Texas Nodal Market: Course Insights and Strategies
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2023_05 LSE
W
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!
Greetings
and
Introductions
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This presentation provides a general overview of the Texas
Nodal Market and is not intended to be a substitute for the
ERCOT Protocols, as amended from time to time. If any
conflict exists between this presentation and the ERCOT
Protocols, the ERCOT Protocols shall control in all respects.
For more information, please visit:
http://www.ercot.com/mktrules/nprotocols/
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Energy
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Capacity
Ancillary Services
Wholesale
Market
Costs
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ERCOT Admin Fee
ERS Settlement
Black-Start Service
Revenue Neutrality
Load-
Allocated
Charges
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•
100 MW forecast at West Load Zone
•
Pricing data provided
•
Recent Real-Time prices
•
Available forward prices
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Buy one of the forward prices
•
Buy in Real-Time
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Congestion Revenue Rights
•
Congestion
Bilateral Trades
•
Energy
•
Capacity
•
Ancillary Service
Day Ahead Market
•
Energy
•
Congestion
•
Capacity
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Provide reliable electric
service at a competitive rate
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Manage cost exposure
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Day-Ahead Market & Trades transact
hourly MWs
•
Real-Time settles
15-minute MWhs
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Calculate all scenarios in
hourly MWs
•
Assume Real-Time prices and loads are
constant for an hour
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100 MW load in West Load Zone
•
Buys all energy in Real-Time
•
Real-Time Price = $40
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Resource
Node A
West
Hub
West
Load Zone
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Hour
Ahead
Operating
Hour
DAM
Day-Ahead
Operating Day
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PTP Obligation Bid
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Proposal to buy energy in DAM
•
Submitted at any Settlement Point
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DASPP = Day-Ahead Settlement Point Price
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•
100 MW Energy Purchase
•
West Load Zone
E
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–
–
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•
QSE-to-QSE transactions
•
Transfers settlement responsibility
•
Buyer and seller must confirm
L
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f
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1
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0
•
100 MW Energy Purchase
•
For delivery to West Hub
E
x
a
m
p
l
e
3
:
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Hub
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•
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•
Settled at Real-Time price spread
D
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M
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•
Energy Bid
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PTP Obligation Bid
D
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A
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r
1
2
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0
•
DAM PTP Obligations
West Hub to West Load Zone
•
Trade Energy Purchase at West Hub
E
x
a
m
p
l
e
4
:
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Hub
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Sink
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4
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Hub
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4
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t
s
•
Purchased at
Auction Price
•
Settled at DAM price spread
•
Two Types
•
Point-to-Point Options
•
Point-to-Point Obligations
A
c
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h
Monthly Auction
Long-Term Auction Sequence
•
Six successive auctions
•
Six-month windows
•
One window each month
Year 1
Year 2
Year 3
D
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5
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r
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5
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r
1
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•
Peak Weekday PTP Options
