Introduction to Electricity Markets National Conference of State - - PowerPoint PPT Presentation

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Introduction to Electricity Markets National Conference of State - - PowerPoint PPT Presentation

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ENERGY CENTER ENERGY CENTER State Utility Forecasting Group (SUFG) State Utility Forecasting Group (SUFG) Introduction to Electricity Markets National Conference of State Legislatures Electricity Markets and State Challenges Workshop Douglas

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SLIDE 1

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Introduction to Electricity Markets

National Conference of State Legislatures Electricity Markets and State Challenges Workshop Douglas J. Gotham Director, State Utility Forecasting Group June 27, 2018

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SLIDE 2

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

State Utility Forecasting Group

  • Independent research and analysis

group at Purdue University

  • Established by Indiana General

Assembly in 1985

  • Performs economic and policy analysis,

provides assistance to state policymakers

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SLIDE 3

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Market Structures

  • Does the utility operate within a

wholesale market operated by a regional transmission organization (RTO) or independent system operator (ISO)?

  • Is it a traditional vertically-integrated

utility or is it under retail choice (aka deregulation)?

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SLIDE 4

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

RTOs/ISOs

Source: Federal Energy Regulatory Commission

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SLIDE 5

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Short-term Energy w/o RTO

  • Utilities dispatch their own resources to

minimize the cost of meeting the load

  • They may enter into contracts to buy or

sell with other entities

  • They perform both unit commitment (for

next day or two) and economic dispatch (now)

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SLIDE 6

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Short-term Energy w/ RTO

  • Suppliers make offers to sell specific

amounts of energy at specific prices

  • Load is also bid at specific prices and

quantities

  • Market operator determines the least-

cost method of supplying the load subject to transmission limitations

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SLIDE 7

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Locational Marginal Price (LMP)

  • LMP represents the marginal cost of

supplying the last increment of energy to a specific location in the network

  • Loads pay the LMP for all energy consumed

at their point in the network and suppliers are paid the LMP for all energy supplied at their network point

  • LMPs differ across the network due to

transmission limitations (congestion) and losses

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SLIDE 8

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

MISO LMP Contour Map

6/19 3:30 pm 6/20 11:50 am

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SLIDE 9

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Day-ahead & Real-time Markets

  • RTOs operate a day-ahead market based on

expected load and generator availability

– settles hourly

  • Also operate a real-time market to balance

deviations from the day-ahead market

– load and/or generator availability may be different than expected – settles every five minutes

  • Both day-ahead and real-time markets

determine LMPs at which the market clears

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SLIDE 10

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Long-term Planning w/ Vertically Integrated Utilities

  • Generally under state purview and often done

through Integrated Resource Planning (IRP)

  • IRPs are long-term (10-20 years) studies to

determine the appropriate expected mix of future resources (both supply-side and demand-side)

  • Generally done every 2-3 years
  • Consider various factors like cost and risk

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SLIDE 11

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

Long-term Planning w/ Retail Choice

  • Usually less state overview
  • Some states may have long-term filing

requirements but most do not require IRPs

  • Suppliers may be subject to RTO

capacity requirements

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SLIDE 12

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

RTO Capacity Markets

  • Some RTOs have capacity markets that
  • perate 1-3 years in advance to ensure

sufficient resources in the future

  • Load-serving entities must have

sufficient resources available to meet their highest level of demand (aka peak demand) plus a reserve margin for unexpected contingencies

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SLIDE 13

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

RTO Capacity Markets

  • Capacity prices also serve as an

indicator as to when new resources may be needed

  • Entities in both restructured and

traditional states are subject to their RTOs’ capacity requirements

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SLIDE 14

ENERGY CENTER

State Utility Forecasting Group (SUFG)

ENERGY CENTER

State Utility Forecasting Group (SUFG)

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Further Information

  • Doug Gotham

– 765-494-0851 – gotham@purdue.edu

  • https://www.purdue.edu/discoverypark/sufg/