November 11, 2016 Patra, Greece

Transcription

1 Wholesale and Local Energy Market Design for Sustainable Development Dr. Alex Papalexopoulos, Ph.D. President & CEO, ECCO International, Inc. San Francisco, CA November 11, 2016 Patra, Greece

2 Outline Power Market Structures Current State of the Art Global Energy Trends Next Generation Power Market Challenges Next Generation Power Market Solutions The Evolution of a Centralized Energy System to a Distributed Energy System Distributed Energy Resources Multi-Use Applications Local Distribution Power Market (DSO) Development 2

3 The USA Markets: The Golden Standard Forward Market, Mitigation and Reliability Process Transmission & Ancillary Services Markets Real-Time Markets Financial Transmission Rights (FTRs) Capacity Markets Virtual Trading Markets 3

4 Successful Market Design Design Principle: Integrate Market Design and System Operations Provide good short-run operating incentives Support forward markets and long-run investments Design Framework: Bid-Based, Security Constrained Unit Commitment & Economic Dispatch Locational Marginal Prices (LMP) with granularity to match system operations Financial Transmission Rights (FTRs) 4

5 Successful Market Design Design Implementation: Pricing Evolution Better scarcity pricing to support resource adequacy Unit commitment and lumpy decisions with coordination, bid guarantees and uplift payments Design Challenge: Infrastructure Investment Hybrid models to accommodate both market-based and regulated transmission investments Beneficiary-pays principle to support integration with rest of the market design 5

6 Solution Method Mixed Integer Linear Programming (MILP) Separate power flows for each time interval Iterate with optimization engine that has a single power balance constraint and the active inequality constraints for each time interval Optimization Engine Schedules PTDFs Loss marginal rates Transmission Grid Power Power Power Flow Power Flow Power Flow Flow 6

7 Problem Size Time Horizon: 1 day, 24 increments Network model: 4,000 buses, 7,000 lines Number of Generators: 1,000 Number of Constraints: 1,000,000 Number of Controls: 100,000 Performance: 10 minutes!! 7

8 Old vs. New Global Trends Transforming the Power Industry Old New Load Growing Flat or falling Paradigm Centralized Decentralized Generation Dispatchable Intermittent Gas/Coal Coal Gas (Shale gas) Renewables Expensive Grid Parity Grid Power flow One-way Bi-directional Customers Consumers Prosumers Tariffs Volumetric Transactive Demand Inflexible Price-responsive Data Manageable Explosive Growth Electric Vehicles Rare Massive Penetration 8

9 Next Power Markets: Major Challenges Climate Change: Move to a low Carbon Economy Investment Issues Lack on proper market price signals to drive investments in new technologies CCS is problematic (only 14 CCS projects globally) Renewable Integration (Short Term & Long Term) Demand Response products & Regulatory Incentives Alignment Distributed Energy Resources such as Storage 9

10 Next Power Markets: Major Challenges Capacity Markets, Generation Adequacy, Security of Supply Changes in Electricity Demand (Increasing ratios of peak loads to average loads, Electric Vehicles, dynamic rates, shifting loads) Innovative technologies for increased reliability and efficiency (EVs, sensors, communications infrastructure, control equipment, intelligent management systems, etc.) Data Communications, Cyber security and Information Privacy Challenges (hacking of the IoTs, the cloud and the smartphones) 10

11 Renewable Integration Challenges California will need 13 GW ramping in 3 Hrs by

12 Potential Flexibility Challenges: Anatomy of a Duck 12

13 German Wholesale Prices Down 50% 13

14 # of Occurrences RTD Prices < Zero Negative Energy Prices Indicating Over- Generation Risk Start to Appear in the Middle of the Day Distribution of Negative Prices - March, April & May 2012, 2013 & 2014 Increase in real-time negative prices shifting to the middle of the day *Source: CAISO 14

15 Frequency of RT Intervals with Curtailed Self-Schedules Frequency of real-time intervals with curtailed self-schedules CAISO BAA April 2015 April

16 Over-generation is the Most Significant Integration Challenge Chart shows increasing overgeneration above 33% in CA Overgeneration is very high on some days under the 50% Large Solar case Fossil generation is reduced to minimum levels needed for reliability Renewable curtailment is a critical strategy to maintain reliability Reduces overgeneration Mitigates ramping events Example April Day 16

17 Next Generation Grid Potential Solutions Increase the footprint of the market Develop a price for Carbon the current EU ETS system is not working Develop new Power Market products (AS products) Change the Power Market architecture design a market that properly values flexibility and capacity Develop new Power Market products (AS products) Invest on flexible generation, like gas power plants Develop organized Local Energy Markets at the Distribution Level for Distributed Energy Resources Implement smart grid technologies and invest on the Internet of Things (IoT) in the power sector Clear power markets taking into account that we are moving into a ZERO marginal cost system 17