West Hub to West Load Zone
•
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E
x
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e
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r
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West
Hub
West
Load Zone
CRR
100 MW
Source
Sink
N
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e
:
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Hub
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CRR
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Sink
E
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C
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Purchase
100 MW
Load
West
Load Zone
West
Hub
R
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p
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CRR Auction
Day-Ahead Market
Real-Time
M
a
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g
W
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M
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Capacity
Ancillary Services
C
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T
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s
E
x
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p
l
e
6
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s
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s
f
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r
H
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r
1
2
0
0
•
Peak Weekday PTP Options
West Hub to West Load Zone
•
DAM PTP Obligations
West Hub to West Load Zone
•
Trade Energy Purchase at West Hub
E
x
a
m
p
l
e
6
:
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l
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r
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West
Hub
West
Load Zone
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100 MW
Source
Sink
E
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e
6
:
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l
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E
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M
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100 MW
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Hub
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t
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E
x
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6
:
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Capacity
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C
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T
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E
x
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e
7
:
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r
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Peak Weekday PTP Options
Resource Node to West Load Zone
•
DAM Energy Purchase at West Load Zone
E
x
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e
7
:
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d
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t
West
Load Zone
CRR
100 MW
Resource
Node A
C
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t
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W
*
$
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M
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E
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Initially in Day-Ahead Market
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Responsive Reserve Obligation was 36 MW
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ERCOT procures 1200 MW Responsive Reserve
•
Total Responsive Reserve Cost = $14,400
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Settlement Charges from ERCOT
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Future Exposure from CRRs
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beyond minimum
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Financial
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CRR
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Credit Limit
Available credit is shared
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= (Min[Bid MW, CRR MW]) * 10% of Bid Price
Credit
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•
Study recent average pricing
information for Hour 1300
•
Minimize cost to serve 100 MW Load
at West Load Zone
Resource
Node A
West
Hub
West
Load Zone
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:
•
CRR MWs exceed transmission limits
•
Payment expected
•
Sink is Resource Node
CRR
CRR
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Node A
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West
