ELECTIVE 1

Introduction

Market Overview in Electric Power Systems

Market Structure and
Operation

Market Overview
 Restructuring:

Introduction
Decomposition of the three components of the
electric power industry
Market Structure and
Operation
Separation of transmission ownership from
transmission control
Market Overview

Creation of a competitive electricity market

 Markets Strategies:

Introduction
Reduce the cost of electricity utilization (primary
Market Structure and motive for restructuring)
Operation

Enhance the security of power system through

Market Overview
economical means
 Market Structure

Introduction
Market Operators: ISO, PX

Market Structure and

Market Participants: Genco, Transco, Disco,
Operation Retailco, Aggregator, Marketer, Broker, Customer

Market Overview
 Overview of the Market
Information Forecasting
Introduction
Two sets of forecasted information:
Market Structure and
Operation • Load
• Electricity price
Market Overview
 Load Forecasting

Introduction
Basis for price forecasting
Most important price driver
Market Structure and
Operation Load forecasting applications:
Unit Commitment,
Market Overview
Power System Security,
Generation Reserve Allocation,
Market Behavior.
 Load Forecasting

Introduction

Market Structure and

Operation

Market Overview
 Load Forecasting

Introduction

Market Structure and

Operation

Market Overview
 Load Forecasting

2400
Forecast
Introduction 2200
Actual
2000

Market Structure and 1800

Load (MW)

Operation
1600

1400

Market Overview 1200

1000

800
0 100 200 300 400 500 600 700
Time (Hour)
 Price Forecasting

Price forecasting is of utmost importance to GENCOs. The price

signal reflects the market situation and would lead every action
Introduction that GENCOs may take.

Market Structure and

Operation

Market Overview
 Price Forecasting

Actual Price
Introduction
Price ($/MWh) 150 Forecasted Price

Market Structure and 100

Operation

Market Overview 50

0
0 200 400 600 800
Time (Hour)
 Price Forecasting
200

Introduction Price ($/MWh) 150

Market Structure and 100

Operation

50
Market Overview

0
1 2 3 4 5
4
Load (MW) x 10
 Price Forecasting

Simulation of the actual system dispatch with system operating

requirements and constraints can provide insight on price.
Introduction

Potential price drivers such as line limits, line outages,

Market Structure and generator outages, load patterns and bidding patterns can be
Operation
identified through sensitivity analysis.

Market Overview Probability Distribution

of Load Forecast
Probability Distribution
ANN of Price Forecast

Others
 Unit Commitment in Markets

Introduction
In California and New England, GENCOs will run the unit
commitment, which is called price based unit commitment.

Market Structure and

Operation
In PJM and New York, ISO runs the transmission security and
voltage constrained unit commitment, which is called security
Market Overview constrained unit commitment.
 Unit Commitment in Markets

PBUC
Introduction

nm
Market Structure and mn
Operation rm
mr
gm
Market Overview mg
m0

P0 P R N
 Arbitrage in Electricity Markets

Introduction
The usage of arbitrage includes any activity that attempts to buy a
relatively under-priced commodity and to sell a similar and
relatively overpriced commodity for profit.
Market Structure and
Operation

Emission No-Arbitrage Arbitrage Arbitrage Amount

Arbitrage Strategy
Price ($/Ton) Profit ($) Profit ($) (Ton)
Market Overview
0.1 200003 241895 Purchase 33.50
1 200003 219636 Purchase 15.00
2 200003 207427 Purchase 5.00
3 200003 202427 Purchase 5.00
4 200003 200003 No Trades 0.00
5 200003 202404 Sale 7.50
 Market Power and Monitoring
Uncertainty and the competitiveness of the market: gaming
strategy is an indispensable tool for GENCOs.
Introduction

Identify non-competitive situations in restructured energy

Market Structure and marketplaces
Operation
Provide support for minimizing risks involved in price decisions in
restructured energy marketplaces
Market Overview
 Asset Valuation / Risk Management
Asset valuation and risk management requires PBUC, arbitrage
and gaming.
Introduction

Market Structure and

Operation

Market Overview
 Asset Valuation / Risk Management

Introduction
FOR Mean VaR (95%) VaR (90%)
0 116442.59 109120.65 110832.63
0.01 115284.07 108827.83 110551.38
Market Structure and
0.02 114139.77 108230.48 110289.98
Operation 0.03 112992.06 107785.6 110060.49
0.04 111854.63 107200.64 109811.18
0.05 110746.49 104180.11 109288.78
Market Overview 0.06 109674.48 0 108932.81
0.07 108596.06 0 108426.52
0.08 107503.33 0 107903.03
0.09 106451.64 0 107376.37
0.1 105345.02 0 105725.45
 Ancillary Services Auction

Spinning Non-Spinning Replacement

Regulation
Introduction Reserve Reserve Reserve

Social cost minimization

Market Structure and
Operation Objective

Procurement cost minimization

Market Overview
Pay-as-bid pricing
Settlement
rule Marginal Pricing
Uniform pricing Demand substitution pricing
Substitution pricing
Supply substitution pricing
 Ancillary Services Auction

Introduction Non-Spinning Replacement

Reserve Reserve
Spinning Supplemental
Reserve Energy
Market Structure and
Operation Uninstructed
Deviation Energy
Imbalance
AGC Real-Time Auction
Market Overview Instructed
Deviation
 Transmission Pricing

• meet revenue expectations,

Introduction • promote an efficient operation of electricity markets,
• encourage investment in generation and transmission,
Market Structure and
• reimburse owners of transmission assets adequately.
Operation

Market Overview