the electrical grid and the wholesale electricity market ......nicola tesla developed the 3-phase...

The Electrical Grid and the

Wholesale Electricity Market

OSPE Energy Seminar

OSPE Energy Task Force

May 2016

OSPE presentations can be downloaded at:

https://www.ospe.on.ca/presentations


The Electrical Grid and the Wholesale Electricity Market2

Historical Perspective - T. Edison, N. Tesla, Sir Adam Beck.

The Electrical Grid

Consumer Load Demand – daily, weekly, annual

Generation Technologies

Storage

Load, Frequency and Voltage Control


How Retail Electricity Prices are Set

Typical Electricity Bill

Q/A

Outline


Thomas Edison – 1882 the first utility to distribute Direct Current (DC) in lower Manhattan eventually serving 1 sq. mile.

Nicola Tesla developed the 3-phase Alternating Current (AC) distribution system we know today.

AC won the day due to its ease of voltage transformation - made distribution of electricity over long distances cheap and efficient.

Sir Adam Beck – the father of Ontario’s electrical power system.

Beck built the power system with government debt which was paid back in user fees over the lifetime of the assets.

Historical Perspective


The Electrical Power System or Electrical Grid includes:

Generating Plants

Centralized (hydroelectric, nuclear, gas-fired)

Distributed (wind, solar, Bio-energy, combined heat and power)

Transmission System: > 50,000 Volts

Distribution System: < 50,000 Volts

All the required control and protection systems and main control centers.

Inter-ties: Interconnections to other electrical grids

The Electrical Grid


Courtesy of Nebraska Public Power District

http://www.nppd.com/vegetation-management/faqs/

The Electrical Grid


Courtesy of the Independent Electricity System Operator

http://www.ieso.ca/Documents/IntertieReport-20141014.pdf

The Electrical Grid


Customer Load Demand – Typical Day

Load data courtesy of IESO

http://www.ieso.ca

Diagrams courtesy of Market Intelligence

& Data Analysis Corporation

0

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Time During Day (Hours)

Ontario Load Oct 12, 2015 Holiday ( lowest demand day in 2015 )

Total System Demand (with exports)

Ontario Demand

Ontario Base Load Demand 10,539 MW

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10,000

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1 3 5 7 9 11 13 15 17 19 21 23

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Time During Day (Hours)

Ontario Load Tue. Jul 28, 2015 ( highest demand day in 2015 )

Total System Demand (with exports)

Ontario Demand

Ontario Base Load Demand 14,637 MW


Customer Load Demand – Typical Week


http://www.ieso.ca



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Customer Load Demand – 2015

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DailyElectricalDemandin2015

OntarioDailyMAX

OntarioDailyMIN

100%ofPeak

47%ofPeak


http://www.ieso.ca




Ontario has phased out coal. In 2015 its energy supply was:

Nuclear generation 58.8 %

Hydro-electric generation 23.1 %

Gas fired generation 9.8 %

Wind turbine generation 6.5 %

Solar generation 1.5 %

Bio-energy generation 0.3 %

Each of these have strengths and weaknesses

To minimize cost of electricity, each has to be used in a way that accommodates their production characteristics.



http://www.ieso.ca

Data adjusted for distribution installed

supply by Market Intelligence & Data

Analysis Corporation



Nuclear Plant – Pickering NGS

Courtesy of Ontario Power Generation

http://www.opg.com/generating-power/nuclear/stations/pickering-nuclear/Pages/pickering-nuclear.aspx



Hydro-electric Plant – Sir Adam Beck GS at Niagara Falls


http://www.opg.com/generating-power/hydro/southwest-ontario/Pages/sir-adam-beck-ii.aspx



Gas Plant – Halton Hills GS

Courtesy of TransCanada

http://www.transcanada.com/docs/Key_Projects/HH_Fact_Sheet.pdf



Wind Turbines

Photo Courtesy of Market Intelligence




Solar Panels

Photo Courtesy of Market Intelligence




Bio-energy Plant – 211 MW Atikokan GS (wood pellets)


http://www.opg.com/generating-power/thermal/stations/atikokan-station/Pages/atikokan-station.aspx


StoragePumped Hydro-electric

CompressedAir

Storage

FlywheelStorage

Battery Storage


For the grid to operate in a stable and reliable manner the system operators must ensure:

Generation output and load demand are in balance.

Frequency is held steady (60 Hertz in North America).

Voltage is maintained within standard low and high limits.



Generation output and load demand is controlled in 4 ways:

Dispatch commands every 5 min. to dispatchablegenerators and loads.

An automatic generation controller (AGC) continuously raises and lowers plant output at one or more designated generators to achieve an exact load balance.

Manual voltage reductions (brown-outs) are used to reduce load demand during generation shortages.

Manual load shedding (localized black-outs) are used to reduce load demand during severe generation shortages.



Frequency is controlled in 4 ways:

Automatic frequency control originating from one authority in an interconnected region or grid island.

Automatic speed governor control at each station if grid frequency falls outside of a narrow band.

During power system emergencies, very low frequency excursions are terminated by automatic load shedding relays at various transformer stations.

Beyond very low and very high frequency limits, generating stations automatically disconnect to protect plant equipment - typically the grid will black out.



Voltage is controlled in 3 ways:

Adjusting the setpoint of the generator excitor voltage controller to add or remove reactive power from the power system.

Adjusting the setpoint of the voltage control equipment at transformer stations to add or remove reactive power from the power system.

