Operating Reserves Educational Session Part B Energy Market Uplift Senior Task Force September 17, 2013 Joseph Bowring Joel Romero Luna
Operating Reserves Operating reserves can be grouped into five categories: Day-Ahead Balancing Reactive Services Black Start Services Synchronous Condensing 2013 www.monitoringanalytics.com 2
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Day-Ahead Charges $1.2 $1.0 Day-Ahead Operating Reserves Unallocated Congestion $0.8 $0.6 $0.4 $0.2 $0.0 2013 www.monitoringanalytics.com 3
Day-Ahead Charges Total Day-Ahead Operating Reserve Charges from Jan 2009 Jun 2013: $462 million From Day-Ahead Operating Reserve Credits (Not Black Start or Reactive): $442 million (96% of all DA OR Charges) From Unallocated Congestion: $20 million (4% of all DA OR Charges) o 67% or $14 million since Jan 2013. 2013 www.monitoringanalytics.com 4
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Share of Credits Day-Ahead Credits Concentration 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Top 10: 69% Others: 31% Top 10 All Others 2013 www.monitoringanalytics.com 5
Day-Ahead Allocation Recap Charges are paid by: Day-Ahead Demand Bids (Load) Day-Ahead Exports Day-Ahead Decrement Bids (DECs) Charges are allocated across the entire RTO. Each transaction pays the same rate per day across the entire system. 2013 www.monitoringanalytics.com 6
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 GWh Basis for Day-Ahead Allocation 800,000 700,000 600,000 12-month Rollling Total Decrement Bids 12-month Rollling Total Day-Ahead Exports 12-month Rollling Total Day-Ahead Demand 500,000 400,000 300,000 200,000 100,000 0 2013 www.monitoringanalytics.com 7
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh Day-Ahead Rate 1.20 1.00 Day-Ahead Rate Monthly Average Day-Ahead Rate 0.80 0.60 0.40 0.20 0.00 2013 www.monitoringanalytics.com 8
$ per MWh Day-Ahead Rate 1.20 1.00 0.80 0.60 Day-Ahead Rate Day-Ahead Rate (Excluding 13-Sep-2012 through 30-Nov-2012) Day-Ahead Rates (Excluding 13-Sep- Statistic Day-Ahead Rates 2012 through 30-Nov- Average 0.124 0.110 Min 0.000 0.000 Max 1.100 0.601 St Dev 0.103 0.071 0.40 0.20 0.00 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 www.monitoringanalytics.com 9
Operating Reserves Operating reserves can be grouped into five categories: Day-Ahead Balancing Reactive Services Black Start Services Synchronous Condensing 2013 www.monitoringanalytics.com 10
Balancing Charges Balancing operating reserves: Balancing (make whole) Reliability o RTO, East or West Deviations o RTO, East or West Lost Opportunity Cost (LOC) Canceled Resources 2013 www.monitoringanalytics.com 11
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Balancing Charges $2.5 $2.0 Balancing Operating Reserve (Make Whole) Lost Opportunity Cost Canceled Resources $1.5 $1.0 $0.5 $0.0 2013 www.monitoringanalytics.com 12
Balancing (BOR) Charges Total BOR Charges from Jan 2009 Jun 2013: $1,786 million From BOR Credits (make whole): $1,211 million (68% of all BOR Charges) From LOC: $555 million (31% of all BOR Charges) From Canceled Resources: $20 million (1% of all BOR Charges) o $0.3 million after Jun-2012 (wind LOC Rule): Before wind LOC rule, LOC paid to wind units was categorized as canceled resources. 2013 www.monitoringanalytics.com 13
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Share of Credits 100% Balancing (Make Whole) Credits Concentration 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Top 10: 53% Others: 47% Top 10 All Others 2013 www.monitoringanalytics.com 14
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Balancing Charges $2.5 $2.0 Reliability Deviations Reliability: 28% Deviations: 72% $1.5 $1.0 $0.5 $0.0 2013 www.monitoringanalytics.com 15
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Balancing Charges $2.0 $1.5 $1.0 RTO Reliability East Reliability West Reliability $0.5 $0.0 $2.0 $1.5 $1.0 RTO Deviations East Deviations West Deviations $0.5 $0.0 2013 www.monitoringanalytics.com 16
Balancing Charges Allocation Allocation Jan 2009 - Nov 2012 Dec 2012 - Jun 2013 Reliability Charges $306 $31 RTO Share 39% 74% East Share 22% 23% West Share 39% 3% Deviation Charges $700 $173 RTO Share 82% 34% East Share 13% 63% West Share 4% 3% 2013 www.monitoringanalytics.com 17
Balancing Allocation Recap Reliability charges are paid by: Real-time Load Real-time Exports Reliability charges are allocated by region (RTO, East or West) Deviation charges are paid by: Real-time deviations from day-ahead position Deviations from desired output (units and DR) Deviation charges are allocated by region (RTO, East or West) 2013 www.monitoringanalytics.com 18
