Market Capacity Definitions and Generation Adequacy Cynthia - - PDF document

Market Capacity Definitions and Generation Adequacy

Cynthia Bothwell Benjamin F. Hobbs Johns Hopkins University FERC Workshop/ 9th Annual Trans-Atlantic Infraday October 30, 2015

Work Supported in part by NSF grants OISE 1243482 (WINDINSPIRE) and ECCS 1230788

Outline

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• Motivation
• Background
• Methodology

– General – Data – Model

• Results
• Next Steps

Motivation

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• Earlier we examined how renewable

technologies could impact capacity markets and allocation of market revenues among technologies

Reliability constraint had large impact on portfolio mix, cost, and market distortions – study of RM and VOLL – Next week at Informs Given variable nature of renewable capacity, how do alternative definitions of capacity distort market

• utcomes?

Additionally, how does an energy market price cap distort outcomes?

Motivation

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

27.2% Wind Nameplate =(63520-60874)/9744 8.1% Wind Nameplate =(62437-61648)/9744 19.2% Wind Nameplate =(63520-61648)/9744 Load and Wind Data – Texas 2009

Motivation

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

10.1% Wind Nameplate =(63520-59574)/38975 Same Load Profile and Wind Pattern Wind Scaled from 10% to 40% Energy Peak Contribution shifted from 19.2% to 10.1% Of Wind Nameplate Wind does not have a fixed % capacity contribution .. It depends on Year and Penetration

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Background Terminology

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• Reserve Margin (RM) – MW of (weighted,

in general) generation capacity above the peak load requirement

• Value of Lost Load (VOLL)– assumed

$/MWh customers are willing to pay to avoid disruption of electric service

• Expected Unserved Energy (EUE) –

amount of MWh not served, considering potential component failures and insufficient reserve

Methodology: General

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• Identify equilibrium electric generation

capacity mix given different planning criteria:

– minimum reserve margin with energy market subject to price cap, – VOLL, with no energy price cap – Vary the renewable capacity to reserves

• Set reliability equal – determine cost
• Static (single year)

Methodology: Reserves

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• No current reserve convention with

renewables

• Traditionally, reserves are the amount of

excess generation capacity over forecasted peak demand.

• Three variations considered:
• 1. Excluding Renewables
• 2. Renewables as negative load
• 3. Renewables as generators: capacity

contribution either predetermined or actual annual performance

Methodology: Data

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• ERCOT 2013 existing system using normalized hourly

actual load, wind, and solar data

• Load scaled to 50,000 MW Peak
• New generation costs (EIA), except existing coal (lower

“going forward” costs)

Methodology: Model

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

The Model Objective over 8760 hours: Minimize TotalCost = InvestmentCost + VariableCost InvestmentCost= VariableCost =

Methodology: Model

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

Subject to constraints:

Reserve Margin ΣGenCapacity >= Load* (1 + ReserveMargin) for every hour Dispatch Dispatch <= Capacity for each generator, every hour LoadBalance ΣGenDispatch + Wind + Solar >= Demand – LostLoad every hour Coal Capacity Capacity(coal) <= PeakDemand * 0.45 Curtailments Curtailment <= Wind + Solar for every hour Availability ΣHoursDispatch <= Capacity * AvailabilityFactor every generator Forced Outages ΣGenDispatch <= ΣGen (Capacity * (1-EFOR)) for every hour RPS ΣHours (Wind + Solar– Curtailment ) <= ΣHours Demand * RPS

Results: Varying VOLL

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

Generation mix:

• Energy dispatch

similar even with lowest reserves.

• Investment in

capacity changed primarily with regard to gas turbines.

• Value only

changes how much excess you buy.

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Results: VOLL vs EUE

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs VOLL $10,000 VOLL $1,000 VOLL $10,000 Energy VOLL $1,000 Energy

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Results: Renewable Capacity

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

Optimal: VOLL $10,000, No Cap Mkt Cap $1,000 – Wind Cap 0%, Solar Cap 0% Mkt Cap $1,000 – Wind Cap 14.6%, Solar Cap 50% Mkt Cap $1,000 – Wind Cap 25%, Solar Cap 50% Mkt Cap $1,000 – Wind Cap 40%, Solar Cap 75%

19¢/MWh 63¢/MWh 1.56¢/MWh for renewable subsidies

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Next Steps

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs

• Current work:

– Expand cases with more actual data – Add more operational characteristics – Examine magnitudes of market distortions

• Analyze market equilibrium investment &
• perations under capacity designs
• Assess the resulting distortions, efficiency,

consumer impacts, and incentives for renewable investment

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Results: Investment Mix

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs Optimal Energy Energy With Distortion

Acknowledgements

Market Capacity Definitions and Generation Adequacy Bothwell, Hobbs Modeling: Calvin Wood, undergrad Virginia Commonwealth University Data Mining: Enyang “Ricky” Xia, Masters student Johns Hopkins University Reference: C.Bothwell & B. Hobbs, “ Electric Capacity Market Performance with Generation Investment and Renewables”, United States Association for Energy Economics,.33rd USAEE/IAEE North American Conference, October 2015, Pittsburgh