Forward Capacity Market Resource Capacity Accreditation Discussion

 
JOINT MEETING NEPOOL MARKETS AND RELIABILITY COMMITTEES
AUGUST 9, 2022 | WESTBOROUGH, MA
 
Feng Zhao
 
TECHNICAL MANAGER
FZHAO@ISO-NE.COM
413-540-4561
 
Continued discussion on conceptual design
 
Resource Capacity Accreditation
in the Forward Capacity Market
 
 
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 FERC to file proposed improvements in
time for FCA 19
In July, the ISO presented its conceptual design at a high level
This presentation illustrates the key conceptual design components with a
numerical example
Graphs and numerical examples do not reflect estimates of the impacts of potential
reforms but are merely stylized examples
 
Resource Capacity Accreditation in the Forward Capacity
Market
 
 
3
 
WMPP ID:
157
 
Proposed Effective Date: FCA 19
 
Outline of today’s discussion:
Review of the RCA improvements (slides 5-6)
Review of the MRI-based conceptual design (slides 8-11)
Illustrative example for the conceptual design (slides 13-49)
Response to conceptual design questions (slides 51-52)
Conclusion (slide 54)
Stakeholder schedule (slides 56-59)
 
Resource Capacity Accreditation in the Forward Capacity
Market
 
REVIEW OF RCA IMPROVEMENTS
 
4
 
5
 
Capacity Accreditation
 
In general, resource capacity accreditation quantifies
resources’ reliability contributions
The accredited value is the maximum amount of capacity that a
resource can sell in FCM
ISO-NE currently uses a resource’s Qualified Capacity (QC)
value as its capacity accreditation value
The reliability contributions of 1 MW QC from different resources may
not be substitutable
 
6
 
Opportunities for Improvement
 
Opportunity #1
: Current capacity accreditation framework can be
improved to reflect different resource contributions toward resource
adequacy. These adjustments will better yield accredited capacity
that is 
substitutable
 between resources, which is beneficial as unique
resource types enter the market
RCA will implement a MRI framework that improves resource substitutability
Opportunity #2
: Current resource adequacy assessment process can
be improved to better reflect resources’ expected performance and
reliability contributions as the resource mix changes
RCA will improve resource adequacy assessment models
 
for more accurate
calculation of resource accreditation values
 
REVIEW OF MRI-BASED CONCEPTUAL DESIGN
 
7
 
8
 
MRI-based Capacity Accreditation Framework
 
As explained in July, there are several key components of the MRI-based
capacity accreditation proposal, which are summarized below:
Each resource’s 
Marginal Reliability Impact (MRI)
, in 
hours/year
,
represents the Expected Unserved Energy (EUE) change over a small
increase of QC: MRI= 
∆EUE/∆QC
Each resource’s 
relative
 
Marginal Reliability Impact (rMRI) 
to perfect
capacity is a ratio (
no units
): rMRI = MRI/MRI
perfect
Each resource’s new accredited capacity, 
Qualified MRI Capacity (QMRIC)
,
will be calculated in 
MW
: QMRIC = 
QC 
 
rMRI
 
9
 
MRI-based Capacity Accreditation
 
Under MRI-based accreditation, t
wo obligations are produced subsequent
to market clearing
The 
new Capacity Supply Obligation (CSO)
 or cleared QMRIC, a market
quantity used for capacity base payment, etc.
The 
Effective CSO (ECSO) 
associated with CSO, a physical representation of
CSO used for FCM reliability reviews, etc.
 
 
10
 
Capacity Demand Curves
 
The ISO has already applied the
MRI concept to its capacity
demand curves
By applying the same MRI concept
and consistent resource mix
assumptions to both supply and
demand sides of FCM, the supply
and demand will properly 
align
 
11
 
Resource Adequacy Assessment Model Enhancements
 
Resource Adequacy Assessment (RAA) models will be
enhanced to allow more accurate calculation of resources’ MRI
The current load shape in RAA will be enhanced with a composite load
shape reflecting representative summer and winter weather conditions
Intermittent resource models such as solar and wind will be enhanced
with hourly output profiles
Energy storage resource models will be enhanced
Gas-only resource models will be improved by incorporating gas supply
constraints
Starting in September, more details about the proposed model
enhancements will be discussed
 
CONCEPTUAL DESIGN EXAMPLE
 
Parameters and models
 
12
 
13
 
Example Roadmap
 
In July, the ISO presented the high-level conceptual design
In the following slides, a small numerical example is used to illustrate
the key elements of the MRI-based design:
Simplified RAA process
Calculation of MRI, rMRI and QMRIC using RAA
Calculation of the new capacity requirement
FCM clearing
Resource capacity obligations (CSO and ECSO)
The simplified models and processes illustrated in this stylized
example do 
not
 reflect estimates of the impacts of potential reforms
 
14
 
Example Assumptions
 
Consider a FCA with two existing resources (
A
 and 
B
), and one
new resource (
C
)
The assumed 
resource parameters
 are summarized in the table below
 
15
 
Example Assumptions, cont.
 
