ercot market education load serving entities 201 · please turn off cell phones & other...

ERCOT MARKET EDUCATIONLoad Serving Entities 201

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PROTOCOL DISCLAIMER

This presentation provides a general overview of the Texas Nodal Market Implementation and is not intended to be a substitute for the ERCOT Nodal Protocols (available at http://nodal.ercot.com/protocols/index.html), as amended from time to time. If any conflict exists between this presentation and the ERCOT Nodal Protocols, the ERCOT Nodal Protocols shall control in all respects.

ANTITRUST ADMONITION

ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, an electronic version is available at http://www.ercot.com/about/governance/index.html. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws.

Legal Disclaimers and Admonitions

http://nodal.ercot.com/protocols/index.html

http://www.ercot.com/about/governance/index.html

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• Restrooms

• Refreshments

• Attendance sheet

• Exam

• Questions

• Microphones

Legal Disclaimers and Admonitions

Please turn off cell phones & other electronics

Course Introduction

5

Load Serving Entities (LSEs), including:

• Retail Electric Providers

• Electrical Cooperatives

• Municipally-Owned Utilities

This course is designed for:

Course Audience

6

• Identify key Wholesale Market costs associated with serving load in the ERCOT Market

• Describe several means of hedging these costs

• Evaluate your current strategies against your needs

Upon completion of this course you will be able to:

Course Objectives

7

• Nodal Market Overview

• Nodal Market Pricing

• Market Costs of Serving Load

• Nodal Market Tools

• Trades

• Day-Ahead Market

• Congestion Revenue Rights

• Using Tools to Manage Costs

Topics covered in this course:

Course Objectives

8

Nodal Market Overview

9

• Registration Requirements

• Network Modeling

• CRR Auction

• Day-Ahead Market

• Reliability Unit Commitment

• Adjustment Period

• Real-time Operations

• Settlements

• Market Information System (MIS)

Topics in this lesson . . .

Course Objectives

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NODAL MARKET OVERVIEW – The Market Structure

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NODAL MARKET OVERVIEW – The Market Structure

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LSEs in ERCOT – Defining LSEs

A Load Serving Entity (LSE) provides

electrical service to end-use customers

Load Serving Entity

13


Types of LSEs:• Retail Electric Providers• Electrical Cooperatives• Municipally-Owned Utilities

Load Serving Entity

14


Registration Requirements:• Registration as an LSE• Designation of a QSE

15

LSEs in ERCOT – LSE Registration

To register as an LSE• Market Participant application• Standard Market Participant agreement

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Designating a QSE• Occurs during registration• LSE may also be a QSE

Changing QSE Representation• LSE must inform ERCOT • New QSE must confirm

17

NODAL MARKET OVERVIEW – Network Modeling

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NODAL MARKET OVERVIEW – CRR Auction

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Congestion Revenue Rights (CRR)• Financial instrument • Hedge against congestion costs

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CRR Account Holders• Must register with ERCOT and

meet qualification requirements• LSE may also be a CRR

Account Holder

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NODAL MARKET OVERVIEW – Day-Ahead Market

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NODAL MARKET OVERVIEW – Reliability Unit Commitment

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NODAL MARKET OVERVIEW – Adjustment Period

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NODAL MARKET OVERVIEW – Real-Time Operations

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NODAL MARKET OVERVIEW – Settlement

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NODAL MARKET OVERVIEW – Market Information System

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• Registration requirements• The purpose of Network Modeling• The role CRRs play in the Nodal Market• Participation in the Day-Ahead Market• Reliability Unit Commitment• Activities of the Adjustment Period• The components of Real-Time Operations• The goals of Settlements• The uses of the MIS

You’ve learned about…

Summary

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Nodal Market Pricing

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• Settlement Points

• Settlement Point Pricing

• Locational Marginal Pricing


Overview

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All Energy in the ERCOT Market is settled at one of three types of Settlement Points:

Settlement Points

ResourceNodes

LoadZones

Hubs

Each Settlement Point has its own Settlement Point Price

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An Electrical Bus where a Resource’s measured output is settled

What is a Resource Node?

Settlement Points

ResourceElectrical Bus

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A grouping of Load Buses where Load is settled.

What is a Load Zone?

