PowerGEM Power Grid Engineering & Markets 1 LMP’s and Congestion Relief Lens, Crystal Ball, or Alice’s Looking Glass ? January 30, 2003 Jim Mitsche [email protected]

PowerGEMPower Grid Engineering & Markets

1

LMP’s and Congestion Relief

Lens, Crystal Ball, or Alice’s Looking Glass ?

January 30, 2003Jim Mitsche

[email protected]


2

Opinions, Based on What ?

• Analysis of NY State Congestion Cost and Causes 2000 – 2002– Report at http://www.nyiso.com/services/documents/groups/oc_tpas_subcomm/12_04_02/draft_final_ny_trans_grid_rev_112602.pdf

• Analysis of Delmarva Peninsula (PJM) Congestion Cost and Causes 2000 – 2002– Report Athttp://www.pjm.com/transmission/trans_exp_plan/meeting/downloads/20021217_mitsche_cong.pdf

http://www.pjm.com/transmission/trans_exp_plan/meeting/downloads/20021217_delmarva_congestion_study4.pdf

• 3 Years of Decision Support to Major TCC Owner in New York

Thanks to my co-workers Boris Gisin and Manos Obessis, and to Scott Gass of PJM !


3

LMP’s Add to Price Volatility, What Do We Get for That ?

In A Nutshell

LMP’s point to congestion causes and impacting load/generation very well (with a little more data than usually available)

LMP differences (congestion cost) patterns are often very mysterious and difficult to predict

Financial products based on LMP differences are good for hedging, but not investment

Some new approaches may reduce LMP price volatility and encourage LMP based transmission investment


4

Delmarva Congestion Cost Components by Constraining Facility

Constrained Facility

Average Shadow Price in $/MWHr

Average MW Load Affected

Average Hourly

Congestion Cost in $/hour

KEENEY 500 KV KEENEY AT51 XFORMER $133.38 679 $90,551



69 KV BRIDGEVI-GREENWD 6738-1 $403.48 101 $40,634

69 KV GREENWD-SHARRING 6738-2 $410.96 95 $39,139

INTERFACE DPLSOUTH $28.57 1136 $32,442

CHURCH 138 KV CHURCH AT2 XFORMER $227.22 141 $32,125

PINEYGRO138 KV PINEYGRO AT1 XFORMER $331.61 54 $17,766

230 KV EDGEMOOR-HARMONY 23012 $34.72 478 $16,585

138 KV NELSON-VIENNA 13707 $156.63 95 $14,817

LMP’s Point to Congestion Causes


5

LMP’s Point to Impacting Load/Generation

ManhattanSame Hour Average Price Components

2000 - 2002 (156 weeks)

$0

$10

$20

$30

$40

$50

$60

$70

$80S

un 0

1:00

Sun

13:

00

Mon

01:

00

Mon

13:

00

Tue

01:

00

Tue

13:

00

Wed

01:

00

Wed

13:

00

Thu

01:

00

Thu

13:

00

Fri

01:0

0

Fri

13:0

0

Sat

01:

00

Sat

13:

00

Hour of the Week

$/M

W

Energy Congestion Losses LMP

Average % of Total LMP

Congestion 13%Losses 7%


6

A Little More Data is Needed

• Shadow Prices Are More Useful than LMP’s for Cause Impact & Analysis– Shadow Prices (value of relieving a constraint) reflect

• Multiple Constraints – (1.9 per hour in PJM, 5+ is common)

• Outages – (4 per hour average in Delmarva alone, 10+ is common in ISO’s)

• Relief Cost & Effectiveness– PJM Shadow Prices vary $0 to $1269

• Amount of Load Affected

These Data + LMP’s Inform Markets


7

• Why is Congestion Occurring at All Load Levels ?• Why Doesn’t Congestion Cost Go Up with the Supply Curve ?

Congestion Patterns are Often Mysterious

Shadow Price Variation with Load LevelDelmarva 2000 - 2002

$0

$200

$400

$600

$800

$1,000

1000 2000 3000 4000

Load in MW

Est

imat

ed S

had

ow

P

rice

in

$/M

W


8

• Does Congestion Increase with Increasing Load Level ?• Generally No !• Somewhat more frequent congestion with no outages at higher loads

Frequency of Congestion Occurrence at Varying Load LevelsDelmarva 2000 - 2002

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1000 2000 3000 4000

Load Level MW

% o

f H

ou

rs O

ccu

rrin

g All CongestedHours

No OutagesCongestedHours

All Hours(Congested orNot)


9

What Causes Congestion At Shoulder Load ?

• Transmission Outages• Generation Outages• Unit Commitment Decisions and Restrictions

– Unit Minimums

– Ramp Rates

– Minimum Run Times

• Bidding Patterns & Generation Location


10

Delmarva PeninsulaSummary of Congestion by Cause

August 1999 - August 2002

Hours

Cost

No Outages

Planned Maintenance

Outages

Forced Outages

Construction Outages

OutagesAverage $/hour

None $6,774Construction $10,000Forced $26,667Planned $47,143


11

CRR’s Make Good Hedgesbut Bad Investments

NY Central East Limit Congestion CostWeekly Average TCC Value

-$20

$0

$20

$40

$60

$801 7 13 19 25 31 37 43 49

Week Number

NY

Cen

tral

Eas

t T

CC

$/

MW

2000 ($785Million)

2001($175Million)

2002


12

Why Spend $$ on New Transmission ?

• Reliability Needs

• Entry Fee– Safe Interconnection and Capacity Deliverability Costs

• Insurance Policy– LMP’s Provide Actuarial Data

– CRR’s Define Hedges

• Investment– Volatile and Unpredictable

– Where is the Pay-Back ?


13

Improving LMP Based MarketsIs There a Way ?

Embryonic Ideas– Reducing LMP Volatility

• Create a financial resource (bilateral transactions or bilateral secondary market ?) to use in commitment/dispatch to avoid going over the congestion “cliff”.

• Clear congestion with a longer term (one week?) to reduce the effect of outages and unit commitment. More volatile and transient (Day Ahead and real time?) congestion charged to load.

– Transmission Investment • Flowgate Set Asides

– Identify Persistent but Somewhat Approximate Transmission Weaknesses

– Identify or Offer Flowgate Increase Opportunities

– Calculate & Use Flowgate Shadow Prices

– Reserve and Pay-out a New Set Aside Like CBM

Documents

PowerGEM Power Grid Engineering & Markets 1 LMP’s and Congestion Relief Lens, Crystal Ball, or Alice’s Looking Glass ? January 30, 2003 Jim Mitsche [email protected]