Resource model
:
Resource 
A
 is modeled with two states: 100 MW and 0 MW with
probabilities of 0.9 and 0.1, respectively
Resource 
B
 is modeled by an output profile: (0%, 20%, 100%) of its
nameplate capacity, each with equal probability of 1/3
Resource 
C
 has the same output profile as 
B
, and its MW output is always
half of 
B
’s 
at any time
The outputs of resources 
A
 and 
B
 are independent
Load model
:
Consider a single peak load level of 99 MW, which is expected to occur in
0.25 days/year and in 4 hours of the peak day (or 1 hour/year = 0.25 x 4)
For simplicity of analysis, other off-peak load levels are assumed to have no
reliability risk and are thus not considered
 
CONCEPTUAL DESIGN EXAMPLE
 
Simplified RAA Process
 
16
 
17
 
Example –
 Simplified RAA Roadmap
 
RAA is used to calculate ICR (
demand-side
) currently and will be
used to calculate resource MRIs (
supply-side
) under the RCA
design
In this section,
We start with a high-level review of the general RAA simulation process
A simplified RAA is then introduced for the simplicity of analysis
The simplified RAA is used to demonstrate the evaluation of reliability
indices for the example
 
18
 
Example –
 General RAA Process
 
RAA performs probabilistic analysis on a system of load and
resource models to evaluate system adequacy/reliability
indices such as LOLE and EUE (illustrated in the below figure)
 
Details of RAA process will be reviewed in the coming meetings
 
19
 
Example –
 Simplified RAA for Illustration
 
In this example, only one peak load level and two existing
resources (i.e., 
A
 and 
B
) are modeled for ICR calculation
New resource 
C
 is not modeled (following current RAA practice)
The number of resource output combinations or scenarios for the two
existing resources is a small number
Monte-Carlo simulation is replaced by simply 
enumerating
 all scenarios
LOLE/EUE is calculated by 
analyzing
 results from the scenarios
The above simplified RAA process can be illustrated for the
example with a scenario table as shown next
 
20
 
Example – 
Scenario Table for Simplified RAA
 
Resource scenarios of the example are summarized in the below table:
 
E.g., LOL will occur under the peak load (¼ days/year) and scenarios 1 and 2 (total
probability 0.2/3) 
 
LOLE = ¼ x 0.2/3 = 0.05/3 days/year < 0.1 days/year
 
LOLE and EUE can
be calculated
from the
outcome of
scenarios 1 and 2
with LOL
 
CONCEPTUAL DESIGN EXAMPLE
 
ICR calculation and ICR base case
 
21
 
22
 
Example –
 ICR Roadmap
 
In the previous section, we illustrated a simplified RAA process
In this section, the simplified RAA is used to calculate the ICR
(which will be used later for calculating the MRIC requirement)
and define the base case for MRI calculation
 
23
 
ICR Key Concepts
 
ICR is the minimum amount of install
ed capacity to meet ISO-NE’s
resource planning criterion (i.e., LOLE 
 
1 day in 10 years)
RAA is used to evaluate LOLE for given system of existing resources and load
Load modeled in RAA may need to be adjusted by the amount of Additional
Load Carrying Capability (ALCC) to bring system LOLE to 1-in-10
Currently, ICR is calculated as
For additional background, please refer to the 
ICR Reference Guide
and the
 
ICR Development Webinar
 
24
 
Example – 
Simplified ICR Calculation
 
25
 
Example – 
Simplified
 
ICR Calculation, cont.
 
LOL scenarios
under the ALCC-
adjusted load
 
26
 
Example – 
ICR Base Case
 
The 
at-criterion
 ICR base case is composed of existing
resources and the ALCC-adjusted load
The base case is used for calculating capacity demand curves
(
demand-side
) and resource MRIs (
supply-side
)
In this example, the 
base case 
is composed of the adjusted
peak load of 108 MW (expected ¼ days/year or 1 hour/year)
and the resource mix of 
A
 and 
B
The ICR base case will be used to calculate the resource MRIs in the
next section
 
27
 
Key Takeaways on ICR and Base Case
 
Installed Capacity Requirement (ICR), calculated by using the
RAA process, is measured by QC amount
ICR can be translated to MRIC amount as illustrated in a later section
(slides 38-40)
The base case and its assumptions used in RAA for the ICR
calculation will be used for the MRI calculation
 
CONCEPTUAL DESIGN EXAMPLE
 
Calculating resource MRI, rMRI and QMRIC
 
28
 
29
 
Example –
 MRI Roadmap
 
In the previous section, we established ICR and the base case
for the example
In this section, the base case is used to calculate resource MRIs
(new process under RCA):
To calculate MRI of a resource, its QC is increased by a small amount of
1 MW, and the scenario table is used to analyze the EUE change
To calculate the relative MRI of each resource to perfect capacity, the
MRI of perfect capacity is calculated by adding 1 MW of its capacity
With these MRIs, the rMRI and QMRIC of each resource are calculated
 
30
 
Example – 
MRI Calculation
 
Under the MRI-based capacity accreditation, resource MRIs
are calculated based on EUE impacts of small changes to the
resource QC:
   