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 GWh RTO Deviations 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 12-month Rollling Total Demand Deviations 12-month Rollling Total Generators Deviations 12-month Rollling Total Supply Deviations 12-month Rollling Total Deviations 2013 www.monitoringanalytics.com 19
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 GWh 60,000 RTO Demand Deviations 12-month Rolling Totals 50,000 40,000 30,000 20,000 10,000 0 IBT Sale Only DEC Only Export Only Load Only Financial Combination with DEC Physical Combination with DEC Combination without DEC 2013 www.monitoringanalytics.com 20
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 GWh 25,000 RTO Supply Deviations 12-month Rolling Totals 20,000 15,000 10,000 5,000 0 IBT Purchase Only Import Only INC Only Import with INC IBT Purchase with INC Import with IBT Purchase 2013 www.monitoringanalytics.com 21
Balancing Rates Jan 2009 - Nov 2012 Statistics RTO Reliability East West RTO Deviation East West Average 0.04 0.04 0.09 0.82 0.23 0.11 Minimum 0.00 0.00 0.00 0.00 0.00 0.00 Maximum 1.61 3.08 1.03 13.37 5.18 3.78 Standard Deviation 0.08 0.17 0.10 0.90 0.56 0.28 Dec 2012 - Jun 2013 Statistics RTO Reliability East West RTO Deviation East West Average 0.05 0.03 0.00 0.77 2.77 0.13 Minimum 0.00 0.00 0.00 0.01 0.00 0.00 Maximum 0.80 2.89 0.13 10.23 32.88 2.10 Standard Deviation 0.09 0.21 0.02 1.16 5.75 0.37 Reliability Deviation Average Rates RTO East West RTO East West Jan 2009 - Nov 2012 0.04 0.04 0.09 0.82 0.23 0.11 Dec 2012 - Jun 2013 0.05 0.03 0.00 0.77 2.77 0.13 Difference 0.01 (0.01) (0.09) (0.04) 2.54 0.02 Percentage 28% (29%) (96%) (5%) 1,122% 22% 2013 www.monitoringanalytics.com 22
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh RTO Reliability Rate 3.5 3.0 RTO Reliability Rate Monthly Average RTO Reliability Rate 2.5 2.0 1.5 1.0 0.5 0.0 2013 www.monitoringanalytics.com 23
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh East Reliability Rate 3.5 3.0 East Reliability Rate Monthly Average East Reliability Rate 2.5 2.0 1.5 1.0 0.5 0.0 2013 www.monitoringanalytics.com 24
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh West Reliability Rate 3.5 3.0 West Reliability Rate Monthly Average West Reliability Rate 2.5 2.0 1.5 1.0 0.5 0.0 2013 www.monitoringanalytics.com 25
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh RTO Deviation Rate 35 30 RTO Deviation Rate Monthly Average RTO Deviation Rate 25 20 15 10 5 0 2013 www.monitoringanalytics.com 26
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh East Deviation Rate 35 30 East Deviation Rate Monthly Average East Deviation Rate 25 20 15 10 5 0 2013 www.monitoringanalytics.com 27
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 $ per MWh West Deviation Rate 35 30 West Deviation Rate Monthly Average West Deviation Rate 25 20 15 10 5 0 2013 www.monitoringanalytics.com 28
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Millions (average per day) Lost Opportunity Cost $2.5 $2.0 Balancing Operating Reserve (Uplift) Lost Opportunity Cost Canceled Resources $1.5 $1.0 $0.5 $0.0 2013 www.monitoringanalytics.com 29
Lost Opportunity Cost Recap LOC is paid to units when: Combustion turbine or diesel scheduled DA not called in RT. For purposes of this presentation, labeled as DA LOC. Units reduced in real-time. For purposes of this presentation, labeled as RT LOC. LOC is paid by RTO deviations. Currently PJM posts one RTO Deviation Rate which combines the RTO Deviation Charges and the LOC Charges. 2013 www.monitoringanalytics.com 30
Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Millions (average per day) Lost Opportunity Cost $1.0 $0.9 DA LOC RT LOC $0.8 $0.7 $0.6 $0.5 $0.4 $0.3 $0.2 $0.1 $0.0 2013 www.monitoringanalytics.com 31
Lost Opportunity Cost LOC from Oct-2011 through Jun-2013: $253 million Oct-2011: LOC calculations in settlement software were corrected to take into account higher of price vs. cost offer rule. DA LOC: $214 million (84%) RT LOC: $40 million (16%) 2013 www.monitoringanalytics.com 32
Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 $ per MWh LOC Rate 20 18 LOC Rate Monthly Average LOC Rate 16 14 12 10 8 6 4 2 0 2013 www.monitoringanalytics.com 33
$ per MWh LOC Rate 20 18 16 14 Rate 95 Percentile Median 5 Percentile Statistics LOC Rate ($/MWh) Average 0.98 Minimum 0.00 Maximum 17.37 Standard Deviation 1.35 12 10 8 6 4 2 0 3.34 0.59 0.06 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 www.monitoringanalytics.com 34
Monitoring Analytics, LLC 2621 Van Buren Avenue Suite 160 Eagleville, PA 19403 (610) 271-8050 MA@monitoringanalytics.com www.monitoringanalytics.com 2013 www.monitoringanalytics.com 35