1. Market Evolution Program
Document ID #: MAC-03-05
02/18/2003
Market Advisory Council of the IMO

2. Market Advisory Council of the IMO
Overview
Status
Consultation (current and next steps)
Initiative updates
Breakout sessions
02/18/2003
Market Advisory Council of the IMO

3. Market Advisory Council of the IMO
Overview
Day Ahead Market
Multi-interval Optimization
Short Term Resource Adequacy
Long Term Resource Adequacy
Wholesale/Retail Integration
Environmental Tracking
Locational Marginal Pricing
02/18/2003
Market Advisory Council of the IMO

4. Market Advisory Council of the IMO
Status
Jan – team formed
MOSC, RASC, TP given overview
Feb 3 – web page launched
Overview
Discussion papers
Phase 1 Consultation Plan
Program Charter
02/18/2003
Market Advisory Council of the IMO

5. Market Advisory Council of the IMO
02/18/2003
Market Advisory Council of the IMO

6. Email IMO.consultation@theimo.com
Phase 1 Consultation
notify
post
IMO
access
Stakeholders
Phone
input/dialog
02/18/2003
Market Advisory Council of the IMO

7. Working Groups/Consultation
notify
post
Working Groups
IMO
access
Stakeholders
Phone
input/dialog
02/18/2003
Market Advisory Council of the IMO

8. Market Advisory Council of the IMO
Working Groups
Day Ahead Market
Multi-interval Optimization
Long Term Resource Adequacy
02/18/2003
Market Advisory Council of the IMO

9. Market Advisory Council of the IMO
Working Groups
Involve stakeholders early on as practicable:
Representational perspective
Leverage experience
Confidence in outcomes
02/18/2003
Market Advisory Council of the IMO

10. Market Advisory Council of the IMO
Working Groups
Day Ahead Market
Volunteers by Thursday, Feb 21
Members notified on Friday, Feb 22
Kick off meeting (conference call) Friday, Feb 24
Multi-interval Optimization
Volunteers by Wednesday, Feb 26
Members notified on Friday, Feb 28
Kick off meeting (conference call) Wednesday, March 4
02/18/2003
Market Advisory Council of the IMO

11. Market Advisory Council of the IMO
Working Groups
Long Term Resource Adequacy
Volunteers by Wednesday, Feb 26
Members notified on Friday, Feb 28
Kick off meeting (conference call) Friday, March 7
02/18/2003
Market Advisory Council of the IMO

12. Market Advisory Council of the IMO
Resource Adequacy
Jason Chee-Aloy
02/18/2003
Market Advisory Council of the IMO

13. Market Advisory Council of the IMO
Overview
Results of Nov 22 MAC input
Short term resource adequacy
Identified mechanisms (discussion paper)
Next steps
Long term resource adequacy
Preliminary plan
02/18/2003
Market Advisory Council of the IMO

14. Objectives/Solutions
Increase generator investment incentives
Increase demand response
Clear supplier and buyer obligations
Address Operational and Planning issues
02/18/2003
Market Advisory Council of the IMO

15. Market Advisory Council of the IMO
Short Term Mechanisms
Arranging Replacement Energy to Support Planned Outages
Payment for Generator Start-up
Capacity Reserve Market
Hour Ahead Dispatchable Loads
Economic Demand Response
02/18/2003
Market Advisory Council of the IMO

16. Market Advisory Council of the IMO
Short Term Mechanisms
Extension of Emergency Demand Response Program
Demand Conservation
LDC/LSE Contracting Obligations
Distributed Generation
02/18/2003
Market Advisory Council of the IMO

17. Recommended Short Term Mechanisms
Arranging Replacement Energy to Support Planned Outages
Participants arrange for replacement energy under specific conditions
Hour Ahead Dispatchable Loads
Schedule dispatchable loads in pre-dispatch
Fixed schedule for entire hour
02/18/2003
Market Advisory Council of the IMO

18. Recommended Short Term Mechanisms
Extension of Emergency Demand Response Program
Market Rules with termination date of April 30, 2003 to be extended
02/18/2003
Market Advisory Council of the IMO