MRI = 
 
EUE / 
QC
 
Next we use the scenario table to analyze the MRI for the two
existing resources modeled in the base case
For each resource, its QC is increased by a small amount of 1 MW and
the resulting EUE change is analyzed
 
31
 
Example – 
MRI for Resource 
A
 
The below table shows that increasing resource 
A
’s QC by 1 MW leads to 1
MW reduction of LOL under scenario 4 (with probability 0.3) and the adjusted
load (expected 1 hour/year) 
 
EUE = 
 
1 MW ∙ 
0.3 
∙ 1 hours/year = 
 0.3
MWh/year 
 
MRI
A
 = 0.3 hours/year
 
32
 
Example – 
MRI for Resource 
B
 
Increasing resource 
B
’s 20 MW QC by 1 MW is equivalent to proportionally increasing
its output profile to (0 MW, 21 MW, 105 MW), which leads to 1 MW LOL reduction of
scenario 2 and 5 MW reduction of scenario 3
The EUE is reduced by
 (1 MW
 
0.1/3 + 
5 MW ∙ 
0.1/3) x 1 hour/year
 = 
 0.2 
MWh/year
 
MRI
B
 = 0.2 hours/year
 
33
 
Example – 
MRI for Resource 
C
 
New resource 
C
 is not modeled in the base case and therefore
its MRI cannot be calculated by using the RAA
We propose to use the MRI of an existing resource or class
(with similar technology, location, etc.) for new resources
In the small example, new resource 
C
 is assumed to have the
same location and technology as 
B
 
 MRI of resource 
B
 is
used for resource 
C
, i.e.,
 
MRI
C
 = MRI
B
 = 0.2 hours/year
 
34
 
Example – 
MRI for Perfect Capacity
 
Adding 1 MW of perfect capacity will result in a 1 MW reduction of LOL for
each LOL scenario (i.e., scenarios 1-4 with total probability of 0.4 = 0.1/3+
0.1/3+ 0.1/3+0.3)
EUE is reduced by
 
1 MW
0.4
∙ 1 hour/year = 0.4 MWh/year 
 MRI
perfect
 =
 0.4
hours/year
 
Perfect
Capacity
 
1
 
35
 
Example – 
Resource rMRI
 
By comparing a resource’s marginal reliability impact to that of the
perfect capacity’s, the resource’s 
relative Marginal Reliability
Impact (rMRI)
 is represented by
rMRI allows each resource’s capacity to be expressed in the same
unit of perfect capacity
With the previously calculated MRI
A
 = 0.3, MRI
B 
= MRI
C 
= 0.2 and
MRI
perfect
 = 0.4, we have
 
rMRI
A
 = 0.3/0.4 = 0.75, rMRI
B 
= rMRI
C 
= 0.2/0.4 = 0.5
 
36
 
Example – 
Resource QMRICs
 
With resource rMRIs calculated, the QC of each resource can be
translated to the equivalent QMRIC amount of perfect capacity:
 
QMRIC for resources of the example are summarized below:
 
CONCEPTUAL DESIGN EXAMPLE
 
MRIC requirement
 
37
 
38
 
Example –
 MRIC Requirement Roadmap
 
In the previous sections, we have calculated the ICR (110 MW)
and resource MRIs for the small example
This section translates the ICR measured in QC to the new
MRIC requirement by using resource MRIs
 
39
 
Example – 
Requirement for MRIC
 
40
 
Example – 
Supply and Demand in MRIC
 
With MRI-based capacity accreditation and capacity
requirement, both supply and demand quantities are in MRIC
(allowing substitutability between resources and demand)
 
CONCEPTUAL DESIGN EXAMPLE
 
FCM clearing
 
41
 
42
 
Example – 
FCM Clearing Roadmap
 
In the previous section, we calculated resource QMRIC and
system MRIC demand for the example
This section will demonstrate the FCM clearing for the MRIC
product
 
43
 
Example – 
Capacity Offers
 
QMRIC-based offer prices based on offer costs for the three
resources are listed in the below table
Price formation will be discussed in coming months
All offers are assumed rationable (no lumpiness)
 
44
 
Example – 
Capacity Market Clearing
 
FCM clears at the intersection of the aggregated offer curve and the
MRIC requirement (illustrated in the below figure)
Capacity clearing price is set by resource 
A
 at $5.33/kw
-m
Capacity demand curves instead of fixed requirement will be used in practice
 
CONCEPTUAL DESIGN EXAMPLE
 
Resource Obligations
 
45
 
46
 
Example – 
Resource Obligations Roadmap
 
Under the MRI-based design, resource obligation is separated
into CSO (market) and ECSO (physical)
This section demonstrates the CSO and ECSO for the
resources in the example as a result of FCM clearing
The numbers in this stylized
 
example do 
not
 reflect estimates
of the market impacts of potential reforms
 
47
 
Example – 
Capacity Obligations
 
Resource 
B
 obtains CSO of 10 MW; resource 
A
 has CSO of 67.92 MW
(=77.92 
 10); resource 
C
 has zero CSO
The market quantity of CSO can be translated back to the physical quantity
of ECSO for each resource: ECSO = CSO x 1/rMRI
The CSO and ECO of the three resources are listed in the below table:
 
