Joint NEPOOL Markets and Reliability Committees Meeting December 6-8, 2022, Westborough, MA

 
JOINT NEPOOL MARKETS AND RELIABILITY COMMITTEES MEETING
DECEMBER 6-8, 2022 | WESTBOROUGH, MA
 
Feng Zhao
 
TECHNICAL MANAGER
FZHAO@ISO-NE.COM
 
Continued discussion on conceptual design
 
Resource Capacity Accreditation
in the Forward Capacity Market
 
Steven Otto
 
ECONOMIST
SOTTO@ISO-NE.COM
 
 
2
 
WMPP ID:
157
 
Proposed Effective Date: FCA 19
 
The Resource Capacity Accreditation (RCA) project proposes improvements to ISO-NE’s
accreditation processes in the Forward Capacity Market (FCM) to further support a
reliable, clean-energy transition by implementing methodologies that will more
appropriately accredit resource contributions to resource adequacy as the resource mix
transforms
The ISO has made a commitment to file proposed improvements in time for FCA 19
The goal of this presentation is to summarize the MRI design discussed over the last six
months and connect it with the primary benefits and objectives of the RCA initiative:
Accredit all resources based on their marginal reliability contributions to improve capacity
substitutability
Through the improved accreditation, enable the ISO to more cost-effectively procure capacity from
resources to meet the region’s reliability objectives
 
Resource Capacity Accreditation in the Forward Capacity
Market
 
 
3
 
WMPP ID:
157
 
Proposed Effective Date: FCA 19
 
Outline of today’s discussion
:
Review of MRI design framework (slides 5-24)
Conforming changes to CNRC (slides 26-30)
Conforming changes to auction mechanic changes (slide 32)
Summary of RCA Improvements to Accreditation (slides 34-54)
Improvements to Non-Intermittent Non-storage Accreditation (slides 37-41)
Improvements to Storage Accreditation (slides 43-45)
Improvements to Intermittent Accreditation (slides 47-50)
Summary and Key Takeaways (slides 51-54)
Stakeholder Schedule (slides 56-60)
 
 
Resource Capacity Accreditation in the Forward Capacity
Market
 
*
 
Numerical examples are provided in appendices to illustrate diversity benefits between storage
and intermittent, and show the QMRIC calculation for a resource with 0.1 MW FCA QC
 
MRI DESIGN FRAMEWORK
 
Key concepts and processes
 
4
 
5
 
Key Concepts
 
Marginal Reliability Impact (MRI)
, in 
hours/year
, reflects a resource’s
expected availability when its capacity is needed for system reliability in
RAA simulations
MRI is calculated as the 
∆EUE/∆QC, where EUE is Expected Unserved Energy
A resource’s new accredited capacity, 
Qualified MRI Capacity (QMRIC)
,
reflects its expected output when its capacity is needed for system
reliability in RAA simulations
QMRIC is calculated as 
QC 
 
rMRI
QC reflects the resource’s measured output from the qualification process
rMRI reflects a resource’s relative MRI
 
to perfect capacity: rMRI = MRI/MRI
perfect
Introduced
July MC/RC Meeting
 
6
 
Key Concepts, cont’d
 
The market clearing yields two sets of obligation quantities
The 
new Capacity Supply Obligation (CSO)
 or cleared QMRIC, and
Effective CSO (ECSO)
, the physical obligation associated with the CSO
 
Introduced
July MC/RC Meeting
 
*Key concepts are highlighted in 
blue
 
7
 
Key Concepts, cont’d
 
Under RCA, the current system and zonal demand curves
(delineating the marginal reliability benefits of total system
and zonal QC levels) will be converted to 
QMRIC demand
curves using rMRI
z
rMRI
z
 represents the average rMRI of the system or zone, and is
calculated as
Introduced
September MC/RC Meeting
 
8
 
Key
 
Processes
 
Resource Adequacy Assessment (RAA) is a probabilistic
simulation process for calculating ICR and demand curves
The process of using RAA to calculate MRIs and QMRICs is new
RAA load and resource models are enhanced
Introduced
July MC/RC Meeting
 
*Key processes are highlighted in 
blue
 
9
 
Connecting Design Elements: Illustrative Digram
 
*Key concepts/processes are highlighted in 
blue
“Substitutable”
 
10
 
MRI Design Benefits
 
From the previous diagram, it can be seen that capacity offers
and demands are all based on QMRIC quantities under RCA
QMRICs of demand and different resources are 
substitutable
,
and thus RCA will achieve 
more efficient market outcomes
More detailed discussion of the benefits are provided by resource
types in the later part of this presentation
Introduced
July MC/RC Meeting
 
11
 
MRI Design
 
Framework:
 
Major Changes
 
RCA introduces a 
new MRI-based capacity accreditation 
called QMRIC
Compared to QC, QMRIC captures the reliability impact of a resource’s other parameters
such as EFORd and the reliability interaction among all resources and load
The 
new capacity market product will be based on 
QMRIC instead of FCA QC
Offers and bids are based on QMRIC
Clearing prices are based on CSO
RCA will 
separate market quantities (QMRIC and CSO) from physical
quantities (QC and ECSO)
The separation is needed as different applications may require different quantities as
input
MRIs are calculated using the existing RAA process
RAA resource and load models are enhanced for more accurate MRIs
Introduced
July MC/RC Meeting
 
12
 
Conforming Changes
 
The concepts and processes below require 
conforming
changes 
under RCA
Key FCM parameters such as Net CONE and capacity demand curves
need to be translated from QC space to QMRIC space
Applications that use current CSOs need to be separated into
applications that use CSOs and those that use ECSOs, depending on
the need of each application
Composite offers are no longer needed as QMRIC captures both
summer and winter reliability contribution of a resource
Introduced
September-November
MC/RC Meetings
 
MRI DESIGN: CAPACITY QUANTITIES
 
13
 
14
 
Capacity Quantities that Matter in RCA
 
Only two sets of capacity quantities matter 
in RCA:
QMRIC and CSO (cleared portion of QMRIC)
QC and ECSO (“cleared” portion of QC)
These quantities define accreditation values and obligations
Other quantities such as nameplate capacity
 
may be used as
an intermediate step of calculating intermittent resource
MRIs, but their use is not required
 
15
 
QC and ECSO
 
QC is a 
physical
 
quantity
 that represents a resource’s
measured
 output during pre-selected hours
QC is determined by the 
resource’s own characteristics
Seasonal
 
QCs are defined in the current design
ECSO is a 
physical obligation
 and represents the portion of QC
associated with the cleared portion of QMRIC:
 
 
 
Seasonal
 ECSOs are introduced under RCA
Introduced
July - November MC/RC
Meetings
 
