SEPTEMBER 24, 2013 | NEPOOL MARKETS COMMITTEE

ISO NEW ENGLAND - MARKET DEVELOPMENT

Summary of NCPC Credit for Postured Generators

NCPC Payments – Generator Posturing

Jon Lowell & Matt Brewster

Preface

This document presents new material not previously discussed at the Markets Committee. Therefore, every slide is labeled as:

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What is Posturing?

• “an action of the ISO to deviate from the jointly optimized security constrained economic dispatch for Energy and Operating Reserves solution for a Resource … for the purpose of maintaining sufficient Operating Reserve (both online and off-line) or for the provision of voltage or VAR

• When the ISO postures a resource, the resource incurs an opportunity cost– The posture order prevents the resource from operating at times and

at output levels that would have been profitable– The Posturing Credit is intended to make the postured resource

financially no worse off for having followed the ISO’s posturing instructions.

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Posturing for Limited Energy Resources

• A Limited Energy Resource is postured to preserve some amount of the available energy for future hours to provide operating reserves, VAR or voltage support in a future hour.– A manual decision is required because the cooptimized energy

dispatch only incorporates a 15 minute lookahead.

• To meet the “no worse off” NCPC design principle, the posturing credit must compare the resource’s actual revenues to the “best alternative” revenues had the resource not been postured.– The Best Alternative results from using the postured energy in the

highest priced hours, subject to the unit’s real-time EcoMax, EcoMin, hourly LEG

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Posturing for Limited Energy Resources

• Since the same “fuel” is used in the actual dispatch and the best alternative proxy dispatch, the cost is the same for both, except…

• A postured resource may have energy left unused at the end of the day– The cost of replacing the unused energy the next day is avoided– The Posturing Credit values the energy remaining in storage at the

end of the day at the estimated avoided cost to replace the energy the next day: • For Pump Storage Resources, replacement cost = RTLMP for HE1-3• For other LEG Resources (storage hydro, gas units with LEG), value of

unused energy = 0

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Posturing for Limited Energy Resources

• Posture Credit for a Limited Energy Resource: = Max[0, Best Alternative Margin – Actual Margin]

= Max[0, (Energy RevenueBA + Remaining Energy MWh ValueBA) – (Energy RevenueACTUAL + Remaining Energy MWh ValueACTUAL)]

• Energy RevenueBA = Best Alternative Energyh x RTLMPh

– Best Alternative Energyh represents the hourly use of available energy that maximizes potential Real-Time revenue

• Energy RevenueACTUAL = Actual Energyh x RTLMPh

• Evaluated from start of posturing through the end of the Operating Day• Available energy for shared fuel resources divided equally amongst units• For non-Fast Start resources, available energy is dispatched in contiguous

hours (no shutdown & restart)

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Generator with Limited Energy (Fast Start) postured though end of operating day (pumped storage)

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Generator with Limited Energy (Fast Start) postured temporarily and later dispatched (pumped storage)

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Posturing for non-Limited Energy Resources

• A resource that is not energy-limited is only postured to meet a reliability need that is not fully reflected in the energy & reserve dispatch.– Once again, a manual decision is required

• No need to estimate the value of postured energy shifted to future hours, since there is no limit on available energy– Credit is determined separately for each postured hour– A Best Alternative Output (BAO) level is determined for each hour,

based on the resource’s energy offer curve, and subject to EcoMin, EcoMax, RTHOL and hourly LEG

– If BAO <= Actual energy, then credit = 0

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Posturing for non-Limited Energy Resources

• Hourly Posture Credit for non-Limited Energy Resources:= Max[0, Best Alternative Margin – Actual Margin]= MAX[0, (RTLMP * BAO – Energy Cost at BAO)

– (RT LMP * RQM – Energy Cost at RQM)]

• Energy cost includes No-Load and Startup Fees– For fast starts postured offline, total Start-Up fee is included each

hour– For non-fast starts postured offline, remaining Start-Up fee from the

RT Commitment NCPC credit is included in each hour – For resources postured online, SU & NL for BA is same as Actual and

can be ignored

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Fast-Start generator postured offline (without energy restriction)

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Generator postured to reduce energy output (without energy restriction)

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Allocation of Posturing Credits

• Total daily posturing credit for a LEG resource is allocated to the “reason” for the posture instruction identified at the time of the posture decision– For example, 1st Contingency, VAR, etc.)

• The hourly posturing credit for non-LEG resources is allocated in accordance with the hourly reason for the posture decision, if so identified.

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