October 2003
Electricity Markets
Regional Evolution
Randy Berry
([email protected])
1
Agenda



What we said last year
A look at how markets are evolving
Conclusions
2
Predictions from last year

Market monitoring improvements
Convergence of market rules and standardization
Increased transparency
Power system and market system coordination

To varying degrees, these predictions did occur



3
What we did not predict
4
Another thing we did not predict…
5
Design Principles
for Electricity Markets



Ensure Reliable Physical System Operation
Provide Choices for Market Participants
Facilitate Integrated Market & System Operation
– Physical system operation requirements are satisfied
(e.g. congestion management,security-constrained
MW dispatch targets)
– Market incentives directly match system dispatch
signals (e.g. natural incentive for following dispatch
instructions)
– Market-based Congestion Management
6
Implementation Principles
for Electricity Markets


Technology is important
Training, organization and participant
management
– Power system and Market system operators require
extensive training to manage new and larger systems
– Organization may change as they transition from
market development to market operations
– Active participant management to set achievable
schedules and capabilities
7
Common Designs Among
Converging Markets

Transmission Access
– Transmission rights are financial within market footprint
– Cross market / border coordination based on shared
physical usage on commercially significant flowgates

Energy Market
– Bilateral contracts are financial
– Physical resources can be self-scheduled or be
scheduled based on spot market bids

Congestion Management
– Simultaneous feasibility tests
– Locational marginal prices
8
Market Migration Implementation

Start with the Basics
– Maintain reliable system operation
– Allow limited range of market trading activities
– Target specific areas to gain market experiences

Recognize the maximum rate of change that can
be successfully introduced
– Financial models
– Physical operations

Build on experiences gained
– Understand what worked well & not well
– Understand why
9
ALSTOM’s RTOs/ISOs
FERC 2000
FERC 888/
889 NOPR
CAISO
CRR, Settlements
ERCOT
ISO NE
ERCOT
ISO NE
Real Time Market
PUCT
Market Monitoring
Fwd Market, FTR, TTSE
PJM
Market Monitoring
PJM
PJM
Forward
Market
FTR
OASIS
Real Time
Market
PJM
PJM
Market
Simulation
FTR - Options
PJM
DMT
SeTrans
SPP/MISO
SPP
NZ
PJM
MISO
NZ
AUSTRALIA
FTR
SeTrans
ALBERTA
AIMS
Market Simulation
POS MOS
E3
96
97
98
99
00
01
02
World wide experience and solutions
03
10
Electricity Market Terminology
11
Market Evolution – going from
here to there
RT Mkt
Single
Buyer
Pool
LMP
?
MCP
Tag/
TLR
Fwd
Mkt
OASIS
Zonal
Starting functions or
Transitional functions
Hedge
Anc
Serv
Mkt
Mon
Mkt
Sim
End state functions
(SMD?)
12
Diagram of Market Evolution
(PJM)
1998 - 2003
Pool
RT Mkt
OASIS
MCP
Hedge
Fwd
Mkt
Mkt
Mon
Mkt
Sim
LMP
Anc
Serv
Single
Buyer
Tag/
TLR
Zonal
Balance
13
Diagram of Market Evolution
(ISO-NE)
1998 - 2004
LMP
Pool
RT Mkt
OASIS
Hedge
Fwd
Mkt
Single
Buyer
Tag/
TLR
Zonal
Balance
Mkt
Sim
Mkt
Mon
Anc
Serv
14
Diagram of Market Evolution
(ERCOT)
2000 - 2004
Mkt
Sim
Zonal
Pool
OASIS
Retail
RT Mkt
Hedge
Anc
Serv
Single
Buyer
Mkt
Mon
Fwd
Mkt
LMP
Tag/
TLR
Balance
15
Diagram of Market Evolution
(MISO)
2002 - 2004
TAG/
TLR
OASIS
Mkt
Sim
RT Mkt
LMP
Hedge
Fwd
Mkt
Mkt
Mon
Anc
Serv
MCP
Single
Buyer
Pool
Zonal
Balance
16
Diagram of Market Evolution
(SPP) 2000 – 2001, 2003-2004
RT Mkt
Pool
OASIS
TLR
Fwd
Mkt
Mkt
Mon
Single
Buyer
Zonal
LMP
Anc
Serv
Hedge
Mkt
Sim
MCP
Balance
Retail
17
Migration considerations



Market systems evolve
IT should support evolution, not prevent it
The IT and applications must be chosen so that the path
of migration can be traveled
– You should not have to replace your system to migrate



The Market Participants will place increasing demands for
information and capabilities
Market Monitoring and Reliability will also place
increasing demands on the systems
Common functions change during the evolution of the
markets
– bidding, publishing, settlements, database
19
Conclusions




Market functionality is converging
Markets accommodate regional differences by
exception rather than the rule
Developing markets can leverage IT, applications,
market rules, business process and other existing
capabilities.
The industry is moving from a pioneering era to a
cultivating era.
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