The use of capacity obligations will be discussed in the coming meetings
 
CONCEPTUAL DESIGN EXAMPLE
 
Key Takeaways
 
48
 
49
 
Example – 
Key Takeaways
 
RCA allows an MRI-based framework for both capacity demand
curve construction and resource accreditation
We will cover more details on specific components of the MRI-
based design starting September
 
ADDITIONAL CONCEPTUAL DESIGN QUESTIONS
 
50
 
51
 
Understanding Expected Performance in FCM Design
Objective 1
 
At the July MC/RC, stakeholders requested clarity on the
performance expectation noted in the first design objective:
Design Objective 1: 
To ensure the system has sufficient resources to meet
the region’s one-day-in-ten reliability requirement, where ‘sufficient’ is
defined as having enough resources that can perform as expected in the
right locations
This is an opportunity to improve the current resource models in the
resource adequacy assessment to more accurately reflect actual
resource performance
In other words, it is the resource’s expected performance that is
contributing to meeting the reliability requirement in advance of the
delivery period and what
 
is meant by ‘sufficient’ resources
 
52
 
Using Nameplate or QC for MRI Calculation Does Not
Affect Accredited Value of Intermittent Resources
 
Stakeholders requested clarity on whether the use of QC or
nameplate for intermittent resources in the MRI calculation will
affect their QMRIC
At the July MC/RC meeting, the ISO introduced the MRI calculation
and how QC will be adjusted to QMRIC (i.e., QMRIC = QC x rMRI)
The use of QC or nameplate for MRI calculation will not affect the
resource’s accredited capacity or QMRIC
We illustrate this in the Appendix assuming resource 
B
 of the example is
an intermittent
 
CONCLUSION
 
53
 
54
 
Key Takeaways
 
The MRI-based design
 
factors each resource’s marginal
reliability contribution into its accredited capacity value
Adequacy assessment model enhancements will improve the
accuracy of MRI and ICR calculations
Details on specific design elements and RAA model
enhancements will be presented in coming months
 
STAKEHOLDER SCHEDULE
 
55
 
56
 
Stakeholder Process - Overview
 
There are several broad phases laid out for this proposal in the stakeholder process:
Background, Conceptual Design, & Education: June 2022 – October 2022
Detailed Design: November 2022 – January 2023
Finalize Design & Review Tariff Language: February 2023 – April 2023
Voting: May 2023 (Technical Committees) and June 2023 (Participants Committee)
Through at least the conceptual design phase, the content will primarily be delivered during the MC with
the RC jointly invited to discuss the RCA proposal
As needed, additional joint MC/RC meetings would be held during the regularly scheduled RC to continue
discussions of material that were not completed during the regular joint MC/RC meeting
Starting likely with the detailed design phase, the MC and RC will meet separately and discuss distinct
content under their committee’s purview
The MC and RC are each invited to continue to participate in each other’s ongoing discussions and review on the
RCA proposal
At the next meeting in September, discussions will continue on:
Average vs. marginal approaches addressing remaining follow-up questions
Further discussion on ISO’s conceptual design
Introduction of the ISO’s proposed impact assessment approach
During the detailed design phase, related conforming changes needed to implement the RCA proposal
will be introduced
 
57
 
Stakeholder Schedule – Conceptual Design Phase
 
58
 
Stakeholder Schedule – Conceptual Design Phase, cont.
 
59
 
Stakeholder Schedule – Detailed Design Phase
Note: Detailed information will be shared once the dates for the 2023 NEPOOL calendar are established
 
60
 
61
 
Appendix – 
Using Nameplate for Resource 
B’s 
MRI
Calculation
 
Assume resource 
B
 in the example is an intermittent, by increasing its 100 MW
nameplate by 1 MW or equivalently, increasing its entire output profile by
1/100 to {
0 MW, 20.2 MW, 101 MW
} as illustrated in the below table
The expected LOL is reduced by (0.1/3 
∙ 0.2 
+ 0.1/3
 ∙ 1) = 
0.04 
MW or EUE is reduced by (0.04
MW ∙ 1 hour/year) = 0.04 MWh/year
Nameplate-based 
MRI
B
 = 0.04 hours/year, 
Nameplate-based 
rMRI
B
 = 0.04/0.4 = 0.1, QMRIC
B
 =
100 x 0.1 = 10 MW  
Same accredited value of 10 MW as the QC-based calculation
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Discussion on improvements to resource capacity accreditation in the Forward Capacity Market to support a reliable, clean-energy transition by accrediting resource contributions effectively as the resource mix evolves. Covers conceptual design, stakeholder schedule, and review of proposed enhancements for FCA 19.


