Overview of the Alberta Capacity Market

Transcription

1 Overview f the Alberta Capacity Market This sectin prvides an verview f the Cmprehensive Market Design 2.0 prpsal. 1.1 Overview f the Alberta capacity market Intrductin In January 2017, the Gvernment f Alberta directed the AESO t design and implement a capacity market in Alberta. 1 The Alberta capacity market will be a mechanism t achieve resurce adequacy and meet the gvernment-defined resurce adequacy standard at least cst by enabling brad cmpetitin amng capacity resurces. The capacity market will wrk efficiently and effectively with the energy and ancillary services markets and will be cnsistent with the lwer-carbn electricity system f the future. The first capacity market auctin is t cmmence in 2019 with first delivery f capacity t ccur in CMD 2.0 Prpsal The Cmprehensive Market Design (CMD) 2 prpsal cntains red and black text t fcus discussins with the wrking grups and ther stakehlders ver the cming mnths. Red text indicates design areas where further AESO analysis and/r stakehlder engagement is expected in rder t advance refinement f the technical design prpsal. Black text indicates design areas where minimal t n further changes t the prpsed technical design are expected at this time. Hwever, areas f black text may still evlve based n feedback received, stakehlder cnsultatin and cntinued analysis. The CMD 2 prpsal as a whle is expected t cntinue t evlve based n nging AESO analysis and cntinued engagement with stakehlders. Overview f Prpsed Design Categry Eligibility and Prequalificatin Requirements UCAP Determinatin High-level Design Chices Minimum sizing requirement will be 1 MW. Certain prequalificatin requirements are asset-specific t accmmdate different perating characteristics and ensure feasibility f physical delivery. Assets that are eligible t prequalify include thermal, demand respnse, external, strage, hydr, variable, and aggregated assets. Existing generatin assets lcated in Alberta with an estimated UCAP f 1 MW r greater will be autmatically prequalified fr capacity auctins. External capacity assets and demand side assets will be required t prequalify in rder t participate in the first transitinal auctin. Resurces that are the subject f a renewable electricity supprt agreement in cnnectin with Renewable Electricity Prgram (REP) Runds 1, 2 r 3 are nt eligible t participate in a capacity auctin. Energy efficiency resurces will nt be eligible fr participatin in initial capacity auctins. Demand respnse assets will nly be eligible t participate n the supply side f 1 Gvernment f Alberta Mandate Letter: pdf Page 1 f 8

2 Categry the capacity market. High-level Design Chices Strage assets must demnstrate 4 hur cntinuus discharge capability at its estimated UCAP level. Refurbished and incremental capacity asset classificatins will be intrduced. Classificatin int these categries will be determined utilizing financial and vlume threshlds. Refurbished and incremental capacity vlumes will be treated as new capacity assets fr the purpses f capacity market mitigatin measures. New capacity assets will be required t pst security equal t net-cone r a minimum dllar amunt. Prequalified capacity assets will remain prequalified fr subsequent auctins subject t certain cnsideratins, including lss f pl participant status, failing t meet develpment milestnes, material changes t the asset, delisting r a change in self-supply designatin. Physical bilateral transactins are nt permitted in the Alberta capacity market. Hwever, a site may self-supply capacity prvided the lad is capable f being served in whle r in part by generatin that is lcated n the same site, and at the same pint f intercnnectin t the electric system (including industrial system designatins and sites under the Duplicatin Avidance Tariff). Sites with nsite generatin that are nly net-metered, and sites with nsite generatin that are net-metered and cannt physically flw their grss vlumes due t system cnnectin limitatins must self-supply. The City f Medicine Hat will be required t self-supply capacity. Self-suppliers wh intend t change frm participating n a net basis t a grss basis r frm a grss basis t a net basis must declare their intentin. Changes will nly be allwed every fur years. Delisting Capacity assets must temprarily r permanently