Settlement Points

All Load must be assigned to a specific Load Zone for Settlement purposes

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• Competitive Load Zones

• Non Opt-in Entity Load Zones

• DC Tie Load Zones

Three types of Load Zones

Settlement Points

34

A grouping of 345kV buses wherefinancial transactions are settled.

What is a Hub?

Settlement Points

Hub

Specific buses in each Hub defined by Protocols

35

ERCOT Hub Average

ERCOT Bus Average

Six Hubs in ERCOT Market

Settlement Points

Four Regional Hubs• North

• West

• South

• Houston

Two Average Hubs

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Settlement Point Prices are calculated from Locational Marginal Prices:

Settlement Points

• Load Zone: Load-weighted average of LMPs at Load Buses within the Load Zone

• Hub: Simple Average of LMPs at defined Hub Buses within the Hub

• Resource Node: LMP at Resource Node

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Additional Real-Time pricing component…

Settlement Points

• Reserve Price Adder: the economic value of reserves that are available for energy dispatch in Real-Time

• LMPs and Reserve Price Adders are used together to form SPPs in Real-Time

LMPs are location-specific. Reserve Price Adders represent the value of

reserves ERCOT-wide.

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What is Locational Marginal Pricing (LMP)?

• Pricing: Cost

• Marginal: to serve the next increment of Load

• Locational: at an Electrical Bus

Locational Marginal Pricing


Buses can be:• Load Buses• Generation Resource Buses• Hub Buses• Other Buses

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• Energy

• Congestion

LMP components


In some markets, LMPs have a component for losses.

The ERCOT Nodal Market does NOT include losses in LMPs.

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Introducing the players…


345kVHub Bus

69kVLoad Bus

Gen 1

Gen 2 Gen 3

Load

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Let’s solve for LMPs at each Bus


Gen 1

Gen 2 Gen 3

20 MW20 MW @ $20

20 MW @ $10

345kVHub Bus

69kVLoad Bus

5 MW Limit

10 MW Limit

40 MW @ $30

$10LMP?

$20LMP?

$30LMP?

$30LMP?

Clear 5 MW

Clear 5 MW Clear 10 MW

Load$20LMP?

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Since we have congestion. . .


Charges to BuyersLMP MW

$30 20 $600

Total $600

Payments to SellersLMP MW

Gen 1 $20 5 $100

Gen 2 $10 5 $50

Gen 3 $30 10 $300

Total $450

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$600

$450

$150

Chargesto

Buyers

Paymentsto

Sellers

Day-Ahead Market Congestion Rent funds Congestion Revenue

Rights (CRRs)

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• LMPs and Settlement Point Prices

• Every Hour

How often are LMPs & Settlement Point Prices calculated?

Settlement Point Prices

LMPs and Reserve Price Adders• Every 5 minutes*

Settlement Point Prices• Every 15 minutes

* Generated every SCED cycle

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• LMP Contour Map

• Day-Ahead Market SPPs

• Real-Time LMPs

• Real-Time SPPs

Market Information System

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• Settlement Points

• Settlement Point Pricing

• Locational Marginal Pricing


Summary

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Market Costs of Serving Load

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• The LSE Business Environment

• Wholesale Market Costs of Serving Load

• The Challenges of Predicting Cost Exposure


Overview

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The LSE Business Environment

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• Primary Costs to Manage: Other costs

• Energy - Reliability Must Run

• Capacity - Black Start

• Congestion - Voltage Support

• Ancillary Services - ERCOT Administrative Fee

Settlement Exposure


51


Energy

Capacity

Congestion

Ancillary Services

What are the wholesalemarket costs for serving load?

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Acquire Energy to serve Load


Bilateral Trade

Day-Ahead Market

Real-Time Purchase

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Acquire Energy to serve Load


Bilateral Trade

Day-Ahead Market

Real-Time Purchase

Energy& Capacity

Energy& Capacity

Energy

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Congestion Cost exposure


Congestion costs are built in to the energy prices.

Resource Node A

$30/MWh

$30/MWh

$30/MWh

Load Zone

$40/MWh

$50/MWh

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Ancillary Services Costs


Regulation Up

Regulation Down

Responsive Reserve

Non-Spin ReserveQSEs (with Load)

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Ancillary Service Plan

• Ancillary Services (MW) for each hour of the Operating Day

• Based on forecasted load

• Posted to MIS Public

Ancillary Services Costs (continued)


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Ancillary Service Obligation

• AS Plan allocated to each QSE, by service, by hour.