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  1. J O I N T M E E T I N G 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 A U G U S T 9 , 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 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 4 1 3 - 5 4 0 - 4 5 6 1 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 FERC to file proposed improvements in time for FCA 19 In July, the ISO presented its conceptual design at a high level This presentation illustrates the key conceptual design components with a numerical example Graphs and numerical examples do not reflect estimates of the impacts of potential reforms but are merely stylized examples 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 the RCA improvements (slides 5-6) Review of the MRI-based conceptual design (slides 8-11) Illustrative example for the conceptual design (slides 13-49) Response to conceptual design questions (slides 51-52) Conclusion (slide 54) Stakeholder schedule (slides 56-59) ISO-NE PUBLIC 3

  4. REVIEW OF RCA IMPROVEMENTS ISO-NE PUBLIC ISO-NE PUBLIC 4

  5. Capacity Accreditation In general, resource capacity accreditation quantifies resources reliability contributions The accredited value is the maximum amount of capacity that a resource can sell in FCM ISO-NE currently uses a resource s Qualified Capacity (QC) value as its capacity accreditation value The reliability contributions of 1 MW QC from different resources may not be substitutable ISO-NE PUBLIC 5

  6. Opportunities for Improvement Opportunity #1: Current capacity accreditation framework can be improved to reflect different resource contributions toward resource adequacy. These adjustments will better yield accredited capacity that is substitutable between resources, which is beneficial as unique resource types enter the market RCA will implement a MRI framework that improves resource substitutability Opportunity #2: Current resource adequacy assessment process can be improved to better reflect resources expected performance and reliability contributions as the resource mix changes RCA will improve resource adequacy assessment modelsfor more accurate calculation of resource accreditation values ISO-NE PUBLIC 6

  7. REVIEW OF MRI-BASED CONCEPTUAL DESIGN ISO-NE PUBLIC ISO-NE PUBLIC 7

  8. MRI-based Capacity Accreditation Framework As explained in July, there are several key components of the MRI-based capacity accreditation proposal, which are summarized below: Each resource s Marginal Reliability Impact (MRI), in hours/year, represents the Expected Unserved Energy (EUE) change over a small increase of QC: MRI= EUE/ QC Each resource s relativeMarginal Reliability Impact (rMRI) to perfect capacity is a ratio (no units): rMRI = MRI/MRIperfect Each resource s new accredited capacity, Qualified MRI Capacity (QMRIC), will be calculated in MW: QMRIC = QC rMRI rMRI Qualified Capacity (QC) Qualified MRIC (QMRIC) ISO-NE PUBLIC 8

  9. MRI-based Capacity Accreditation Under MRI-based accreditation, two obligations are produced subsequent to market clearing The new Capacity Supply Obligation (CSO) or cleared QMRIC, a market quantity used for capacity base payment, etc. The Effective CSO (ECSO) associated with CSO, a physical representation of CSO used for FCM reliability reviews, etc. FCM Clearing Physical & market quantity Current: CSO QC Physical quantity QC ECSO New: 1/rMRI rMRI FCM Clearing Market quantity CSO QMRIC ISO-NE PUBLIC 9

  10. Capacity Demand Curves The ISO has already applied the MRI concept to its capacity demand curves Zonal Demand Curves By applying the same MRI concept and consistent resource mix assumptions to both supply and demand sides of FCM, the supply and demand will properly align MRI-based Demand Curve MRI-based Resource QC accreditation Accreditation ISO-NE PUBLIC 10

  11. Resource Adequacy Assessment Model Enhancements Resource Adequacy Assessment (RAA) models will be enhanced to allow more accurate calculation of resources MRI The current load shape in RAA will be enhanced with a composite load shape reflecting representative summer and winter weather conditions Intermittent resource models such as solar and wind will be enhanced with hourly output profiles Energy storage resource models will be enhanced Gas-only resource models will be improved by incorporating gas supply constraints Starting in September, more details about the proposed model enhancements will be discussed ISO-NE PUBLIC 11

  12. CONCEPTUAL DESIGN EXAMPLE Parameters and models ISO-NE PUBLIC ISO-NE PUBLIC 12

  13. Example Roadmap In July, the ISO presented the high-level conceptual design In the following slides, a small numerical example is used to illustrate the key elements of the MRI-based design: Simplified RAA process Calculation of MRI, rMRI and QMRIC using RAA Calculation of the new capacity requirement FCM clearing Resource capacity obligations (CSO and ECSO) The simplified models and processes illustrated in this stylized example do not reflect estimates of the impacts of potential reforms ISO-NE PUBLIC 13

  14. Example Assumptions Consider a FCA with two existing resources (A and B), and one new resource (C) The assumed resource parameters are summarized in the table below Nameplate (MW) Resource Type QC (MW) A Existing 100 100 B Existing 100 20 C New 50 10 ISO-NE PUBLIC 14

  15. Example Assumptions, cont. Resource model: Resource A is modeled with two states: 100 MW and 0 MW with probabilities of 0.9 and 0.1, respectively Resource B is modeled by an output profile: (0%, 20%, 100%) of its nameplate capacity, each with equal probability of 1/3 Resource C has the same output profile as B, and its MW output is always half of B s at any time The outputs of resources A and B are independent Load model: Consider a single peak load level of 99 MW, which is expected to occur in 0.25 days/year and in 4 hours of the peak day (or 1 hour/year = 0.25 x 4) For simplicity of analysis, other off-peak load levels are assumed to have no reliability risk and are thus not considered ISO-NE PUBLIC 15

