Ancillary Service market

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

6/15/2012 Vijay Menghani, Joint Chief (Engg.) CERC

Agenda

• Need of the hour- Responsibility of
Regulator:
• Ancillary Services
• Market Design and operation
• Concerns and Resolution
• Case Study on settlement mechanism.


Electric 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.


Four 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.


Four Pillars of market operation

Past experience: Overlay Account in NREB
Delhi as Load Serving Entity using UI Mechanism as
Ancillary Services


Ancillary 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


Ancillary Services : Statutory Provisions
Indian Electricity Grid Code, 2010- Definition 2 (1) b
Ancillary Services means in relation to power system ( or
grid) operation , the services necessary to support the power
system ( or grid) operation in maintaining power quality ,
reliability and security of the grid, eg active power support for
load following, reactive power support, black start, etc.
Objective of IEGC: Regulation 1.2
Facilitation of power market and ancillary Service by defining a
common basis of operation of the ISTS , applicable to all the
users of the ISTS.
Regulation 2.3.2(g) – Ancillary service an exclusive function of
RLDCs.
UI Regulation 11 (1) (b) UI pool account shall be used for
providing Ancillary Services


What 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.


Role 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.


Variability and Uncertainty: Few
Examples-Tamilnadu


Variability and Uncertainty: Few
Examples-Tamil Nadu


16.01.2012 Wind Schedule(Forecast) Vs Actual With
Frequency-Golida GFL 50 MW
Schedule Actual freq
35.00 50.80

30.00
50.60
MWh 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


Renewable 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.


Frequency 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.


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


Objectives 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


Role 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.


T-20 Excitement: Will it happen today
Draft
Regulation
preparation
Oct,2012

Petition Ancillary Concept
Paper
Oct,2011 Service April,2013

Approach
Paper
June,2010


Proposed 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


Design 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)


Load 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.


Concern 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


Central 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.


Case 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.


Frequency on 28.9.2011
freq freq_new
49.9

49.8 Ancilliary 250
MW at 62nd
49.7 block,

49.6

49.5

49.4

49.3 Freq
below
49.2 49.5 Hz
for more
49.1 than 2
blocks
49
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96
Time Block


Ancilliary Power Economics on 28.9.2011
Saving in UI ( Rs. Lakh) Ancilliary Power Cost ( Rs. Lakh) Net saving ( Rs. Lakh)
199.71
200.00

180.00

160.00

140.00
124.80
120.00

100.00

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


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


Issues : 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


What 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


Path 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


Process should not be seen as Regulator or System
Let us try Operator driven but need to be explained as an effort
toward better and reliable power supply for people .


Thank You
Vijay Menghani
Joint Chief(Engg.), CERC
vmenghani@cercind.gov.in
menghaniv@gmail.com
• All views expressed here are personal opinion of the
presenter.


References:
• 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.


Dynamic 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


Agenda 2013 – Second Quarter
• Congestion Procedure Amendment
• Grid Code Amendment
• Modification in UI Pricing Mechanism
• Amendments in relevant regulations to facilitate Ancillary
Power market Regulation


Market 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


Market 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


Market 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


Market 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


Impact of Regulatory Intervention on Frequency in NEW Grid
(1998 onwards)

Frequency Excursions reduced

Ancillary Service market

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