• Based on Load Ratio Share



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QSE settles with LSE

• ERCOT charges QSE for any Obligation not self-arranged

• QSE may charge LSE for Ancillary Services



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• Supply and Demand

• Transmission Congestion

• Transmission and Generation Outages

• Weather

Factors Impacting Wholesale Market Costs:


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Predicting Cost Exposure


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• The LSE Business Environment

• Wholesale Market Costs of Serving Load

• The Challenges of Predicting Cost Exposure


Summary

Market Tools

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• Why do anything?

• Tools available in ERCOT, including:

• Trades

• Day Ahead Market


• Criteria for using these tools

• Financial impact of using these tools


Overview

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The Tools for Managing Wholesale Costs

Market Tools

Congestion

Energy, Capacity, Congestion

Day-Ahead Market

Congestion Revenue Rights

Bilateral TradesEnergy, Capacity, Ancillary Services

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The more forward the Energy is purchased the higher the price.

In general . . .

Market Tools

So, why would an LSE buy energy forward?

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Trades and DAM provide Price Certainty

Real-Time Price Volatility!

Market Tools

0

10

20

30

40

50

60

1 3 5 7 9 11 13 15 17 19 21 23

LMP

Hour

Load Zone

Real-Time Prices

Day-Ahead Prices

Trade Prices

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Avoid Capacity-Related charges!

Market Tools

Bilateral Trade

Day-Ahead Market

Real-Time Purchase

Energy& Capacity

Energy& Capacity

Energy

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Market Tools - Trades

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• QSE-QSE transactions• Transfers financial responsibility• Types

• Capacity• Energy• Ancillary Service

Trades

Market Tools – Trades

Trades are used only in Settlements

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Trade Options:• LSEs may trade• QSEs report trades to ERCOT

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• Trades do not “exist” until bothQSEs agree.

• One QSE reports the trade• The other QSE confirms the trade

• After the Trade is confirmed, either party may reject it if the deadline for doing so has not passed.

Buyer and Seller QSE must confirm Trades


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Information Needed Energy Trade Capacity Trade AS Trade

Buying QSE

Selling QSE

Type of AS:

Settlement Point:

MW quantity for each Settlement Interval 15 minute Hourly Hourly

Start and Stop Time 1st / Last 15-minute Settlement Interval 1st / Last Hour 1st / Last Hour

Submittal Criteria by Trade


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Submitted prior to 1430

Energy Trade• Energy supply in Real-Time• Capacity supply in Day-Ahead

RUC

Capacity Trade• No Energy supply in Real-Time• Capacity supply in Day-Ahead

RUC

Submitted after 1430

Energy Trade• Energy supply in Real-Time• Capacity supply in subsequent

Hourly RUC

Capacity Trade• No Energy supply in Real-Time• Capacity supply in subsequent

Hourly RUC

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Market Tools - Day Ahead Market (DAM)

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• Centralized Forward Market• QSEs buy and sell Energy• ERCOT buys Ancillary Services • Forward market provides price

certainty

The Day-Ahead Market

Market Tools – Day Ahead Market

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• Market opens at 0600

• Clearing Process begins at 1000

• Results posted by 1330

When does the Day-Ahead Market occur?


06:00 13:30 00:00

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Only QSEs participate in the Day-Ahead Market.

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Types of Bids:• Energy Bid• PTP Obligation Bid

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Energy Bid

h

• Submitted at any Settlement Point• Includes:

• MW Quantity• Price buyer is willing to pay

Day-Ahead Market Energy Bid


Energy bids are used only in DAM. Load is a price

taker in Real-Time

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• Financial instruments• Hedge against

congestion costs• Financial Investment

• Purchased at DAM price spread

• Settled at Real-Time price spread

Day-Ahead Market PTP Obligations


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• Submitted for any two Settlement Points• Includes:

• MW Quantity• (Sink – Source) price buyer is willing to pay

DAM PTP Obligation Bid


SourceSettlement

Point

SinkSettlement

Point

PTP Obligation

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• Awarded DAM Energy Bid

• Energy supply in Real-Time

• Capacity supply in RUC

• Awarded DAM PTP Obligation

• Payment or Charge in Real-time

• No Energy supply in Real-Time

• No Capacity supply in RUC


TOMORROWTODAY

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Market Tools - Congestion Revenue Rights (CRRs)

