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WEM101 – Introduction to ISO-NE’s Wholesale Energy Market Market Analysis & Training 1 ©ISO New England 2004 Energy Markets: Overview of the Day-Ahead Market (DAM) Michael Taniwha Manager, Market Administration August 2004

Energy Markets: Overview of the Day-Ahead Market (DAM)

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August 2004. Energy Markets: Overview of the Day-Ahead Market (DAM). Michael Taniwha Manager, Market Administration. 2000 hrs. Complete Reserve Adequacy Assessment. 1600 hrs. Post DAM Schedules. 1800 hrs. Verify DAM Schedules. 2200 hrs. Complete REGO Analysis. - PowerPoint PPT Presentation

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Page 1: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

1©ISO New England 2004

Energy Markets: Overview of the Day-Ahead Market (DAM)

Michael TaniwhaManager, Market Administration

August 2004

Page 2: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

2©ISO New England 2004

SMD Timeline for Day-Ahead Market (DAM)

1200 hrs.TradingDeadline

1600 hrs.PostDAM

Schedules

1600 hrs.Open

Re-BidPeriod

1800 hrs.CloseRe-BidPeriod

1800 hrs.VerifyDAM

Schedules

2000 hrs.CompleteReserve

AdequacyAssessment

2200 hrs.Complete

REGOAnalysis

0001 hrs.RTM

OpensContinue

RAA

Day before the

Operating Day

Operating Day

Day-Ahead Market

Reserve Adequacy Assessment

Real-Time Market

Page 3: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

3©ISO New England 2004

Why a Day-Ahead Market (DAM)?

Provides a “forward or futures” market for Market Participants to hedge against Real-Time (RT) price volatility – Allows Participants to buy or sell energy forward one

day and hedge vulnerability to RT price fluctuations

– Allows wholesale demand (buyers) to participate in Day-Ahead Market price determination

In comparison to Real-Time Energy Market where demand is a price taker

Improves Real-Time reliability by providing financial incentive for resources cleared Day-Ahead to deliver physically in Real-Time– Incentive created from energy deviations and OR

charges

Page 4: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

4©ISO New England 2004

Fundamentals of the DAM

DAM clearing based on Market Participant submitted supply (offers) and demand (bids) – Market clearing is based on least cost means of

satisfying cleared demand using a security constrained economic dispatch

DAM produces financially binding schedules for supply and demand– Based on hourly Locational Marginal Pricing (LMP)

that include marginal cost of energy, congestion, and losses

Page 5: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

5©ISO New England 2004

Inputs to the DAM

Network information– Network model

Transmission elements and ratings– Approved transmission outages

Expected topology Abnormal limits

– Generation Requirements for Transmission (GRT) spreadsheet

Interface limits Generation requirements

– Transmission Related Abnormal Generation (TRAGO) sheet

Units committed for VARS

Page 6: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

6©ISO New England 2004

Inputs to the DAM (continued)

Reserve requirements– Ten Minute Reserve

100% of 1st Contingency– 50% is spinning

– Operating Reserve 50% of 2nd Contingency

– Replacement Reserve 50% of 2nd Contingency

Page 7: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

7©ISO New England 2004

Inputs to the DAM (continued)

Demand Bids– Actual demand

Fixed Price-sensitive

– Virtual demand Decrement bids (Decs)

Page 8: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

8©ISO New England 2004

Inputs to the DAM (continued)

Supply Offers– Actual resources

Generation– ICAP resources

Must-run Economic Unavailable

– ICAP - Limited Energy Resource (LEG)– Intermittent resources– Non-ICAP resources

– Virtual resources Increment offers (Incs)

Page 9: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

9©ISO New England 2004

Inputs to the DAM (continued)

External Transactions– DA externals only

Three types– Fixed– Dispatchable– Up-to-congestion

Page 10: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

10©ISO New England 2004

WebServer

Outage scheduler

Market Participants

Bids & OffersSchedules/PricesOutages

ISO-New England

MDb(Market Database)

Transmission Owners & Satellite Centers

UDS

eFTR

eMKT

DA/RAA - SPD

LMPC

MIS

DMT

Data Flows

Page 11: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

11©ISO New England 2004

Clearing of the DAM

Least Cost Security Constrained Economic Dispatch– New England Power Pool, Market Rule 1

Section 1.10.8, ISO Responsibilities– (a) The ISO shall use its best efforts to determine (i) the

least‑cost means of satisfying hourly purchase requests for energy, the projected hourly requirements for Operating Reserve, Replacement Reserve and other ancillary services of the Participants, including the reliability requirements of the NEPOOL Control Area, of the Day-Ahead Energy Market

Page 12: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

12©ISO New England 2004

Clearing of the DAM (continued)

Least Cost Security Constrained Economic Dispatch– NEPOOL Manual for Market Operations (Manual M-

11) Section 5.1, ISO Philosophy

– The ISO scheduling philosophy in the Day-Ahead Energy Market is to schedule and Dispatch generation, Increment Offers and External Transaction purchases on a least cost, security-constrained basis (minimize Start-Up Fees, No-Load Fees and incremental Energy costs) to meet the aggregate cleared Demand Bids, cleared Decrement Bids, cleared External Transactions sales and Operating Reserve and Replacement Reserve requirements, while maintaining the reliability of the NEPOOL Control Area.

Page 13: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

13©ISO New England 2004

Clearing the DAM (continued)

Supply Offers

Price

Quantity

Demand Bids

ClearedCleared

> 0$

0$0 MW > 0 MW

Not ClearedNot Cleared

PDA

QDA

Page 14: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

14©ISO New England 2004

Clearing of the DAM (continued)

Software applications– Resource Scheduling & Commitment (RSC)

Security constrained unit commitment

– Scheduling, Pricing and Dispatch (SPD) Security constrained economic dispatch using the

commitment profile produced by RSC SPD is linear program (LP) optimization that clears

schedule and calculates shadow prices (LMPs)

– Simultaneous Feasibility Test (SFT) Contingency analysis of SPD results Constraint sensitivities fed back to SPD for reiteration Uses STE contingency limits

Page 15: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

15©ISO New England 2004

Outputs of the DAM

Public– DAM LMP

– DAM hourly net tie schedules

– Binding constraints

– DAM summary Cleared demand Operating reserves

Page 16: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

16©ISO New England 2004

Outputs of the DAM (continued)

Private– Supply schedules

Generation Incs

– Demand schedules Load Decs

– External transaction schedules

Page 17: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

17©ISO New England 2004

Outputs of the DAM (continued)

DAM generation schedules are an initial input to the RAA.

Page 18: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

18©ISO New England 2004

Overview of DAM Settlement

Cleared demand (fixed or price sensitive) pays the price of its zone (the Zonal LMP)

Cleared supply (generation) is paid at the price of its node (the Nodal LMP)

Cleared virtual demand or supply pays or is paid at the location where bid (i.e., Hub, Zone, Node)

Financial Transmission Rights (FTR) holders are charged or credited based on the difference between the DAM congestion component between source and sink nodes

Page 19: Energy Markets:   Overview of the Day-Ahead Market (DAM)

WEM101 – Introduction to ISO-NE’s Wholesale Energy MarketMarket Analysis & Training

19©ISO New England 2004

Questions?