impmentation of the pjm financial transmission rights auction market...

July 24, 2002 Page 1IEEE 2002 Summer Power Meeting, Chicago Chicago

Impmentation of the PJM Financial Transmission Rights

Auction Market System

Xingwang Ma, David Sun, Andy Ott

IEEE 2002 Summer Power Meeting

January, 2002January, 2002


Content

Current PJM FTR Market– Point-To-Point (PtP) Obligation FTR– Approaches to FTR procurement – FTR Auction Market Systems

FTR Extensions– FTR Functionality: Optionality, Flowgate hybrid, ...– Examples


Current PJM FTR Market

Why do We Need FTRs– LMP based energy spot– Uncertainty with transmission congestion – Price uncertainty– Market liquidity – Market competitiveness– Market power mitigation– Transmission investment



PtP FTR Basic Characteristics – Financial entitlement, independent of physical MW scheduling – Provide financial credit against transmission congestion charge

• All transmission customer pays congestion charge– Congestion Charge= (LMPi-LMPj) x MWFlow

• FTR holder receives congestion credit– Congestion Credit = (LMPi-LMPj) x FTRijMW

• Congestion charge & credit could be negative quantities• PtP obligation FTRs



FTR may be obtained in several ways– Network & firm point-to-point service, – Secondary trading– Centralized monthly auction (buy & sell, re-configuration,

residuals)



Monthly FTR Auction Fundamentals– Dynamic re-configuration & auctioning of bids & offers– Revenue adequacy maintained through simultaneous

feasibility testing (N-1 security constraints)MW Injection/Withdraw model: – FTR Bids: [source, sink, MW] @ price– Pre-committed transmission capacity– Transmission capacity consumed by external loop-flows

Bid clearing criteria:– Maximize market merit subject to N-1 security limits.


FTR/LMP Example

A B

100mwhLMP=$20

100mwhLMP=$30

1. Line A to B is congested (different LMP at A & B)2. Congestion charge = ($30-$20) * 100mwh = $10003. Congestion credit for a FTR- holder of ‘100mw A to B’

= ($30-$20) * 100mwh = $10004. Net Payment = $ 0.0



System Architecture

Market database

MUIMOI

Message Bus

LP Engine SFT


Extensions of Basic FTR

Basic FTR– Financial commitment: Obligation– Locational model: Point-to-Point (node, zone, hub) – Inter-temporal coupling: None

Future Extensions– Long-term FTR auction of full transmission capability– Inter-temporal coupling: On/Off Peak, multi-months... – Auction revenue rights– Financial commitment: Obligation, Option– Locational Model: Point-to-Point, Flowgate


FTR Optionality

Business Rational– A Financial Options instrument– Holder receives benefits (credits) when congestion is in

the same direction as the Option. – Holder does NOT pay out when congestion is in the

opposite direction of the OptionOperational Considerations– Revenue adequacy (analytical complexity)– Price of Options premium (and quantities available)


FTR with PtP and Flowgate

Business Rational– PtP provides more complete hedge– Flowgates provides increased liquidity in secondary

tradingOperational Considerations– Alternate representation of Flowgate rights

• Tradeoff between MW distribution vs. Price for congested flowgates

– Revenue adequacy requires consistent modeling of grid constraints between transmission right auction and energy market


Expandable System Architecture

Market database

MUIMOI

Message Bus

LP Engine SFT 1 SFT n


Numerical Examples

FTR Examples & Demonstration

Case 1: Reference Baseline FTRCase 2: FTR Obligation & OptionsCase 3: FTR PtP and Flowgate


PJM 5-Bus Example

Table 1. Branch DataBranch Name From To Impedance

(per unit)Admittance(per unit)

Branch Limit(MW)

A-B A B 0.0281 35.58719 250A-D A D 0.0304 32.89474 150A-E A E 0.0064 156.2500 400B-C B C 0.0108 92.59259 350C-D C D 0.0297 33.67003 240D-E D E 0.0297 33.67003 240


PJM 5-Bus Example (continued)Table 2. Shift factors for the flow-gate FG_A

Node A B C D E Hub A Hub BShiftfactors

0 -0.179245 -0.248137 -0.437588 -0.077578 0.216920 -0.256579

1) Point-to-Point BidsFTR

Bid IDSourceNode

Sink Node ParticipantName

Sale/Purchase

Quantity(MW)

Bid Price($/MW)

Option

FTR-1 A D LSE-B 0 4000 18.6 0FTR-2 E C LSE-B 0 1000 5.0 0FTR-3 E B LSE-B 0 1000 6.0 0FTR-4 Brighton B LSE-B 0 4000 7.0 0FTR-5 Brighton C LSE-C 0 2000 8.0 0FTR-6 Solitude D LSE-D 0 2200 9.0 0FTR-7 D A LSE-D 0 10 2.0 1FTR-8 D A LSE-C 0 10 2.0 0FTR-9 A D LSE-B 0 10 2.0 12) FGR BidsFGR Bid Flowgate Participant Name Quantity Price OptionFGR-1 FG_A BuyerX 1000 20.0 0


Baseline FTR Example

Point-to-Point FTR Obligation AuctionBranch flow summary:

Table 4. Point-to-point FTR obligation bids cleared:

FTRBid ID

SourceNode

SinkNode

ParticipantName

Quantity(MW)

