overview

In California and New England, GENCOs will run the unit commitment, which is called price based unit commitment.

Market Overview

Unit Commitment in Markets

In PJM and New York, ISO runs the transmission security and voltage constrained unit commitment, which is called security constrained unit commitment.


Systems


Introduction



PBUC

gm

rm

nm

m0

mg

mr

mn

P0 P R N

gm

rm

nm

m0

mg

mr

mn

P0 P R N


Systems


Introduction



Impact of Reliability

Generation Scheduling

violations

Voltage Subproblem

Transmission Subproblem

Master Problem(Unit Commitment)

Contingency Subproblem j

Transmission Subproblem

Voltage Subproblem

Steady State Subproblems


Systems


Introduction

Market Overview

The usage of arbitrage includes any activity that attempts to buy a relatively under-priced commodity and to sell a similar and relatively overpriced commodity for profit.

Market Overview

Arbitrage in Electricity Markets

EmissionPrice ($/Ton)

No-ArbitrageProfit ($)

ArbitrageProfit ($)

Arbitrage StrategyArbitrage Amount

(Ton)0.1 200003 241895 Purchase 33.501 200003 219636 Purchase 15.002 200003 207427 Purchase 5.003 200003 202427 Purchase 5.004 200003 200003 No Trades 0.005 200003 202404 Sale 7.50

EmissionPrice ($/Ton)

No-ArbitrageProfit ($)

ArbitrageProfit ($)

Arbitrage StrategyArbitrage Amount

(Ton)0.1 200003 241895 Purchase 33.501 200003 219636 Purchase 15.002 200003 207427 Purchase 5.003 200003 202427 Purchase 5.004 200003 200003 No Trades 0.005 200003 202404 Sale 7.50


Systems


Introduction


Market Power and Monitoring

Identify non-competitive situations in restructured energy marketplaces

Provide support for minimizing risks involved in price decisions in restructured energy marketplaces

Uncertainty and the competitiveness of the market: gaming strategy is an indispensable tool for GENCOs.


Systems


Introduction


Asset Valuation / Risk Management

Asset valuation and risk management requires PBUC, arbitrage and gaming.


Systems


Introduction


Asset Valuation / Risk Management

FOR Mean VaR (95%) VaR (90%)0 116442.59 109120.65 110832.63

0.01 115284.07 108827.83 110551.380.02 114139.77 108230.48 110289.980.03 112992.06 107785.6 110060.490.04 111854.63 107200.64 109811.180.05 110746.49 104180.11 109288.780.06 109674.48 0 108932.810.07 108596.06 0 108426.520.08 107503.33 0 107903.030.09 106451.64 0 107376.370.1 105345.02 0 105725.45

FOR Mean VaR (95%) VaR (90%)0 116442.59 109120.65 110832.63

0.01 115284.07 108827.83 110551.380.02 114139.77 108230.48 110289.980.03 112992.06 107785.6 110060.490.04 111854.63 107200.64 109811.180.05 110746.49 104180.11 109288.780.06 109674.48 0 108932.810.07 108596.06 0 108426.520.08 107503.33 0 107903.030.09 106451.64 0 107376.370.1 105345.02 0 105725.45


Systems


Introduction



Objective

Social cost minimization

Procurement cost minimization

Settlementrule

Uniform pricing

Pay-as-bid pricing

Substitution pricing

Marginal Pricing

Supply substitution pricing

Demand substitution pricing

RegulationSpinning Reserve

Non-Spinning Reserve

Replacement Reserve


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Introduction



EnergyImbalance

AGC Real-Time Auction

SpinningReserve

Non-SpinningReserve

ReplacementReserve

SupplementalEnergy

UninstructedDeviation

InstructedDeviation


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Introduction

Market Overview

• meet revenue expectations,

Market Overview

Transmission Pricing

• promote an efficient operation of electricity markets, • encourage investment in generation and transmission, • reimburse owners of transmission assets adequately.


Systems


Introduction

Market Overview

Introduction

Source: EIA


Systems


Introduction

Market Overview

Thank You

Mohammad Shahidehpour

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Market Overview in Electric Power Systems Market Structure and Operation Introduction Market...

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