“Cleared portion”
expressed as a ratio
 
16
 
QMRIC and CSO
 
QMRIC is a 
market
 
quantity
 that represents a resource’s 
probability-
weighted
 
outputs
 during 
simulated 
RAA reliability hours
QMRIC is determined by both the 
resource’s own characteristics, other
resources 
and
 load
As a 
market quantity
, resource QMRICs can be uniformly increased or
decreased by the same percentage without affecting market outcome (i.e.,
only relative value matters)
QMRIC is an annual value for the annual market construct
CSO is a 
market obligation
 and represents the cleared portion of
QMRIC
CSO is an annual value
Introduced
July - November MC/RC
Meetings
 
17
 
Comparison of QC (ECSO) and QMRIC (CSO)
 
QMRIC does not replace QC – both will be kept under RCA
 
18
 
Proposed Use of
 
ECSO and CSO
 
19
 
QC is Needed Under RCA
 
Currently, QC is an 
audited measure 
that is available for the ISO to
track year-to-year performance or ratings of 
all resources
Applications such as reliability review require physical quantities
such as QC and ECSO (instead of QMRIC) to be used as feasible unit
output
QC is a defined capacity concept in current market rules
Additional concepts such as nameplate capacity bring no obvious benefits
to the capacity market
Seasonal QCs rather than other quantities allow a more accurate
representation of resource performance characteristics in an annual
capacity market construct
 
 
MRI DESIGN: SEASONALITY IN THE ANNUAL
MARKET
 
20
 
21
 
Seasonal QCs in RAA
 
RAA allows seasonal input parameters in calculating 
annual
reliability indices
Seasonal QCs 
for thermal resources and 
hourly output
profiles 
for intermittent resources are proposed as RAA model
enhancements
This allows more accurate calculation of a resource’s QMRIC, which
reflects its aggregated reliability contribution from all seasons (shown
in the following slide)
Introduced
September - October RC
Meetings
 
* Note there is no conflict of using seasonal QCs in evaluating annual QMRIC!
 
22
 
QMRIC Captures Aggregated Reliability Contribution
 
QMRIC as a resource’s 
annual reliability contribution 
is calculated as
 
MRI is defined as (
∆EUE/∆QC) where QC represents annual FCA QC
The following equality can be shown mathematically:
 
 
Summer MRI is defined as (
∆EUE/∆SummerQC)
Winter MRI is defined as (
∆EUE/∆WinterQC)
QMRIC reflects a resource’s 
aggregated seasonal reliability
contributions
 
23
 
Example: Seasonal Break-down of QMRIC
 
Consider one RAA reliability hour in summer and winter respectively, i.e., 50/50
summer/winter risk split
MRI_perfect = 2 hours/years
Resource 
A
 has a summer QC of 100 MW and a winter QC of 110 MW, and is always available
Summer MRI = Winter MRI = 1 hours/year
Summer reliability contribution is 50 MW, and winter reliability contribution is 55 MW
Aggregated reliability contribution from both seasons is 105 MW
Resource 
B
 has a summer QC of 110 MW and a winter QC of 100 MW, and is always available
Summer MRI = Winter MRI = 1 hours/year
Summer reliability contribution is 55 MW and winter reliability contribution is 50 MW
Aggregated reliability contribution from both seasons is 105 MW
Resource 
C
 has a summer QC of 210 MW and a winter QC of 210 MW, and is always available
Summer MRI = Winter MRI = 1 hours/year
Summer reliability contribution is 105 MW, and winter reliability contribution is 105 MW
Aggregated reliability contribution from both seasons is 210 MW
 
24
 
Implications of Seasonal Break-down of QMRIC
 
QMRIC will capture a resource’s seasonal reliability
contributions
Composite offers are no longer needed
In the previous example, if Resource 
C
 is a composite of 
A
 and 
B
, it has
the same QMRIC as the sum of 
A
 and 
B
’s
QMRIC substitutability still holds with seasonal QCs since
QMRIC is defined as annual reliability contribution
 
CONFORMING CHANGES TO CNRC
 
25
 
26
 
CNRC Overview
 
Capacity Network Resource Capability (CNRC) is the MW
quantity associated with a capacity network resource’s
interconnection service
In current FCM, CNRC of a new resource is established based
on its 
cleared QC 
MW, i.e., capacity supply obligation (CSO)
 
27
 
CNRC Interpretation and Application
 
CNRC represents a resource’s 
transmission capability
preserved on the network in deliverability power flow studies
CNRC reflects the resource’s maximum output in those 
studies
CNRC does 
not
 represent the resource’s output limits in actual
operations
CNRC of an existing resource serves as the 
cap on Qualified
Capacity
 (QC), i.e., QC 
 
CNRC
 
28
 
CNRC Interpretation and Application Is Unchanged
Under RCA
 
RCA separates the market quantities of QMRIC and CSO from
the physical quantities of QC and ECSO
CNRC as a physical quantity will continue to be established
based on a new resource’s cleared physical quantity, i.e., 
ECSO
CNRC will continue to be applied as a cap on a resource’s QC
(i.e., QC
 
 
CNRC)
 
29
 
CNRC Conforming Changes in Terminology
 
CNRC is considered a physical limit and should be established
based on physical quantity of a new resource
The physical quantity associated with the obligation of a new
resource is represented by ECSO under the RCA
Proposed conforming changes would be to 
shift terminology
from “CSO” to “ECSO”
 
30
 
Key Takeaways
 
CNRC interpretation and application remain unchanged under
RCA
Conforming changes will be needed to shift terminology from
“CSO” to “ECSO”
 
CONFORMING CHANGES TO AUCTION
MECHANICS
 
31
 
32
 
With RCA Reforms, FCA will be Conducted in Terms
of QMRIC
 
The descending clock auction (DCA) and market clearing engine (MCE) will still
determine awards and prices, but the FCA will now be conducted with respect
to QMRIC rather than QC
Capacity resources will decide whether to withdraw from the auction in a
given round based on the price they would be paid for their QMRIC at that
point in the DCA
The auction starting price will still be set at max[1.6*Net CONE’, Gross CONE’],
where the CONE values will be in terms of QMRIC, as outlined in the October
Conceptual Design presentation
As under current rules:
The auction administrator will determine each round’s starting and end prices
The MCE will be fed the withdrawal prices and quantities, as well as the other key
auction parameters, and determine the combination of capacity awards that maximizes
social surplus
 
SUMMARY OF RCA IMPROVEMENTS TO
ACCREDITATION
 
33
 
34
 
Section Overview
 
This section will describe, at a high level, the primary benefits
provided by moving to MRI-based accreditation
Three sub-sections will cover improvements to non-
intermittent non-storage, storage, and intermittent resources
respectively
Focus on a system without winter risk to simplify discussion
Subsequent discussion in the afternoon will provide an overview of
the incorporation of winter risk into the accreditation process
 