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• Financial instruments• Hedge against

congestion costs• Financial Investment

• Purchased at Auction Clearing Price

• Settled at DAM price spread

Congestion Revenue Rights

Market Tools – Congestion Revenue Rights

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Price certainty - Locking in the price of congestion at the cost of purchasing the CRR


Price Separation between two Settlement Points

Diff

eren

ce

Hour

As a Financial Hedge for…

88

•As a Financial Investment…

•CRRs may be purchased as a financial tool to speculate:


Congestion Rent > Purchase Price

89

Congestion Revenue Rights Characteristics


• Designated point of injection (source) and point of withdrawal (sink)

• Settlement based on difference between sink and source Settlement Point Prices (Sink – Source)

• Two Instruments:• Point-to-Point Options• Point-to-Point Obligations

Point-to-Point Congestion

Revenue Rights

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Types of Congestion Revenue Rights


Point-to-Point Options• Can only result in a payment

Point-to-Point Obligation• Can result in a payment or charge

Point-to-Point Congestion

Revenue Rights

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Point-to-Point (PTP) Options


Point A

Point B

Point COptionAB Payment = $10.00

OptionCB Payment = $0?

$10/MWh$20/MWh

$30/MWh

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Point-to-Point (PTP) Obligations


Point A

Point B

Point CObligation AB Payment = $10.00

Obligation CB Payment = -$10.00 ?

$10/MWh$20/MWh

$30/MWh

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• CRR Auction

• Allocation (NOIEs only)

• Bilateral Trades


Auction

Allocation

Trade

CRRs

Three ways of acquiring CRRs:

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• Time-of-Use Blocks

• One month strips

CRRs are auctioned and allocated by:


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• CRR Auction• Monthly and Semi-Annual Auctions• Based on Network Operations Model


http://ep.ercot.com/npt/ERCOT%20Nodal%20Graphics/allocation_titled.png


96


Only CRR Account Holders can become owners-of-record for CRRs

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• Timing of Auctions:

• Monthly

• Long Term Auction Sequence

• Semi-annual

• Four successive auctions


1st Six months

2nd Six months

3rd Six months

4th Six months

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• Available Capacity

• 90% in Monthly Auction

• Less in Long-Term Auction

• 60% for first six months

• 45% for second six months

• 30% for third six months

• 15% for fourth six months


CRR Auction Awards are also constrained by

Credit Limits

99

Pay to QSEs representing Load

Annual and MonthlyCRR Auctions

Distribution occurs once a month.

CRR Auction Settlement


http://ep.ercot.com/npt/ERCOT%20Nodal%20Graphics/CRR%20Auction%20Revenues.png

http://ep.ercot.com/npt/ERCOT%20Nodal%20Graphics/CRR%20Auction%20Revenues.png

100

• PTP Options• PTP Obligations

• Characteristics remain unchanged

• Both parties must meet credit requirements.

Trading CRRs Bilaterally


101

• The need for forward energy purchases

• Tools available in ERCOT, including:

• Trades

• Day Ahead Market


• Criteria for using these tools

• Financial impact of using these tools


Summary

102

Using Market Tools to Manage Costs

103

• Introduce our Laboratory LSE and the experimental conditions

• Use various market tools to manage costs for our LSE

• Explore many scenarios

• Use single tools and combinations of tools

• Compare costs

• Discuss the benefits and risks associated with each tool.

In this lesson we will. . .

Overview

104

MEGALOAD CORPORATION

Goals in doing Business in the ERCOT Market:

• Provide reliable electric service at a competitive rate

• Manage cost exposure

Introducing…

Scenario Conditions

MegaLoadCorp

105

Scenario Conditions

What do I do

now?

MegaLoadCorp

• MegaLoad is it’s own QSE.

• MegaLoad is also a CRR Account Holder.

• MegaLoad does not own any generation.