19. Remaining Short Term Mechanisms
Further assessment:
Payment for generator start-up
Economic Demand Response
Requires further consultation with OEB and Government:
Demand conservation
LDC/LSE contracting obligations
Distributed generation
02/18/2003
Market Advisory Council of the IMO

20. Remaining Short Term Mechanisms
Do not pursue:
Capacity Reserve Market (as detailed in the market rules
02/18/2003
Market Advisory Council of the IMO

21. Market Advisory Council of the IMO
Next Steps
Further development for Summer 2003:
Continued feasibility assessments for the three recommended mechanisms
Greater detail to be stakeholdered through market rule amendment and marketplace change management process
02/18/2003
Market Advisory Council of the IMO

22. Market Advisory Council of the IMO
Next Steps
Break-out session objectives:
Determine if there are any other short term resource adequacy mechanisms
Feedback on proposed details of arranging replacement energy to support planned outages and implementing hour ahead dispatchable load process
02/18/2003
Market Advisory Council of the IMO

23. Long Term Resource Adequacy
Discussion paper (to be issued within the week) will identify:
Mechanisms used in other jurisdictions
Issues to be addressed for the Ontario market
Often common to other markets
Many are issues still unresolved in these other markets
02/18/2003
Market Advisory Council of the IMO

24. Long Term Resource Adequacy
Working Group
Different objective to those of demand response advisory group
Working towards preliminary long term resource adequacy recommendation to the IMO Board on March 28
02/18/2003
Market Advisory Council of the IMO

25. Multi-interval Optimization
Mark Wilson
02/18/2003
Market Advisory Council of the IMO

26. Market Advisory Council of the IMO
Overview
How do we optimize now?
Why change what we do?
What is Multi-interval Optimization (MIO)?
Benefits
Next Steps
02/18/2003
Market Advisory Council of the IMO

27. Current (5-minute) Optimization
Real Time Constrained Sequence:
Dispatch algorithm optimizes resources and derives dispatch instructions every 5 minutes.
Each interval calculated in isolation
Look Ahead Sequence:
Supplements Real Time Constrained Sequence
Runs every 15 minutes for 11 intervals out
Identifies future Operating Reserve deficiencies
Requires manual intervention in Real Time dispatch to solve identified deficiencies
02/18/2003
Market Advisory Council of the IMO

28. Market Advisory Council of the IMO
Rationale for Change
Real Time Operational Issues
Unit cycling caused by limited forward looking capability of the Real Time Constrained Sequence.
Fast loading resources are often more economic than slow loading resources and are often loaded first resulting in:
Operating Reserve deficiencies
Manual intervention required to solve for future deficiencies
Higher overall cost of resource dispatch
Longer Optimization period will result in more efficient operation
02/18/2003
Market Advisory Council of the IMO

29. What is Multi-interval Optimization?
Dispatch solution for the next 5 minute interval that optimizes based on a defined set of criteria over a given period of time:
Optimization could be based on criteria such as:
Least cost solution or
Reducing the number of dispatch changes
Possible optimization period is 60 minutes
Provides Dispatch Advisories for future intervals to indicate potential dispatch targets
02/18/2003
Market Advisory Council of the IMO

30. Market Advisory Council of the IMO
Benefits
Suppliers
Should reduce resource cycling (smoothing of dispatch instructions) thereby improving facility reliability
Provides future dispatch advisories
02/18/2003
Market Advisory Council of the IMO

31. Market Advisory Council of the IMO
Benefits
Loads
Efficiently solve reliability issues and higher cost dispatches
Should reduce CMSC payments and hence overall market costs
Improves transparency by reducing manual intervention in the dispatch process
02/18/2003
Market Advisory Council of the IMO

32. Market Advisory Council of the IMO
Next Steps
Working Group
Working towards a multi-interval optimization recommendation to the IMO Board on March 28
02/18/2003
Market Advisory Council of the IMO

33. Market Advisory Council of the IMO
Next Steps
Break-out session objectives:
Verify stakeholder understanding of current vs. multi-interval optimization and attendant benefits
Determine preferences for:
Optimization period
Frequency and form of dispatch advisories
02/18/2003
Market Advisory Council of the IMO

34. Wholesale/Retail Integration
Edward Arlitt
02/18/2003
Market Advisory Council of the IMO

35. Market Advisory Council of the IMO
Overview
What is a Wholesale/Retail Issue?
What are the implications?
What is being investigated?
Next Steps
02/18/2003
Market Advisory Council of the IMO

