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Ancillary Service market


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Ancillary Service market

  1. 1. 04/10/2013 Vijay Menghani, Joint Chief (Engg.) CERC ANCILLARY SERVICE MARKET Regulatory Perspective in Indian Context Possible settlement Mechanism- A Case Study of Norhern Region Vijay Menghani, Joint Chief(Engg.) CERC
  2. 2. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCAgenda• Need of the hour- Responsibility of Regulator:• Ancillary Services• Market Design and operation• Concerns and Resolution• Case Study on settlement mechanism.
  3. 3. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCElectric Power System Operation• Two unique requirements which must be continuously and exactly satisfied order to maintain overall system stability and reliability: 1. Maintain a constant balance between generation and load( No storage) 2.Adjust generation(load) to manage power flows within the constraints of individual transmission facilities.
  4. 4. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCFour consequences• Prices are inherently volatile.• System operation and transmission are communal and must be regulated.• Current operations are restricted by precaution of avoiding disturbance.• Response has values.
  5. 5. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCFour Pillars of market operation Past experience: Overlay Account in NREB Delhi as Load Serving Entity using UI Mechanism as Ancillary Services
  6. 6. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCAncillary Services• “Necessary to support the transmission of electric power from the seller to purchaser given the obligation of balancing areas and transmitting utilities and transmitting utilities within these balancing areas to maintaining reliable operations of the interconnected transmission system.” FERC order 888,889,2000
  7. 7. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCAncillary Services : Statutory ProvisionsIndian Electricity Grid Code, 2010- Definition 2 (1) b Ancillary Services means in relation to power system ( orgrid) operation , the services necessary to support the powersystem ( or grid) operation in maintaining power quality ,reliability and security of the grid, eg active power support forload following, reactive power support, black start, etc. Objective of IEGC: Regulation 1.2Facilitation of power market and ancillary Service by defining acommon basis of operation of the ISTS , applicable to all theusers of the ISTS.Regulation 2.3.2(g) – Ancillary service an exclusive function ofRLDCs.UI Regulation 11 (1) (b) UI pool account shall be used forproviding Ancillary Services
  8. 8. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCWhat is important• What is important to realize the need for and VALUE of Capacity and the Ancillary services.• This basic must not lost in the implementation detail and market rules.• Energy is the still the basic commodity that is of interest to users.• Everything else simply supports the delivery of energy- But without effective delivery no transaction completed as per expectation.
  9. 9. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCRole of Regulator• Grid Disturbance brought Line flows under focus which can be controlled only with Scheduled Power Flows.• Increasing contribution of Renewables require urgent introduction.• Day ahead Power market- Unsold Quantity• Phasing out UI Mechanism require need to develop other avenues for Real Time balancing• Tightening of frequency band can succeed with availability of Ancillary market.• Market Development-New product to diversify risk for Generator and options for Consumers.• Intra day Market need to develop.
  10. 10. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCVariability and Uncertainty: FewExamples-Tamilnadu
  11. 11. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCVariability and Uncertainty: FewExamples-Tamil Nadu
  12. 12. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC 16.01.2012 Wind Schedule(Forecast) Vs Actual With Frequency-Golida GFL 50 MW Schedule Actual freq 35.00 50.80 30.00 50.60MWh Schedule and Actual 50.40 25.00 50.20 Frequency 20.00 50.00 15.00 49.80 49.60 10.00 49.40 5.00 49.20 0.00 49.00 3 9 6 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 Time block Time block
  13. 13. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCRenewable Tamilnadu Dilemma• Wind ramp Up – UI rate less than Feed–In tariff• Other states costly generation not back down : need of Down Regulation as Ancilliary Service?• Wind quickly ramp down – TN need to draw under UI to balance load generation – UI rates high• Load generation balance not the sole responsibility of home state.• Control area need to be wider and Ancillary Services need to be included.
  14. 14. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCFrequency range Tightening • Frequency Range tightening • 2002 : 49.0- 50.5 Hz • 2009 : 49.2- 50.3 Hz • 2010 : 49.5- 50.3 Hz • 2012 : 49.7- 50.2 Hz • Primary Response Provider resist mandatory FGMO/RGMO due to wide variations . • Grid Code Commercial Mechanism for wind +/-30% band not taking off due to uncertain frequency and UI liability.