  16. CONCEPTUAL DESIGN EXAMPLE Simplified RAA Process ISO-NE PUBLIC ISO-NE PUBLIC 16

  17. Example Simplified RAA Roadmap RAA is used to calculate ICR (demand-side) currently and will be used to calculate resource MRIs (supply-side) under the RCA design In this section, We start with a high-level review of the general RAA simulation process A simplified RAA is then introduced for the simplicity of analysis The simplified RAA is used to demonstrate the evaluation of reliability indices for the example ISO-NE PUBLIC 17

  18. Example General RAA Process RAA performs probabilistic analysis on a system of load and resource models to evaluate system adequacy/reliability indices such as LOLE and EUE (illustrated in the below figure) Resource parameters (QC, EFORd, etc.) Load parameters RAA models (load and resources) Monte-Carlo simulation Reliability metrics (EUE, LOLE, etc.) RAA tool (GE-MARS) Details of RAA process will be reviewed in the coming meetings ISO-NE PUBLIC 18

  19. Example Simplified RAA for Illustration In this example, only one peak load level and two existing resources (i.e., A and B) are modeled for ICR calculation New resource C is not modeled (following current RAA practice) The number of resource output combinations or scenarios for the two existing resources is a small number Monte-Carlo simulation is replaced by simply enumerating all scenarios LOLE/EUE is calculated by analyzing results from the scenarios The above simplified RAA process can be illustrated for the example with a scenario table as shown next ISO-NE PUBLIC 19

  20. Example Scenario Table for Simplified RAA Resource scenarios of the example are summarized in the below table: Scenario 1 2 3 4 5 6 A (MW) 0 0 0 100 100 100 B (MW) 0 20 100 0 20 100 Total MW 0 20 100 100 120 200 Scenario Prob. 0.1 1/3 0.1 1/3 0.1 1/3 0.9 1/3 0.9 1/3 0.9 1/3 LOL (MW) 99 79 0 0 0 0 LOLE and EUE can be calculated from the outcome of scenarios 1 and 2 with LOL Load = 99 MW, expected days/year or 1 hour/year E.g., LOL will occur under the peak load ( days/year) and scenarios 1 and 2 (total probability 0.2/3) LOLE = x 0.2/3 = 0.05/3 days/year < 0.1 days/year ISO-NE PUBLIC 20

  21. CONCEPTUAL DESIGN EXAMPLE ICR calculation and ICR base case ISO-NE PUBLIC ISO-NE PUBLIC 21

  22. Example ICR Roadmap In the previous section, we illustrated a simplified RAA process In this section, the simplified RAA is used to calculate the ICR (which will be used later for calculating the MRIC requirement) and define the base case for MRI calculation ISO-NE PUBLIC 22

  23. ICR Key Concepts ICR is the minimum amount of installed capacity to meet ISO-NE s resource planning criterion (i.e., LOLE 1 day in 10 years) RAA is used to evaluate LOLE for given system of existing resources and load Load modeled in RAA may need to be adjusted by the amount of Additional Load Carrying Capability (ALCC) to bring system LOLE to 1-in-10 Currently, ICR is calculated as For additional background, please refer to the ICR Reference Guide and the ICR Development Webinar ICR =???????? ???????? ??? ???????? ??4 ?????? 1 + ???? ???? ?????? ???? ISO-NE PUBLIC 23

  24. Example Simplified ICR Calculation Next we demonstrate how to calculate ICR (which will be translated to MRIC requirement later) for the example using the scenario table The previous analysis shows that for the example, the existing resource mix (A and B) and the peak load yield LOLE < 0.1 days/year The load modeled RAA needs to be adjusted by ALCC in MW to achieve the LOLE criterion of 0.1 days/year The next slide shows that increasing the load by 9 MW will achieve the LOLE criterion for this example, i.e., ALCC = 9 MW, and the simplified ICR (ignoring tie benefits, OP4 relief, and HQICCs) for the example is ???????? ????????/ (1 + ???? ????) = 110 MW ???? ISO-NE PUBLIC 24

  25. Example Simplified ICR Calculation, cont. It is shown below that with an increased peak load of 108 MW (expected days/year), scenarios 1-4 (total probability of 0.4) yield LOL LOLE = 0.4 = 0.1 days/year ALCC = 108-99 = 9 MW, Existing Capacity measured in QC = 100 + 20 = 120 MW ??? = 120 / (1+9/99) = 110 MW Scenario 1 2 3 4 5 6 Adjusted Load = 108 MW, expected days/year or 1 hour/year A (MW) 0 0 0 100 100 100 B (MW) 0 20 100 0 20 100 Total MW 0 20 100 100 120 200 Scenario Prob. 0.1 1/3 0.1 1/3 0.1 1/3 0.9 1/3 0.9 1/3 0.9 1/3 LOL (MW) 108 88 8 8 0 0 LOL scenarios under the ALCC- adjusted load ISO-NE PUBLIC 25

