ASM Phase II Real Time Dispatch and Reserve Constraint Penalty Factors rev3.0 NEPOOL Markets Committee July 12-13, 2005 Jim Milligan ISO-NE Markets Development

Presentation Title © 2005 ISO New England Inc. 2 Outline Overview of real time dispatch –TMSR Re-dispatch –TMSR Shortage Proposed Reserve Constraint Penalty Factors Use of RCPFs –Dispatch Solutions Reserve Shortages

Presentation Title © 2005 ISO New England Inc. 3 Real Time Dispatch Objective of real time dispatch algorithm is to determine the least costly means of serving the next increment of load and reserves at each node in the system from available resources given all identified constraints Identified constraints include; –Active transmission constraints –Resource operating constraints including ramp rates and limits –System reserve requirements (new with ASM) –Locational reserve requirements (new with ASM) –Real time energy (load) requirements –Regulation requirements

Presentation Title © 2005 ISO New England Inc. 4 Real Time Dispatch (cont) Available Resources –On-line dispatchable Resources (Generators and Asset Related Demand) –On-line non-dispatchable Generators and scheduled External transactions (energy requirements) –Off-line Fast Start Generators

Presentation Title © 2005 ISO New England Inc. 5 Real Time Dispatch (cont) Real time ex-ante dispatch outputs –Desired Dispatch Points (MW) and reserve designations for all dispatchable resources to meet the energy, reserve and transmission constraints –Ex-ante dispatch rates (energy LMP) for all pricing nodes and reserve clearing prices for each reserve product for system and reserve zones Real time ex-post LMP Calculator determines energy LMPs and final reserve allocations based on performance

Presentation Title © 2005 ISO New England Inc. 6 Real Time Dispatch (cont) Non-normal dispatch conditions –Re-dispatch to meet system TMSR reserve requirements When re-dispatch is required to maintain the system TMSR reserve requirement, the resource(s) re-dispatched will incur an opportunity cost to provide the reserves When this condition occurs, the real time TMSR Reserve Clearing Price will be the highest opportunity cost of the resource dispatched to provide the reserves The energy LMP will be the sum of the marginal energy resource plus the opportunity cost of meeting the reserve constraint All resources that are designated as providing TMSR will be eligible to receive the TMSR Clearing Price for the MWs of reserve provided

Presentation Title © 2005 ISO New England Inc. 7 Real Time Dispatch (cont) Non-normal dispatch conditions –System Capacity Deficiency (OP#4) If there is insufficient capacity in real time to meet the energy and reserve requirements, the energy needs of the system will be met and the reserve requirements will not be met Under these conditions, one or more reserve constraint violation(s) will occur and non-zero real time reserve clearing price(s) will be produced by the Reserve Constraint Penalty Factor(s)(RCPF) The energy LMP will be the sum of the marginal energy resource plus the sum of the RCPF(s) The RCPFs have been developed to recognize the value of the reserve shortage and reduced reliability state of the power system

Presentation Title © 2005 ISO New England Inc. 8 Derivation of RCPFs RCPFs have been established to be consistent with operational requirements and practices of power system. RCPFs reflect the costs the ISO would be willing to incur to procure reserves given the $1000/MW Energy Cap. RCPFs will replace the existing Reserve Shortage Condition Pricing Rule as defined in Market Rule 1. RCPFs will provide mechanism to reflect reserve shortages in stages for system and locational requirements.

Presentation Title © 2005 ISO New England Inc. 9 Proposed Reserve Constraint Penalty Factors Location ProductRoSReserve Zones TMSR S $50n/a TMNSR S $850n/a TMOR S $100n/a TMOR L n/a$50

Presentation Title © 2005 ISO New England Inc. 10 Dispatch Rules Additional Dispatch Rules: –Unused MWs of higher quality reserves will be available to meet lower quality reserve requirements –Lower quality Reserve Clearing Prices will cascade upward to higher quality Reserve Clearing Prices Reserve capability of on-line Resources will be computed based on either 10*MRR or 30*MRR from DDP constrained by EcoMax using MRR at DDP. Reserve capability of off-line Resources will be computed based on CLAIM10/30 Offer data constrained by EcoMax.

