Market Operations Bulletin # 14 – June 2nd, 2004

Implementation of PRR 424- Elimination of Resource-Specific Deployment Used for Energy Balance Purpose

Background

This Market Bulletin updatesprevious Market Bulletins # 2 and # 3 regarding Balancing Energy dispatch instructions and the congestion management mechanism.

With the implementation of PRR 424, Elimination of Resource-Specific Deployment Used for Energy Balance Purpose, when the ERCOT Operational Model predicts Local Congestion, Balancing Energy Service dispatch instructions will be issued through a three-step process according to Section 6.7.1.2 (1) - (8) and Section 7.3.2 (4) of the Protocols. These sections are included here for reference.

6.1.7.2 Deployment of Balancing Energy when Congestion Occurs

(1) If the Operational Model indicates there is Zonal Congestion, ERCOT will separate the Balancing Energy Service bids into a Bid Stack for each Congestion Zone.

(2)ERCOT will use the Operational Model to determine the amount and location of Balancing Energy deployment for clearing Zonal Congestion as well as balancing the system.

(3)Except as stated in item (4) below, ERCOT will deploy Balancing Energy bids within a zone in bid price Merit Order.

(4)ERCOT may form specific Resource prices for both incrementing and decrementing a specific Resource to resolve Local Congestion.

(5)As part of the submittal of the Resource Plan for each Resource at a plant, QSEs may specify bid premiums by Resource. Such bid premiums must be based on the Resource Category Generic Price for Balancing Energy Up deployments (RCGUP) and the Resource Category Generic Price for Balancing Energy Down deployments (RCGDP) published by ERCOT pursuant to Section 4.4.20, Posting of Resource Category Bid. Resource-specific incremental prices will be the incremental bid premium as specified in Section 4.4.20, Posting of Resource Category Bid. Resource-specific decremental prices will be the decremental premium specified in Section 4.4.20, Posting of Resource Category Bid.

(6)The actual Shift Factors with respect to the Local Congestion of Resources’ individual incremental and decremental prices from above are used to determine the most economical deployment of individual Resources to solve Local Congestion.

(7)ERCOT will instruct QSEs to deploy Balancing Energy Service from a specific Resource through the issuance of a Dispatch Instruction for each Resource using the most economical solution to resolve the Local Congestion.

(8)The Dispatch Instruction will specify the instructed output level, the amount of Balancing Energy Service, and the range of acceptable operation of the specific Resource.

7.3.2 Resolution of Zonal Congestion

(4)Congestion is resolved in Real Time as follows:

  1. Using Zonal Shift Factors, estimate zonal BES deployments needed to maintain flows within CSC Limits. If the Congestion that needs to be resolved is on a CRE, then Boundary Generation Resources unique to that CRE will be instructed to operate at the respective Resource Plan levels (i.e., this is not an instructed deviation from schedule or Resource Plan).
  2. Based on (a), deploy unit specific instructions to manage Local Congestion. The Resource specific instructions will be defined as instructed deviations using the following criteria:

iWhen a Resource is instructed to operate at or above an instructed output level and the Resource Plan output level is below the instructed output level, the instructed deviation will be defined as the difference between the instructed output level and Resource Plan output level for the target interval.

iiWhen a Resource is instructed to operate at or below an instructed output level and Resource Plan output level is above the instructed output level, the instructed deviation will be defined as the difference between the instructed output level and Resource Plan output level for the target interval.

iiiWhen a Resource is requested to go to an instructed output level, the instructed deviation will be defined as the difference between the instructed output level and the Resource Plan output level.

ivOtherwise, the Resource specific deployment will not be defined as instructed deviation.

  1. Clear the Balancing Energy Service market to maintain system power balance and the CSC flow within the CSC Limit.
  2. In the event of a contingency, estimate BES deployment to maintain flows within pre-second contingency CSC Limits and deploy unit-specific instructions to manage any resulting Local Congestion and clear the BES market to maintain CSC flows within pre-second contingency CSC Limits.

A. Balancing Energy Market Clearing Process

STEP 1

STEP 1 is designed to estimate the Balancing Energy deployment by simultaneously solving energy imbalance and Zonal Congestion as stated in Protocols section 7.3.2(4).a set forth above. In this step, the Balancing Market Clearing Engine calculates the preliminary portfolio-based Balancing Energy deployment and evaluates the presence or absence of Local Congestion based on the portfolio instructions determined in this step. If no Local Congestion exists, the process stops after STEP 1 and deployment instructions are issued. If there is Local Congestion, STEP 2 and STEP 3 are executed.

STEP 2

When the Operational Model predicts the existence of Local Congestion, the Balancing Energy Market Clearing Engine resolves Operational Congestion as follows:

(1)In accordance with Protocols Section 6.7.1.2, a Security Constrained Economic Dispatch algorithm is used to increase or decrease the Resource operating output level to resolve the Local Congestion. In the solution process, the following information for each Resource is used in the Security Constrained Economic Dispatch (SCED) algorithm:

  1. Resource-specific prices as determined by the incremental and decremental premiums submitted by the QSE.[1]
  2. Resource-specific shift factors corresponding to each active constraint.
  3. Estimated output level for each Resource.

(2)During the Local Congestion management process, the energy balance and zonal constraint limits are respected.

(3)When the Local Congestion management process is completed, only those Resources deployed to resolve a constraint will receive Resource-specific dispatch instructions.

(4)For those Resource issued Resource-specific dispatch instructions, an instructed deviation is determined as specified in Protocol Section 7.3.2(4)b.