35
 
All Resources Are Impacted by Change in Accredited
Capacity from QC to QMRIC
 
It is expected that the resource adequacy assessment may result in both
summer and winter risks being identified
Most resources will see their accredited capacity decrease
 
from their
existing QC, although some resources may see an increase (QMRIC > QC)
As a result, the total quantity of capacity procured is likely to decrease
Because most resources will have less accredited capacity, their cost per
unit of accredited capacity will also increase
Higher costs per unit of accredited capacity will likely lead to higher
capacity offers, which in turn will likely increase the capacity clearing price
compared to the current design
Which effect (less accreditation, higher capacity price) will dominate is uncertain,
will be resource specific, and will change over time
 
IMPROVEMENTS TO NON-INTERMITTENT,
NON-STORAGE ACCREDITATION
 
36
 
37
 
MRI-Based Accreditation for Non-Intermittent, Non-
Storage Resources
 
With the RCA reforms, non-intermittent resources will be
accredited based on their Marginal Reliability Impact (MRI), rather
than their outputs over an audit window (the current QC
accreditation)
MRIs will be calculated using small changes in each resource’s QC in
RAA to measure their marginal impact on system expected
unserved energy (EUE)
Non-intermittent resources’ available capacity are created from their QC
and their EFORd: in all hours in GE-MARS, these resources either perform
at their QC when not on outage or at 0 MW when on outage or
maintenance
Intuitively, non-intermittent resources’ QMRIC is their expected
performance (given by their available capacity) during the RAA MRI Hours
 
38
 
Primary Benefits of MRI-Based Accreditation for
Non-Intermittent, Non-Storage Resources
 
Accrediting non-intermittent, non-storage resources based on
their marginal contribution to system reliability has two
primary benefits to market efficiency:
1.
Incorporates resources’ EFORd into their accreditation value
Resources that have higher outage rates are more likely to be on outage
when additional available capacity would decrease system EUE
2.
Incorporates resources’ size into their accreditation value
Resources that are larger are more likely to be on outage when additional
available capacity would decrease system EUE because their outages are
more likely to cause load shed
 
39
 
RCA Reforms Will Result in Compensation that Better
Reflects Differences in Reliability Contributions
 
Under existing rules, resources cleared in the market that are the
same size but have different EFORd are compensated identically in
the FCM
E.g., a reliable 100 MW resource with an EFORd = 2% receives the same
capacity market revenue as a less reliable 100 MW resource with an
EFORd = 30%
With the RCA reforms, a resource’s EFORd will be incorporated into
their accreditation value
Resources that are more likely to be on outage during hours when
the system needs them will generally be paid less than otherwise
identical resources that are less likely to be on outage during those
hours
 
40
 
RCA Reforms will Result in a Greater Decrease in
Accredited Capacity for Larger Resources
 
Under existing rules, resources that have identical properties 
except for
their size 
are compensated identically per MW of qualified capacity
E.g., a 100 MW QC non-intermittent, non-storage resource receives 10% of the
capacity revenue as a 1,000 MW QC, otherwise identical, non-intermittent, non-
storage resource
Larger resources’ available capacity is more correlated with hours where
system reliability is at risk
A simple numerical example on the next slide demonstrates this point
Under the RCA reforms, a resource’s size will be incorporated into their
accreditation value, so that larger non-intermittent, non-storage resources
will be paid less per MW of QC than otherwise identical, smaller resources
 
41
 
Numerical Example: Larger Resources Have Outages
that Are More Correlated with RAA MRI Hours
 
Resource 1 is 100 MW and Resource 2 is 1,000 MW
While Resource 1’s outage does not cause load shed, Resource 2 is larger
and their outage has a larger impact on Available Capacity, leading to load
shed
Because Resource 2’s outages are more likely to result in load shed, their
outages are more correlated with the RAA MRI Hours
This correlation with the RAA MRI Hours will result in a decrease in their QMRIC
 
IMPROVEMENTS TO STORAGE ACCREDITATION
 
42
 
43
 
MRI-Based Accreditation for Storage Resources
 
With the RCA reforms, storage resources will be accredited based on their
Marginal Reliability Impact (MRI) rather than their performance during a
2-hour audit window (the current QC accreditation)
Storage resources’ MRI will be calculated by small changes in their QC
(and their associated storage limit), which leads to small changes in hourly
charging/discharging patterns in RAA
The small changes in their hourly charging/discharging MWs decrease EUE, yielding
the resource’s MRI
Critically, storage resources’ hourly charging/discharging patterns are a
function of their stored energy
 
and maximum charge/discharge rate:
resources with more stored energy will be able to discharge energy at
their maximum capability for longer
Additionally, resources with more stored energy take longer to charge
 
44
 
Primary Benefits of MRI-Based Accreditation for
Storage Resources
 
Accrediting storage resources based on their marginal
contribution to system reliability has two primary benefits to
market efficiency:
1.
Incorporates resources’ stored energy into their accreditation value
Resources with more stored energy are more likely to provide more
energy during hours where additional energy would reduce EUE
2.
Incorporates diversity benefits between storage and intermittent
resources
See 
Appendix
 
A
 for a numerical example that shows how storage
resources allow solar resources to have a positive MRI even when all
hours with load shed occur after the sun has set
 
45
 
RCA Reforms will Result in Compensation that
Better Reflects Resources’ Maximum Stored Energy
 
Under existing rules, two storage resources that are identical but
have different quantities of stored energy are compensated
identically
E.g., a 100 MW storage resource that can discharge for 2 hours receives
the same capacity market payments as a 100 MW storage resource that
can discharge for 8 hours
Under RCA reforms, differences in stored energy across resources
will be incorporated into their QMRIC, so that resources cleared in
the market with less stored energy are likely paid less than
otherwise identical resources with more stored energy
 
IMPROVEMENTS TO INTERMITTENT
ACCREDITATION
 
46
 
47
 
MRI-Based Accreditation for Intermittent Resources
 
With the RCA reforms, intermittent resources will be
accredited based on their Marginal Reliability Impact (MRI),
rather than their expected median output in a pre-defined set
of “reliability hours” (the current QC accreditation)
Intermittent resources’ MRI will be calculated by small
changes in their QC, which lead to small changes in their
hourly output profile in MARS
The small increments in their hourly output profile decrease EUE,
yielding the resource’s MRI
 
48
 
Primary Benefits of MRI-Based Accreditation for
Intermittent Resources
 
Accrediting intermittent resources based on their marginal
contribution to reliability has two primary benefits to market
efficiency:
1.
Intermittent resources will no longer be accredited only based on
their expected performance in the pre-defined reliability hours, but
will instead be accredited based on their performance during a wider
set of hours that GE-MARS models as being important for system
reliability (the RAA MRI hours)
2.
MRI-based accreditation will account for correlated hourly output
profiles within classes (e.g., when the sun is down, all solar resources
produce zero energy)
 
49
 
RCA Reforms Will Consider a Broader Set of Hours
When Accrediting Intermittent Resources
 