106

Hour Ending 1200

Resource Node A West HubWest Load

Zone

Trade Price $23 25 $35DAM SPP $20 25 $30RT SPP $30 40 $50

Scenario Conditions

Peak Weekday Block PTP Option Clearing Price

West Hub to West Load Zone $5Resource Node A to West Load Zone $8

107

Comparing Forward & Real-time transactions

• DAM transactions & Trades are conducted hourly

• Real-Time is settled in 15 minute intervals

• For simplicity, we will

• Calculate all examples on an hourly basis

• Assume Real-Time prices and loads are constant for an hour

Scenario Conditions

108

Scenarios – Managing Costs of Serving Load

Costs Tools

CRRs

Bilateral Trades

Energy

Congestion

Capacity

Ancillary Services Do Nothing

Day-Ahead Market

109

Managing Energy Costs

Costs Tools

Energy

Congestion

Capacity

Ancillary Services Do Nothing

110

QSE Representing Load• Settled for difference between

Real-Time Load and Trade or DAMtransactions

• Settles with LSE


Loads in Real-Time• Are price takers

• Pay for all energy not previouslyarranged through Trade or DAM

05

1015202530354045

1 3 5 7 9 11 13 15 17 19 21 23

LMP

Hour

Load Zone

111

ERCOT calculates each QSE’s Real-Time Energy Imbalance:

Real-Time Energy Settlement


( )_ x (-1) RTSPP ($/MWh)Real-Time Settlement

Point Price

ERCOT settles a QSE’s Energy Imbalance at each Settlement Point

Supplies Obligations

112

Real-Time Energy Purchase:SCENARIO 1


x (-1) RTSPP ( )_Supplies Obligations

• QSE does not buy forward energy

• Load is 5 MW in West Load Zone for hour ending 1200

• Settlement Point Price: $50/MWh

113

Real-Time Energy Purchase:SCENARIO 1


_0 (-1) $50.00 = $250.005 xSupplies

(Obligations

)

• Load is exposed to Real-Time Price

• QSE pays $250 (per hour)

114

Type of Settlement Hour 12:00

Real-TimeReal-Time Energy Imbalance $250.00Payment for DAM PTP Obligations N/A

Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A

CRR Auction Charge for Awarded CRR Auction Bid N/A

Total ERCOT Settlement $250.00

Energy Trade Cost to LSE for Energy Traded N/A

NET MegaLoad Cost $250.00

SCORECARD

115


Costs Tools

Energy

Congestion

Capacity

Ancillary Services

Day-Ahead Market

116

Day-Ahead Market PurchaseSCENARIO 2


5MW X $30.00/MWh = $150.00 for the hour

• QSE buys 5MW in the West Load Zone for Hour Ending1200

• Day-Ahead Settlement Point Price• West Load Zone: $30/MWh

117

Real-Time SettlementSCENARIO 2



• QSE bought 5MW in DAM

• Load is 5 MW in West Load Zone for interval 1200

118



_5 (-1) $50.00 = $0.005 xSupplies

(Obligations

)

• Load is not exposed to Real-Time Prices

• Settlement Point Price• West Load Zone: $50/MWh

119



Day-AheadDAM Energy Charge $150.00Payments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A





SCORECARD

120


Costs Tools

Energy

Congestion

Capacity

Ancillary Services

Bilateral Trades

121

Trade Energy PurchaseSCENARIO 3


5MW X $25.00/MWh = $125.00 for the hour

• QSE buys 5MW at the West Hub for Hour Ending1200

• Trade Price• West Hub: $25/MWh

122




• QSE bought 5MW through Trade

• Load is 5 MW in West Load Zone for Hour Ending 1200

123



_5 (-1) $40.00 = -$200.000 xSupplies

(Obligations

)

• Trade energy is delivered to West Hub

• Settlement Point Price• West Hub: $40/MWh

124



_0 (-1) $50.00 = $250.005 xSupplies

(Obligations

)

• QSE still has load at the West Load Zone

• Settlement Point Price• West Load Zone: $50/MWh

125

Real-Time Settlement


Resource Node A

$30/MWh

$40/MWh

$50/MWhWestLoad Zone

Payment at West Hub

Charge at West Load Zone Real-time Net Cost

$200 $250 $50

West Hub

126



Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations N/A



Energy Trade Cost to LSE for Energy Traded $125.00


SCORECARD

127


Costs Tools

CRRs

Energy

Congestion

Capacity

Ancillary Services

Day-Ahead Market

128

Managing Congestion Costs

Costs Tools

Energy

Congestion

Capacity

Ancillary Services

Day-Ahead Market

129

Congestion Cost exposureSCENARIO 4


Resource Node A

$??/MWh

$??/MWh

$??/MWhWestLoad Zone

• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone

West Hub

130



Types of Bids:• Energy Bid• PTP Obligation Bid

131

Day-Ahead Market PTP ObligationsSCENARIO 4


Price in Day Ahead Market = $5

Value in Real Time = $10 ?