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Delve into the world of the Texas Nodal Market through this detailed course covering topics such as market products for hedging costs, primary and other costs of serving load, market relationships, and more. Explore scenarios like predicting cost exposure and gain valuable insights into energy, congestion, wholesale market costs, and ancillary services.
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Presentation Transcript
Load Serving Entities LSE201 2023_05 LSE
Welcome! Greetings and Introductions 22
Housekeeping WebEx Tips Windows Buttons Attendance Questions / Chat 33
Legal PROTOCOL DISCLAIMER This presentation provides a general overview of the Texas Nodal Market and is not intended to be a substitute for the ERCOT Protocols, as amended from time to time. If any conflict exists between this presentation and the ERCOT Protocols, the ERCOT Protocols shall control in all respects. For more information, please visit: http://www.ercot.com/mktrules/nprotocols/ 44
Course Format Scenarios Concept Examples Discussions 55
Course Topics Topics in this course include: Introduction 1 Market Products for Hedging Costs 2 Credit Overview 3 Using Market Products for Hedging Costs 4 A Few Other Risks and Rewards 5 66
Primary Costs of Serving Load Energy Congestion Wholesale Market Costs Capacity Ancillary Services 99
Other Costs of Serving Load ERCOT Admin Fee ERS Settlement Load- Allocated Charges Black-Start Service Revenue Neutrality 1010
Scenario: The Challenge of Predicting Cost Exposure You have Load to serve during Hour 1500: 100 MW forecast at West Load Zone Pricing data provided Recent Real-Time prices Available forward prices You must choose: Buy one of the forward prices Buy in Real-Time 1111
Recent Real-Time Prices for West Load Zone 100 90 80 70 60 $/MWh 50 40 30 20 10 0 0500 0900 1300 1700 2100 0500 0900 1300 1700 2100 0500 0900 1300 1700 2100 Day 1 0100 Day 2 0100 Day 3 0100 1212
Available Forward Prices for Hour 1500 Resource Node A Resource Node A West Hub West Hub West Load Zone West Load Zone Bilateral Trade Day-Ahead Bilateral Trade Day-Ahead Market Market $45/MWh $45/MWh $50/MWh $50/MWh $60/MWh $60/MWh $40/MWh $40/MWh $50/MWh $50/MWh $52/MWh $52/MWh Real-Time $35/MWh $45/MWh $55/MWh West Hub West Hub Resource Node A West Load Zone Resource Node A West Load Zone 1313
Market Products for Hedging Wholesale Market Costs
Tools for Hedging Wholesale Market Costs Day Ahead Market Energy Congestion Capacity Bilateral Trades Energy Capacity Ancillary Service Congestion Revenue Rights Congestion 1515
LSE for Tool Examples Introducing Friendly Power, LLP Business Goals Provide reliable electric service at a competitive rate Manage cost exposure 1616
Settlement Convention for Tool Examples Comparing Forward & Real-time transactions Day-Ahead Market & Trades transact hourly MWs Real-Time settles 15-minute MWhs For simplicity, we will Calculate all scenarios in hourly MWs Assume Real-Time prices and loads are constant for an hour 1717
Managing Wholesale Market Costs Costs Tools Energy Day-Ahead Market ? Congestion Congestion Do Nothing Bilateral Trades Capacity Capacity CRRs Ancillary Services Ancillary Services 1818
Example 1: Baseline Energy Costs Friendly Power, LLP Does not hedge for Hour 1200 100 MW load in West Load Zone Buys all energy in Real-Time Real-Time Price = $40 1919
Real-Time Energy Settlement Real-Time Energy Imbalance * = (-1) SUPPLIES OBLIGATIONS RTSPP RTSPP = Real-Time Settlement Point Price 2020
Real-Time Energy Settlement Real-Time Energy Imbalance at Load Zone DAM Energy Sales + Trade Energy Sales + Metered Load DAM Energy Purchases + Trade Energy Purchases * = (-1) RTSPP Each Settlement Point settled separately 2121
Real-Time Energy Settlement Real-Time Energy Imbalance at Resource Node Metered Generation + DAM Energy Purchases + Trade Energy Purchases DAM Energy Sales + Trade Energy Sales * = (-1) RTSPP Each Settlement Point settled separately 2222
Real-Time Energy Settlement Real-Time Energy Imbalance at Hub DAM Energy Purchases + Trade Energy Purchases DAM Energy Sales + Trade Energy Sales * = (-1) RTSPP Each Settlement Point settled separately 2323
Example 1: Baseline Energy Cost Real-Time Energy Imbalance at West Load Zone DAM Energy Sales + Trade Energy Sales + Metered Load DAM Energy Purchases + Trade Energy Purchases * = (-1) RTSPP * 0 = (-1) 100 MW $40/MWh = $4000 per hour 2424
Discussion: Other Options for Buying Energy? Real-Time Energy Imbalance offers ideas * = (-1) SUPPLIES? Metered Load RTSPP . . . but what are the Potential Risks? 2525
