Download - Congestion Management Settlement Credits

Congestion Management Settlement Credits

December, 2002

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Market Design Principles

• The price of energy at each time and place should reflect the marginal cost of producing or not consuming one more unit of energy (at that time and place)

• Dispatchable market participants should be compensated for the effects of constraints

33

Congestion

Occurs when physical capability of the transmission system cannot meet market

requirements

Operating Profit

55

Operating Profit

• Operating Profit is the difference between operating cost and revenue

• Market Rules written assuming participants bid and offer based on marginal benefit/cost

• Marginal Cost - Cost of producing next MW• Marginal Benefit - Benefit of consuming next

MW

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OP = Revenue - Cost

Quantity (MW)Quantity (MW)

MCP = 20MCP = 20

Price ($/MWh)Price ($/MWh)

MQSI=60MQSI=60100100

1515

1010

55

2525

3030

808060604040202000

OP+OP+OP+OP+

OP+OP+

77

Skill Check

88

Skill Check• Generator A offer:

• 0-20 MW $15• 21-30 MW $25• 31 - 40 MW $100

Dispatched to 30 MW

• Load B bid:• 0-10 MW $1,000• 11-20 MW $500• 21-30 MW $20

Dispatched to 20 MW

If MCP is $30, what is the OP for A and B?

Congestion Management Settlement Credits

1010

Congestion Management Settlement Credit

• CMSC payments are based on the difference between the Operating Profit that would result from the Market Schedule and Operating Profit resulting from the Dispatch Instruction

OP (MQSI) - OP (DQSI)Where MQSI = Market Quantity Scheduled for Injection

DQSI = Dispatch Quantity Scheduled for Injection

1111

Market Schedule

Requirement is Requirement is 190 MW190 MW• Gen 1: 100 MWGen 1: 100 MW• Gen 2: 90 MWGen 2: 90 MW• MCP $20MCP $20• GEN 3: does not runGEN 3: does not run

Region 2Region 2Region 1Region 1

nonotransmissiontransmission

line limitline limit

Generator 3Generator 3

100 MW100 MW$25$25

LoadLoad

190 MW190 MW


100 MW100 MW$15$15


100 MW100 MW$20$20

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Transmission Congestion

Requirement is Requirement is 190 MW190 MW• Gen 1: 100 MWGen 1: 100 MW• Gen 2: 50 MWGen 2: 50 MW• Gen 3: 40 MWGen 3: 40 MW• MCP $20MCP $20


100 MW100 MW$15$15


100 MW100 MW$20$20


100 MW100 MW$25$25

LoadLoad

190 MW190 MW


150 MW150 MWtransmissiontransmission


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CMSCFor Generator 2 in this case:MQSI = 90 Offer = $20DQSI = 50 MCP = $20

CMSC = OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= (20-20) x90 - (20-20) x 50= 0 - 0= $0

1414

CMSCFor Generator 3 in this case:MQSI = 0 Offer = $25DQSI = 40 MCP = $20

CMSC = OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= (20-25) x 0 - (20-25) x 40= 0 - (-$200)= $200

1515

Gen 1- Constrained Off



100 MW100 MW$25$25

LoadLoad

190 MW190 MW




95 MW limit95 MW limitGenerator 1Generator 1

100 MW100 MW$15$15


100 MW100 MW$20$20

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Constrained Off PaymentGenerator 1

• Market Schedule: 100 MW• Dispatch : 95 MW• Offer: $15 /MWh• MCP: $20 /MWh

CMSC= OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI = (20-15) x 100 - (20-15) x 95 = $25

1717

Gen 2 - Constrained Off



100 MW100 MW$25$25

LoadLoad

190 MW190 MW




9595MWMW

100100MWMW


100 MW100 MW$15$15


100 MW100 MW$20$20

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Constrained Off PaymentGenerator 2

• Market Schedule: 90 MW• Dispatch : 55 MW• Offer: $20 /MWh• MCP: $20 /MWh

CMSC= OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= (20-20) x 90 - (20-20) x 55 = $0

1919

Constrained On PaymentGenerator 3

• Market Schedule: 0• Dispatch : 40 MW• Offer: $25• MCP: $20 /MWh

CMSC= OP(MQSI) - OP(DQSI) = (MCP-Offer) x MQSI - (MCP-Offer) x DQSI

= ($20-$25) x 0 - ($20-$25) x 40 MW = $200

Constraint Payments

When Actual Quantity Different than Dispatch Quantity

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Gen 1- Constrained Off



100 MW100 MW$25$25

LoadLoad

190 MW190 MW




95 MW limit95 MW limitGenerator 1Generator 1

100 MW100 MW$15$15


100 MW100 MW$20$20

Actually produces 50 MW

2222

Constraint Payments

MQSI = 0 MW, DQSI=40 MW, AQEI =50MWMCP = $20 Offer = $25

CMSC = OP (MQSI) - MAX [OP (DQSI), OP (AQEI)]= (20-25) x 0 - MAX [(20-25) x 40, (20-25) x 50]= $0 - MAX [$-200, $-250]= $-(-200)= $200

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CMSC for a Dispatchable Load

• Load may be dispatched off or on• Any time constrained and unconstrained are

different, possibility exists for CMSC

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CMSC for a Dispatchable LoadE.G.• Load A bids for 100 MW at $2,000• Market Clearing Price = $100• Load A is dispatched to only 75 MW• At a bid price of $2,000 Load A will be scheduled by the unconstrained algorithm for all 100

MW

2525

CMSC for a Dispatchable Load• Bid = $2,000 MCP = $100• MQSI = 100 MW, DQSI = 75 MW• CMSC = OP(MQSI) - OP(DQSI)

= ($2,000 - $100) x 100 - ($2,000 - $100) x 75)

= $1900 x 100 - $1900 x 75 = $47,500

• The lost Operating Profit is $47,500

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Negative CMSC

• CMSC payments bring the participant back to the market schedule operating profit

• Generally CMSC payments will be a top-up to restore operating profit

• Sometimes the schedule would lead to lower profit than dispatch instructions

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CMSC

• CMSC payments bring the participant back to the market schedule operating profit

• While CMSC can be negative, it is more often a payment to participants

• The cost of CMSC is recovered from loads based on their activity in the market