Energy Imbalance Markets

A Brief Introduction to:Energy Imbalance MarketsJune 6, 2013

Energy Imbalance Markets• An “Energy Imbalance Market” (EIM) automates thebilateral transaction process using bids– Using computers, the system is dispatched every 5 minutes usingthe lowest bids possible to serve the load in a safe and securemanor• Process is called “Security Constrained Economic Dispatch” (SCED)• The term EIM is somewhat of a misnomer– While an EIM is serving imbalances or the changes from minute tominute, the SCED is doing a full optimal dispatch of the offeredresources– Typically EIM term indicates that it is focused on the real-timeoperating hour3

Energy Imbalance Markets• Other systems operate markets that perform a SCED aday-ahead and hours in advance of the real-timeoperating hour– Sometimes to a Day 1 (pre-schedule day) and Day 2 (operatingday)• In Day 1 markets, decisions are made on which units orplants should operate the next day• In Day 2 markets, decisions on which units to start or stopare more limited• In an EIM, no decisions are made to start or stop units4

NWPP Investigation• Started in 2012• Funded by 20+ utilities• Prior market studies suggested potential savings– WECC EIM– PUC EIM• Investigate market issues unique to the Northwest PowerPool footprint– Discussed many options and alternatives that collapsed to:• Energy Imbalance Market• Alternative bi-lateral enhancements5

NWPP Energy Imbalance Market Features• Real-time – only the operating hour• No unit commitment – day-ahead or hour-ahead• Voluntary bids offered to market centered aroundplanned operation• Day-ahead and hour-ahead bilateral transactions used tohedge market risk• Market price and dispatch recalculated every 5 minutes• Why– Provides efficient dispatch– Best alternative for future– Exhausted effective bilateral improvements6

“Energy Imbalance”• One of the results of the SCED are prices required to servethe next MW of load• These prices can be used to settle imbalances• For wholesale transactions, settlement of an energyimbalance is provided under the Open AccessTransmission Tariff– Settlements currently priced at the “Mid-C” index– In a market, imbalances settled at the nodal “Location ImbalancePrice” or LIP• For retail load, energy imbalance is a cost included in thecost of service7

How does voluntary bidding work?Danskin2Danskin1BrownleeLangleyGBridgerWithout EIMWest ValleyGadsbyYaleLakesideBridgerColstripChehalisKlamathFallsCouleeBoardmanCentraliaAssumes:• Market clearing price settlement, not as bid•Transmission not constrainedWith EIMWest ValleyDanskin2ChehalisGadsbyDanskin1YaleBrownleeLangleyGKlamathFallsLakesideCouleeBoardmanBridgerColstrip8

NWPP Simulation Studies• NWPP annual thermal cost - $3,200,000,000• Hydro value – 255,000,000 MWh– At $30/MWh, $ 7,650,000,000– Total Cost/Value $10,850,000,000• Market efficiency gain - $40 to $90M– (1 to 3%) – Based on thermal costs– (0.37 to 0.83%) – Based on thermal/hydro value9

Idaho Power EIM Benefits• Simulations suggest that Idaho Power will purchase aboutthe same amount of energy as it sells• Market able to efficiently net the diversity of wind andload variations• Market able to provide access to capacity to accommodatewind variations• Better imbalance price signal than current index10

Concerns• Governance, Governance, Governance– With any proposal governance is the major issue– PacifiCorp MOU with CAISO• Can a single entity operate a west-wide market?• Market Design– This has been done before but significant decisions still need tobe made– Each region has its own unique characteristics• Footprint / critical mass ?– Without it, costs will exceed benefits11

Questions ?12