  26. Example ICR Base Case The at-criterion ICR base case is composed of existing resources and the ALCC-adjusted load The base case is used for calculating capacity demand curves (demand-side) and resource MRIs (supply-side) In this example, the base case is composed of the adjusted peak load of 108 MW (expected days/year or 1 hour/year) and the resource mix of A and B The ICR base case will be used to calculate the resource MRIs in the next section ISO-NE PUBLIC 26

  27. Key Takeaways on ICR and Base Case Installed Capacity Requirement (ICR), calculated by using the RAA process, is measured by QC amount ICR can be translated to MRIC amount as illustrated in a later section (slides 38-40) The base case and its assumptions used in RAA for the ICR calculation will be used for the MRI calculation ISO-NE PUBLIC 27

  28. CONCEPTUAL DESIGN EXAMPLE Calculating resource MRI, rMRI and QMRIC ISO-NE PUBLIC ISO-NE PUBLIC 28

  29. Example MRI Roadmap In the previous section, we established ICR and the base case for the example In this section, the base case is used to calculate resource MRIs (new process under RCA): To calculate MRI of a resource, its QC is increased by a small amount of 1 MW, and the scenario table is used to analyze the EUE change To calculate the relative MRI of each resource to perfect capacity, the MRI of perfect capacity is calculated by adding 1 MW of its capacity With these MRIs, the rMRI and QMRIC of each resource are calculated ISO-NE PUBLIC 29

  30. Example MRI Calculation Under the MRI-based capacity accreditation, resource MRIs are calculated based on EUE impacts of small changes to the resource QC: MRI = EUE / QC hours/year MWh/year MW Next we use the scenario table to analyze the MRI for the two existing resources modeled in the base case For each resource, its QC is increased by a small amount of 1 MW and the resulting EUE change is analyzed ISO-NE PUBLIC 30

  31. Example MRI for Resource A The below table shows that increasing resource A s QC by 1 MW leads to 1 MW reduction of LOL under scenario 4 (with probability 0.3) and the adjusted load (expected 1 hour/year) EUE = 1 MW 0.3 1 hours/year = 0.3 MWh/year MRIA = 0.3 hours/year Scenario 1 2 3 4 5 6 Adjusted Load = 108 MW, expected days/year or 1 hour/year A (MW) 0 0 0 100 1 100 1 100 1 B (MW) 0 20 100 0 20 100 Total MW 0 20 100 100 1 120 1 200 1 Scenario Prob. 0.1 1/3 0.1 1/3 0.1 1/3 0.9 1/3 0.9 1/3 0.9 1/3 LOL (MW) 108 88 8 8 1 0 0 ISO-NE PUBLIC 31

  32. Example MRI for Resource B Increasing resource B s 20 MW QC by 1 MW is equivalent to proportionally increasing its output profile to (0 MW, 21 MW, 105 MW), which leads to 1 MW LOL reduction of scenario 2 and 5 MW reduction of scenario 3 The EUE is reduced by (1 MW 0.1/3 + 5 MW 0.1/3) x 1 hour/year = 0.2 MWh/year MRIB = 0.2 hours/year Scenario A (MW) B (MW) Total MW 1 0 0 0 2 0 20 1 20 1 3 0 100 5 100 5 4 100 0 100 5 100 20 1 120 1 6 100 100 5 200 5 Adjusted Load = 108 MW, expected days/year or 1 hour/year Scenario Prob. 0.1 1/3 0.1 1/3 0.1 1/3 0.9 1/3 0.9 1/3 0.9 1/3 LOL (MW) 108 88 1 8 5 8 0 0 ISO-NE PUBLIC 32

  33. Example MRI for Resource C New resource C is not modeled in the base case and therefore its MRI cannot be calculated by using the RAA We propose to use the MRI of an existing resource or class (with similar technology, location, etc.) for new resources In the small example, new resource C is assumed to have the same location and technology as B MRI of resource B is used for resource C, i.e., MRIC = MRIB = 0.2 hours/year ISO-NE PUBLIC 33

  34. Example MRI for Perfect Capacity Adding 1 MW of perfect capacity will result in a 1 MW reduction of LOL for each LOL scenario (i.e., scenarios 1-4 with total probability of 0.4 = 0.1/3+ 0.1/3+ 0.1/3+0.3) EUE is reduced by 1 MW 0.4 1 hour/year = 0.4 MWh/year MRIperfect = 0.4 hours/year Scenario 1 2 3 4 5 6 Adjusted Load = 108 MW, expected days/year or 1 hour/year A (MW) 0 0 0 100 100 100 B (MW) 0 20 100 0 20 100 Total MW 0 20 100 100 120 200 Scenario Prob. 0.1 1/3 0.1 1/3 0.1 1/3 0.9 1/3 0.9 1/3 0.9 1/3 LOL (MW) 108 1 88 1 8 1 8 1 0 0 Perfect Capacity 1 ISO-NE PUBLIC 34

