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Market Evolution Program

Market Evolution Program. Document ID #: MAC-03-05. Overview. Status Consultation (current and next steps) Initiative updates Breakout sessions. Overview. Day Ahead Market Multi-interval Optimization Short Term Resource Adequacy Long Term Resource Adequacy Wholesale/Retail Integration

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Market Evolution Program

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  1. Market Evolution Program Document ID #: MAC-03-05 Market Advisory Council of the IMO

  2. Overview • Status • Consultation (current and next steps) • Initiative updates • Breakout sessions Market Advisory Council of the IMO

  3. Overview • Day Ahead Market • Multi-interval Optimization • Short Term Resource Adequacy • Long Term Resource Adequacy • Wholesale/Retail Integration • Environmental Tracking • Locational Marginal Pricing Market Advisory Council of the IMO

  4. Status • Jan – team formed • MOSC, RASC, TP given overview • Feb 3 – web page launched • Overview • Discussion papers • Phase 1 Consultation Plan • Program Charter Market Advisory Council of the IMO

  5. Market Advisory Council of the IMO

  6. access input/dialog notify post Email IMO.consultation@theimo.com Phone 905-403-6931 Phase 1 Consultation IMO Stakeholders Market Advisory Council of the IMO

  7. access input/dialog notify post Email IMO.consultation@theimo.com Phone 905-403-6931 Working Groups/Consultation Working Groups IMO Stakeholders Market Advisory Council of the IMO

  8. Working Groups • Day Ahead Market • Multi-interval Optimization • Long Term Resource Adequacy Market Advisory Council of the IMO

  9. Working Groups • Involve stakeholders early on as practicable: • Representational perspective • Leverage experience • Confidence in outcomes Market Advisory Council of the IMO

  10. Working Groups • Day Ahead Market • Volunteers by Thursday, Feb 21 • Members notified on Friday, Feb 22 • Kick off meeting (conference call) Friday, Feb 24 • Multi-interval Optimization • Volunteers by Wednesday, Feb 26 • Members notified on Friday, Feb 28 • Kick off meeting (conference call) Wednesday, March 4 Market Advisory Council of the IMO

  11. Working Groups • Long Term Resource Adequacy • Volunteers by Wednesday, Feb 26 • Members notified on Friday, Feb 28 • Kick off meeting (conference call) Friday, March 7 Market Advisory Council of the IMO

  12. Resource Adequacy Jason Chee-Aloy Market Advisory Council of the IMO

  13. Overview • Results of Nov 22 MAC input • Short term resource adequacy • Identified mechanisms (discussion paper) • Next steps • Long term resource adequacy • Preliminary plan Market Advisory Council of the IMO

  14. Objectives/Solutions • Increase generator investment incentives • Increase demand response • Clear supplier and buyer obligations • Address Operational and Planning issues Market Advisory Council of the IMO

  15. Short Term Mechanisms • Arranging Replacement Energy to Support Planned Outages • Payment for Generator Start-up • Capacity Reserve Market • Hour Ahead Dispatchable Loads • Economic Demand Response Market Advisory Council of the IMO

  16. Short Term Mechanisms • Extension of Emergency Demand Response Program • Demand Conservation • LDC/LSE Contracting Obligations • Distributed Generation Market Advisory Council of the IMO

  17. Recommended Short Term Mechanisms • Arranging Replacement Energy to Support Planned Outages • Participants arrange for replacement energy under specific conditions • Hour Ahead Dispatchable Loads • Schedule dispatchable loads in pre-dispatch • Fixed schedule for entire hour Market Advisory Council of the IMO

  18. Recommended Short Term Mechanisms • Extension of Emergency Demand Response Program • Market Rules with termination date of April 30, 2003 to be extended Market Advisory Council of the IMO

  19. Remaining Short Term Mechanisms • Further assessment: • Payment for generator start-up • Economic Demand Response • Requires further consultation with OEB and Government: • Demand conservation • LDC/LSE contracting obligations • Distributed generation Market Advisory Council of the IMO

  20. Remaining Short Term Mechanisms • Do not pursue: • Capacity Reserve Market (as detailed in the market rules Market Advisory Council of the IMO

  21. Next Steps • Further development for Summer 2003: • Continued feasibility assessments for the three recommended mechanisms • Greater detail to be stakeholdered through market rule amendment and marketplace change management process Market Advisory Council of the IMO

  22. Next Steps • Break-out session objectives: • Determine if there are any other short term resource adequacy mechanisms • Feedback on proposed details of arranging replacement energy to support planned outages and implementing hour ahead dispatchable load process Market Advisory Council of the IMO

  23. Long Term Resource Adequacy • Discussion paper (to be issued within the week) will identify: • Mechanisms used in other jurisdictions • Issues to be addressed for the Ontario market • Often common to other markets • Many are issues still unresolved in these other markets Market Advisory Council of the IMO

  24. Long Term Resource Adequacy • Working Group • Different objective to those of demand response advisory group • Working towards preliminary long term resource adequacy recommendation to the IMO Board on March 28 Market Advisory Council of the IMO

  25. Multi-interval Optimization Mark Wilson Market Advisory Council of the IMO

  26. Overview • How do we optimize now? • Why change what we do? • What is Multi-interval Optimization (MIO)? • Benefits • Next Steps Market Advisory Council of the IMO