BidPrice

Option ClearedMW

MarginalPrice

FTR-1 A D LSE-B 4000 18.60 0 10 18.60FTR-2 E C LSE-B 1000 5.00 0 0 8.00FTR-3 E B LSE-B 1000 6.00 0 0 7.00FTR-4 Brighton B LSE-B 4000 7.00 0 600 7.00FTR-5 Brighton C LSE-C 2000 8.00 0 39.73 8.00FTR-6 Solitude D LSE-D 2200 9.00 0 434.01 9.00FTR-8 D A LSE-C 10 2.00 0 10 -18.6


FTR with Obligations & Options

Table 5. Point-to-point FTR obligation/Option bids cleared:

FTRBid ID

SourceNode

SinkNode

Quantity(MW)

Bid Price Option Base FTR(Obligation)

ClearedMW

MarginalPrice

FTR-1 A D 4000 18.60 0 10 7.37 18.60FTR-2 E C 1000 5.00 0 0 0 8.00FTR-3 E B 1000 6.00 0 0 0 7.00FTR-4 Brighton B 4000 7.00 0 600 596.12 7.00FTR-5 Brighton C 2000 8.00 0 39.73 34.65 8.00FTR-6 Solitude D 2200 9.00 0 434.01 423.64 9.00FTR-7 D A 10 2.00 1 0 10 1.20**

FTR-8 D A 10 2.00 0 10 10 -18.60FTR-9 A D 10 20.00 1 0 10 19.80**


FTR with Obligations & Options (cont’d)

Observations– The marginal price for FTR obligation over path A-D is

$18.60/MW.

– The marginal price for FTR obligation over path D-A is $-18.60/MW.

– Point-to-point FTR option (FTR-9) from A to D is cleared, as the marginal price for option over the path is $19.80/MW compared to its bid price of $20.00/MW.

– Point-to-point FTR option (FTR-7) from D to A is cleared in full amount, as the marginal price for option over the path of $1.20/MW is less than its bid price of $2.00/MW.


FTR with PtP and Flowgates

Table 6. FGR Solution:

FGR Bid Flowgate ParticipantName

Quantity Price Cleared MW Marginal Price

FGR-1 FG_A BuyerX 1000 20.00 0 33.64

Observations from Table 6No FGR is cleared: the marginal price of the flow-gate FG_A is $33.64/MW while the FGR bid price is only $20.00/MW.


FTR with PtP and Flowgates (cont’d)

What Happens if the FGR bidder increases its price to $33.65/MW

Table 7. FGR Solution:FGR Bid Flowgate Participant

NameQuantity Price Cleared MW Marginal Price

FGR-1 FG_A BuyerX 1000 33.65 8.91 33.65

Table 8. Point-to-point FTR obligation bids cleared:FTR

Bid IDSourceNode

SinkNode

ParticipantName

Quantity(MW)

BidPrice

BasePtP FTR

ClearedMW

Marginal Price

FTR-1 A D LSE-B 4000 18.60 10 0 18.61FTR-2 E C LSE-B 1000 5.00 0 0 8.00FTR-3 E B LSE-B 1000 6.00 0 0 7.00FTR-4 Brighton B LSE-B 4000 7.00 600 600.50 7.00FTR-5 Brighton C LSE-C 2000 8.00 39.73 30.92 8.00FTR-6 Solitude D LSE-D 2200 9.00 434.01 428.82 9.00FTR-8 D A LSE-C 10 2.00 10 10 -18.61


FTR with PtP and Flowgates(cont’d)

Observations from Tables 7 & 8

– The FGR bid is cleared partially when its bid price increased from $20.00/MW to $33.65/MW.

– FGR bids competes for the transmission capability along with point-to-point FTR bids.


A PJM Case

Obligation vs Option FTR Price

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1 22 43 64 85 106 127 148 169 190 211 23 25 27 29 316 33 35 37 40 421 44 46 48 50 52 54 56 58 610 631 65 67 69 715

P a t h

Ob ligat io nPriceOp tio nPrice

- SENECA 13 KV 1GEN_HOBOKEN 230 KV T-1AB: 903- DPL_CARLLS 69 KV CT_1&2: 1791- MIDD AE 69 KV CT_1&2&3_DPL: 1520- DPL_SHERMAN AVE CT 1: 2025- DPL SOUTH_BAYVIEW 4 KV G1: 2712


Conclusion

Current FTR MarketExtensions of PtP Obligation FTR market– Auction of full transmission capability– Temporal coupling of multiple period auction– Optionality– Hybrid market models

Key to success of energy market


Thank you.

ContentCurrent PJM FTR MarketCurrent PJM FTR MarketCurrent PJM FTR MarketCurrent PJM FTR MarketFTR/LMP ExampleCurrent PJM FTR MarketExtensions of Basic FTRFTR OptionalityFTR with PtP and FlowgateExpandable System ArchitectureFTR Examples & DemonstrationPJM 5-Bus ExamplePJM 5-Bus Example (continued)Baseline FTR ExampleFTR with Obligations & OptionsFTR with Obligations & Options (cont’d)FTR with PtP and FlowgatesFTR with PtP and Flowgates (cont’d)FTR with PtP and Flowgates (cont’d)A PJM CaseConclusion

impmentation of the pjm financial transmission rights auction market...

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