Under existing rules, intermittent resources are only
accredited based on their expected median performance in a
pre-defined set of reliability hours
Under the RCA reforms, intermittent resources’ performance
in all hours modeled as being at risk for load shed in GE-MARS
will be considered in their accreditation value
As a result, cleared resources that are expected to perform better in
RAA MRI Hours will be paid more, cleared resources that do not
perform as well in RAA MRI Hours will be paid less
 
50
 
RCA Reforms Will Consider the Impact of Correlated
Intermittent Resource Performance on Reliability
 
Intermittent resources often have highly correlated outputs
E.g., when the wind is strong, all wind resources in the same geographical area will
generally have higher output
As an intermittent resource class comprises a larger share of the resource
mix, the hourly output profiles of the intermittent resources will be
increasingly correlated with the RAA MRI Hours
E.g., in a system that is predominantly wind resources, the vast majority of hours
when the system is at risk will occur when the wind is not strong
MRI-based accreditation accounts for the correlated performances of
these resources
This dynamic for intermittent resources is identical to the size correlation of
individual non-intermittent resources (i.e., as a resource gets bigger, its non-
performance is more correlated with when RAA MRI hours occur)
 
SUMMARY AND KEY TAKEAWAYS
 
51
 
52
 
Primary Benefits of MRI-Based Accreditation
 
Benefit 1:
 By incorporating EFORd into accreditation, less
reliable non-intermittent, non-storage resources will be paid
less than otherwise identical more reliable resources
Benefit 2:
 Larger non-intermittent, non-storage resources will
be paid less per MW of QC than otherwise identical, smaller
resources
Benefit 3: 
Resources with less stored energy will be paid less
than otherwise identical resources with more stored energy
 
53
 
Primary Benefits of MRI-Based Accreditation, cont.
 
Benefit 4: 
Accreditation will incorporate diversity benefits
between resource types (See 
Appendix A
 for an example)
Benefit 5: 
Intermittent resources will be accredited based on
their performance in hours that better reflect when system
reliability risk occurs, not just the pre-defined “reliability
hours”
Benefit 6: 
Correlated performance of intermittent resources
will also be accounted for in their accredited capacity
 
54
 
Key Takeaways
 
Benefits 1-6 will improve market entry/exit signals and enable the
ISO to more cost effectively procure capacity and so will reduce
costs to consumers
While many resources will likely see decreases in their accredited
capacity, this does not mean that they will necessarily receive less
capacity market revenue than they would under current rules
RCA reforms will also likely increase the capacity clearing price, compared
to current rules, because less accredited capacity will likely be procured
Which effect (less accreditation, higher capacity price) will dominate is
uncertain, will be resource specific, and will change over time
 
ROAD MAP AND STAKEHOLDER SCHEDULE
 
55
 
RCA Road Map – MRI Framework
 
The below road map provides a projection of when
committee discussions will begin on topics related to the MRI
framework:
 
 
56
 
h
 
RCA Stakeholder Process
 
There are several broad phases laid out for this proposal in the stakeholder process:
Background, Conceptual Design, & Education: June 2022 – February 2023
Detailed Design: December 2022 – March 2023 (from 3 months to 4 months)
Finalize Design, Review Tariff Language, & Stakeholder Amendments: April 2023 – June 2023
Voting: July 2023 (Technical Committees) and August 2023 (Participants Committee)
There are also several key dates for the impact assessment projected in the process:
September 2022: Introduce proposed impact assessment approach
February 2023: Finalize scenarios
March 2023: Review initial results for all resource types
June 2023: Final report
 
57
 
Introduce
IA
Approach
 
Finalize IA
Scenarios
 
Review
Initial IA
Results
 
Final IA
Report
 
FERC
Order
 
h
 
Stakeholder Schedule – Conceptual Design Phase
 
58
 
h
 
Stakeholder Schedule – Conceptual/Detailed Design Phase
 
59
 
h
 
Stakeholder Schedule – Conceptual/Detailed Design Phase
 
60
 
61
 
APPENDIX A
 
Storage Resources and Diversity Benefits
 
62
 
63
 
Numerical Example A Overview
 
Appendix A contains a numerical example that demonstrates how storage and
intermittent resources will have diversity benefits incorporated in accreditation under
the RCA reforms
The example shows that, even on a day where all of the load shed occurs in hours where the sun has
set and a solar resource is not modeled to produce energy, the presence of storage resources allows
the solar resources to contribute to reliability on the margin
The example includes three resources:
A 100 MW QC solar resource that only generates energy in Hours 1 and 2;
A 20 MW QC 2-hour battery that has 40 MWh of stored energy;
A 200 MW QC perfect capacity resource (used to calculate the MRI for perfect capacity)
Table A1 provides the base case upon which the Solar resource’s MRI will be calculated
Table A2 calculates the Solar resource’s MRI
Table A3 calculates Perfect Capacity’s MRI
Table A4 calculates the Solar resource’s QMRIC
 
64
 
Table A1: Preview
 
Table A1 on the next slide provides the base case against
which the Solar resource’s MRI and QMRIC are calculated
The MRIs and QMRICs will be calculated based off a single six
hour day that experiences load shed in Hours 3-5
Each hour has a:
Resource output level (or “energy profile”);
Total available capacity for all resources;
Modeled load;
EUE
Difference between total available capacity and modeled load
 
65
 
Table A1: Resource Output Across the Six Hours
 
In Hour 2, the 2-hour battery discharges energy to meet load, but
load shed doesn’t occur
 
66
 
Table A2: Preview
 
Table A2 calculates the Solar resource’s MRI
The solar resource does not perform in any of the hours
modeled to include load shed (Hours 3-5), but they do
perform in Hour 2 which is also a RAA MRI Hour
A small increase in the Solar resource’s capacity would result in more
available capacity in Hour 2, which would allow the 2-Hour Battery to
save more of its limited stored energy for a future hour that has load
shed
 
67
 
Table A2: Calculating MRI for 2-Hour Battery
 
As described in the November materials, the hourly perturbation for an intermittent resource is
their energy profile in an hour divided by their QC
For Hour 2, that is 80 MW/100 MW = 0.8 MW
Solar’s additional production in Hour 2 allows the 2-Hour Battery to discharge additional energy in
Hour 4, reducing EUE in that hour. Solar’s MRI is thus 0.8 MWh/MW/year = 0.8 hours/year
 
68
 
Table A3: Calculating MRI for Perfect Capacity
 
Perfect Capacity’s additional performance in Hour 2 allows the 2-Hour Battery to discharge an
additional MWh of energy in Hour 5
Perfect Capacity’s MRI is the decrease in EUE that results from the 1 MW increase in their capacity:
4 MWh/MW/year = 4 hours/year
 
