SPP Flips the Switch on New Marketplace



Author: Velocity Suite ISO Data Analyst

ABB Helps Navigate the Integrated Marketplace

On March 1st the Southwest Power Pool (SPP) successfully launched its Integrated Marketplace, which includes updated methods for clearing and dispatching energy. The Integrated Marketplace is comprised of day-ahead processes, real time balancing mechanisms and congestion hedging. Reserves are now managed by the consolidated SPP balancing authority.

On March 1st the ABB teams were ready. Updated software on the desks of nMarket and Velocity Suite clients meant that they were also prepared and had the tools needed to navigate the new market. The start of the Integrated Marketplace was not without sparks. Cold weather presented early challenges to the footprint; however, the ABB team was in the front seat. Here’s a quick rundown of the first week of the market.

The cold weather moved into the SPP region shortly after the market launched, and temperatures started to fall during the evening of March 1st. These low temperatures meant demand was higher across the system as homes and businesses turned on heaters and hunkered down indoors. The chart below shows some of the low temperatures observed across the footprint- specifically on March 2nd, 3rd and 4th. Lincoln, Nebraska saw sustained temperatures hovering near zero for over a day. The low temperatures were present throughout the footprint – Fort Smith, