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 14

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. The final CMD will include the financial and vlume threshlds. The final CM will als clarify that where a capacity market participant that is subject t capacity market pwer mitigatin has an asset satisfying the refurbishment threshld, it will be allwed a netime ptin t prvide unmitigated ffers fr the refurbished asset and a mitigated (if applicable) ffer fr the existing asset. Shuld the unmitigated ffer nt clear in the capacity auctin, the mitigated ffer will be added back int the supply curve and the clearing prcess fr the capacity auctin will be run again. This will allw flexibility fr participants t ffer refurbishment assets as new capacity assets while preventing withhlding f capacity frm the market. New capacity assets will be required t pst security equal t net-cone r a minimum dllar amunt. The final CMD will be reflect a change t the security requirement fr a new capacity asset revised t be based n 5% f CONE multiplied by 1/Capital Recvery Factr fr a new capacity asset, incremental capacity asset and refurbished capacity asset. 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 selfsupply 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. The red text abve will be changed t black in the final CMD, with the additinal prvisin that changes t the self-supply designatin will be permitted prir t fur years due t physical peratinal changes at the self-supply facility. 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 Page 2 f 14

3 Categry High-level Design Chices 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. The red text abve will changed t black in the final CMD. Temprary ecnmic delisting requests will nly be allwed fr the secnd rebalancing auctin. The red text abve will changed t black in the final CMD. If the AESO adpts the market pwer mitigatin mdel that applies a default ffer price cap f net CONE t all existing capacity assets as described in the subsectin 7.1. anntatin, the AESO will remve the requirement in the final CMD that a temprary ecnmic delisting request may be submitted nly befre the secnd rebalancing auctin and include a requirement that a temprary ecnmic delisting request may be submitted befre any capacity 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. The final CMD will include a requirement fr a crprate fficer t submit an attestatin that the submitted csts fr a temprary ecnmic delist request r the utage duratins fr physical delists are accurate. The legal wner f a capacity asset that is the subject f a temprary ecnmic delisting request must ffer the net avidable csts f such asset int the secnd rebalancing auctin. 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. The red text abve will be changed t black in the final CMD with the additinal design cntent belw added. A capacity asset may temprarily ecnmically delist frm the capacity market but chse t participate in the energy and ancillary services markets fr n mre than 5 cntinuus mnths in the same bligatin perid. Avidable csts and EAS ffsets will be calculated based n utage dates prvided prir t finalizatin f the secnd rebalancing auctin. 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. The red text will be changed t black in the final CMD. A capacity asset may temprarily delist frm the capacity market but chse t Page 3 f 14

4 Categry High-level Design Chices participate in the energy and ancillary services markets fr n mre than 5 cntinuus mnths in the same 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. The red text abve will be changed t black in the final CMD. Clarificatin will be prvided than an asset retirement date need nt ccur at the start f the bligatin perid. The legal wner f a capacity asset intending t permanently delist may cntinue t participate in the energy and ancillary services markets until the physical retirement date thrugh submissin f a temprary physical delist request fr the relevant prtin f the initial retirement year. N ecnmic test will be cnducted n permanent delist ntificatins. UCAP Determinatin 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. The red text abve will be changed t black in the final CMD. The ranges fr each asset will be calculated based n eliminatin f the tp and bttm 5% f the data set utilized t determine UCAP. A minimum range f either +/- 2% f the calculated capacity r availability factr r +/- 1 MW will be prvided if these ranges are wider than thse calculated thrugh eliminatin f 5% f the data. 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. The 100 tightest supply cushin hurs t calculate an asset s UCAP will change t 250 tightest supply cushin hurs and will be turned int black text in the final CMD. 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. The red text abve will be changed t black in the final CMD. 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). The final CMD will include a requirement that run-f-river hydr UCAP will be based n capacity factr. Page 4 f 14

5 Categry High-level Design Chices 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. The final CMD will clarify that UCAP will be determined based n an availability factr methdlgy fr assets fr which metered vlumes d nt match energy market dispatches but have a crrelatin f 80% r greater between metered vlumes and dispatch levels. 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. The 90% value will be changed t 91% in the final CMD. Fr FCL assets, the use f an availability factr methdlgy will be remved frm the final CMD. 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. The reference t named and utility system resurces will be remved and red text will be changed t black in the final CMD. 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. The red text will be changed t black in the final CMD. A UCAP dispute reslutin prcess will be established fr disputes exceeding a materiality threshld. The AESO is cntinuing t evaluate a dispute reslutin prcess fr all capacity market disputes as described in Sectin 5 and anticipates this subsectin will be remved in the final CMD. Page 5 f 14

6 Categry Calculatin f Demand Curve Parameters High-level Design Chices 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. The red text will be changed t black in the final CMD. The final CMD is expected t cntain a descriptin f the prcesses and methdlgies assciated with adjustments t the fleet-wide unfrced capacity value t accunt fr demand and supply shcks that are nt captured in the RAM. 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 t unqualified imprt vlumes in red text will be remved in the final CMD. Interties will be treated in a similar fashin t ther capacity resurces by utilizing calculated eligible UCAP t align prcurement vlumes frm the RAM. The reference technlgy used fr determining grss-cone and net-cone will be a natural gas-fired technlgy and selected thrugh detailed cst screening. The AESO anticipates that an F-class turbine will be black in the final CMD and will be evaluated in additin t an aerderivative simple-cycle gas turbine (tw LM6000 units) and cmbined-cycle frame turbine (ne H-class gas turbine and ne steam turbine). 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 AESO cntinues t evaluate and cnsult n this, hwever the revenue certainty apprach remains the preferred ptin. 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; Page 6 f 14

7 Categry High-level Design Chices The ft is 13 per cent abve the target capacity vlume and at a price f 0. The AESO cntinues t evaluate and cnsult n the Grss CONE, Net CONE estimate, and shape f the demand curve. Frward Capacity Auctin 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. 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. The red text will be changed t black in the final CMD. 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. The red text will be changed t black in the final CMD. 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 red text will be changed t black in the final CMD. Rebalancing Auctins The capacity market auctin clearing mechanism will maximize scial surplus and minimize deadweight lss. Offers will cnsist f ne up t seven price quantity pairs with limitatin as t which blcks may be inflexible. 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 Page 7 f 14

8 Categry High-level Design Chices market price cap t ensure they clear in the market. The final CMD will clarify that assets chsing t buy back an bligatin fr reasns ther than UCAP reductin in the final rebalancing auctin r missing milestnes will nt have the ability t submit a price abve the price cap. The rebalancing auctin may clear with a net purchase r sale frm the AESO, cnsistent 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 Offers will cnsist f ne up t seven price quantity pairs with limitatin as t which blcks may be inflexible. 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. In additin t an ex-ante market pwer screen ptin, the AESO is prpsing an alternative ptin fr market pwer mitigatin where all existing capacity assets wuld be subject t a default ffer price cap f net CONE and n asset specific ffer caps wuld be allwed. 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. If the final market pwer mitigatin apprach includes a market pwer screen, the red text abve will be changed t black in the final CMD. The market pwer screen will be based n a firm s capacity ffer cntrl f UCAP, regardless f resurce type. 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. If the final market pwer mitigatin apprach includes a market pwer screen, the AESO will increase the default ffer price cap frm 0.5 x net-cone t 0.8 x net- CONE in the final CMD. The final CMD will clarify that the net ging frward cst will be equal t avidable csts minus the energy and ancillary service margin. Guiding principles will be included t infrm acceptable avidable csts. Opprtunity csts, majr incremental capital expenditures and net decmmissining csts will be remved frm the list f Page 8 f 14

9 Categry High-level Design Chices acceptable avidable csts in the final CMD. Supply Obligatins and Perfrmance Assessments There will be n minimum ffer price requirements fr capacity suppliers due t net-shrt capacity psitins r ut-f-market payments. 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. The red text abve will be changed t black in the final CMD, subject t cnfirmatin via further research. 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 red text abve will be changed t black in the final CMD. 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. Fr the final CMD, the AESO intends t clarify that a 10 f 10 day average baseline and an in-day adjustment factr will be used t assess the perfrmance f a guaranteed lad reductin (GLR) asset. Prvisin f armed LSSi vlumes will be cunted as perfrmance vlume. A capacity cmmitted asset with a psitive availability vlume thrughut an bligatin perid will be eligible t receive an ver-availability payment adjustment, t 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). Page 9 f 14