delist befre ceasing participatin in the capacity, energy r ancillary service markets. Delisting requests r ntificatins will either be permanent delisting ntificatins (asset retirement) r temprary delisting requests. Temprary delisting requests may be fr physical r ecnmic reasns. The AESO may cnduct a reliability review prir t finalizing its assessment f delisting requests. Temprary ecnmic delisting requests will nly be allwed fr the secnd rebalancing auctin. The legal wner f a capacity asset that is the subject f a temprary ecnmic delisting request must ffer the net-ging frward csts f such asset int the secnd rebalancing auctin. Csts will be evaluated based n ecnmic justifiability and benefits t the balance f the asset wner s prtfli. An asset will nly be allwed t temprarily withdraw frm the energy and ancillary services markets fr the duratin f the bligatin perid if the secnd rebalancing auctin clears at a price less than the temprary ecnmic delist ffer price. A capacity asset may nt ecnmically delist fr mre than tw cnsecutive bligatin perids. Temprary physical delist requests may be submitted when a capacity asset is expected t be physically unavailable fr five cntinuus mnths r mre during the bligatin perid. Permanent delist ntificatins may nly be submitted during the prequalificatin perid assciated with the base auctin and first rebalancing auctin. Requests fr the secnd rebalancing auctin are nt permitted. N ecnmic test will be cnducted n permanent delist ntificatins. Page 2 f 8

3 Categry UCAP Determinatin High-level Design Chices The AESO will calculate and assign a UCAP value fr each prequalified asset. Participants will be allwed t chse a UCAP within a range f the AESO calculated UCAP. Five years f histrical data will be utilized fr asset specific UCAP determinatin fr existing assets. The 100 tightest supply cushin hurs in each year will be utilized. Frced and planned derates and utages, and frce majeure events will nt be excluded frm availability and prductin data and will act t reduce calculated UCAP values. Transmissin system cnstraints will be excluded and will nt reduce calculated UCAP values. Resurces with insufficient histrical perating data will have data supplemented by class averages r engineering estimates. With sme limited exceptins, an availability r capacity factr methdlgy will be used t calculate asset-specific UCAPs: An availability factr will be used when metered generatin r lad vlumes align with energy market dispatches (typically, thermal, strage, large hydr and run-friver hydr assets). A capacity factr will be used when metered generatin r lad vlumes d nt align with energy market dispatches (typically, wind and slar assets) UCAP fr self-supply sites and aggregated capacity assets may use an availability r capacity factr methdlgy, depending n the asset. Demand side resurces will be classified as either firm cnsumptin level (FCL) r guaranteed lad reductin (GLR): UCAP fr FCL assets will be established as 90% f the difference between an estimated baseline cnsumptin level and the FCL f the asset. An availability factr methdlgy will be utilized nce sufficient histrical perfrmance data is available. UCAP fr GLR assets will be established as 90% f the GLR level prvided during prequalificatin. UCAP fr external capacity assets will be based n firm transmissin vlume held in the external jurisdictin and demnstratin that the supply surce is a nn-recallable resurce f sufficient size. This vlume will then be derated t reflect the frequency f time during histrical supply cushin hurs that the respective intertie was ut f service with 0 ATC. UCAP fr mthballed r temprarily delisted assets with data available fr 250 r mre tight supply cushin hurs will utilize available data t calculate UCAP. Assets with less than 250 hurs f data available will have available data supplemented with class average data such that a ttal f 250 data pints is btained. A UCAP dispute reslutin prcess will be established fr disputes exceeding a materiality threshld. Calculatin f Demand Curve Parameters The demand curve will be develped in rder t satisfy the resurce adequacy standard specified by the Gvernment f Alberta. The AESO will use a frward-lking prbabilistic resurce adequacy mdel (RAM) t determine capacity vlume requirements. The RAM will cnsider factrs