the ea’s 2-hub ftr market
DESCRIPTION
The EA’s 2-Hub FTR Market. Roger Miller and Grant Read Presented to EPOC 2011 by Roger Miller. Disclaimer. The Authority has just started an RFP process for the FTR manager, which runs till 31 st October RFP is on www.gets.govt.nz Running a fair, open, competitive tender process - PowerPoint PPT PresentationTRANSCRIPT
The EA’s 2-Hub FTR MarketRoger Miller and Grant Read
Presented to EPOC 2011 by Roger Miller
Disclaimer The Authority has just started an RFP process for the FTR
manager, which runs till 31st October RFP is on www.gets.govt.nz Running a fair, open, competitive tender process Information must be given to all potential bidders My presentation will be placed on the Authority’s website Any relevant Q & A’s will be posted on GETS Specific questions can be emailed to [email protected] Any discrepancy with tender documents or Code
amendment - those documents take precedence
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Overview1. Hubs versus nodes
Why use hubs and how do they work?
2. “All inclusive” FTRs Why use full price difference vs loss exclusive definition
3. Option vs Obligation FTRs Why we need options in a “tidal flow” situation
4. Simplified Grid Model for 2 hub FTR5. Partitioning the Rental Pool for 2 hub FTRAppendix - Loss and Reserve Issues (if time?)
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
1. Hubs versus nodes Why use hubs and how do they work?
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Hubs Hubs are a grouping of one or more nodes Nodes within a hub may have specified weights Settled on the weighted average nodal price FTR hub injections split into component nodal
injections for feasibility testing and rental calculation Trading between a few major hubs reduces market
power concerns Initial FTR “hubs” aligned with ASX futures reference
nodes – BEN2201 and OTA2201 May need to “expand” hubs slightly to handle flows
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
2. “All inclusive” FTRs Why use full price difference vs loss exclusive definition?
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
BEN-OTA Monthly Price Components
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
-100
-80
-60
-40
-20
0
20
40
60Ja
n 20
08
Feb
2008
Mar
200
8
Apr
200
8
May
200
8
Jun
2008
Jul 2
008
Aug
200
8
Sep
200
8
Oct
200
8
Nov
200
8
Dec
200
8
Jan
2009
Feb
2009
Mar
200
9
Apr
200
9
May
200
9
Jun
2009
Jul 2
009
Aug
200
9
Sep
200
9
Oct
200
9
Nov
200
9
Dec
200
9
Jan
2010
Feb
2010
Mar
201
0
Apr
201
0
$/M
Wh
Congestion
HVDC Risk/Reserve
Loss
Wet/North Flow
Dry/South Flow
-30%
-20%
-10%
0%
10%
20%
30%Ja
n 20
08
Feb
2008
Mar
200
8
Apr
200
8
May
200
8
Jun
2008
Jul 2
008
Aug
200
8
Sep
200
8
Oct
200
8
Nov
200
8
Dec
200
8
Jan
2009
Feb
2009
Mar
200
9
Apr
200
9
May
200
9
Jun
2009
Jul 2
009
Aug
200
9
Sep
200
9
Oct
200
9
Nov
200
9
Dec
200
9
Jan
2010
Feb
2010
Mar
201
0
Apr
201
0
BEN-OTA Monthly Loss Factors
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Dry/South Flow
Wet/North Flow
“All inclusive” FTRsWhy use full price difference vs loss exclusive definition?
Losses account for a large part of the price differential (especially during HVDC South Flow)
Size and direction of loss price differential depends on generation pattern (unpredictable)
Integrates with futures platform (ASX) better
Simpler for participants to understand and value
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
3. Option vs Obligation FTRs Why we need options in a “tidal flow” situation
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Obligations - What are they?
Price Difference
Payout Pure swap Positive or negative value Symmetrical Linear Simple optimisation
problem
Holder receives payment
Holder must pay
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Price Difference
Payout Pure swap Positive or negative value Symmetrical Linear Simple optimisation
problem
Holder receives payment
Holder must pay
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Options - What are they?
Price Difference
Payout
Asymmetrical Non-negative value Non-Linear More complex optimisation
problem
Holder receives payment
No requirement for holder to pay
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Why we need option FTRs Direction of transmission flows depends on generation
pattern (unpredictable) Direction of price differentials depends on direction of
transmission flows Inter-island HVDC flow direction particularly important in
NZ Depends on (SI) hydro inflows (seasonal pattern but
unpredictable from year to year) (“Tidal Flow”) Less important for regions with little generation (e.g.