36. Wholesale/Retail Issues
Common characteristics
Affects both wholesale and retail markets
Is in the long term interest of both markets to resolve
No single governing/regulatory authority has full rule making powers or responsibility over the issue
Complicated because they span the wholesale/retail market boundary (e.g. issue ownership, computer systems, business processes and financial risk management)
02/18/2003
Market Advisory Council of the IMO

37. Wholesale/Retail Issue Areas
A more accurate assignment of prudential risk
Opening the door to future retail demand response products
Ensuring the wholesale/retail market boundary keeps pace with emerging technologies such as retail interval metering and distributed generation
02/18/2003
Market Advisory Council of the IMO

38. Market Advisory Council of the IMO
Implications
Before we do anything:
Industry-wide consensus required
Changes to wholesale and retail ground rules may be required
Control over ground rules and development of solutions may need to be treated as separate issues
02/18/2003
Market Advisory Council of the IMO

39. Market Advisory Council of the IMO
Implications
Timing:
Obtaining regulatory alignment and some form of industry-wide consensus may be a lengthy process
In the meantime, there is still opportunity for stakeholdering various solution concepts for each issue area
02/18/2003
Market Advisory Council of the IMO

40. Market Advisory Council of the IMO
Under Investigation
Early recognition of joint responsibility over the issues by entities on both sides of the wholesale/retail boundary
A combination of potential solutions aimed at addressing one or more of the issue areas
Overall, a better wholesale market interface that could potentially benefit a wide array of retail market entities
02/18/2003
Market Advisory Council of the IMO

41. Market Advisory Council of the IMO
Next Steps
Break-out session objectives:
Your opinions on the most pressing issues influenced by the wholesale/retail boundary
Consideration for each issue: Should we continue to view the issue in a separate wholesale and/or retail context or does it require a unified solution?
02/18/2003
Market Advisory Council of the IMO

42. Market Advisory Council of the IMO
Day Ahead Market
Leonard Kula
02/18/2003
Market Advisory Council of the IMO

43. Market Advisory Council of the IMO
Overview
The three options
Proposed approach
Next Steps
02/18/2003
Market Advisory Council of the IMO

44. Day Ahead Market (DAM) - value to participants
02/18/2003
Market Advisory Council of the IMO

45. Market Advisory Council of the IMO
Option 1 for Summer 2003
RISKS:
The market won’t be liquid or won’t clear:
most participants already hedged
simple, conservative prudential scheme which would require additional prudential support over what is required in the real-time physical marketplace
lack of transparency of generator outage information creating large bid/ask spreads
out-of-market actions
02/18/2003
Market Advisory Council of the IMO

46. Market Advisory Council of the IMO
Option 1 for Summer 2003
RISKS:
Little time for:
participants to prepare (systems, procedures, risk strategies)
IMO to develop rules, tools, procedures & training - May 1 proved the value of comprehensive preparation
Opportunity cost:
delay development of Option 2 and/or Option 3
02/18/2003
Market Advisory Council of the IMO

47. Day Ahead Market Status
Option 1:
conclude that the risks outweigh the potential opportunities and reluctantly abandon pursuit of a summer 2003 implementation
Option 2/3:
immediately re-focus resources upon development of Option 2/3
prepare detailed recommendation on timing and choice of option for IMO Board - March 28
02/18/2003
Market Advisory Council of the IMO

48. Market Advisory Council of the IMO
Next Steps
Breakout session objectives:
Confirm your support of the IMO proceeding with the development of Option 2 (Day Ahead Unit Commitment Market) and/or Option 3 (Day Ahead Physical Market)?
02/18/2003
Market Advisory Council of the IMO

49. Market Advisory Council of the IMO
Next Steps
Working Group
Working towards a day ahead market recommendation to the IMO Board on March 28
02/18/2003
Market Advisory Council of the IMO

50. Market Advisory Council of the IMO
Breakout Sessions
Day ahead Market
Multi-interval Optimization
Resource Adequacy
Wholesale/Retail Integration
Back by 2:30
Feedback will be summarized and posted
02/18/2003
Market Advisory Council of the IMO