that impact the supply demand balance in Alberta such Alberta grss lad, supply availability, frced and planned utages fr thermal assets, nsite generatin, variable generatin prfiles, hydrelectric generatin prfiles, and imprts. Outputs f the RAM will be translated int fleet-wide UCAP values using a frmula t align with asset-specific UCAP calculatins. System UCAP requirements will be adjusted t accunt fr self-supplied vlumes, unqualified imprt vlumes, and ineligible resurces (including successful Renewable Electricity Prgram (REP) Rund 1, 2 and 3 prjects). The reference technlgy used fr determining grss-cone and net-cone will be a natural gas-fired technlgy and selected thrugh detailed cst screening. Page 3 f 8

4 Categry High-level Design Chices A cmprehensive grss-cone estimate will be cmpleted by an independent cnsultant at regular intervals. Annual interim adjustments will be made using cst indices. The energy and ancillary services ffset fr the reference technlgy will be determined n a frward lking basis via a revenue certainty methdlgy utilizing frward market electricity and natural gas prices. The demand curve fr the Alberta capacity market will be a dwnward-slping, cnvex demand curve. Current wrking assumptins are as fllws: The price cap at the maximum f 1.75 x net-cone r 0.5 x grss-cone; The minimum quantity will be set at a value f capacity cmmensurate with the minimum resurce adequacy standard f % Expected Unserved Energy (EUE) in ne year (mdelled as 800 MWh currently) Target quantity has been set based n 400 MWh EUE; The inflectin pint is set at x net-cone, at a quantity 4 % abve the target quantity; The ft is 13 per cent abve the target capacity vlume and at a price f 0. The rebalancing demand curve will have the same shape as the base auctin demand curve. Prcurement vlumes will be updated prir t each rebalancing auctin. Frward Capacity Auctin Three-year frward perid. One-year bligatin perid, running Nvember 1 Octber 31. One-year payment term fr all capacity cmmitted assets, crrespnding with bligatin perid. N ptin fr seasnal capacity cmmitments (annual bligatins nly). REP Rund 1, 2 and 3 resurces with a Renewable Electricity Supprt Agreement will be ineligible. N ther adjustments fr ut-f-market payments will be made fr the initial auctin. Unifrm price, sealed bid, single rund auctin. Alberta will clear as a single capacity regin with ne capacity price set at the uncnstrained price level established withut cnsideratin f expected transmissin cnstraints. After cnsidering vlumes limited due t expected transmissin cnstraints, any capacity asset vlumes required t satisfy the capacity purchase vlume determined thrugh uncnstrained market clearing that are priced abve the market clearing price will receive uplift payments equal t the difference between their ffer price and the market clearing price. External capacity asset ffers and any transmissin-cnstrained ffers exceeding transmissin delivery limits will be cleared based n ffered capacity price in supply curve, then by the ffer maximizing scial surplus, then by pr rata allcatin. Cleared assets will receive the market clearing price. The capacity market auctin clearing mechanism will maximize scial surplus and minimize deadweight lss. Rebalancing Auctins After a transitinary perid, tw rebalancing auctins will be held at 18 and 3 mnths befre the bligatin perid. During the transitinary perid, ending after auctins fr the 2023/24 bligatin perid, ne rebalancing auctin will be held three mnths befre the bligatin perid. Capacity suppliers may ffer buy-ut bids and incremental sell ffers int the rebalancing auctin. Capacity suppliers wh are required t buy-ut in a rebalancing auctin due t failure t meet develpment milestnes r UCAP reductins will be priced marginally abve the market price cap t ensure they clear in the market. The rebalancing auctin may clear with a net purchase r sale frm the AESO, cnsistent Page 4 f 8

