Capacity Market Technical Design Stakeholder Update Session .Capacity Market Technical Design...

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Transcript of Capacity Market Technical Design Stakeholder Update Session .Capacity Market Technical Design...

  • Capacity Market Technical Design Stakeholder Update Session Straw Alberta Market (SAM 3.0)

    Dec. 11, 2017 Public

  • Session outline

    1

    Time Agenda Item

    1:30 1:35 p.m. Welcome and session overview: Matt Gray, AESO

    1:35 1:40 p.m. Opening remarks: Miranda Keating Erickson, AESO

    1:40 2:40 p.m.

    Review of SAM 3.0 (Q&A to follow each presenter)

    - Adequacy & Demand Curve Determination: Marcy Cochlan, TransAlta

    - Eligibility: Janene Taylor, TransCanada

    - Market Mechanics: Kris Aksomitis, Power Advisory, on behalf of Cogen Working Group

    2:40 2:55 p.m. Break

    2:55 3:45 p.m.

    Review of SAM 3.0 (continued)

    - Procurement and Hedging: Richard Penn, IPCAA

    - Energy & Ancillary Services: Matt Davis, ATCO

    3:45 4 p.m. Next steps for market design and engagement: Kevin Dawson, AESO

    Public

  • Development of the comprehensive market design (CMD)

    SAM 3.0 working group (WG) recommendations will be considered in the development of the CMD by the AESO

    2

    SAM 2.0 SAM 3.0 AESO CMD

    A starting point on key design elements for collaborative discussions

    WG initial examination of design questions

    Industry feedback used as input into SAM 3.0

    SAM 3.0 contains WG provisional recommendations

    May 2017

    SAM 1.0

    June Aug. 2017 Sept. Dec. 2017

    First draft of CMD to be shared with consolidated working groups

    Jan 2018

    Public

  • Development of provisional recommendations Exploration of a key design element (KDE)

    3

    Introduction of KDE

    KDE and related questions introduced for examination by WG members

    Poll of WG members conducted to establish directional alignment, initial WG member positions and interest

    Examination of KDE

    Information and analysis about KDE presented to/by WG members

    Members review and discuss alternatives for designing KDE

    When majority of WG members believe sufficient examination has occurred, draft recommendation presented for review and voting by WG members

    Recommendation for KDE

    Vote conducted and result documented

    Affirming and dissenting votes recorded, along with reasons for dissent

    Recommendations and context of WG discussions that produced them reported in SAM 3.0

    Public

    SAM 3.0 WG provisional recommendations are understood as advice and will be considered by AESO in developing the draft comprehensive market design

  • Resource adequacy requirement How much capacity needs to be procured?

    4 Public

    SAM 3.0 provisional recommendations

    The capacity market will have an annual reliability requirement and delivery period instead of a seasonal requirement.

    A set of demand curve principles, which provide guidance on balancing resource adequacy, cost and volatility in the demand curve, were developed with the WG.

    A set of methodology and inputs for resource adequacy modelling have been reviewed and approach accepted by the workgroup; Continued transparency requested in the ongoing consultation process.

    Working Group: Adequacy & Demand Curve Determination

    SAM 3.0 discussion context

    Three candidate curves were produced for the working group. General alignment on:

    Gross-CONE calculation approach. Simple-cycle technology best fits the reference technology criteria. EAS revenues for net-CONE calculation developed with a forecast approach.

  • Eligibility Who can provide capacity?

    5

    SAM 3.0 provisional recommendations

    Demand resource participation: demand response resources and price responsive load should be eligible to participate in the capacity market.

    Resources available over interties should be eligible to participate. Storage resources should be eligible to participate.

    Public

    Working Group: Eligibility & Capacity Value Determination

    SAM 3.0 discussion context

    Work group requires more information to determine how energy efficiency resources can participate.

  • Eligibility How much can they provide?

    6

    SAM 3.0 provisional recommendations

    Minimum resource size: Resources 1 MW and greater should be eligible to participate in the capacity market.

    Aggregation: Resources should be able to aggregate when participating in the capacity market.