10 Categry High-level Design Chices The red text abve will be changed t black in the final CMD. 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. External assets will be cnsidered meeting perfrmance requirements fr the first tw hurs f a perfrmance event if they have an ffer in the merit rder but are nt dispatched because the available transfer capability is fully utilized. 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. The red text abve will be changed t black in the final CMD, subject t the fllwing clarificatin: The actual availability vlume fr a firm cnsumptin level (FCL) asset will be measured as fllws: Actual Availability Vlume = Qualifying Baseline calculated fr the purpses f bidding int the auctin - Qualifying Baseline calculated during the delivery year. 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. The abve requirements will be mdified in the final CMD t clarify that a LLTE asset that is directed t start but enters a start time within 10 minutes f receiving the directive will be eligible t be cnsidered perfrming during a perfrmance assessment perid based n prductin vlume. 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 nn-perfrmance payment adjustments fr a capacity cmmitted asset will be capped at 130% f the annual capacity revenue based n the bligatin price per MW. The red text abve will be changed t black in the final CMD. Page 10 f 14

11 Categry High-level Design Chices 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). The red text abve will be changed t black in the final CMD based n ratinale develped fr sectin 3. 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 The Sectin will be renamed Settlement and Financial Security 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. 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. The final CMD will clarify that new capacity assets that have nt reached cmmercial peratin befre the start f the settlement perid will nt be paid the mnthly capacity payment in that settlement perid. The mnthly capacity payment fr that settlement perid will be held by the AESO until all penalties fr the delivery year are assessed and thereafter will be applied twards the payment adjustment balance. The final CMD will als clarify that financial security is nt required fr existing capacity assets during the bligatin perid prvided the asset maintains an bligatin and is eligible fr a capacity payment fr the fllwing bligatin perid. Page 11 f 14

12 Categry Radmap fr Changes in the Energy and Ancillary Services Markets High-level Design Chices 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. The red text abve will be changed t black in the final CMD. 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. The final CMD will clarify that a lad r an aggregated lad asset with a capacity cmmitment less than 5 MW but greater than 1 MW may participate in the energy market by submitting an ffer (nt a bid). A lad r an aggregated lad asset that has a capacity cmmitment f 5 MW r mre must submit an ffer (nt a bid). A lad r aggregated lad that has nt cleared in a capacity auctin will nt have a must ffer requirement. 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. The red text abve will be changed t black in the final CMD. The final CMD will clarify that an imprt asset with a capacity cmmitment will nt have pririty dispatch and bump a nn-capacity cmmitted imprt asset. Page 12 f 14

13 Categry High-level Design Chices 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. The AESO anticipates that a prpsal fr submissin f an asset s ramp capability during an asset s peratinal state (dispatch table) will be included in the final CMD as black, and will be subject t nging cnsultatin. The cnsultatin will determine a mdel fr mnitring dispatch cmpliance and hw t trigger ptential changes t the Sectin f the ISO rules, as required. Further changes including the ramp prduct and ramp by blck and are currently in the market radmap fr future cnsideratin. 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 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. The red text abve will be changed t black in the final CMD, subject t further evaluatin f the 500 MW threshld. The final CMD will clarify that, in additinal t physical supply bligatins, financial bligatins will als be cnsidered in the calculatin f bligatins t be netted ff in the calculatin f the residual supplier index. 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. The final CMD will clarify that while firms are identified during the market pwer screen, it is the ffers abve the reference price fr a firm that has been identified as having market pwer that fail the three part test. The red text abve will turn t black in the final CMD, subject t replacing carbn cst with carbn price t x Asset-specific Carbn Efficiency Factr j. 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 Page 13 f 14

14 Categry High-level Design Chices 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. The red text abve will turn t black in the final CMD, with the clarificatin that auctin prcess timelines may be adjusted based n further analysis. Page 14 f 14