5 Categry High-level Design Chices with an updated administrative demand curve. The shape f the demand curve will stay the same in the rebalancing auctin. Rebalancing auctins will clear using the same mechanics as the base auctin. Rebalancing auctins will reflect updated assessments f any anticipated transmissin cnstraints. Previusly cleared capacity cmmitted assets which are n lnger able t deliver all r a prtin f their cmmitted capacity vlume will nt be subject t reduced capacity payments. Mnitring and Mitigatin A must-ffer requirement will apply t all qualified capacity assets unless they are permanently delisted r temprarily physically delisted. The AESO will cnduct an ex-ante market pwer screen prir t each base auctin t identify firms wh will be subject t capacity market ffer price mitigatin based n their prtfli size. Rebalancing auctins will nt be subject t ffer mitigatin. Firms subject t market pwer mitigatin will be identified utilizing the demand curve. A market pwer screen will be applied t identify firms that have the ability t prfitably increase the clearing price f an auctin by 10% r mre, measured bth abve and belw the inflectin pint f the demand curve, by ecnmically withhlding capacity frm a base auctin. Firms that fail the market pwer screen will be required t ffer all existing capacity assets at r belw the default ffer price cap f 0.5 x net-cone. Assets may be allwed t ffer at higher prices subject t demnstrating higher net ging-frward csts. There will be n minimum ffer price requirements fr capacity suppliers due t net-shrt capacity psitins r ut-f-market payments. Supply Obligatins and Perfrmance Assessments Prir t the cmmencement f an bligatin perid, a capacity supplier will be required t meet develpment milestnes: A new capacity cmmitted asset will be required t meet develpment milestnes tracked by the AESO. If, prir t the first rebalancing auctin, majr milestnes have nt been met by mre than eight mnths, r, prir t the secnd rebalancing auctin, if a new capacity asset is mre than five mnths delayed in its prject schedule, then the new capacity asset will be required t buy ut its capacity cmmitment in the rebalancing auctin up t the market price cap. A capacity cmmitted asset with a UCAP that has decreased belw its capacity cmmitment vlume by a threshld will be required t buy back the difference in the secnd rebalancing auctin up t the market price cap. During an bligatin perid, the AESO will assess a capacity cmmitted asset n bth an availability and perfrmance basis: The availability f a capacity cmmitted asset will be assessed during the 100 tightest supply cushin hurs. The AESO will perfrm a supply cushin analysis at the end f each bligatin perid t identify the 100 tightest supply cushin hurs. The AESO will apply an unavailability payment adjustment t capacity suppliers with a negative availability vlume thrughut an bligatin perid. The unavailability payment adjustment will be based n a $/MWh rate f 40 % f 1.3 multiplied by the asset specific weighted average capacity revenue per MW acrss all auctins fr the delivery year divided by 100. Fr a guaranteed lad reductin (GLR) asset, its stated available capability (AC) vlume will be adjusted fr armed LSSi vlumes. Fr a firm cnsumptin level asset, availability will be measured by the difference between a lk-back baseline (established using actual data frm the immediately preceding 10 days) less the firm cnsumptin level. Lng lead time energy resurces will need t be nline and ready t receive a dispatch t be deemed available. A capacity cmmitted asset with a psitive availability vlume thrughut an bligatin perid will be eligible t receive an ver-availability payment adjustment, t Page 5 f 8

6 Categry High-level Design Chices be whlly funded frm the unavailability payment adjustments received frm capacity cmmitted assets with negative availability vlumes. The ver-availability payment adjustment will be based n a $/MWh rate determined by dividing the ttal unavailability payment adjustments cllected in an bligatin perid ($) by the ttal ver-availability vlume (MWh). The perfrmance f a capacity cmmitted asset relative t its capacity cmmitment adjusted by a balancing rati (energy and reserves prduced by all capacity cmmitted assets during a perfrmance assessment perid divided by ttal capacity purchased) will be assessed during EEA events (levels 1 thrugh 3) using actual energy prductin, level f cnsumptin and/r prvisin f reserves. The AESO will apply a nn-perfrmance payment adjustment fr a capacity cmmitted asset with a negative perfrmance vlume. The nn-perfrmance payment adjustment will be based n a $/MWh rate f 60 per % all auctins fr the delivery year divided by the maximum