Upper SI, Auckland? – flow always northward)
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Examples
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Price
S-N Option
N-S Option
Short/Importing Long/
Exporting
Exercise patterns
Number of exercise patterns = number of permutations of hub orderings by price = n! (assuming options between all hubs, which may not be necessary)
For 2 hubs there are just 2 patterns: S-N, N-S
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Ob/Op Constraints
S-N Op + S-N Ob – N-S Ob ≤ S-N Capacity N-S Op + N-S Ob – S-N Ob ≤ N-S Capacity
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
PS-N Ob = PS-N Op – PN-S Op PN-S Ob = PN-S Op – PS-N Op PS-N Ob = – PN-S Ob
Obligation/Option relationship
Price Difference
Payout
S-N Option
-ve N-S Option
Applies to: Auction clearing prices Payouts Ex-post scaling may distort
these relationships
S-N Obligation
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
4. Simplified Grid Model for 2 hub FTR
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Simplified Grid ModelFor 2 hubs
Traditional approach is to ensure FTRs are simultaneously feasible on forecast FTR grid
For 2 hubs FTRs add or subtract algebraically Establish a maximum flow in each direction FTR grid reduces to a 2 node + 1 line model
Ben-Ota Max
Ota-Ben Max
OtahuhuBenmore
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
5. Partitioning the rental pool Flow based decomposition for 2 hubs
Motivation Ring fence intra-island rents for a possible
future intra-island locational price risk solution Not yet decided what this should be
(if anything) Avoid cross subsiding the inter-island FTR Maintain consistent inter-island FTR rental
stream if future FTRs hubs or some other intra-island solution are implemented
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Different approach used for:
HVDC rents AC rents
HVDC - just collect all rent between Benmore and Haywards HVDC terminals = PricereceivedFlowreceived – PricesentFlowsent
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Approach for AC system rents Rents are generated by branch capacities, loss tranche limits,
branch (“equation”) constraints, mixed constraints (if any)
Rent generated by constraint c = σcRHSc
where σc is the constraint shadow price
For each constraint we need to collect rent of σcAssignedCapacityc
where AssignedCapacityc is the maximum LHS constraint loading implied by any feasible FTR flow pattern
Note that if the FTR flow pattern is feasible then AssignedCapacityc ≤ RHSc for all c
For 2 hubs only need to consider 2 extreme flow patterns: BEN-OTA Max; and OTA-BEN Max
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
Allowing for differences between the FTR Grid and the “On the Day” grid
Extreme injection patterns based on an over-estimated grid (no outages, no contingencies)
Use shift factors to deduce branch/constraint loadings on the “On the Day” grid for each extreme injection pattern
Shift factors avoid having to solve a full load flow for each injection pattern for each trading period
Still collect rent on constraints in series with “On the Day” bottlenecks
Simplified by using lossless shift factors and lossless injection patterns
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
FTR Injection Patterns Feasible flow pattern is unbalanced (lossy) Approximate by a balanced (lossless) pattern Lossless flow ≥ Lossy flow on each branch
(over estimate)
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
FTR sinkFTR source FTR flow
Unbalanced flows reduce progressively from source to sink due to losses leaking out at the end of each branch
Balanced flow approximation
Positive injection
at source
Negative injection at sink
NB: This presentation relates to the approved FTR Code Amendment, which comes into force on 1 Oct 2011. It is currently intended to be implemented from Oct 2012.
branch flowAssigned Branch
Capacity
Actual Flow
Pr LF1
Pr LF2
Pr LFmarg
Cap1 Cap2
AssCap2
AssCap1
SP1
SP2
Loss Rentals
•
SPD uses a piece-wise linear loss approximation
LFj is loss factor of the jth tranche
LFmarg is loss factor of the marginal tranche
Capj is capacity of the jth tranche
AssCapj is assigned capacity of the jth tranche
Pr is price at scheduled flow receiving end node
SPj is shadow price of the jth tranche = Pr (LFmarg - LFj)
Loss rent collected
Pr LFmarg
Marginal Loss Factor
xspot price
The End