Presentation Title © 2005 ISO New England Inc. 11 Real Time Re-dispatch For TMSR Example: –First example is a re-dispatch to meet TMSR requirements that result in opportunity costs setting the TMSR Clearing Price –Second example is an application of TMSR RCPF setting the TMSR Clearing Price in Reserve Shortage Condition

Presentation Title © 2005 ISO New England Inc. 12 Unit Supply Offer Data Unit AUnit BUnit CUnit D EcoMax EcoMin100(SS) MRR2132 Initial MW Initial TMSR Energy Offers Unit AUnit BUnit CUnit D Block 4175$35185$50150$48100$70 Block 3150$30165$40140$4285$30 Block 2125$25125$25125$3870$25 Block 1100$20100$2575$2050$15

Presentation Title © 2005 ISO New England Inc. 13 Dispatch at t=0 System is being economically dispatched –Unit A is the marginal resource and setting LMP at $35 –TMSR is assigned based on response rates and available capacity Unit D is in a startup ramp and not dispatchable

Presentation Title © 2005 ISO New England Inc. 14 Initial Conditions (Dispatch at t=0) 35 __150__ 30 __125__ 25 __100__ __165__ 40 __125__ 25 __100__ __140__ 42 __125__ 38 _75__ __85__ 30 __70__ 25 __50__ 15 Unit A Unit B Unit C Unit D DDP 155 DDP 150 DDP 75 DDP Load = 410 MWSpin Reserve Reqt = 60 MW LMP = $35TMSR CP = $0 Unit D in S/U

Presentation Title © 2005 ISO New England Inc. 15 Dispatch at t=1 Load has increased to 435MW Unit A must be constrained to meet reserve requirements and incurs an opportunity cost Unit C becomes marginal and sets LMP at $38 Unit D is still not dispatchable

Presentation Title © 2005 ISO New England Inc. 16 Dispatch at t=1 35 __150__ 30 __125__ 25 __100__ __165__ 40 __125__ 25 __100__ __140__ 42 __125__ 38 _75__ __85__ 30 __70__ 25 __50__ 15 Unit A Unit B Unit C Unit D DDP 155 DDP 150 DDP 85 DDP Load = 435 MWSpin Reserve Reqt = 60 MW LMP = $38TMSR CP = $3 (OC Unit A) Unit D in S/U

Presentation Title © 2005 ISO New England Inc. 17 Dispatch at t=2 Load has increased to 451MW Unit D is now dispatchable and eligible to participate in energy and reserve dispatch Unit C is marginal and sets energy LMP at $38 TMSR is satisfied without re-dispatch

Presentation Title © 2005 ISO New England Inc. 18 Dispatch at t=2 35 __150__ 30 __125__ 25 __100__ __165__ 40 __125__ 25 __100__ __140__ 42 __125__ 38 _75__ __85__ 30 __70__ 25 __50__ 15 Unit A Unit B Unit C Unit D DDP 175 DDP 150 DDP 76 DDP Load = 451 MWSpin Reserve Reqt = 60 MW LMP = $38TMSR CP = $0 Unit D is dispatchable

Presentation Title © 2005 ISO New England Inc. 19 Dispatch at t=X-1 Load has increased to 550MW System is exactly meeting energy and reserve requirements Unit B is the marginal energy resource and sets LMP at $50 Units A and C are constrained to meet reserve requirements Unit A has the highest opportunity cost and sets TMSR CP at $15

Presentation Title © 2005 ISO New England Inc. 20 Dispatch at t=X-1 35 __150__ 30 __125__ 25 __100__ __165__ 40 __125__ 25 __100__ __140__ 42 __125__ 38 _75__ __85__ 30 __70__ 25 __50__ 15 Unit A Unit B Unit C Unit D DDP 170 DDP 175 DDP 120 DDP Load = 550 MWSpin Reserve Reqt = 60 MW LMP = $50TMSR CP = $15

Presentation Title © 2005 ISO New England Inc. 21 Dispatch at t=X Load has increased to 551MW System energy requirements are being met, however, insufficient capacity exists to meet the reserve requirements TMSR CP is set by TMSR RCPF=$50 Unit A becomes the marginal energy resource and energy LMP is $85 (Unit A energy offer plus TMSR RCPF)