69
 
Table A4: Calculating QMRIC
 
Solar still receives a positive accreditation value, despite the fact
that they do not perform in hours with load shed, because their
performance in RAA MRI Hours without load shed allows storage to
discharge additional energy later in the day
 
APPENDIX B
 
Accreditation for Winter-Only Resources
 
70
 
71
 
Overview
 
The November Conceptual Design presentation included a numerical example that
calculated the QMRIC for a winter resource with FCA QC = 0 MW
This section extends that example to show that the winter resource would receive the
same accredited capacity value if its FCA QC = 0.1 MW, 
with a smaller perturbation
The smaller perturbation is necessary to solve a numerical issue, where perturbing with respect to 1
MW of FCA QC when FCA QC = 0.1 MW would result in very large changes in the resource’s energy
profile
Tables B1, B2, B3, and B4 are duplicates of Tables 1, 2, 4, and 6 from the November
materials, and demonstrate how Resource W’s QMRIC are calculated when their FCA
QC = 0
Table B5 demonstrates how their MRI is calculated when their FCA QC = 0.1 MW, with a
smaller 0.01 MW perturbation in FCA QC
Table B6 calculates Perfect Capacity’s MRI with a 0.01 MW perturbation in their FCA QC
Table B7 calculates the winter resource’s QMRIC when its FCA QC = 0.1 MW
 
72
 
Table B1: Resource Parameter Summary
 
Three resources: Resource S (a summer resource), Resource
W (a winter resource), and a “Perfect Capacity” resource
For intermittent resources, FCA QC = Summer QC
 
 
73
 
Table B2: Preview
 
Table B2 on the next slide provides the base case against
which MRI and QMRIC are calculated for the three resources
Each hour has a:
Resource output level (or “energy profile”);
Total available capacity for all resources;
Modeled load;
EUE
Difference between total available capacity and modeled load
 
74
 
Table B2: Resource Output in the Four Modeled RAA
MRI Hours
 
While Resource S has 0 MW of Winter QC and Resource W
has 0 MW of Summer QC, the two resources are still modeled
to provide some energy during both seasons
 
75
 
Table B3 Preview: Calculating MRI for Resources
with 0 Summer QC
 
Intermittent resources that have 0 MW of QC in the summer or the
winter will still have their reliability contributions in both seasons
count towards their MRI
Their energy profile will still be perturbed, even in seasons where they
have zero QC
Resource W has 0 MW Summer QC and so has FCA QC = 0 MW
For resources with 0 MW FCA QC but positive winter QC, we
perturb with respect to winter QC to calculate their MRI
Table B3 on the next slide demonstrates how this works using
Resource W as an example
 
76
 
Table B3: Calculating MRI for Resource W
 
In Hour 1, the perturbation in Resource W’s energy profile is their energy
profile in that hour (15 MW) divided by their Winter QC (100 MW) = 0.15
MW
Resource W’s MRI is the decrease in total EUE in Table D2 (170 MWh) as a
result of the 1 MW increase in Resource W’s Winter QC: 2.15
MWh/MW/year = 2.15 hours/year
 
 
77
 
Table B4: Calculating Resource W’s QMRIC
 
Resource W’s QMRIC is their Winter QC (100 MW) times their
rMRI (0.5375) = 53.75 MW
 
78
 
Table B5: Preview
 
79
 
Table B5: Calculating MRI for Resource W with FCA
QC
 
Resource W’s MRI is the decrease in total EUE in Table D2 (170
MWh) as a result of the 0.01 MW increase in Resource W’s
FCA QC: 21.5 MWh/MW/year = 21.5 hours/year
 
80
 
Table B6: Calculating MRI for Perfect Capacity with
the Smaller FCA QC Perturbation
 
For Perfect Capacity to act as a reference for Resource W, the perturbation
in Perfect Capacity’s FCA QC must be the same size: 0.01 MW
Perfect Capacity’s MRI is the decrease in total EUE in Table B2 (170 MWh)
as a result of the 0.01 MW increase in its FCA QC: 0.04 MWh/MW/year =
0.04 hours/year
 
81
 
Table B7: Calculating QMRIC for Resource W with
FCA QC
 
Resource W’s QMRIC is their FCA QC (0.1 MW) times their
rMRI (537.5) =53.75 MW, the same QMRIC from Table B4
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A meeting discussing Resource Capacity Accreditation in the Forward Capacity Market, focusing on improving accreditation processes to support a reliable transition to clean energy. The presentation outlines the proposed improvements for FCA 19, emphasizing the accreditation of resources based on their reliability contributions to enhance capacity substitutability and cost-effective capacity procurement.


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  1. J O I N T N E P O O L M A R K E T S A N D R E L I A B I L I T Y C O M M I T T E E S M E E T I N G D E C E M B E R 6 - 8 , 2 0 2 2 | W E S T B O R O U G H , M A Resource Capacity Accreditation in the Forward Capacity Market Continued discussion on conceptual design Feng Zhao Steven Otto E C O N O M I S T T E C H N I C A L M A N A G E R F Z H A O @ I S O - N E . C O M S O T T O @ I S O - N E . C O M ISO-NE PUBLIC

  2. WMPP ID: 157 Resource Capacity Accreditation in the Forward Capacity Market Proposed Effective Date: FCA 19 The Resource Capacity Accreditation (RCA) project proposes improvements to ISO-NE s accreditation processes in the Forward Capacity Market (FCM) to further support a reliable, clean-energy transition by implementing methodologies that will more appropriately accredit resource contributions to resource adequacy as the resource mix transforms The ISO has made a commitment to file proposed improvements in time for FCA 19 The goal of this presentation is to summarize the MRI design discussed over the last six months and connect it with the primary benefits and objectives of the RCA initiative: Accredit all resources based on their marginal reliability contributions to improve capacity substitutability Through the improved accreditation, enable the ISO to more cost-effectively procure capacity from resources to meet the region s reliability objectives ISO-NE PUBLIC 2

  3. WMPP ID: 157 Resource Capacity Accreditation in the Forward Capacity Market Proposed Effective Date: FCA 19 Outline of today s discussion: Review of MRI design framework (slides 5-24) Conforming changes to CNRC (slides 26-30) Conforming changes to auction mechanic changes (slide 32) Summary of RCA Improvements to Accreditation (slides 34-54) Improvements to Non-Intermittent Non-storage Accreditation (slides 37-41) Improvements to Storage Accreditation (slides 43-45) Improvements to Intermittent Accreditation (slides 47-50) Summary and Key Takeaways (slides 51-54) Stakeholder Schedule (slides 56-60) * Numerical examples are provided in appendices to illustrate diversity benefits between storage and intermittent, and show the QMRIC calculation for a resource with 0.1 MW FCA QC ISO-NE PUBLIC 3

