impmentation of the pjm financial transmission rights auction market...
TRANSCRIPT
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July 24, 2002 Page 1IEEE 2002 Summer Power Meeting, Chicago Chicago
Impmentation of the PJM Financial Transmission Rights
Auction Market System
Xingwang Ma, David Sun, Andy Ott
IEEE 2002 Summer Power Meeting
January, 2002January, 2002
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July 24, 2002 Page 2IEEE 2002 Summer Power Meeting, Chicago Chicago
Content
Current PJM FTR Market– Point-To-Point (PtP) Obligation FTR– Approaches to FTR procurement – FTR Auction Market Systems
FTR Extensions– FTR Functionality: Optionality, Flowgate hybrid, ...– Examples
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July 24, 2002 Page 3IEEE 2002 Summer Power Meeting, Chicago Chicago
Current PJM FTR Market
Why do We Need FTRs– LMP based energy spot– Uncertainty with transmission congestion – Price uncertainty– Market liquidity – Market competitiveness– Market power mitigation– Transmission investment
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July 24, 2002 Page 4IEEE 2002 Summer Power Meeting, Chicago Chicago
Current PJM FTR Market
PtP FTR Basic Characteristics – Financial entitlement, independent of physical MW scheduling – Provide financial credit against transmission congestion charge
• All transmission customer pays congestion charge– Congestion Charge= (LMPi-LMPj) x MWFlow
• FTR holder receives congestion credit– Congestion Credit = (LMPi-LMPj) x FTRijMW
• Congestion charge & credit could be negative quantities• PtP obligation FTRs
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July 24, 2002 Page 5IEEE 2002 Summer Power Meeting, Chicago Chicago
Current PJM FTR Market
FTR may be obtained in several ways– Network & firm point-to-point service, – Secondary trading– Centralized monthly auction (buy & sell, re-configuration,
residuals)
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July 24, 2002 Page 6IEEE 2002 Summer Power Meeting, Chicago Chicago
Current PJM FTR Market
Monthly FTR Auction Fundamentals– Dynamic re-configuration & auctioning of bids & offers– Revenue adequacy maintained through simultaneous
feasibility testing (N-1 security constraints)MW Injection/Withdraw model: – FTR Bids: [source, sink, MW] @ price– Pre-committed transmission capacity– Transmission capacity consumed by external loop-flows
Bid clearing criteria:– Maximize market merit subject to N-1 security limits.
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July 24, 2002 Page 7IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR/LMP Example
A B
100mwhLMP=$20
100mwhLMP=$30
1. Line A to B is congested (different LMP at A & B)2. Congestion charge = ($30-$20) * 100mwh = $10003. Congestion credit for a FTR- holder of ‘100mw A to B’
= ($30-$20) * 100mwh = $10004. Net Payment = $ 0.0
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July 24, 2002 Page 8IEEE 2002 Summer Power Meeting, Chicago Chicago
Current PJM FTR Market
System Architecture
Market database
MUIMOI
Message Bus
LP Engine SFT
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July 24, 2002 Page 9IEEE 2002 Summer Power Meeting, Chicago Chicago
Extensions of Basic FTR
Basic FTR– Financial commitment: Obligation– Locational model: Point-to-Point (node, zone, hub) – Inter-temporal coupling: None
Future Extensions– Long-term FTR auction of full transmission capability– Inter-temporal coupling: On/Off Peak, multi-months... – Auction revenue rights– Financial commitment: Obligation, Option– Locational Model: Point-to-Point, Flowgate
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July 24, 2002 Page 10IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR Optionality
Business Rational– A Financial Options instrument– Holder receives benefits (credits) when congestion is in
the same direction as the Option. – Holder does NOT pay out when congestion is in the