    Unforced capacity (UCAP): UCAP should be used to represent capacity when determining capacity values.

    Public

    Working Group: Eligibility & Capacity Value Determination

    SAM 3.0 discussion context

    AESO should be the UCAP calculating agent, but will require additional information to do so.

  • Performance assessments How do we know that capacity has been provided?

    7 Public

    SAM 3.0 provisional recommendations

    No recommendation.

    Working Group: Eligibility & Capacity Value Determination

    SAM 3.0 discussion context

    WG reached directional alignment that additional performance testing periods be considered to mitigate the concerns associated with performance measurement occurring only during EEA events.

    A majority of WG members agreed: There is a need for a penalty framework. Increasing the number of performance measurement events will recognize

    the uniqueness of the Alberta market and make penalties more manageable. Non-EEA event performance should be measured on resource availability

    (where availability means that the resource is available for energy market dispatch).

  • Procurement timing and frequency How will the capacity market operate? When and how often will capacity be purchased?

    8

    SAM 3.0 provisional recommendations

    Auction type: The auction should be a single-round, sealed-bid auction. Forward period: The auction should be held three years prior to the obligation

    period. Rebalancing auctions: There should be two rebalancing auctions.

    Public

    Working Group: Market Mechanics

  • Term How long will the capacity delivery period be?

    9 Public

    SAM 3.0 provisional recommendations

    The obligation period will be one year (non-seasonal).

    Working Group: Market Mechanics

    SAM 3.0 discussion context

    Obligation period: WG was largely split between a one-year term and a seven-year term for new resources.

    Asset substitution: WG agreed asset substitution is an important method for resources to manage risk; Supported a flexibility approach to ex ante asset substitution.

  • Term How should out-of-market power and out-of-market payments be managed?

    10 Public

    SAM 3.0 provisional recommendations

    No recommendation.

    Working Group: Market Mechanics

    SAM 3.0 discussion context

    Market power Mitigation should be enforced ex ante. Resource suppliers that are not pivotal should not have any mitigation

    applied to their capacity market offers. Working group considered three approaches for pivotal supplier mitigation.

    Out-of-market payments Working group agreed offer mitigation for resources that receive out-of-

    market payments should be applied on an ex ante basis; there was no agreement on definition of an out-of-market payment.

  • Obligation to procure Who will buy the capacity? Includes question of cogen treatment/self-supply

    11 Public

    SAM 3.0 provisional recommendations AESO should hold the obligation to procure capacity on behalf of load. AESO should operate an organized market, with a centralized auction

    mechanism and standard product definition, where all capacity is exchanged through a centralized auction with a simple, transparent price.

    Working Group: Procurement & Hedging

    SAM 3.0 discussion context

    This aligns with Alberta Energy policy statement (September),

  • Obligation to procure Who will buy the capacity? Includes question of cogen treatment/self-supply

    12 Public

    SAM 3.0 provisional recommendations Cost should be allocated to self-supply net load according to the cost allocation

    method developed. Self-suppliers will not be assessed a load obligation, provided the cost

    allocation methodology addresses potential fairness issues that may result from self-suppliers failing to adequately self-supply during performance events.

    Working Group: Procurement & Hedging

    SAM 3.0 discussion context A load obligation is a requirement placed on load to not consume beyond a

    certain level, otherwise be subject to curtailment, penalties, or additional costs.

  • Obligation to procure Who will buy the capacity? Includes question of cogen treatment/self-supply

    13 Public

    SAM 3.0 provisional recommendations

    Physical bilateral procurement of capacity is not permitted. However, a site may choose to self-supply capacity provided they meet the

    following certain requirements.

    Working Group: Procurement & Hedging

    SAM 3.0 discussion context Physical bilateral procurement of capacity is not to be confused with a

    contract-for-differences (CfD) for capacity, but rather a contractual arrangement between a load and a specific capacity resource, utilizing the transmission or distribution system for physical delivery of all or a portion of the loads capacity needs.

    Majority of the WG felt the UCAP for self-supply sites should ideally be determined based on effective load carrying capability. Concerns with the complexity and lack of transparency with the effective load

    carrying capability approach. Further e