Message-ID: <17973400.1075846387950.JavaMail.evans@thyme> Date: Fri, 17 Nov 2000 02:52:00 -0800 (PST) From: steven.kean@enron.com To: eric@ehirst.com Subject: Re: Outline for Project on Real-Time Markets Cc: steve.walton@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: steve.walton@enron.com X-From: Steven J Kean X-To: Eric Hirst X-cc: Steve Walton X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Sent X-Origin: KEAN-S X-FileName: skean.nsf Contact Steve Walton =09Eric Hirst =0911/10/2000 10:03 AM =09=09=20 =09=09 To: Skean@enron.com (Steve Kean) =09=09 cc:=20 =09=09 Subject: Outline for Project on Real-Time Markets Dear Steve, Once again, I call on you for advice. Who, within Enron, should I talk with= =20 about a new project I am working on, related to real-time balancing=20 operations and markets (all the messy stuff that causes so many problems=20 within all the existing ISOs)? Here is the outline for the project. Can you send me your suggestions on=20 revising the outline, other people at Enron (and elsewhere) to contact=20 related to these markets, and written materials on how the various ISO=20 markets operate.=20 Thanks. Eric ---------------- ISSUES TO DISCUSS FOR PROJECT ON: REAL-TIME BALANCING OPERATIONS AND MARKETS November 6, 2000 1. Introduction: Importance of real-time operations and markets=20 Essential for reliability, especially security=20 Basis for all forward contracts (hour- and day-ahead, block monthlies,=20 bilaterals)=20 Real-time prices motivate generation-capacity decisions: new construction,= =20 repowering, retirements=20 Ensure equitable treatment for =01&new=018 intermittent and distributed res= ources=20 2. Physical Requirements and Operations=20 Balance generation to load in near-real time (intrahour)=20 Normal conditions (frequency response, CPS1, CPS2)=20 Contingency conditions (DCS)=20 In neither case is it necessary for generation to exactly balance load over= =20 short time periods (e.g., 10 minutes), but must balance energy over longer= =20 intervals=20 Benefits of aggregation=20 Performance and characteristics of individual generation and load resources= :=20 random fluctuations, energy level, ramp rate, acceleration rate, startup=20 time, minimum run time, block loading, energy-limited characteristics of=20 hydro units, etc=20 Control-area balance vs individual-schedule balance, good vs bad inadverten= t=20 interchange=20 NERC and FERC requirements=20 3. Operations with Vertically Integrated Utilities=20 Unit commitment=20 Economic dispatch=20 Regulation=20 Contingency reserves=20 Control area forecasts of loads and resources, effects of forecasts on unit= =20 commitment and dispatch=20 Treatment of (payments and penalties for) energy imbalance and inadvertent= =20 interchange=20 4. RTO Operations and Markets=20 Generation not owned by RTO, RTO must purchase outputs from generation and= =20 load resources=20 Relationship between real-time operations and markets, how are resources=20 dispatched (and by whom) and how are they compensated=20 Time interval (1, 5, 10, or 15 minutes) for dispatch and price setting; wha= t=20 are the tradeoffs in choosing among these intervals=20 Single market-clearing price in each interval vs pay-as-bid for each resour= ce=20 Pay for energy only or pay also for maneuverability (e.g., ramp and=20 acceleration rates); how do resource constraints determine which resources= =20 are permitted to set the market-clearing price and which aren't, and why?= =20 Set prices ex ante or ex post? If prices set ex ante, what is the basis for= =20 the value?=20 Should unit commitment (resource scheduling) be done by individual supplier= s,=20 by RTO, or both?=20 Relationship between real-time markets and ICAP and RMR requirements, and R= TO=20 requirements to ICAP and RMR units to bid resources into real-time market= =20 Treatment of exports and imports, rules governing interchange scheduling=20 (number of schedule changes per hour permitted, ramp rates for schedule=20 changes)=20 To what extent does the RTO make short-term forecasts of load and generatio= n,=20 how far into the future (10 minutes to 24 hours), how does the RTO use thes= e=20 forecasts? Should the RTO commit and dispatch resources on the basis of=20 expected future conditions (i.e., beyond the current and next interval)? Wh= o=20 pays for these RTO decisions?=20 Should RTO publish prices and let demand and supply respond to the price=20 signal, or should RTO dispatch resources up and down based on supplier bids= ?=20 If the RTO explicitly dispatches resources, should uninstructed deviations = be=20 treated differently, in terms of payment or penalties, from instructed=20 deviations? What about a resource=01,s failure to follow instructions?=20 Under what circumstances should RTO go =01&out-of-market=018 for resources?= What=20 should set the price of (payment to) these resources?=20 Under what conditions, if any, are penalties appropriate, for what kinds of= =20 behavior, what determines the magnitude of the penalty? Should penalties=20 apply to generation only or to loads also?=20 How, if at all, should capacity assigned to ancillary services (especially= =20 the reserve services) be incorporated into real-time operations and markets= ?=20 For example, should the capacity assigned to contingency reserves be set=20 aside and used only when a major outage occurs? Or should such reserves be= =20 used routinely whenever it is economic to do so, as long as sufficient=20 capacity is available to meet the NERC reserve requirements?=20 How should intermittent resources (e.g., wind) be treated in real-time=20 operations and markets? Should they be treated any differently from a large= ,=20 volatile load?=20 Can retail loads participate in real-time markets? How?=20 5. Case Studies of U.S. ISOs=20 California=20 PJM, New York, and New England=20 ERCOT=20 6. Conclusions and Recommendations=20 Key features of operations and markets=20 What works=20 What are the options=20 What problems still remain=20 ---------------------------------------------- Eric Hirst Consulting in Electric-Industry Restructuring 106 Capital Circle Oak Ridge, TN 37830 865-482-5470 (phone & fax) Eric@EHirst.com http://www.EHirst.com/=20