opposite direction of the OptionOperational Considerations– Revenue adequacy (analytical complexity)– Price of Options premium (and quantities available)
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July 24, 2002 Page 11IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with PtP and Flowgate
Business Rational– PtP provides more complete hedge– Flowgates provides increased liquidity in secondary
tradingOperational Considerations– Alternate representation of Flowgate rights
• Tradeoff between MW distribution vs. Price for congested flowgates
– Revenue adequacy requires consistent modeling of grid constraints between transmission right auction and energy market
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July 24, 2002 Page 12IEEE 2002 Summer Power Meeting, Chicago Chicago
Expandable System Architecture
Market database
MUIMOI
Message Bus
LP Engine SFT 1 SFT n
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July 24, 2002 Page 13IEEE 2002 Summer Power Meeting, Chicago Chicago
Numerical Examples
FTR Examples & Demonstration
Case 1: Reference Baseline FTRCase 2: FTR Obligation & OptionsCase 3: FTR PtP and Flowgate
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July 24, 2002 Page 14IEEE 2002 Summer Power Meeting, Chicago Chicago
PJM 5-Bus Example
Table 1. Branch DataBranch Name From To Impedance
(per unit)Admittance(per unit)
Branch Limit(MW)
A-B A B 0.0281 35.58719 250A-D A D 0.0304 32.89474 150A-E A E 0.0064 156.2500 400B-C B C 0.0108 92.59259 350C-D C D 0.0297 33.67003 240D-E D E 0.0297 33.67003 240
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July 24, 2002 Page 15IEEE 2002 Summer Power Meeting, Chicago Chicago
PJM 5-Bus Example (continued)Table 2. Shift factors for the flow-gate FG_A
Node A B C D E Hub A Hub BShiftfactors
0 -0.179245 -0.248137 -0.437588 -0.077578 0.216920 -0.256579
1) Point-to-Point BidsFTR
Bid IDSourceNode
Sink Node ParticipantName
Sale/Purchase
Quantity(MW)
Bid Price($/MW)
Option
FTR-1 A D LSE-B 0 4000 18.6 0FTR-2 E C LSE-B 0 1000 5.0 0FTR-3 E B LSE-B 0 1000 6.0 0FTR-4 Brighton B LSE-B 0 4000 7.0 0FTR-5 Brighton C LSE-C 0 2000 8.0 0FTR-6 Solitude D LSE-D 0 2200 9.0 0FTR-7 D A LSE-D 0 10 2.0 1FTR-8 D A LSE-C 0 10 2.0 0FTR-9 A D LSE-B 0 10 2.0 12) FGR BidsFGR Bid Flowgate Participant Name Quantity Price OptionFGR-1 FG_A BuyerX 1000 20.0 0
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July 24, 2002 Page 16IEEE 2002 Summer Power Meeting, Chicago Chicago
Baseline FTR Example
Point-to-Point FTR Obligation AuctionBranch flow summary:
Table 4. Point-to-point FTR obligation bids cleared:
FTRBid ID
SourceNode
SinkNode
ParticipantName
Quantity(MW)
BidPrice
Option ClearedMW
MarginalPrice
FTR-1 A D LSE-B 4000 18.60 0 10 18.60FTR-2 E C LSE-B 1000 5.00 0 0 8.00FTR-3 E B LSE-B 1000 6.00 0 0 7.00FTR-4 Brighton B LSE-B 4000 7.00 0 600 7.00FTR-5 Brighton C LSE-C 2000 8.00 0 39.73 8.00FTR-6 Solitude D LSE-D 2200 9.00 0 434.01 9.00FTR-8 D A LSE-C 10 2.00 0 10 -18.6
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July 24, 2002 Page 17IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with Obligations & Options
Table 5. Point-to-point FTR obligation/Option bids cleared:
FTRBid ID
SourceNode
SinkNode
Quantity(MW)
Bid Price Option Base FTR(Obligation)
ClearedMW
MarginalPrice
FTR-1 A D 4000 18.60 0 10 7.37 18.60FTR-2 E C 1000 5.00 0 0 0 8.00FTR-3 E B 1000 6.00 0 0 0 7.00FTR-4 Brighton B 4000 7.00 0 600 596.12 7.00FTR-5 Brighton C 2000 8.00 0 39.73 34.65 8.00FTR-6 Solitude D 2200 9.00 0 434.01 423.64 9.00FTR-7 D A 10 2.00 1 0 10 1.20**
FTR-8 D A 10 2.00 0 10 10 -18.60FTR-9 A D 10 20.00 1 0 10 19.80**
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July 24, 2002 Page 18IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with Obligations & Options (cont’d)
Observations– The marginal price for FTR obligation over path A-D is
$18.60/MW.