18 ISO Footprint Expansion Enhances reliability by improving system visibility Leverages geographical diversity of loads and resources in the market footprint More efficient dispatch (Reduced costs for balancing the system) Reduced flexibility reserves Real-time economic transfers in expanded pool of resources Reduced renewable energy curtailment 18

19 A Price for Carbon Mechanisms that put a price on carbon will change the environmental footprint of economic dispatch Carbon Tax This is the most direct means of solving this problem. The tax becomes part of the marginal cost for carbon emitting plants. This leads to a seamless integration with shortrun economic dispatch Cap and Trade This is an indirect approach of solving this problem. If the cap and trade system allows for banking and borrowing over any reasonably extended period, the current price of permits operates like a carbon tax. This also leads to a seamless integration with economic dispatch 19

20 A Price for Carbon The possible implementation details range from those consistent with efficient electricity markets to those that would destroy the necessary market fundamentals Good Solutions Carbon Tax and Cap-and-Trade Bad Solutions Self-Scheduling Deemed Cost-Adders Proliferating Subsidies 20

21 Will Market Design Survive the Implementation of Environmental Goals? Important Observation: It is much more effective to penalize carbon emissions than to subsidize everything else, e.g., Electric Vehicles Why subsidize Electric Vehicles (which we do) and not biking (which we do not)? Is the answer to subsidize all low carbon activities? It would prove astronomically expensive if we subsidize all low carbon activities Another problem is that subsidies are so uneven in their impact A study by the National Academy of Sciences has shown that the net effect of all the subsidies taken together was effectively zero! Monetizing carbon is the key to meshing environmental goals and electricity market design 21

22 Performance based Frequency Regulation Traditional approaches typically include a capacity payment (usually based on shadow price) an energy payment (for the net energy injected/withdrawn in/from the system) The new market design a capacity payment (usually based on shadow price) Mileage Payments adjusted for accuracy 22

23 Performance based Frequency Regulation We replace the net energy payments by a mileage payment for the ACE correction provided 23

24 Proposed Methodology Frequency regulation is procured in the Day-Ahead Market, which is formulated as a Mixed Integer Linear Programming (MILP) problem Security Constrained Unit Commitment model: Minimize Cost h Cost subject to System Requirements / Constraints Resource-Specific Constraints Ancillary Energy Commitment Services Compensation for Frequency Regulation: Capacity Payments Performance-Based Payments Cost 24

25 Proposed Methodology Capacity Payments: Reserve requirements constraints i i R R h Up i, h Down i, h Up, Req h R R h Down, Req h Shadow prices Capacity Payments Up R ih, Down Rih, Scheduled frequency regulation up/down for resource i, hour h Up, Req Rh Down, Req Rh Requirements for frequency regulation up/down for hour h 25

26 Proposed Methodology Performance-Based Payments: Actual Mileage Mileage Mileage Price Payments Performance $ MW-miles $ Score MW-miles Up/down movement of the resource following AGC dispatch signal Market-based or administratively set Different approaches; no well-established methodology 26

27 Other AS Market Products for Automatic Unit Response The objective is to ensure that sufficient units are on line to provide immediate response to frequency deviations without any ISO direct control Potentially this could consist of two products Inertia: To ensure that sufficient spinning mass is available to damp frequency excursions Frequency response: to ensure sufficient governor response is available to arrest frequency excursions prior to AGC response 27

28 Large Negative Bids & Elimination of Monthly Netting of Deviations It is critical to reduce the energy bid floor to a very negative number (some US markets allow bids up to $-1000/MWh) Inflexible resources will not incur the full cost of their inflexibility due to the fact that the bid floors are not low enough This will provide RES providers to participate in the power market, provide economic bids, especially decremental bids and invest in increased dispatch capability Allows market prices to go lower, incenting RES to submit decremental bids Currently in some markets the deviations of RES resources are netted monthly to reduce the financial exposure of RES developers It is critical to eliminate netting of deviations and treat RES resources like any other conventional resource bidding into the power market 28

29 15-Minute Power Market A critical market to allow RES and other conventional resources 15 minute schedule updates The 15-minute market allows Market Participants scheduling options: Self-schedule hourly block (equal MW in all 4 intervals) Self-schedule using RES forecast, by interval Economic bid for hourly block Economic bid for hourly block, with single intra-hour economic schedule change Economic bid with participation in the 15-minute market Self-schedules can change in the 15-minute market, e.g., due to physical or operational characteristics, such as forecasted RES output, and reloads in other BAAs 29