f (Expected EEA hurs, 20). The nnperfrmance payment adjustment rate will then be multiplied by the perfrmance vlume t determine the nn-perfrmance payment adjustment fr the perfrmance event fr the capacity cmmitted asset. Armed LSSi vlumes will be cnsidered as meeting perfrmance requirements fr demand side resurces. A GLR asset will be measured relative t a baseline cnsumptin level established using actual data frm the 10 days preceding the event. Lng lead time energy (LLTE) capacity asset perfrmance will be measured based n its availability t prvide energy in respnse t a dispatch during a perfrmance assessment perid. An LLTE asset that has at any pint received a directive cvering the perfrmance perid will be cnsidered nn-perfrming. In the event availability and perfrmance assessment perids verlap, bth frms f payment adjustments will be applicable. The AESO will cap the cmbined payment adjustment expsure t unavailability and nn-perfrmance payment adjustments fr each capacity cmmitted asset. Mnthly nn-perfrmance payment adjustments fr a capacity cmmitted asset will be capped at 300% f the mnthly capacity revenue based n the capacity cmmitted asset s bligatin price per MW. The cumulative annual unavailability and nnperfrmance payment adjustments fr a capacity cmmitted asset will be capped at 130% f the annual capacity revenue based n the bligatin price per MW. Over-availability and ver-perfrmance payment adjustments will als be capped at a capacity cmmitted asset s ttal annual bligatin price per MW. A capacity cmmitted asset that is cnstrained dwn due t limits n the Alberta internal transmissin system will be exempt frm unavailability payment adjustments and nn-perfrmance payment adjustments n that vlume f its bligatin. Availability and perfrmance assessments will nt be cnducted during perids when a state f market suspensin is in effect. N ther exemptins t the assessment f unavailability payment adjustments r nn-perfrmance payment adjustments will be permitted (including fr n-site and/r distributin system cnstraints, r transmissin utages that result in the asset being electrically discnnected frm the transmissin system). A capacity supplier will have the ptin f ex ante asset substitutin, r ex pst vlume reallcatin t avid r decrease nn-perfrmance payment adjustments assciated with a failure t deliver n its bligatin vlume during a perfrmance assessment perid. Settlements and Credit Requirements Payments will nt be made t capacity suppliers prir t the start f the bligatin perid. Cnsistent with the energy market, capacity market statements will be issued mnthly. Mnthly capacity payment is equal t the capacity market price fr the delivery year multiplied by the capacity bligatin cleared in the base auctin, minus the difference in cleared quantity between the rebalancing auctins, multiplied by relevant rebalancing price. Page 6 f 8

7 Categry High-level Design Chices Capacity payment adjustments due t nn-availability and nn-perfrmance will be deducted frm mnthly capacity payments. Remaining payment adjustment balances will be carried ver t subsequent mnths until the ttal payment adjustment is cllected. Csts f prcuring capacity will be allcated t custmers accrding t the apprved capacity cst allcatin methdlgy. N net settlement instructins fr capacity will be enabled. Capacity assets lking t buy back in rebalancing auctins, as well as new capacity assets, will need t demnstrate sufficient credit and may have t prvide security. Capacity bligatin is the last bligatin fllwing the final rebalancing auctin prir t the delivery year. This bligatin must be actively tracked by the AESO. Radmap fr Changes in the Energy and Ancillary Services Markets Current aspects f the energy and ancillary services markets will cntinue, including, withut limitatin: Current self-cmmitment rules. Current must-ffer requirement will cntinue t apply t a generatin asset, regardless f whether r nt it has a capacity cmmitment (available capability must be ffered). A lad asset that des nt have a capacity cmmitment (demand respnse and price-respnsive lad) may ffer r may cntinue t self-dispatch. A generatin asset, regardless f whether r nt it has a capacity cmmitment, must submit infrmatin related t asset utages in accrdance with current requirements (n utage apprval). All ffers may be between