Presentation Title © 2005 ISO New England Inc. 22 Dispatch at t=X (TMSR Shortage) 35 __150__ 30 __125__ 25 __100__ __165__ 40 __125__ 25 __100__ __140__ 42 __125__ 38 _75__ __85__ 30 __70__ 25 __50__ 15 Unit A Unit B Unit C Unit D DDP 171 DDP 175 DDP 120 DDP Load = 551 MWSpin Reserve Reqt = 60 MW Spin Actual = 59 LMP = $85TMSR CP = $50

Presentation Title © 2005 ISO New England Inc. 23 Real Time Dispatch (cont) Non-normal dispatch conditions –Re-dispatch to meet local reserve requirements See example

Presentation Title © 2005 ISO New England Inc. 24 Locational Example of RCPFs Initial conditions: ActualEcoMinEcoMaxEnergyMRRReserve –GenA $70130 –GenB $50520 –GenC0525$150C10=2525 –GenD0525$200C30=2525 GenA and GenB committed, Local Reserve Reqt = 100 MW Interface Limit =200MW, Interface Flow=150MW Local Load = 255 System LMP = $50, Reserve Prices = $0

Presentation Title © 2005 ISO New England Inc. 25 Conditions at t=0 Local Load = 255 GenA 25R=30 GenB 80R=20 GenC 0R=25 GenD 0R=25 Load 255 L Res = 150 Local LMP $50 L RCP = $0 Limit = 200 Actual = 150 System LMP = $50 System RCPs = $0 System Reserve Zone

Presentation Title © 2005 ISO New England Inc. 26 Conditions at t=1 Local Load = 300 GenA 25R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 300 L Res = 105 Local LMP = $55 L RCP = $0 Limit = 200 Actual = 175 System LMP = $55 System RCPs = $0 System Reserve Zone Energy Balance is satisfied Local Reserve Reqt is satisfied

Presentation Title © 2005 ISO New England Inc. 27 Conditions at t=2 Local Load = 310 GenA 30R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 310 L Res = 100 Local LMP = $70 L RCP = $15 Limit = 200 Actual = 180 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is satisfied Re-dispatch of Interface – similar to Gen opportunity cost Reserve Zone

Presentation Title © 2005 ISO New England Inc. 28 Conditions at t=3 Local Load = 351 GenA 70R=30 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 351 L Res = 99 Local LMP = $105 L RCP = $50 Limit = 200 Actual = 181 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is violated Reserve Zone

Presentation Title © 2005 ISO New England Inc. 29 Conditions at t=4 Local Load = 371 GenA 71R=29 GenB 100R=0 GenC 0R=25 GenD 0R=25 Load = 371 L Res = 79 Local LMP = $120 L RCP = $50 Limit = 200 Actual = 200 System LMP = $55 System RCPs = $0 System Energy Balance is satisfied Local Reserve Reqt is violated Reserve Zone

Presentation Title © 2005 ISO New England Inc. 30 Reserve Shortages Previous example shows local reserve shortage and use of local RCPF Similar concept employed for system reserve shortages Typical condition would begin with a shortage of TMOR followed by shortage of TMNSR, and in extreme cases, a shortage of TMSR. Under this scenario, system TMOR RCPF would be violated first followed by system TMNSR RCPF and finally system TMSR RCPF

Presentation Title © 2005 ISO New England Inc. 31 Reserve Shortages (cont) Frequency of System Reserve Shortages –Reference: Analysis of Historical Reserve Shortages White Paper Historical analysis indicates that the Control Area has experienced a deficiency in Operating Reserves (TMOR) in real time approximately 0.26% of time. Of the total Number of deficient conditions (24), five resulted in a deficiency of TMNSR, and of the five, three may have resulted in a deficiency of TMSR.

Presentation Title © 2005 ISO New England Inc. 32 Reserve Shortages (cont) Historical information does not exist to perform similar analysis of locational reserve shortage conditions. The ISO is continuing to investigate the feasibility of producing such an analysis.

Presentation Title © 2005 ISO New England Inc. 33 Discussion and Questions