30 New Flexible AS Products (Flexi- Ramp AS) CAISO Secures capacity in the day-ahead market, fifteen-minute market and real-time dispatch Compensates resources whose dispatch is held back in a financially binding interval to meet future ramping needs Allocates costs to self-schedule movement and uninstructed imbalance energy who drive requirement Must procure ramp capacity between intervals Traditional ancillary services are not sufficient in some markets at meeting operational needs for flexibility 30

31 Real Time Market Horizon Regulation deals with uncertainties that take place after the RTD execution T 7.5' RTED T 2.5' Dispatch Prices 1 2 T 10' T 5' T T+5' T+10' 31

32 New Flexible AS Product The Flexible AS product reserves capacity for ramping between intervals Flexible ramping capacity product improve the dispatch flexibility in RTD, while all other ASs reduce the RTD dispatch flexibility because they lock in flexibility in the AS awards The ISO should award flexible ramping capacity to dispatchable resources in RTD (5-minute dispatch) that are able to offer energy into the real-time market The flexible ramping capacity product price will be based on marginal opportunity cost No bids will be submitted in this market product 32

33 Long Term Flexibility Capacity Market Create a separate category of flexible capacity to be procured for the long-term needs of the system In California we have now three types of Capacity: System, Local and Flexible capacity Flexible capacity can be procured in centralized capacity auctions or in the Bilateral Market Requirements are established via simulation studies using historical data or sequential Monte-Carlo methods Ramp policies or reserve policies can be incorporated in these methods 33

34 Distributed Energy Resources Distributed Energy Resources (DER) Solar Photovoltaic (PV) and wind Small, gas-fueled generators Energy storage systems Combined Heat & Power Microgrid systems Demand Response 34

35 Impact of DERs Numerous DERs will be counting for resource adequacy and participating in ISO markets and dispatch Numerous small resources (< 0.5 MW) will present challenges for metering, modeling and real-time operation Combinations of different DER types form a virtual power plant that participates as a single resource Increasing share of end-use energy is produced locally without relying on the ISO grid (DG) and in the near future, without having to rely on the distribution system (rooftop PV plus storage) DERs are more diverse & variable and the resulting flows on the distribution system are complex & bi-directional creating various operational and market problems; also they create opportunities 35

36 Market Design Changes Due to DERs ISOs are developing Non-Generating Resource (NGR) models for Demand Response, Storage and other DERs Continuing to evaluate market enhancements to remove barriers to Demand Response and ESR participation On-going market enhancements to enable storage to participate in regulation markets Enabling market participation of DER resources through aggregation Develop aggregation market rules for dual use, metering, telemetry, registration, etc.) 36

37 Non-Generator Resource (NGR) Model NGR is a generic resource model where a resource can produce or consume energy within a continuous operating range that can pan both generation and demand This model can be used for demand responses, when the operating range spans demand only, or for an ESR than can operate continuously in charging and discharging modes Pmin Pmax Charging Discharging 37

38 Non-Generator Resource (NGR) Model Improve model to include transition limits, opportunity costs, operating characteristics, etc. Allow NGR modeled resources to qualify for use-limited status to be able to submit start-up, minimum load costs and minimum MWH run time The resource owner should manage limitations related to charge and discharge, depth and frequency of cycling, etc. More improvements are on the way as more experience is gained from operating NGR assets 38

39 Revenue Opportunities: Flatten the Belly of the Duck Curve DR/ESR can be very effective in mitigating this problem by charging during morning hours and discharging at sunset, effectively shifting the net demand by elevating the belly of the duck and reducing the evening onramp by shaving the early night peak 39

40 Fast Regulation Response from Battery Resource (ERCOT Case Study) The Department of Energy performed a case study of the Notrees battery storage resource located in ERCOT. The study demonstrated that battery devices can be very effective in providing fast regulation, and other fast-responding ancillary services 40

41 Non-Generator Resource (NGR) Model Improve model to include transition limits, opportunity costs, operating characteristics, etc. Allow NGR modeled resources to qualify for use-limited status to be able to submit start-up, minimum load costs and minimum MWH run time The resource owner should manage limitations related to charge and discharge, depth and frequency of cycling, etc. More improvements are on the way as more experience is gained from operating NGR assets 41

42 Non-Generator Resource (NGR) Model Improve model to include transition limits, opportunity costs, operating characteristics, etc. Allow NGR modeled resources to qualify for use-limited status to be able to submit start-up, minimum load costs and minimum MWH run time The resource owner should manage limitations related to charge and discharge, depth and frequency of cycling, etc. More improvements are on the way as more experience is gained from operating NGR assets 42