the price cap ($999) and flr ($0), unless mitigated (further explained belw). The current market structure fr ancillary services will remain the same. Ex pst mnitring and mitigatin f the market will cntinue. New requirements t facilitate implementatin f the capacity market and market pwer mitigatin include: Offer cntrl infrmatin must be submitted. Sectin f the ISO rules, Mthball Outage Reprting will be replaced by capacity market delist prcess. Market participants must ffer energy in the delivery perid unless delisted. Minr changes t the supply adequacy r supply shrtfall rules t include assets with capacity cmmitments. A lad asset with a capacity cmmitment must ffer (similar t generatin assets), and cmply with dispatch requirements. In the event f equal priced ffers thrughut the merit rder, including at the ffer cap ($999.99), a lad asset with a capacity cmmitment will be the last dispatched assets. An imprt r exprt asset will be prvided the ptin t submit ffers in price quantity pairs upn request f a new priced asset, in which case they will be dispatched during the settlement perid, and may set system marginal price. An imprt asset with a capacity cmmitment must ffer its bligatin vlume int the energy market. A lad asset with a capacity cmmitment must submit utage infrmatin, similar t the existing requirements fr generatin assets (n utage apprval). Changes fr enhanced dispatch certainty, including cntinued evaluatin f ramp rates. An ex ante market pwer screen will be adpted in the energy market, based n an hurly residual supplier index (RSI) structural screen set at an RSI f 1.0. The Page 7 f 8

8 Categry High-level Design Chices market pwer screen will nt be cnducted when the energy market is frecast t be in scarcity situatins such that the supply cushin is frecast t be less than 500 MW. The RSI calculatin will incrprate a vluntary submissin f physical supply bligatins, which will be netted ff the firm s prtfli. A firm that fails the market pwer screen will have its ffers r bids mitigated t an asset-specific reference price, calculated as: Fr thermal assets, 3 x marginal cst, defined as heat rate x fuel price + variable O&M + carbn cst; r Fr ther assets, including an imprt asset r a nn-thermal, energylimited asset, a frmula that captures the cncept f pprtunity cst. An asset may submit t the AESO an exceptin request fr the asset-specific reference price, and in ding s must submit its actual shrt-run marginal cst. The fllwing design changes are included in the market radmap (i.e., nt included as part f the capacity market implementatin fr 2021) and will be reviewed and implemented as part f the nging evaluatin f the market and day t day peratins: Energy market pricing methdlgy, including thse that may be required t ensure efficient dispatch and pricing during shrtage and surplus events in the future: raising the ffer cap abve $999.99; negative pricing; and shrtage pricing. Dispatch and flexibility: dispatch certainty thrugh tightened dispatch tlerance and ramp by blck; intrductin f a ramp prduct; and shrter settlement. The fllwing design changes will nt be included as part f the capacity market implementatin r market radmap, althugh they may be cnsidered as part f a separate evaluatin at anther time shuld the need arise: lcatinal marginal pricing (LMP); security cnstrained unit cmmitment (SCUC); security cnstrained ecnmic dispatch (SCED); intertie dynamic scheduling; c-ptimizatin f the energy and ancillary services markets; and day-ahead market (DAM). 1.2 Auctin Timelines and Transitinary Perid Each capacity auctin prcess is expected t take apprximately eight mnths, starting frm the prequalificatin prcess thrugh t market clearing and psting f auctin results. In the transitin t the final capacity market structure, auctins will be cnducted n a cmpressed frward perid and with a reduced number f rebalancing auctins. The initial base auctin prcess fr the 2021/2022 bligatin perid will start in Nvember 2019 and is anticipated t run thrugh t apprximately the end f June During the transitinary perid, base auctins will be held apprximately every six mnths until the full three-year frward perid is achieved with the cmpletin in Octber 2021 f the base auctin prcess fr the 2024/2025 bligatin perid. Please see Sectins 5 and 6 fr additinal detail. Page 8 f 8