  27. Current (5-minute) Optimization • Real Time Constrained Sequence: • Dispatch algorithm optimizes resources and derives dispatch instructions every 5 minutes. • Each interval calculated in isolation • Look Ahead Sequence: • Supplements Real Time Constrained Sequence • Runs every 15 minutes for 11 intervals out • Identifies future Operating Reserve deficiencies • Requires manual intervention in Real Time dispatch to solve identified deficiencies Market Advisory Council of the IMO

  28. Rationale for Change • Real Time Operational Issues • Unit cycling caused by limited forward looking capability of the Real Time Constrained Sequence. • Fast loading resources are often more economic than slow loading resources and are often loaded first resulting in: • Operating Reserve deficiencies • Manual intervention required to solve for future deficiencies • Higher overall cost of resource dispatch • Longer Optimization period will result in more efficient operation Market Advisory Council of the IMO

  29. What is Multi-interval Optimization? • Dispatch solution for the next 5 minute interval that optimizes based on a defined set of criteria over a given period of time: • Optimization could be based on criteria such as: • Least cost solution or • Reducing the number of dispatch changes • Possible optimization period is 60 minutes • Provides Dispatch Advisories for future intervals to indicate potential dispatch targets Market Advisory Council of the IMO

  30. Benefits • Suppliers • Should reduce resource cycling (smoothing of dispatch instructions) thereby improving facility reliability • Provides future dispatch advisories Market Advisory Council of the IMO

  31. Benefits • Loads • Efficiently solve reliability issues and higher cost dispatches • Should reduce CMSC payments and hence overall market costs • Improves transparency by reducing manual intervention in the dispatch process Market Advisory Council of the IMO

  32. Next Steps • Working Group • Working towards a multi-interval optimization recommendation to the IMO Board on March 28 Market Advisory Council of the IMO

  33. Next Steps • Break-out session objectives: • Verify stakeholder understanding of current vs. multi-interval optimization and attendant benefits • Determine preferences for: • Optimization period • Frequency and form of dispatch advisories Market Advisory Council of the IMO

  34. Wholesale/Retail Integration Edward Arlitt Market Advisory Council of the IMO

  35. Overview • What is a Wholesale/Retail Issue? • What are the implications? • What is being investigated? • Next Steps Market Advisory Council of the IMO

  36. Wholesale/Retail Issues • Common characteristics • Affects both wholesale and retail markets • Is in the long term interest of both markets to resolve • No single governing/regulatory authority has full rule making powers or responsibility over the issue • Complicated because they span the wholesale/retail market boundary (e.g. issue ownership, computer systems, business processes and financial risk management) Market Advisory Council of the IMO

  37. Wholesale/Retail Issue Areas • A more accurate assignment of prudential risk • Opening the door to future retail demand response products • Ensuring the wholesale/retail market boundary keeps pace with emerging technologies such as retail interval metering and distributed generation Market Advisory Council of the IMO

  38. Implications • Before we do anything: • Industry-wide consensus required • Changes to wholesale and retail ground rules may be required • Control over ground rules and development of solutions may need to be treated as separate issues Market Advisory Council of the IMO

  39. Implications • Timing: • Obtaining regulatory alignment and some form of industry-wide consensus may be a lengthy process • In the meantime, there is still opportunity for stakeholdering various solution concepts for each issue area Market Advisory Council of the IMO

  40. Under Investigation • Early recognition of joint responsibility over the issues by entities on both sides of the wholesale/retail boundary • A combination of potential solutions aimed at addressing one or more of the issue areas • Overall, a better wholesale market interface that could potentially benefit a wide array of retail market entities Market Advisory Council of the IMO

  41. Next Steps • Break-out session objectives: • Your opinions on the most pressing issues influenced by the wholesale/retail boundary • Consideration for each issue: Should we continue to view the issue in a separate wholesale and/or retail context or does it require a unified solution? Market Advisory Council of the IMO

  42. Day Ahead Market Leonard Kula Market Advisory Council of the IMO

  43. Overview • The three options • Proposed approach • Next Steps Market Advisory Council of the IMO

  44. Day Ahead Market (DAM) - value to participants Market Advisory Council of the IMO

  45. Option 1 for Summer 2003 • RISKS: • The market won’t be liquid or won’t clear: • most participants already hedged • simple, conservative prudential scheme which would require additional prudential support over what is required in the real-time physical marketplace • lack of transparency of generator outage information creating large bid/ask spreads • out-of-market actions Market Advisory Council of the IMO

  46. Option 1 for Summer 2003 • RISKS: • Little time for: • participants to prepare (systems, procedures, risk strategies) • IMO to develop rules, tools, procedures & training - May 1 proved the value of comprehensive preparation • Opportunity cost: • delay development of Option 2 and/or Option 3 Market Advisory Council of the IMO

  47. Day Ahead Market Status • Option 1: • conclude that the risks outweigh the potential opportunities and reluctantly abandon pursuit of a summer 2003 implementation • Option 2/3: • immediately re-focus resources upon development of Option 2/3 • prepare detailed recommendation on timing and choice of option for IMO Board - March 28 Market Advisory Council of the IMO

  48. Next Steps • Breakout session objectives: • Confirm your support of the IMO proceeding with the development of Option 2 (Day Ahead Unit Commitment Market) and/or Option 3 (Day Ahead Physical Market)? Market Advisory Council of the IMO

  49. Next Steps • Working Group • Working towards a day ahead market recommendation to the IMO Board on March 28 Market Advisory Council of the IMO

  50. Breakout Sessions • Day ahead Market • Multi-interval Optimization • Resource Adequacy • Wholesale/Retail Integration • Back by 2:30 • Feedback will be summarized and posted Market Advisory Council of the IMO

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