  4. MRI DESIGN FRAMEWORK Key concepts and processes ISO-NE PUBLIC ISO-NE PUBLIC 4

  5. Introduced July MC/RC Meeting Key Concepts Marginal Reliability Impact (MRI), in hours/year, reflects a resource s expected availability when its capacity is needed for system reliability in RAA simulations MRI is calculated as the EUE/ QC, where EUE is Expected Unserved Energy A resource s new accredited capacity, Qualified MRI Capacity (QMRIC), reflects its expected output when its capacity is needed for system reliability in RAA simulations QMRIC is calculated as QC rMRI QC reflects the resource s measured output from the qualification process rMRI reflects a resource s relative MRIto perfect capacity: rMRI = MRI/MRIperfect ISO-NE PUBLIC 5

  6. Introduced July MC/RC Meeting Key Concepts, cont d The market clearing yields two sets of obligation quantities The new Capacity Supply Obligation (CSO) or cleared QMRIC, and Effective CSO (ECSO), the physical obligation associated with the CSO Physical quantities QC ECSO 1/rMRI rMRI FCM Clearing Market quantities CSO QMRIC *Key concepts are highlighted in blue ISO-NE PUBLIC 6

  7. Introduced September MC/RC Meeting Key Concepts, cont d Under RCA, the current system and zonal demand curves (delineating the marginal reliability benefits of total system and zonal QC levels) will be converted to QMRIC demand curves using rMRIz rMRIz represents the average rMRI of the system or zone, and is calculated as ????? ????? ?? ? ? ?????? ?? ???? ????? ?? ?? ? ? ?????? ?? ???? = QC-weighted average rMRI ISO-NE PUBLIC 7

  8. Introduced July MC/RC Meeting KeyProcesses Resource Adequacy Assessment (RAA) is a probabilistic simulation process for calculating ICR and demand curves The process of using RAA to calculate MRIs and QMRICs is new RAA load and resource models are enhanced MRIs, QMRICs Enhanced load and resource modeling QCs RAA ICR, demand curves other parameters *Key processes are highlighted in blue ISO-NE PUBLIC 8

  9. Connecting Design Elements: Illustrative Digram Market Clearing CSOs, ECSOs QMRIC demand curves Capacity Offers QMRICs System or zonal rMRIz Resource rMRIs QCs Enhanced load and resource models Qualification Process ICR, demand curves RAA Other parameters *Key concepts/processes are highlighted in blue ISO-NE PUBLIC 9

  10. Introduced July MC/RC Meeting MRI Design Benefits From the previous diagram, it can be seen that capacity offers and demands are all based on QMRIC quantities under RCA QMRICs of demand and different resources are substitutable, and thus RCA will achieve more efficient market outcomes More detailed discussion of the benefits are provided by resource types in the later part of this presentation ISO-NE PUBLIC 10

  11. Introduced July MC/RC Meeting MRI Design Framework: Major Changes RCA introduces a new MRI-based capacity accreditation called QMRIC Compared to QC, QMRIC captures the reliability impact of a resource s other parameters such as EFORd and the reliability interaction among all resources and load The new capacity market product will be based on QMRIC instead of FCA QC Offers and bids are based on QMRIC Clearing prices are based on CSO RCA will separate market quantities (QMRIC and CSO) from physical quantities (QC and ECSO) The separation is needed as different applications may require different quantities as input MRIs are calculated using the existing RAA process RAA resource and load models are enhanced for more accurate MRIs ISO-NE PUBLIC 11

  12. Introduced September-November MC/RC Meetings Conforming Changes The concepts and processes below require conforming changes under RCA Key FCM parameters such as Net CONE and capacity demand curves need to be translated from QC space to QMRIC space Applications that use current CSOs need to be separated into applications that use CSOs and those that use ECSOs, depending on the need of each application Composite offers are no longer needed as QMRIC captures both summer and winter reliability contribution of a resource ISO-NE PUBLIC 12

  13. MRI DESIGN: CAPACITY QUANTITIES ISO-NE PUBLIC ISO-NE PUBLIC 13

  14. Capacity Quantities that Matter in RCA Only two sets of capacity quantities matter in RCA: QMRIC and CSO (cleared portion of QMRIC) QC and ECSO ( cleared portion of QC) These quantities define accreditation values and obligations Other quantities such as nameplate capacity may be used as an intermediate step of calculating intermittent resource MRIs, but their use is not required ISO-NE PUBLIC 14

  15. Introduced July - November MC/RC Meetings QC and ECSO QC is a physicalquantitythat represents a resource s measured output during pre-selected hours QC is determined by the resource s own characteristics SeasonalQCs are defined in the current design ECSO is a physical obligation and represents the portion of QC associated with the cleared portion of QMRIC: ??? ????? ???? = ???/???? = ?? Cleared portion expressed as a ratio Seasonal ECSOs are introduced under RCA ISO-NE PUBLIC 15

  16. Introduced July - November MC/RC Meetings QMRIC and CSO QMRIC is a marketquantitythat represents a resource s probability- weightedoutputs during simulated RAA reliability hours QMRIC is determined by both the resource s own characteristics, other resources and load As a market quantity, resource QMRICs can be uniformly increased or decreased by the same percentage without affecting market outcome (i.e., only relative value matters) QMRIC is an annual value for the annual market construct CSO is a market obligation and represents the cleared portion of QMRIC CSO is an annual value ISO-NE PUBLIC 16

  17. Comparison of QC (ECSO) and QMRIC (CSO) QC or ECSO QMRIC or CSO Physical quantity Market quantity (only relative value matters) Measured Simulated (non-measurable) Seasonal Annual (result of annual product) Based on pre-selected hours Based on simulated RAA reliability hours Reflect resource s own characteristics Affected by load and other resources Can be modeled as feasible unit outputs for power flow studies May be infeasible unit outputs for power flow studies QMRIC does not replace QC both will be kept under RCA ISO-NE PUBLIC 17

  18. Proposed Use of ECSO and CSO ECSO CSO CNRC will be established based on ECSO of new resources Capacity base payment will be calculated based on CSO Energy must offer rules will be based on ECSO PFP Obligation is defined based on CSO Reliability review will be conducted based on ECSO Monthly reconfiguration and bi-laterals will trade CSO quantities ISO-NE PUBLIC 18

  19. QC is Needed Under RCA Currently, QC is an audited measure that is available for the ISO to track year-to-year performance or ratings of all resources Applications such as reliability review require physical quantities such as QC and ECSO (instead of QMRIC) to be used as feasible unit output QC is a defined capacity concept in current market rules Additional concepts such as nameplate capacity bring no obvious benefits to the capacity market Seasonal QCs rather than other quantities allow a more accurate representation of resource performance characteristics in an annual capacity market construct ISO-NE PUBLIC 19