– The marginal price for FTR obligation over path D-A is $-18.60/MW.
– Point-to-point FTR option (FTR-9) from A to D is cleared, as the marginal price for option over the path is $19.80/MW compared to its bid price of $20.00/MW.
– Point-to-point FTR option (FTR-7) from D to A is cleared in full amount, as the marginal price for option over the path of $1.20/MW is less than its bid price of $2.00/MW.
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July 24, 2002 Page 19IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with PtP and Flowgates
Table 6. FGR Solution:
FGR Bid Flowgate ParticipantName
Quantity Price Cleared MW Marginal Price
FGR-1 FG_A BuyerX 1000 20.00 0 33.64
Observations from Table 6No FGR is cleared: the marginal price of the flow-gate FG_A is $33.64/MW while the FGR bid price is only $20.00/MW.
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July 24, 2002 Page 20IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with PtP and Flowgates (cont’d)
What Happens if the FGR bidder increases its price to $33.65/MW
Table 7. FGR Solution:FGR Bid Flowgate Participant
NameQuantity Price Cleared MW Marginal Price
FGR-1 FG_A BuyerX 1000 33.65 8.91 33.65
Table 8. Point-to-point FTR obligation bids cleared:FTR
Bid IDSourceNode
SinkNode
ParticipantName
Quantity(MW)
BidPrice
BasePtP FTR
ClearedMW
Marginal Price
FTR-1 A D LSE-B 4000 18.60 10 0 18.61FTR-2 E C LSE-B 1000 5.00 0 0 8.00FTR-3 E B LSE-B 1000 6.00 0 0 7.00FTR-4 Brighton B LSE-B 4000 7.00 600 600.50 7.00FTR-5 Brighton C LSE-C 2000 8.00 39.73 30.92 8.00FTR-6 Solitude D LSE-D 2200 9.00 434.01 428.82 9.00FTR-8 D A LSE-C 10 2.00 10 10 -18.61
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July 24, 2002 Page 21IEEE 2002 Summer Power Meeting, Chicago Chicago
FTR with PtP and Flowgates(cont’d)
Observations from Tables 7 & 8
– The FGR bid is cleared partially when its bid price increased from $20.00/MW to $33.65/MW.
– FGR bids competes for the transmission capability along with point-to-point FTR bids.
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July 24, 2002 Page 22IEEE 2002 Summer Power Meeting, Chicago Chicago
A PJM Case
Obligation vs Option FTR Price
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1 22 43 64 85 106 127 148 169 190 211 23 25 27 29 316 33 35 37 40 421 44 46 48 50 52 54 56 58 610 631 65 67 69 715
P a t h
Ob ligat io nPriceOp tio nPrice
- SENECA 13 KV 1GEN_HOBOKEN 230 KV T-1AB: 903- DPL_CARLLS 69 KV CT_1&2: 1791- MIDD AE 69 KV CT_1&2&3_DPL: 1520- DPL_SHERMAN AVE CT 1: 2025- DPL SOUTH_BAYVIEW 4 KV G1: 2712
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July 24, 2002 Page 23IEEE 2002 Summer Power Meeting, Chicago Chicago
Conclusion
Current FTR MarketExtensions of PtP Obligation FTR market– Auction of full transmission capability– Temporal coupling of multiple period auction– Optionality– Hybrid market models
Key to success of energy market
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July 24, 2002 Page 24IEEE 2002 Summer Power Meeting, Chicago Chicago
Thank you.
ContentCurrent PJM FTR MarketCurrent PJM FTR MarketCurrent PJM FTR MarketCurrent PJM FTR MarketFTR/LMP ExampleCurrent PJM FTR MarketExtensions of Basic FTRFTR OptionalityFTR with PtP and FlowgateExpandable System ArchitectureFTR Examples & DemonstrationPJM 5-Bus ExamplePJM 5-Bus Example (continued)Baseline FTR ExampleFTR with Obligations & OptionsFTR with Obligations & Options (cont’d)FTR with PtP and FlowgatesFTR with PtP and Flowgates (cont’d)FTR with PtP and Flowgates (cont’d)A PJM CaseConclusion