Analysis of system level market power Amelia Blanke Manager, - - PowerPoint PPT Presentation

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Analysis of system level market power

Amelia Blanke Manager, Monitoring & Reporting Department of Market Monitoring Market Surveillance Committee Meeting General Session June 7, 2019

ISO Public

DMM analysis of structural market power

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Comments on CAISO’s Analysis of Structural System-Level Competiveness, Department of Market Monitoring, May 20, 2019 http://www.caiso.com/Documents/DMMComments-SystemMarketPowerAnalysis.pdf

Hours with RSI < 1 (2018)

With virtual supply Without virtual supply Input bids   Transmission losses   Self-scheduled exports   A/S bids without energy bids No No Virtual supply  No RSI 1 < 1 5 34 RSI 2 < 1 18 100 RSI 3 < 1 45 305 A/S bids without energy removed

ISO Public

DMM analysis of structural market power updated to include ancillary service bid segments without

• verlapping energy bids.

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With virtual supply Without virtual supply With virtual supply Without virtual supply Input bids     Transmission losses     Self-scheduled exports     A/S bids without energy bids No No   Virtual supply  No  No RSI 1 < 1 5 34 5 31 RSI 2 < 1 18 100 17 91 RSI 3 < 1 45 305 43 272 A/S bids without energy removed A/S bids without energy not removed

Hours with RSI < 1 (2018)

ISO Public

Average net cleared virtual bids in 2018

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• 6,000
• 4,000
• 2,000

2,000 4,000 6,000 8,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 MW Virtual supply (cleared) Virtual supply (offered) Virtual demand (cleared) Virtual demand (offered) Net virtual (cleared)

ISO Public

Analysis of uncompetitively high priced supply and “almost” self-scheduled exports.

Average hourly MW of high price supply and exports during 272 hours with RSI3 < 1

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High priced Total high priced Bid price range Import energy Gas PDR/RDR Import AS Total supply exports (MW) supply + exports $1000 to $990 404 67 58 17 545 198 744 $1000 to $750 614 137 71 17 839 232 1,071 $1000 to $590 665 146 118 17 946 264 1,210 High priced supply (MW)

ISO Public

Market competitiveness – 2018 Annual Report

• CAISO’s energy markets were generally competitive in 2018.
• Prices in the day-ahead market were significantly in excess of

competitive levels in some hours when net load that must be met by gas-fired units is highest.

• Market for capacity needed to meet local requirements is

structurally uncompetitive in all local areas.

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2018 Annual Report on Market Issues and Performance, DMM. http://www.caiso.com/Documents/2018AnnualReportonMarketIss uesandPerformance.pdf

ISO Public

Net sellers supply bids vs. default energy bids for gas units (July 24, 2018 hour 20).

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• $200
• $100

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Price ($/MWh) Cumulative incremental MW Day-ahead bid price Default energy bids

ISO Public

Net buyers supply bids vs. default energy bids for gas units (July 24, 2018 hour 20).

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• $200
• $100

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Price ($/MWh) Cumulative incremental MW Day-ahead bid price Default energy bids

ISO Public

Price-cost markup based on system marginal prices with cost-based bids for gas units (2018)

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$10 $20 $30 $40 $50 $60 $70 $80 $90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Load-weighted average price ($/MWh) System marginal energy cost Base-case Competitive scenario (gas at minimum of DEB, bid-price)

ISO Public

Average hourly price-cost markup is highest in evening ramping hours (HE 17-21).

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$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Price-cost-markup ($/MWh) 2017 2018

ISO Public

Duration curve of highest hourly price-cost markups

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$0 $20 $40 $60 $80 $100 $120 $140 50 100 150 200 Price-cost markup ($/MWh) Hours 2018 price-cost markup ($/MWh) 2017 price-cost markup ($/MWh)

ISO Public

Markup based on highest cost gas-fired unit dispatched each hour in day-ahead market (2017-2018).

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$0 $100 $200 $300 $400 $500 $600 $700 50 100 150 200 Price-cost markup ($/MWh) Hours 2018 Price-cost markup ($/MWh) 2017 Price-cost markup ($/MWh)

ISO Public

Comparison of competitive baseline price with day- ahead prices (using day-ahead market software).

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$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018 Average price ($/MWh) Competitive scenario - gas at DEBs Average load-weighted day-ahead price Average load-weighted base case price

ISO Public

System market power recommendations (2017 – 2018)

• ISO should begin to consider various actions that might be taken to

reduce/mitigate potential system market power.

• DMM recognizes that this recommendation involves major market design

and policy issues, including the possible development of new market design

• ptions to mitigate potential system market power.
• DMM recognizes that the competitiveness of the ISO’s markets is heavily

affected by the procurement decisions of the state’s load-serving entities and policies of their local regulatory authorities.

• Because of the potential severity of the impact of market power, DMM

made this recommendation at this time so that the ISO, stakeholders and regulatory entities can give thorough consideration to this issue and potential options to address it.

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ISO Public

Potential measures to reduce the potential for or mitigate the effect of system market power:

• Begin consideration of options for system market power mitigation.
• Set local and system resource adequacy requirements sufficiently high to ensure

reliability (which may also reduced likelihood of non-competitive market outcomes).

• Reexamine resource adequacy provisions relating to imports (e.g. must offer obligation

in day-ahead only, resource or system backing RA imports, etc.)

• Strengthen the penalties and the enforcement of the penalties for must-offer obligations.
• Carefully track and seek to limit out-of-market purchases of imports at above-market

prices, which can encourage economic and physical withholding of available imports.

• Closely monitor for potential errors or software issues affecting market power mitigation.

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