  20. MRI DESIGN: SEASONALITY IN THE ANNUAL MARKET ISO-NE PUBLIC ISO-NE PUBLIC 20

  21. Introduced September - October RC Meetings Seasonal QCs in RAA RAA allows seasonal input parameters in calculating annual reliability indices Seasonal QCs for thermal resources and hourly output profiles for intermittent resources are proposed as RAA model enhancements This allows more accurate calculation of a resource s QMRIC, which reflects its aggregated reliability contribution from all seasons (shown in the following slide) * Note there is no conflict of using seasonal QCs in evaluating annual QMRIC! ISO-NE PUBLIC 21

  22. QMRIC Captures Aggregated Reliability Contribution QMRIC as a resource s annual reliability contribution is calculated as ????? = ?? ???/?????????? MRI is defined as ( EUE/ QC) where QC represents annual FCA QC The following equality can be shown mathematically: ????? = ???????? ????????? + ???????? ????????? /?????????? Summer MRI is defined as ( EUE/ SummerQC) Winter MRI is defined as ( EUE/ WinterQC) QMRIC reflects a resource s aggregated seasonal reliability contributions ISO-NE PUBLIC 22

  23. Example: Seasonal Break-down of QMRIC Consider one RAA reliability hour in summer and winter respectively, i.e., 50/50 summer/winter risk split MRI_perfect = 2 hours/years Resource A has a summer QC of 100 MW and a winter QC of 110 MW, and is always available Summer MRI = Winter MRI = 1 hours/year Summer reliability contribution is 50 MW, and winter reliability contribution is 55 MW Aggregated reliability contribution from both seasons is 105 MW Resource B has a summer QC of 110 MW and a winter QC of 100 MW, and is always available Summer MRI = Winter MRI = 1 hours/year Summer reliability contribution is 55 MW and winter reliability contribution is 50 MW Aggregated reliability contribution from both seasons is 105 MW Resource C has a summer QC of 210 MW and a winter QC of 210 MW, and is always available Summer MRI = Winter MRI = 1 hours/year Summer reliability contribution is 105 MW, and winter reliability contribution is 105 MW Aggregated reliability contribution from both seasons is 210 MW ISO-NE PUBLIC 23

  24. Implications of Seasonal Break-down of QMRIC QMRIC will capture a resource s seasonal reliability contributions Composite offers are no longer needed In the previous example, if Resource C is a composite of A and B, it has the same QMRIC as the sum of A and B s QMRIC substitutability still holds with seasonal QCs since QMRIC is defined as annual reliability contribution ISO-NE PUBLIC 24

  25. CONFORMING CHANGES TO CNRC ISO-NE PUBLIC ISO-NE PUBLIC 25

  26. CNRC Overview Capacity Network Resource Capability (CNRC) is the MW quantity associated with a capacity network resource s interconnection service In current FCM, CNRC of a new resource is established based on its cleared QC MW, i.e., capacity supply obligation (CSO) ISO-NE PUBLIC 26

  27. CNRC Interpretation and Application CNRC represents a resource s transmission capability preserved on the network in deliverability power flow studies CNRC reflects the resource s maximum output in those studies CNRC does notrepresent the resource s output limits in actual operations CNRC of an existing resource serves as the cap on Qualified Capacity (QC), i.e., QC CNRC ISO-NE PUBLIC 27

  28. CNRC Interpretation and Application Is Unchanged Under RCA RCA separates the market quantities of QMRIC and CSO from the physical quantities of QC and ECSO CNRC as a physical quantity will continue to be established based on a new resource s cleared physical quantity, i.e., ECSO CNRC will continue to be applied as a cap on a resource s QC (i.e., QC CNRC) ISO-NE PUBLIC 28

  29. CNRC Conforming Changes in Terminology CNRC is considered a physical limit and should be established based on physical quantity of a new resource The physical quantity associated with the obligation of a new resource is represented by ECSO under the RCA Proposed conforming changes would be to shift terminology from CSO to ECSO ISO-NE PUBLIC 29

  30. Key Takeaways CNRC interpretation and application remain unchanged under RCA Conforming changes will be needed to shift terminology from CSO to ECSO ISO-NE PUBLIC 30

  31. CONFORMING CHANGES TO AUCTION MECHANICS ISO-NE PUBLIC ISO-NE PUBLIC 31

  32. With RCA Reforms, FCA will be Conducted in Terms of QMRIC The descending clock auction (DCA) and market clearing engine (MCE) will still determine awards and prices, but the FCA will now be conducted with respect to QMRIC rather than QC Capacity resources will decide whether to withdraw from the auction in a given round based on the price they would be paid for their QMRIC at that point in the DCA The auction starting price will still be set at max[1.6*Net CONE , Gross CONE ], where the CONE values will be in terms of QMRIC, as outlined in the October Conceptual Design presentation As under current rules: The auction administrator will determine each round s starting and end prices The MCE will be fed the withdrawal prices and quantities, as well as the other key auction parameters, and determine the combination of capacity awards that maximizes social surplus ISO-NE PUBLIC 32

  33. SUMMARY OF RCA IMPROVEMENTS TO ACCREDITATION ISO-NE PUBLIC ISO-NE PUBLIC 33

  34. Section Overview This section will describe, at a high level, the primary benefits provided by moving to MRI-based accreditation Three sub-sections will cover improvements to non- intermittent non-storage, storage, and intermittent resources respectively Focus on a system without winter risk to simplify discussion Subsequent discussion in the afternoon will provide an overview of the incorporation of winter risk into the accreditation process ISO-NE PUBLIC 34

  35. All Resources Are Impacted by Change in Accredited Capacity from QC to QMRIC It is expected that the resource adequacy assessment may result in both summer and winter risks being identified Most resources will see their accredited capacity decrease from their existing QC, although some resources may see an increase (QMRIC > QC) As a result, the total quantity of capacity procured is likely to decrease Because most resources will have less accredited capacity, their cost per unit of accredited capacity will also increase Higher costs per unit of accredited capacity will likely lead to higher capacity offers, which in turn will likely increase the capacity clearing price compared to the current design Which effect (less accreditation, higher capacity price) will dominate is uncertain, will be resource specific, and will change over time ISO-NE PUBLIC 35

  36. IMPROVEMENTS TO NON-INTERMITTENT, NON-STORAGE ACCREDITATION ISO-NE PUBLIC ISO-NE PUBLIC 36

  37. MRI-Based Accreditation for Non-Intermittent, Non- Storage Resources With the RCA reforms, non-intermittent resources will be accredited based on their Marginal Reliability Impact (MRI), rather than their outputs over an audit window (the current QC accreditation) MRIs will be calculated using small changes in each resource s QC in RAA to measure their marginal impact on system expected unserved energy (EUE) Non-intermittent resources available capacity are created from their QC and their EFORd: in all hours in GE-MARS, these resources either perform at their QC when not on outage or at 0 MW when on outage or maintenance Intuitively, non-intermittent resources QMRIC is their expected performance (given by their available capacity) during the RAA MRI Hours ISO-NE PUBLIC 37