?

$25/MWh $30/MWh

DAMPTP Obligation

DAM Prices:

$40/MWh $50/MWhReal-Time Prices:

WestLoad Zone

Source SinkWest Hub

132

DAM PTP Obligation Purchase:SCENARIO 4


5MW X $5.00/MW = $25.00

• QSE buys 5MW of PTP Obligations from West Hub to West Load Zone for hour ending 1200

• Day-Ahead Price = $5/MW

133



Resource Node A

$30/MWh

$40/MWh

$50/MWhWestLoad Zone

• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone• 5MW PTP Obligation Hub to Load Zone

West Hub

134

Payment at West Hub

Charge at West Load Zone

Payment for PTP Obligation

Real-timeNet Cost

$200 $250 $50 $0



Resource Node A

$30/MWh

$40/MWh

$50/MWh

WestLoad Zone

West Hub

135


Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations -$50.00-

Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM N/ACharge for DAM PTP Obligations $25.00





SCORECARD

Don’t forget: A PTP Obligation can result in a charge in Real-Time

136


Costs Tools

CRRs

Energy

Congestion

Capacity

Ancillary Services

137

• CRR Auction• Monthly and Semi-Annual Auctions• Based on Network Operations Model




138

MegaLoad buys CRRs in Monthly Auction


MegaLoad

5 MWs of Peak Weekday CRRs

Clearing price is $5 per MW per hour

ERCOT will charge MegaLoad for all hours in the Time-Of-Use block

139

CRR Purchase:SCENARIO 6


139

5MW X $5.00/MW = $25.00

for Hour Ending 1200

MegaLoad

CRR Account Holder buys 5MW Peak WD PTP Option from West Hub to West Load Zone

Auction Clearing Price = $5/MW

140

Congestion Revenue RightsSCENARIO 5


$25/MWh $30/MWh

PTP Option

DAM Prices:


WestLoad ZoneSource Sink

• 5MW Trade Energy Purchase at West Hub• 5MW Load at West Load Zone• 5MW PTP Option from Hub to Load Zone

West Hub

141



CRR Payment in DAM $25Real-Time Congestion Cost $50

$25/MWh $30/MWh

PTP Option

DAM Prices:


WestLoad ZoneSource SinkWest Hub

142



Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM -$25.00-Charge for DAM PTP Obligations N/A

CRR Auction Charge for Awarded CRR Auction Bid $25.00




SCORECARD

143



CRR Payment in DAM $25Real-Time Congestion Cost $50

Might bridge with DAM PTP Obligation

$25/MWh $30/MWh

PTP Option

DAM Prices:


WestLoad ZoneSource SinkWest Hub

144


Real-TimeReal-Time Energy Imbalance $50.00Payment for DAM PTP Obligations -$50.00-

Day-AheadDAM Energy Charge N/APayments for CRRs Settled in DAM -$25.00-Charge for DAM PTP Obligations $25.00





SCORECARD

145

Day-Ahead Congestion HedgingSCENARIO 7


• 5MW DAM Energy Purchase at West Load Zone• 5MW PTP Option from Resource Node A to West Load Zone

WestLoad Zone

Resource Node A

West Hub

146

CRR Purchase:SCENARIO 7


146

5MW X $8.00/MW = $40.00

for Hour Ending 1200

MegaLoad

CRR Account Holder buys 5MW Peak WD PTP Option from Resource Node A to West Load Zone

Auction Clearing Price = $8/MW

147


Day-Ahead Congestion HedgingSCENARIO 7

Energy Purchase PTP Option Payment Net Day-Ahead Cost$150 $50 $100

$20/MWh

$25/MWh

$30/MWh

WestLoad Zone

Resource Node A

West Hub

148



148

_5 (-1) $50.00 = $0.005 xSupplies

(Obligations

)

Load is not exposed to Real-Time Prices

Settlement Point PriceWest Load Zone: $50/MWh

149



Day-AheadDAM Energy Charge $150.00Payments for CRRs Settled in DAM -$50.00-Charge for DAM PTP Obligations N/A





SCORECARD

150

CLASSACTIVITY

Class Activity

Split into groups:• Maximum of 5 people per group• Minimum of 3

• Analyze pricing information for Interval 0800• Minimize MegaLoad’s costs for serving 5MW of Load at the

West Load Zone

151

Hour Ending 0800

Resource Node A West HubWest Load

Zone

Trade Price $25 30 $35DAM SPP $20 25 $30RT SPP $15 20 $28

Class Activity Conditions

Peak Weekday Block PTP Option Clearing Price

West Hub to West Load Zone $3Resource Node A to West Load Zone $5

152

A Few Other Risks Impacting Market Costs

153

• Funding of CRRs

• CRR Balancing Account

• Derations

A few other things you should know about . . .