  35. Example Resource rMRI By comparing a resource s marginal reliability impact to that of the perfect capacity s, the resource s relative Marginal Reliability Impact (rMRI) is represented by ???? = ???/?????????? rMRI allows each resource s capacity to be expressed in the same unit of perfect capacity With the previously calculated MRIA = 0.3, MRIB = MRIC = 0.2 and MRIperfect = 0.4, we have rMRIA = 0.3/0.4 = 0.75, rMRIB = rMRIC = 0.2/0.4 = 0.5 ISO-NE PUBLIC 35

  36. Example Resource QMRICs With resource rMRIs calculated, the QC of each resource can be translated to the equivalent QMRIC amount of perfect capacity: ????? = ?? ???? QMRIC for resources of the example are summarized below: Resource QC (MW) MRI (hours/year) rMRI QMRIC (MW) A 100 0.3 0.75 75 B 20 0.2 0.5 10 C 10 0.2 0.5 5 Perfect Capacity - 0.4 1 - ISO-NE PUBLIC 36

  37. CONCEPTUAL DESIGN EXAMPLE MRIC requirement ISO-NE PUBLIC ISO-NE PUBLIC 37

  38. Example MRIC Requirement Roadmap In the previous sections, we have calculated the ICR (110 MW) and resource MRIs for the small example This section translates the ICR measured in QC to the new MRIC requirement by using resource MRIs ISO-NE PUBLIC 38

  39. Example Requirement for MRIC Under the MRI-based design, the QC-based ICR (110 MW for the example) is translated to the MRIC requirement Base case is composed of resource A (100 MW QC) and resource B (20 MW QC) Each MW QC of base case resource mix has 5/6 MW QCA and 1/6 MW QCB MRIC of 1 MW resource mix = 5 MRIC requirement = ICR 17/24 = 110 17/24 = 77.92 MW 6 rMRIA + 1 6 rMRIB = 5 6 0.75+ 1 6 0.5 = 17/24 Existing capacity MRIC Req. ICR Perfect capacity Base case mix ISO-NE PUBLIC 39

  40. Example Supply and Demand in MRIC With MRI-based capacity accreditation and capacity requirement, both supply and demand quantities are in MRIC (allowing substitutability between resources and demand) ISO-NE PUBLIC 40

  41. CONCEPTUAL DESIGN EXAMPLE FCM clearing ISO-NE PUBLIC ISO-NE PUBLIC 41

  42. Example FCM Clearing Roadmap In the previous section, we calculated resource QMRIC and system MRIC demand for the example This section will demonstrate the FCM clearing for the MRIC product ISO-NE PUBLIC 42

  43. Example Capacity Offers QMRIC-based offer prices based on offer costs for the three resources are listed in the below table Price formation will be discussed in coming months All offers are assumed rationable (no lumpiness) QC (MW) rMRI QMRIC (MW) Cost QMRIC Offer Price ($/kw m) ( $106/year) A 100 0.75 75 4.8 5.33 B 20 0.5 10 0.48 4 C 10 0.5 5 0.36 6 Demand 110 17/24 77.92 ISO-NE PUBLIC 43

  44. Example Capacity Market Clearing FCM clears at the intersection of the aggregated offer curve and the MRIC requirement (illustrated in the below figure) Capacity clearing price is set by resource A at $5.33/kw-m Capacity demand curves instead of fixed requirement will be used in practice MRIC Req. = 77.92 MW $/kw-m Aggregated offers 6 5.33 4 C A B 10 85 90 MRIC (MW) ISO-NE PUBLIC 44

  45. CONCEPTUAL DESIGN EXAMPLE Resource Obligations ISO-NE PUBLIC ISO-NE PUBLIC 45

  46. Example Resource Obligations Roadmap Under the MRI-based design, resource obligation is separated into CSO (market) and ECSO (physical) This section demonstrates the CSO and ECSO for the resources in the example as a result of FCM clearing The numbers in this stylized example do not reflect estimates of the market impacts of potential reforms ISO-NE PUBLIC 46

  47. Example Capacity Obligations Resource B obtains CSO of 10 MW; resource A has CSO of 67.92 MW (=77.92 10); resource C has zero CSO The market quantity of CSO can be translated back to the physical quantity of ECSO for each resource: ECSO = CSO x 1/rMRI The CSO and ECO of the three resources are listed in the below table: QC (MW) rMRI QMRIC (MW) CSO (MW) ECSO (MW) A 100 0.75 75 67.92 90.56 B 20 0.5 10 10 20 C 10 0.5 5 0 0 Demand 110 17/24 77.92 The use of capacity obligations will be discussed in the coming meetings ISO-NE PUBLIC 47

  48. CONCEPTUAL DESIGN EXAMPLE Key Takeaways ISO-NE PUBLIC ISO-NE PUBLIC 48

  49. Example Key Takeaways RCA allows an MRI-based framework for both capacity demand curve construction and resource accreditation We will cover more details on specific components of the MRI- based design starting September ISO-NE PUBLIC 49

  50. ADDITIONAL CONCEPTUAL DESIGN QUESTIONS ISO-NE PUBLIC ISO-NE PUBLIC 50

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