The distribution level voltage can also be adjusted on individual buses by adjusting the voltage ratio at transformers.

Normal supply voltage at the distribution level is controlled within limits established by the CSA Group in CAN3-C235-83 Table 3.



Wholesale Electricity Market Prior to deregulation on May 1, 2002, Ontario’s electrical system was:

Centrally planned and procured by Ontario Hydro (HEPCO earlier)

Generation dispatched by variable cost order-of-merit including:

Consideration of startup/shutdown cost

Consideration of emissions (SOx, NOx primarily)

Ontario Hydro planned the supply mix to minimize electricity rates.

Inflexible technologies were assigned base-load duty.

Flexible technologies were assigned peak-load duty.

Intermittent generation was avoided - high capital & integration costs.

Producers were paid their total costs plus rate of return.


Deregulated wholesale market opened on May 1, 2002.

Wholesale market operates as an auction administered by the Independent Electricity System Operator (IESO).

Dispatchable generators submit “offers” to sell a quantity of energy at a min. price per MWh at a specific ramp rate.

Dispatchable loads submit “bids” to buy a quantity of energy at a max. price per MWh at a specific ramp rate.

IESO uses these offers and bids to match total supply with total demand (including non-dispatchable supply and demand).

IESO then sets the wholesale market clearing price that is paid to all generators and charged to all loads participating in the market.


Note: For a more complete description refer to the IESO “Introduction to Ontario’s Physical Markets” at

http://www.ieso.ca/Documents/training/IntroOntarioPhysicalMarkets.pdf



Positive

Market

Clearing

Price

Generator

Offers at

Marginal Cost

Load MW

High

Load

Demand

0

Price

$/MWh


For reliability purposes the market requires a number of ancillary services that are contracted by the IESO.

Their cost is added to the commodity cost by the IESO when it creates the final commodity price. In 2014 the cost of ancillary services was approx. $64 million dollars.

These ancillary services include:

Regulation services (for both load balance and frequency control)

Reactive support and voltage control services

Certified black start facilities

Reliability must run services (including operating reserves):


Note: For a more complete description refer to the IESO “Procurement Market” at

http://www.ieso.ca/Pages/Participate/Markets-and-Programs/Procurement-Market.aspx


Capacity is planned centrally by the IESO – type, location & qty.

Currently, capacity is contracted through a competitive bidding process for large facilities and through a Feed-In-Tariff (FIT) program for small renewable facilities.

Contracts include guaranteed payments for capacity (fixed costs).

IESO plans to establish a capacity auction market that will supply all short term and long term capacity in response to market price signals and planning direction from the IESO. The objective is to transfer a greater share of planning risk from the consumer to the generators.



Market prices can go negative !

If a generation facility has a high cost of shutdown, its marginal cost is negative. It would then offer a negative price so it does not get dispatched off.

However if load demand is very low, all other higher cost generators could have been dispatched off.

If load continues to fall, eventually the generator with negative offers will set the market clearing price.



Wind, solar and flexible nuclear generation have fixed contract prices so they have large negative marginal costs because they don’t get paid if they don’t get dispatched.

To prevent wind, solar and flexible nuclear plants from creating high cost shutdowns of inflexible plants, market rules set floor prices on their offers.

In 2016 the floor prices are:

- 3 $/MWh for 100% of solar & 90% of wind output

- 5 $/MWh for flexible nuclear output

- 15 $/MWh for the last 10% of wind output




Negative

Market

Clearing

Price

Generator

Offers at

Marginal Cost

Load MW

Low

Load

Demand

0

Price

$/MWh



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HOEP cents/kWh

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MW

Supply vs Demand

( Week of Sep 8 to 14, 2014 )

Wind Availability MW Hydro + Nuclear Availability MW

Total Demand incl Exports MW Ontario Demand MW

HOEP Price (cents/kWh)

“Curtailment” (waste) of

carbon-free electricity occurs

when available supply exceeds

Total Demand Line (Red Line)

“Export” of carbon-free

electricity occurs when available

supply exceeds Ontario Demand

Line (Green Line)

Electricity prices can become

negative (Ontario pays to export)

when carbon-free electricity

is being curtailed.



The wholesale market does not collect enough revenue to cover all fixed costs to operate generation.

To honour generation contracts with fixed prices a global adjustment is computed by the IESO to pay for:

Fixed generation costs not recovered in the wholesale market

Conservation costs

Other costs related to ensuring reliable efficient operation

The global adjustment is added to the market clearing price to arrive at a total commodity price.

transmission, distribution and other regulatory costs are added to the commodity price to arrive at a total retail price.


The wholesale market does not support grid scale storage !

During the day, a storage facility will offer its capacity as “generation” and drive the clearing price down.

During the night, a storage facility will bid its capacity as “demand” and drive the clearing price up.

The net effect of a large storage facility is to reduce the clearing price spread between day and night.

As the spread is reduced, there is insufficient revenue for storage to justify its construction and operating costs (incl. losses).

Grid scale storage must be an ancillary service for the grid.

Storage must be controlled by the grid operator to prevent gaming and excessive price volatility.




Negative

Market

Clearing

Price

Generator

Offers at

Marginal Cost

Load MW

Low

Load

Demand

0

Price

$/MWh

High

Load

Demand

Grid scale

storage will

drive the two

red lines

together and

eliminate the

revenue to

pay for

operation.


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