CRRs – A Few Other Risks

154

Payment due toCRR Account Holders

Hourly

Funding of CRRs


155


Hourly

CRR Settlement


may be short paid in some hours

156


Pay to QSEs representing Load

Monthly

CRR Balancing Account Fund

CRR Rolling Balancing Account

157



Monthly

158


Monthly


X

may remain short paid

159

• Transmission elements are oversold

• The Target Payment is a positive value

• CRR source or sink is a Resource Node

CRR payments may be derated if:


Resource Node A

WestLoad Zone

PTP Option

West Hub

160

Managing Capacity Costs

Costs Tools

Bilateral Trades

Energy

Congestion

Capacity

Ancillary Services

Day-Ahead Market

161

It ensures:

• Enough capacity is committed to serve the forecasted load

• Committed capacity is in the right locations

Reliability Unit Commitment (RUC)


162

If ERCOT commits a Resource through RUC

• ERCOT provides QSE with a payment guarantee

• May provide “Make-Whole Payment”

Cost recovery

• QSEs are responsible for capacity

• QSEs who are capacity short responsible for Make-Whole


163

• Load (Adjusted Metered Load )

• Capacity Trades where the QSE is a seller

• Energy Trade where the QSE is a seller

• Cleared DAM Energy Offer

What is included in the QSE’s capacity obligation?


Capacity Required to meet QSE Obligations

164

• Show capacity from its Resources in its COP

• Capacity Trades where the QSE is a buyer

• Energy Trades where the QSE is a buyer

• Cleared DAM Energy bids

How can a QSE arrange to meet these obligations?


Capacity arranged by QSE

165

QSEs that do not arrange enough capacity to cover obligations are responsible for the costs of RUC


Capacity Short Charge

Capacity Required to meet QSE Obligations

Capacity arranged by QSE

Capacity Shortfall

166

• RUC Capacity-Short Charges are subject to a cap• Remaining Make-Whole funds are collected on a Load

Ratio Share basis.

RUC Make-Whole Uplift Charges


Make-Whole Payments

Capacity Short Charges

Make-Whole Uplift Charge

Settlement

167

Managing Ancillary Service Costs

Costs Tools

Bilateral Trades

Energy

Congestion

Capacity

Ancillary Services

168

(AS Price) * (AS Quantity)

A QSE’s share of the Ancillary Service cost for an Operating Hour is


=AS Price ERCOT Total AS Cost( )MW procured by ERCOT

=AS Quantity ( )QSE Obligation - ( )Self-Arranged Qty

TotalAS Costs

169

QSE chooses how to fulfill Obligations


Self-Arrange Allow ERCOT to procure

DAM SASM

170

• May become part of QSE’s Self-Arrangement

• Reduces AS cost exposure in DAM or SASM

LSE may have Ancillary Service trades


171

• The risks of “doing nothing”

• The impact of forward energy purchases on costs

• The risks associated with delivery points for energy

• Hedging congestion costs

• Real-Time congestion costs

• Day-Ahead congestion costs

• Hedging capacity costs

• Managing Ancillary Service costs

You’ve learned about. . .

Summary

Wow!That’s a

lot.

Course Conclusion

173

• Identify key Wholesale Market costs associated with serving load in the ERCOT Market

• Energy

• Congestion

• Capacity

• Ancillary Services

• Describe several means of hedging these costs

• Evaluate your current strategies against your need

You should now be able to …

Course Objectives

174

ERCOT Nodal Market Protocols http://www.ercot.com/mktrules/nprotocols/

ERCOT Training

http://www.ercot.com/services/training/

Nodal Market Education Contact

[email protected]

Additional Resources

Links

http://www.ercot.com/mktrules/nprotocols/

http://www.ercot.com/services/training/

mailto:[email protected]

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