  15. 15. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Power : Cost, Price or value ?• Public equating power sector with Wheat, ample availability still people hungry.• Gujarat became self sufficient in Energy . Want to sell energy outside, no buyer around Rs 4 /kWh.• Discom financial not allowing power purchase in market as cash and carry system.• Unscheduled power –Deferred /litigated payment.• Quality of power suffered –impacting life of Generator- Long Term loss for short term gain.• Most Important : Due to unscheduled power flows Grid security issues due to line loading crossing stability limits
  16. 16. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCObjectives of Ancillary Power• Harness leftover Generation at Optimum Cost• Help the grid – Improved frequency profile• Opportunity for the Generators• Reduce load shedding• Alleviate congestion in transmission to some extent• Opportunity for peakers and pumped storage plants• Renewable Generation • Handling Variation thereby facilitating integration
  17. 17. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCRole of System Operator• NLDC,RLDC SLDC assigned role of economic and efficient operation of system.ES Act,2003-28 (3)-(a)• be responsible for optimum scheduling and dispatch of electricity within the region, in accordance with the contracts entered into with licensee or the generating companies operating in the region.• ‘Contracts between whom’ need to be defined in case of Ancillary market as System operator can not take commercial risk.EA 2003, Section 27 (2):• “Provided further that no Regional Load Despatch Centre shall engage in the business of generation of electricity or trading in electricity.”• Ancillary market role is not trading of power as sale and purchase at profit is not involved.
  18. 18. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCT-20 Excitement: Will it happen today Draft Regulation preparation Oct,2012 Petition Ancillary Concept Paper Oct,2011 Service April,2013 Approach Paper June,2010
  19. 19. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCProposed Ancillary Services• Load Generation Balance Services(LGBS)- Immediate Future• Network Control Ancillary Services (NCAS) • Voltage Control Ancillary Services• System Restart Ancillary Services(SRAS)-Black start
  20. 20. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCDesign and proposed Structure• Eligibility Criteria.• Standing Clearance/NOC.• Market Platform• Bidding and Price Discovery- Upper Limits• Despatch of FSAS bids in real time • Trigger Point • Despatch Certainty Duration • Exit and Pre mature Exit• Scheduling.• Accounting and Settlement- Deviation penalty.• Payment from UI pool or To be booked to overdrawing entities in proportion to Over drawl ( Causer to pay)• No Commitment charges.( ??? Would player come)
  21. 21. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCLoad generation Balance Services• Undespatched Surplus• Peaking Gas Stations• Pumped Storage Plants• Benefits:• Resource Optimization• Reducing Peaking Shortage.• Powerful signal for investment in generation Co- optimization of diverse sources and risk mitigation by providing alternative revenue streams.
  22. 22. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCConcern and resolution• Affordability.• UI and Ancillary Power• Can it work in shortage scenario.• Concept and Capacity Building.• Automatic trigger point define through Regulation• Operational Requirement and information sharing
  23. 23. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCCentral Advisory Committee-14.3.2012• There was a general consensus on the need for introduction of ancillary services in India for greater security and reliability of grid operation.• Introduction of ancillary service is expected to reduce dependence on UI which should be resorted to only as a last mile imbalance settlement mechanism.• The framework should be explained in greater detail to the stakeholders before launching it.• Care should be taken to ensure that there is no imposition of high cost power on the consumers as a result of introduction of ancillary services. Only those who are responsible for overdrawal should be made to pay for cost of ancillary services.
  24. 24. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCCase Study• 28.9.2011 in NEW GRID.• NEW grid faced problem of low frequency during 22.9.2011- 5.10.2011.• Assumption of study:• Power Number of NEW Grid during evening peak was considered as 2500 MW/Hz.. 250 MW power is available in Power Exchange at Rs 9/kWh i.e Rs 1 more than maximum Market Clearing price on 28.9.2011.• Cost of power purchase allocated to overdrawing entities in ratio of overdrwal over a day .• Sensitivity Analysis with price of Rs 9,10,11,12,13 per kWh was done and it was found that even at these price level this is Win- Win Situation.• Trigger : Frequency touching 49.5 Hz for more than two blocks.• Within 2 time block Ancillary Power support available.