STEP 3

In STEP 3, the Balancing Energy Market Clearing Engine adjusts the QSE’s portfolio balancing bids by the calculated instructed deviation for Resources, aggregated by QSE by zone. According to Protocols Section 7.3.2(4)c., the Balancing Energy Market clears to balance generation and Load and resolves Zonal Congestion while respecting the Resource-specific dispatch instructions used to resolve Local Congestion. In addition, STEP 3 calculates the final portfolio-based Balancing Energy awards. The Category 1 portfolio balancing instruction includes the portfolio-based Balancing Energy awards and the calculated instructed deviations from Resource-specific deployment. From this step, the MCPE for each zone and Shadow Prices for each CSC are determined and fixed for that interval. This is the MCPE and the Shadow Prices that the QSEs receive from the XML API and that are also published on the web portal.

When Local Congestion exists, the solution at the end of STEP 3 is the set of final portfolio-based instructions and Resource-specific dispatch instructions to be issued to the QSEs. Because the final portfolio-based dispatch instruction equals the net result of the STEP 3 portfolio-based Balancing Energy awards and any instructed deviation from Resource-specific deployment, the QSE’s bid curve may not match the MCPE determined in STEP 3. This may cause the appearance of being “struck” incorrectly. Whenever a QSE receives Resource-specific deployments with calculated instructed deviation, it will also receive a Category 1 portfolio-based deployment.

The following section uses an example to demonstrate these concepts.

B. Example For BES Deployment

Figure 1 shows a simplified single zone system. Figure 2 shows the UBES and DBES bid curves for QSE A, QSE B, and QSE C.

Figure 1 - Simplified Single Zone System

Figure 2 - UBES and DBES Bid Curves

Assume the following:

  1. A system load forecast of 40,000 MW
  2. Scheduled Generation totaling 39,940 MW
  3. Resource Plan for each unit is 100 MW.

Using the process described in Section A above, STEP 1 yields:

  1. Based on the assumptions, 60 MW UBES is required to balance the system.
  2. To solve the power balance problem, QSE C’s bid of 60MW at $20 receives the preliminary award in STEP 1. QSE A and QSE B have higher bids and do not get a STEP 1 preliminary award. (Note—no QSEs receive dispatch instructions at this point—the amounts cleared in STEP 1 are for internal use and ERCOT sends no dispatch instructions until the Market Clearing Process is complete.)

The STEP 2 process yields the following:

  1. Local Congestion is detected between Resources A1 and A2 from QSE A.
  2. Assume that STEP 2 determines that unit A1 should increase output 70 MW from 100MW to 170MW with a Category 3 deployment.
  3. Assume also that STEP 2 determines that unit A2 should decrease output 20MW from 100MW to 80MW with a Category 2 deployment.
  4. Units from QSE B have a minimal impact on the constraint, but in order to maintain the power balance determined in STEP 1 and using the premiums provided by QSE B, STEP 2 also moves B1 down 50 MW from 100MW to 50MW. ERCOT will not issue a Resource-specific dispatch instruction to B1 because it is moved solely to achieve power balance. [Note: 50 MW is needed for power balance because the instruction to QSE A is 70 MW up and 20 MW down, yielding a net amount of 50 MW up. This +50 MW needs to be counterbalanced by -50 MW to keep the power balance.]
  5. The instructed deviation for unit A1 is 70 MW (i.e. Instructed Output Level of 170 MW – Resource Plan of 100 MW). The instructed deviation for unit A2 is -20 MW (i.e. Instructed Output Level of 80 MW – Resource Plan of 100 MW). QSE A’s total instructed deviation in this zone is 50 MW (70 MW – 20MW).

The STEP 3 process yields the following:

  1. Zonal energy schedule for QSE A is adjusted by the instructed deviation amount[2]. Therefore, scheduled generation after adjustment equals 39,990 (39,940 + 50). QSE A’s portfolio UBES bid is adjusted to 0 MW (Bid of 50 MW – Instructed Deviation of 50 MW).
  2. With the adjusted energy schedule, there is a difference of 10 MW UBES between generation and Load.
  3. To solve the power balance problem, QSE C’sbid of 10MW at $11.25 sets the MCPE and QSE C is awarded a portfolio-based UBES energy block for the 10MW. So, the initial amount cleared in Step 1 for QSE C was advisory to the system—this amount was eventually reduced and QSE C receives a dispatch instruction for 10MW.

Figure 3 summarizes the dispatch instructions that QSEs A, B and C receive.

QSE / Portfolio / Unit Specific
TYPE / MW / CAT / CONG / RESC / MW / CAT / CONG
A / UBES / 50 / 1 / F
A1 / 170 / 3 / T
A2 / 80 / 2 / T
C / UBES / 10 / 1 / F

Figure 3 - Deployment Instruction Summary

C. Treatment of Resource Specific Category 4 Deployments

With the implementation of PRR424, commercial Category 4 deployments have been eliminated. QSEs will continue to receive physical Category 4 Resource specific deployments. These deployments are generated in cases where it is necessary for a Resource to operate at the instructed output level due to its impact, in opposite directions, on multiple constraints. Due to the nature of the physical Category 4 Resource-specific deployments, QSEs are expected to follow thesedispatch instructions.

1

June 2, 2004

[1] The portfolio-based UBES/DBES price curves are not directly used in Step 2.

[2] The adjusted schedule is used only in the market clearing process and the QSE-submitted schedule is used for SCE calculation and financial settlement.