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Procuring Flexibility in Wholesale Electricity Markets

  • Energy Markets (R Sioshansi and A Mousavian, Section Editors)
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Abstract

Purpose of Review

Wholesale electricity market operators will require additional flexibility in the future as grid-scale intermittent resource penetration increases and as loads become less certain due to behind-the-meter investments, such as distributed energy resources. Given the market design changes required to address this need, this paper presents an overview of market-based mechanisms that wholesale electricity market operators (regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) in the US have adopted or considered adopting to increase operational flexibility.

Summary

The paper discusses the two ISOs/RTOs that have introduced flexible ramping products and notes that others have considered procuring additional reserves as a means to increase flexibility. The paper also discusses the extent to which a capacity-like payment can be used to procure flexibity.

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References

Papers of particular interest, published recently, have been highlighted as: • Of importance

  1. U.S. Energy Information Administration. Short-Term Energy Outlook, 201.

  2. California ISO. Managing oversupply, accessed March 2019 available at http://www.caiso.com/informed/Pages/ManagingOversupply.aspx

  3. A hybrid resource, which includes both an intermittent resource and an electric storage resource such as a battery, can provide electricity when the renewable fuel is not available, but that generation comes from the storage resource, not the intermittent resource. As discussed later below, hybrid resources are a key tool to manage the integration of intermittent resources.

  4. California ISO. What the duck curve tells us about managing a green grid, 2016, available at https://www.caiso.com/Documents/FlexibleResourcesHelpRenewables_FastFacts.pdf.

  5. Note that in most cases, ISO/RTO dispatch signals are provided electronically.

  6. • New York Independent System Operator. Integrating public policy: a wholesale market assessment of the impact of 50% renewable generation, 2017, at 8. This paper explains some of the operational issues NYISO projects operators will encounter as the penetration of renewable generation increases over time.

  7. New York Independent System Operator. Market design concepts to prepare, for significant renewable generation, ancillary services shortage pricing market design concept proposal, 2018.

  8. See Enhanced Price Formation in Reserve Markets of PJM Interconnection, L.L.C., Docket No. ER19-1486-000 (filed Mar. 29, 2019) and Enhanced Price Formation in Reserve Markets of PJM Interconnection, L.L.C., Docket No. EL19-58-000 (filed Mar. 29, 2019).

  9. Midcontinent Independent System Operator, Inc. order conditionally accepting tariff revisions, 149 FERC 61,095, 2014

  10. Id. At P 7

  11. • California ISO, Department of Market Monitoring. Flexible ramping product uncertainty calculation and implementation issues, 2018, at 3. This paper from the CAISO internal market monitor explains in detail how the CAISO Flexible Ramping Product works, including how CAISO derives the demand curves for flexible capacity, which is based on an empirical distribution of recent forecast errors.

  12. California ISO. Day ahead market enhancements: updates to revised straw proposal, 2018.

  13. • California ISO, Department of Market Monitoring. Flexible ramping product uncertainty calculation and implementation issues, 2018, at 3–5, and 38. This paper from the CAISO internal market monitor explains in detail how the CAISO flexible ramping product works, including how CAISO derives the demand curves for flexible capacity, which is based on an empirical distribution of recent forecast errors.

  14. Potomac Economics. MISO independent market monitor quarterly report: winter 2019, 2019, at 32.

  15. Source: CAISO OASIS. In April 2019, the flex-down price was non-zero in 0.4% of the fifteen-minute market intervals in the EIM area and in 0.3% of intervals in the Arizona public service area. The average EIM area flex-up and flex down prices in the fifteen-minute market in April 2019 were $1.52/MWh and $0.14/MWh, respectively. Other areas of the EIM had non-zero flex-up and flex-down prices in fewer than 0.1% of the fifteen-minute market intervals in 2019.

  16. California Public Utilities Commission, The 2017 Resource Adequacy Report, 2018, at 5. On a month-ahead basis, jurisdictional load serving entities must demonstrate to the California Public Utility Commission that they have procured their monthly system and flexible resource adequacy obligation. For the months of July through December, those LSEs must demonstrate they have met their local resource adequacy obligation.

  17. See e.g., California ISO. Flexible Resource Criteria and Mus Offer Obligation – Phase 2, 2018, at 7–10.

  18. • Midcontinent ISO. Resource availability and need evaluation whitepaper, 2018, at 9. This whitepaper written by MISO staff explains some of the operational challenges MISO is experiencing due to, among other things, higher penetrations of intermittent resources. MISO staff proposes several market mechanisms, including a product to ensure that flexible capacity is available in the near-term, to enhance operator flexibility.

  19. See e.g., Electric Reliability Council of Texas, Nodal Protocol Revision Request Number 863 – Creation of ERCOT Contingency Reserve Service and Revisions to Responsive Reserve. These responses will typically be automatic.

  20. Most ISOs/RTOs already perform longer-term (e.g., seven days ahead) unit commitments for planning purposes but these commitments are generally for advisory purposes and not financially binding.

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Authors and Affiliations

  1. Concentric Energy Advisors, Washington, D.C., USA

    Emma Nicholson

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  1. Emma Nicholson
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Correspondence to Emma Nicholson.

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Conflict of Interest

Emma Nicholson, Ph.D., has received compensation from PJM Powers Group to write about the topic of ISO/RTO flexibility in Federal Energy Regulatory Commission Docket ER19-1486-000 in May 2019 through a consulting agreement.

Human and Animal Rights and Informed Consent

This article does not contain any studies with human or animal subjects performed by any of the authors.

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This article is part of the Topical Collection on Energy Markets

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Nicholson, E. Procuring Flexibility in Wholesale Electricity Markets. Curr Sustainable Renewable Energy Rep 6, 100–106 (2019). https://doi.org/10.1007/s40518-019-00133-4

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  • DOI: https://doi.org/10.1007/s40518-019-00133-4

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