  25. 25. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Frequency on 28.9.2011 freq freq_new49.949.8 Ancilliary 250 MW at 62nd49.7 block,49.649.549.449.3 Freq below49.2 49.5 Hz for more49.1 than 2 blocks 49 0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 Time Block
  26. 26. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Ancilliary Power Economics on 28.9.2011 Saving in UI ( Rs. Lakh) Ancilliary Power Cost ( Rs. Lakh) Net saving ( Rs. Lakh) 199.71200.00180.00160.00140.00 124.80120.00100.00 80.00 74.91 67.88 60.00 39.36 40.00 34.54 28.52 24.89 17.4717.19 20.00 7.59 9.65 9.20 7.39 3.91 3.48 1.61 0.28 0.00 Haryana Himachal J&K Rajasthan Uttar Pradesh Uttarakhand
  27. 27. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC 80.0 Sensitivity Analysis Net Savings wrt Price of Ancilliary Power (Rs/kWh) 70.0 60.0 50.0 40.0 Rs. In lakhs 30.0 20.0 10.0 0.0 Haryana Himachal J&K Rajasthan Uttar Pradesh Uttarakhand -10.0 -20.0 P9 P10 P11 P12 P13
  28. 28. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCIssues : Explain, Understand, Convince.Resolve• Need of Ancillary Services.• Role of system Operator(Legal issues)• Forecasting• Payment Risk• Linkage to UI Ceiling Rates• Possible breach of PPAs.• Load Management by Utilities• Commitment Charge• Allocation of Ancillary Service Cost• Market Design- Sequential or Simultaneous
  29. 29. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCWhat is worrying Us:Monitoring of actual delivery of Ancillary Service ?How Ancillary market deviation would be accounted for? If settled in UI market chance of gaming or undue profits?Habitual Overdrawing state abdicating grid discipline and looking to Ancillary as their rescue
  30. 30. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCPath Forward• Discom Financial Position and Improvement in Tariff Determination.• Knowledge Sharing- Three years since first well research high quality Concept paper by POSOCO.• Not much progress- Need better concept selling- More diverse audience, business driver like traders and Generators need to be involved.• Consumer groups to be educated about real economic value and multiplier factor of Electricity-Gurgaon Society DG Set Expenses.• Volume and Price caps on power purchase by SERCs.• Prejudice- Perception- Participation-Process
  31. 31. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Process should not be seen as Regulator or SystemLet us try Operator driven but need to be explained as an effort toward better and reliable power supply for people .
  32. 32. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Thank You Vijay Menghani Joint Chief(Engg.), CERC• All views expressed here are personal opinion of the presenter.
  33. 33. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCReferences:• POSOCO Approach Paper on Ancillary Power In Indian Context ,June,2010.• ICF Presentation on Power Economics ,June,2009• Minutes of Central Advisory Committee Meeting dated 14.3.2012.• CERC Presentation in Central Advisory Committee Meeting dated 14.3.2012.• Ancillary Services: Technical and Commercial Insights,July 2007,Brendan Kirby.• Tamilnadu SLDC presentation in RRF Capacity Building workshop.
  34. 34. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCDynamic Regulatory Actions• 2000-Grid Code• 2002-03 settlement System• 2004-Open Access• 2008-Power Exchanges• 2009-UI Regulation and Revised IEGC• 2009- Congestion Management• 2009-Regulatory approval of Transmission• 2010- Regulation of Power Supply• 2010- Power Market Regulations• 2010-REC• 2011-Point of Connection charges• 2011- Standard of Performance of Transmission Licensees
  35. 35. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCAgenda 2013 – Second Quarter• Congestion Procedure Amendment• Grid Code Amendment• Modification in UI Pricing Mechanism• Amendments in relevant regulations to facilitate Ancillary Power market Regulation
  36. 36. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCMarket Design and Operation• Issues to be decided;• Type of market: Sequential , simultaneous, Simultaneous Co- optimization• Type of Product : 10 min, 30 min.• Time line: Opening and closing• Opportunity cost and switchover
  37. 37. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCMarket Design – Sequential• Ancillary Services Market is separate from the Energy Market• Separate Ancillary Services Markets with separate offers for each product• Execute in order – highest quality to lowest quality• Resulting in pricing problems, including Economic Withholding and Price Reversal
  38. 38. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCMarket Design – Simultaneous• Ancillary Service Market is separate from the Energy Market• One Ancillary Services Market with separate offers for each product• Simultaneously execute Ancillary Services Markets• Advantages gained over Sequential, but misses trade-offs between Energy and Ancillary Services
  39. 39. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERCMarket Design – Simultaneous Co-optimization• Combines Energy and Ancillary Services Markets • Single offer with Energy component and an Ancillary Services component • Ancillary Service component is an Availability Offer • Availability Offers may include costs plus a risk premium• Recognizes tradeoff between Energy and Ancillary Services• Makes generators indifferent to providing Energy or Ancillary Service
  40. 40. 6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC Impact of Regulatory Intervention on Frequency in NEW Grid (1998 onwards) Frequency Excursions reduced