  38. Primary Benefits of MRI-Based Accreditation for Non-Intermittent, Non-Storage Resources Accrediting non-intermittent, non-storage resources based on their marginal contribution to system reliability has two primary benefits to market efficiency: 1. Incorporates resources EFORd into their accreditation value Resources that have higher outage rates are more likely to be on outage when additional available capacity would decrease system EUE 2. Incorporates resources size into their accreditation value Resources that are larger are more likely to be on outage when additional available capacity would decrease system EUE because their outages are more likely to cause load shed ISO-NE PUBLIC 38

  39. RCA Reforms Will Result in Compensation that Better Reflects Differences in Reliability Contributions Under existing rules, resources cleared in the market that are the same size but have different EFORd are compensated identically in the FCM E.g., a reliable 100 MW resource with an EFORd = 2% receives the same capacity market revenue as a less reliable 100 MW resource with an EFORd = 30% With the RCA reforms, a resource s EFORd will be incorporated into their accreditation value Resources that are more likely to be on outage during hours when the system needs them will generally be paid less than otherwise identical resources that are less likely to be on outage during those hours ISO-NE PUBLIC 39

  40. RCA Reforms will Result in a Greater Decrease in Accredited Capacity for Larger Resources Under existing rules, resources that have identical properties except for their size are compensated identically per MW of qualified capacity E.g., a 100 MW QC non-intermittent, non-storage resource receives 10% of the capacity revenue as a 1,000 MW QC, otherwise identical, non-intermittent, non- storage resource Larger resources available capacity is more correlated with hours where system reliability is at risk A simple numerical example on the next slide demonstrates this point Under the RCA reforms, a resource s size will be incorporated into their accreditation value, so that larger non-intermittent, non-storage resources will be paid less per MW of QC than otherwise identical, smaller resources ISO-NE PUBLIC 40

  41. Numerical Example: Larger Resources Have Outages that Are More Correlated with RAA MRI Hours Resource 1 is 100 MW and Resource 2 is 1,000 MW While Resource 1 s outage does not cause load shed, Resource 2 is larger and their outage has a larger impact on Available Capacity, leading to load shed Because Resource 2 s outages are more likely to result in load shed, their outages are more correlated with the RAA MRI Hours This correlation with the RAA MRI Hours will result in a decrease in their QMRIC QC Available Capacity A.C. After Outage 15,000 MW 15,000 MW Load EUE 0 MWh Resource 1 100 MW Resource 2 1000 MW 14,900 MW 14,000 MW 14,500 MWh 14,500 MWh 500 MWh ISO-NE PUBLIC 41

  42. IMPROVEMENTS TO STORAGE ACCREDITATION ISO-NE PUBLIC ISO-NE PUBLIC 42

  43. MRI-Based Accreditation for Storage Resources With the RCA reforms, storage resources will be accredited based on their Marginal Reliability Impact (MRI) rather than their performance during a 2-hour audit window (the current QC accreditation) Storage resources MRI will be calculated by small changes in their QC (and their associated storage limit), which leads to small changes in hourly charging/discharging patterns in RAA The small changes in their hourly charging/discharging MWs decrease EUE, yielding the resource s MRI Critically, storage resources hourly charging/discharging patterns are a function of their stored energy and maximum charge/discharge rate: resources with more stored energy will be able to discharge energy at their maximum capability for longer Additionally, resources with more stored energy take longer to charge ISO-NE PUBLIC 43

  44. Primary Benefits of MRI-Based Accreditation for Storage Resources Accrediting storage resources based on their marginal contribution to system reliability has two primary benefits to market efficiency: 1. Incorporates resources stored energy into their accreditation value Resources with more stored energy are more likely to provide more energy during hours where additional energy would reduce EUE 2. Incorporates diversity benefits between storage and intermittent resources See AppendixA for a numerical example that shows how storage resources allow solar resources to have a positive MRI even when all hours with load shed occur after the sun has set ISO-NE PUBLIC 44

  45. RCA Reforms will Result in Compensation that Better Reflects Resources Maximum Stored Energy Under existing rules, two storage resources that are identical but have different quantities of stored energy are compensated identically E.g., a 100 MW storage resource that can discharge for 2 hours receives the same capacity market payments as a 100 MW storage resource that can discharge for 8 hours Under RCA reforms, differences in stored energy across resources will be incorporated into their QMRIC, so that resources cleared in the market with less stored energy are likely paid less than otherwise identical resources with more stored energy ISO-NE PUBLIC 45

  46. IMPROVEMENTS TO INTERMITTENT ACCREDITATION ISO-NE PUBLIC ISO-NE PUBLIC 46

  47. MRI-Based Accreditation for Intermittent Resources With the RCA reforms, intermittent resources will be accredited based on their Marginal Reliability Impact (MRI), rather than their expected median output in a pre-defined set of reliability hours (the current QC accreditation) Intermittent resources MRI will be calculated by small changes in their QC, which lead to small changes in their hourly output profile in MARS The small increments in their hourly output profile decrease EUE, yielding the resource s MRI ISO-NE PUBLIC 47

  48. Primary Benefits of MRI-Based Accreditation for Intermittent Resources Accrediting intermittent resources based on their marginal contribution to reliability has two primary benefits to market efficiency: 1. Intermittent resources will no longer be accredited only based on their expected performance in the pre-defined reliability hours, but will instead be accredited based on their performance during a wider set of hours that GE-MARS models as being important for system reliability (the RAA MRI hours) 2. MRI-based accreditation will account for correlated hourly output profiles within classes (e.g., when the sun is down, all solar resources produce zero energy) ISO-NE PUBLIC 48

  49. RCA Reforms Will Consider a Broader Set of Hours When Accrediting Intermittent Resources Under existing rules, intermittent resources are only accredited based on their expected median performance in a pre-defined set of reliability hours Under the RCA reforms, intermittent resources performance in all hours modeled as being at risk for load shed in GE-MARS will be considered in their accreditation value As a result, cleared resources that are expected to perform better in RAA MRI Hours will be paid more, cleared resources that do not perform as well in RAA MRI Hours will be paid less ISO-NE PUBLIC 49

  50. RCA Reforms Will Consider the Impact of Correlated Intermittent Resource Performance on Reliability Intermittent resources often have highly correlated outputs E.g., when the wind is strong, all wind resources in the same geographical area will generally have higher output As an intermittent resource class comprises a larger share of the resource mix, the hourly output profiles of the intermittent resources will be increasingly correlated with the RAA MRI Hours E.g., in a system that is predominantly wind resources, the vast majority of hours when the system is at risk will occur when the wind is not strong MRI-based accreditation accounts for the correlated performances of these resources This dynamic for intermittent resources is identical to the size correlation of individual non-intermittent resources (i.e., as a resource gets bigger, its non- performance is more correlated with when RAA MRI hours occur) ISO-NE PUBLIC 50

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