THE RATIONAL BUYER APPROACH FOR THE ACQUISITION OF CAPACITY-BASED ANCILLARY SERVICES Gianfranco Chicco George Gross Politecnico and University of Illinois di Torino Urbana-Champaign presentation at the Seventh International Workshop on Electric Power Control Centers May 25-28, 2003 Ortisei, Italy Gianfranco Chicco and George Gross, 2003 OUTLINE Prioritizable capacity-based ancillary services (PCAS) Independent Grid Operator (IGO) strategies for PCAS acquisition Overview of the rational buyer approach Proposed procedure for effective implementation Future work Page 1
TYPES OF CAPACITY-BASED ANCILLARY SERVICES (AS) service type frequency regulation load following reserves objective and nature of service track the load with the generation so as to maintain frequency excursions within a predefined band maintain balance with the load through the non-automatic response of the generating units to the IGO signals provide an option for energy through the unloaded capacity available within a specified response time service provision increase and decrease of unit output increase and decrease of unit output on- and offline resources PRIORITIZATION OF CAPACITY-BASED AS The capacity-based AS have specific time response requirements: for a t-minute response, the capacity must be fully operational within t minutes or, equivalently, the same quantity of load can be curtailed or shed within t minutes Capacity-based AS are prioritizable on the basis of the response times, with the highest priority associated with the shortest time and the lowest with the longest time A capacity-based AS usable for a response time t may also be used for any lower priority service with a required response time t > t Page 2
PRIORITIZABLE CAPACITY-BASED AS (PCAS) a 1 frequency control a 2 load following priority increases a 3 a 4 reserves with increasing response time requirements response time increases UNBUNDLED MARKETS forward markets s c h e d u l e congestion management as provision markets markets time line Page 3
IGO PCAS ACQUISITION The IGO holds a set of auctions for acquiring each PCAS competitively, for each hour of the day-ahead schedule All the sellers must submit their offers to provide PCAS for the day-ahead auctions auction for hour h PCAS a i clearing price price ρ i (h) demand clearing quantity capacity C i (h) SUBSTITUTABILITY OF PCAS The unused portion of the capacity offered for a higher priority PCAS may automatically be used for any lower priority PCAS without submitting additional offers Substitutability introduces a coupling effect among the auctions for the different PCAS for a given hour In conceptual terms, substitutability modifies the and/or the demand for each PCAS Page 4
BASIC APPROACHES TO PCAS ACQUISITION Separable sequential auctions Sequential auctions with substitutability Rational buyer approach SEPARABLE SEQUENTIAL AUCTIONS FOR HOUR h PCAS acquisition for a 1, a 2 and a 3 with: demand r 1 (h) demand r i (h) fixed for each a i three separate auctions C 1 (h) demand r 2 (h) ρ 3 (h) PCAS a 3 demand r 3 (h) C 2 (h) C 3 (h) Page 5
a 1, a 2 and a 3 unsuccessful offers for PCAS a i are automatically used to modify the for PCAS a i +1 SEQUENTIAL AUCTIONS WITH SUBSTITUTABILITY FOR HOUR h PCAS acquisition for demand r 2 (h) C 2 (h) demand r 1 (h) C 1 (h) with initial offers for to be modified using the unsuccessful offers for PCAS acquisition for a 1, a 2 and a 3 unsuccessful offers for are automatically used to modify the for SEQUENTIAL AUCTIONS WITH SUBSTITUTABILITY FOR HOUR h demand r 2 (h) C 2 (h) demand r 1 (h) C 1 (h) modified for unsuccessful offers for Page 6
SEQUENTIAL AUCTIONS WITH SUBSTITUTABILITY FOR HOUR h PCAS acquisition for a 1, a 2 and a 3 unsuccessful offers for are automatically used to modify the for PCAS a 3 demand r 2 (h) C 2 (h) ρ 3 (h) PCAS a 3 demand r 1 (h) C 1 (h) C 3 (h) demand r 3 (h) THE RATIONAL BUYER APPROACH Basic premise: the IGO may overbuy a higher priority PCAS to substitute for a lower priority PCAS and to reduce consequently the demand for lower priority PCAS The acquisition process requires a minimization of the IGO acquisition costs The acquisition process can no longer be solved with separate sequential auctions The auctions for different PCAS for the same hour h are strongly coupled The minimization problem changes to a combinatorial optimization Page 7
PROBLEM FORMULATION The objective is the minimization of the IGO acquisition costs for N PCAS in the hour h The constraints considered include the requirement that sufficient cumulative capacity be offered to cover the cumulative demand of the N PCAS the incorporation of transmission considerations through a limiting capacity that explicitly takes into account transfer capability limitations to ensure no congestion in hour h ramp rate limits PROBLEM SOLUTION PROCEDURE The offer prices are used as the discrete variables (DV) in a discrete programming approach For each PCAS, the clearing price must be the value of one of the DV for that PCAS The number of DV considered is reduced by computing upper/lower bounds for each PCAS detecting infeasible DV combinations identifying the avoidable calculations leading to IGO-incurred costs higher than those of already evaluated DV combinations The resulting linear program is solved for the remaining DV combinations Page 8
THE RATIONAL BUYER AUCTION FOR HOUR h Example with three PCAS the limiting capacities affect the accepted offers accepted offers forming the clearing capacity C i (h) for PCAS a i demand r 1 (h)=150 demand r 2 (h)=120 PCAS a 3 demand r 3 (h)=200 ρ 3 (h) FUTURE WORK Study the uses of the PCAS solution for market monitoring applications Improve the PCAS acquisition process by formulation of optimal offers by sellers investigation of the impacts of geographic diversity in the provision of PCAS study of the use of joint offer strategies in the forward energy and AS markets analysis of the impacts of demand participation Page 9