43 Non-Generator Resource (NGR) Model Demand Response is coming back strong; new technologies are emerging that are not coercive and top-down; they are bottom-up, accurate, non-intrusive, precise and fast The approach we advocate is based on distributed-computing based stochastic control It identifies flexible demand on a device level, aggregates on a system level and re-distributes along with the demand target Not all DR can be bid in the wholesale markets 43

44 Energy Demand Cloud Energy Demand Cloud Price Sensitive Reliability Signaled Special Programs Distributed Generation Renewable Choice Energy Storage Electric Vehicles Affinity Programs Demand Monitoring & Feedback over Internet Broadband/Cellular Individual Wireless Controllers Home/Facility Management Systems Smart Buildings, Commercial & Industrial Electric Vehicle Chargers Smart Appliances Distributed Energy & Storage TODAY FUTURE DR client is ~10kb virtually any embedded device can run it 44

45 Home Energy Management Will Google/Nest be able to monetize HEM? The IoTs has breathed new life in this industry The HEM will reach an annual value of $2.2 Billion in the US by 2022 Advancements in mobile technologies, such as more responsive apps will allow customers to control their home devices from anywhere 45

46 DER Aggregators and Virtual Power Plants Aggregators hide some of this complexity via VPP abstraction Wholesale VPP Resource qualification VPP Retail DER Energy Market $/kw, hrs/day Calls when needed Block bid/offer Delivers response Meter data DER-VPP Aggregator Paid for performance 46

47 DER Multi-Use Applications: Types of Services Time of Use Bill Management Demand Charge Reduction Back-up Power Increased solar self-consumption Located Behind the Retail Meter (BTM) Energy Regulation Spin/Non-Spin Reserve Resource Adequacy Flexible Capacity Flexible Ramping Located IFOM or BTM Distribution Asset Deferral Reactive Supply Voltage Control Frequency Response Islanding Located BTM or IFOM 47

48 Multi-Use Application Customer Demand Optimization Demand Charge Reduction Battery Charge from Solar 48

49 Multi-Use Application Customer + Wholesale DR Demand Charge Reduction Add Text Here High LMP PDR Dispatch Battery Charge from Solar 49

50 Multi-Use Application Customer + Wholesale DR + Distribution Service Demand Charge Reduction High LMP PDR Dispatch Distribution Service Congestion Relief Battery Charge from Solar 50

51 Multi-Use Application Customer + Distribution Service + Wholesale AS Regulation Up Distribution Service Congestion Relief Demand Charge Reduction Regulation Down 51

52 Integrated Distributed Electricity System 52

53 Basic Structure SCE Case All load both regular load and PEV load receives electricity behind one point of interconnection to the distribution system Retail load is billed at a single master meter PEVs have a WDAT interconnection behind an ISO revenue-grade meter to distinguish PEV demand and energy from the remainder of the load, which remains on an otherwise applicable tariff Master Meter Measures all retail load CAISO Meter Used for CAISO set Adjusts retail bill Utility represents PEV load Facilitates reg instructions between the CAISO and PEV 53

54 Markets & Power System Operations DR, PV, PEV aggregation and Wind/Solar integration Demand Response DSO/Aggregator Dispatch Instructions & Prices Evolutionary Market Design ISO Control Center Wind/Solar Generators 54

55 Local Market Development Principles ECCO is in the process of developing the first DSO market of its kind in England We plan to follow the same principles we adopted in implementing wholesale markets We ll overlay the economic model (probably MIP where offers and bids are housed) on a distribution power flow Offers and bids will be submitted by DER aggregators and the market will clear through an iteration process between the economic model and the distribution power flow Distribution LMPs will be produced along the feeder these reference prices will be deployed to allow trading for transactive energy, DSO and ISO markets ISO LMP prices will also be used as an input to the market clearing 55

56 Local Market Solution Method Mixed Integer Linear Programming (MILP) Separate distribution power flows for each time interval Iterate with optimization engine that has a single power balance constraint and the active inequality constraints for each time interval Optimization Engine Schedules PTDFs Loss marginal rates Distribution Power Power Flow Power Flow Power Flow Flow 56

57 Concluding Remarks The market impact on transitioning to a low carbon economy has not been substantial The transition will require trillion of dollars, not billions Putting a price on carbon is fundamental to maintaining energy markets (the price should be about 100 $/ton); anything lower cannot work Oil consumption will continue to increase; peak in 2030 Gas is the transition fuel; we need to support market structure that value flexibility The development of organized Local Energy markets (DSOs) is essential Environmental goals, depending how they are implemented, may destroy energy markets, i.e., we may be moving back to re-regulation 57