Price Matrix for Hour 1200 Resource Node A West Hub West Load Zone Bilateral Trade Day-Ahead Market $50/MWh $55/MWh $60/MWh $45/MWh $47/MWh $50/MWh Real-Time $30/MWh $35/MWh $40/MWh West Hub Resource Node A West Load Zone 2626
Managing Wholesale Market Costs Costs Tools Energy Day-Ahead Market Congestion Bilateral Trades Capacity CRRs Ancillary Services 2727
Day-Ahead Market Timing Day-Ahead Hour Ahead Operating Hour Operating Day DAM 10:00 13:30 00:00 2828
Day-Ahead Market Transactions Bids Awards Offers Prices Network Model DAM Types of Bids: Energy Bid PTP Obligation Bid 2929
Energy Bids Day-Ahead Market Energy Bid Proposal to buy energy in DAM Energy Bid Submitted at any Settlement Point $ / MWh MW Financial credit in Real-Time 3030
Day-Ahead Market Energy Settlement Charge for awarded Energy Bid = Awarded MWs * DASPP Payment for awarded Energy Offer = (-1) * Awarded MWs * DASPP DASPP = Day-Ahead Settlement Point Price 3131
Example 2: Hedging Energy Costs with DAM Friendly Power, LLP DAM Award for Hour 1200 100 MW Energy Purchase West Load Zone Charge = 100 MW * $50/MWh = $5000 per hour 3232
Example 2: Hedging Energy Costs with DAM Real-Time Energy Imbalance at West Load Zone DAM Energy Sales + Trade Energy Sales + Metered Load DAM Energy Purchases + Trade Energy Purchases * = (-1) RTSPP * 100 MW = (-1) 100 MW $40/MWh = $0 per hour 3333
Example 2: Scorecard Type of Settlement Result Day-Ahead Market DAM Energy Purchase $5000.00 Real-Time Energy Imbalance $0 Real-Time NET Cost $5000.00 3434
Managing Wholesale Market Costs Costs Tools Energy Day-Ahead Market Congestion Bilateral Trades Capacity CRRs Ancillary Services 3535
Bilateral Trades Decentralized Forward Market QSE-to-QSE transactions Transfers settlement responsibility Buyer and seller must confirm $ MW Bilateral Trade 3636
LSEs and Trades 3737
Example 3: Hedging Energy Costs with Trade Friendly Power, LLP Energy Trade for Hour 1200 100 MW Energy Purchase For delivery to West Hub Cost = 100 MW * $55/MWh = $5500 per hour 3838
Example 3: Hedging Energy Costs with Trade Real-Time Energy Imbalance at West Hub DAM Energy Purchases + Trade Energy Purchases DAM Energy Sales + Trade Energy Sales * = (-1) RTSPP * 100 MW = (-1) 0 $35/MWh = -$3500 per hour 3939
Example 3: Hedging Energy Costs with Trade Real-Time Energy Imbalance at West Load Zone DAM Energy Sales + Trade Energy Sales + Metered Load DAM Energy Purchases + Trade Energy Purchases * = (-1) RTSPP * 0 = (-1) 100 MW $40/MWh = $4000 per hour 4040
Example 3: Hedging Energy Costs with Trade Net Real-Time Energy Imbalance 100 MW Trade Purchase 100 MW Load West Load Zone West Hub RT Prices: $35 $40 Payment at Hub -$3500 Charge at Load Zone $4000 Net Amount $500 4141
Example 3: Scorecard Type of Settlement Result Day-Ahead Market DAM Energy Purchase N/A Real-Time Energy Imbalance $500.00 Real-Time Net ERCOT Settlement $500.00 Cost to LSE for Energy Traded $5500.00 Energy Trade NET Cost $6000.00 4242
Managing Wholesale Market Costs Costs Tools Energy Day-Ahead Market Congestion Bilateral Trades Capacity CRRs Ancillary Services 4343
Day-Ahead Market Point-to-Point Obligations Point-to-Point Obligations Hourly Financial instruments Purchased at DAM price spread Settled at Real-Time price spread Source Sink 4444
Day-Ahead Market Transactions Bids Awards Offers Prices Network Model DAM Types of Bids: Energy Bid PTP Obligation Bid 4545
Day-Ahead Market Point-to-Point Obligation Bid Submitted between any two Settlement Points Source Sink Bid West Hub West Load Zone MW $ / MW Resource Node A West Load Zone MW $ / MW Resource Node A West Hub MW $ / MW West Hub Resource Node A MW $ / MW Payment or charge in Real-Time! 4646
Example 4: Hedging Real-Time Congestion with DAM Friendly Power, LLP 100 MW Transactions for Hour 1200 DAM PTP Obligations West Hub to West Load Zone Trade Energy Purchase at West Hub 4747
Example 4: Hedging Real-Time Congestion with DAM Day-Ahead Market Point-to-Point Obligations West Load Zone West Hub PTP Source Sink 100 MW DAM Prices: $47 $50 RT Prices: $35 $40 Settlement DAM RT Sink minus Source Price $50 $47 = $3 $40 $35 = $5 PTP Obligation Amount $300 $500 4848
Example 4: Hedging Real-Time Congestion with DAM Real-Time Settlement 100 MW Trade Purchase 100 MW Load West Load Zone West Hub PTP 100 MW RT Prices: $35 $40 Payment at Hub -$3500 Charge at Load Zone $4000 Payment for PTP Obligation -$500 Net Amount $0 4949
Example 4: Scorecard Type of Settlement Result DAM Energy Purchase Charge for DAM PTP Obligations Real-Time Energy Imbalance Payment for DAM PTP Obligation N/A Day-Ahead Market $300.00 $500.00 -$500.00 Real-Time Net ERCOT Settlement $300.00 Cost to LSE for Energy Traded $5500.00 Energy Trade NET Cost $5800.00 5050
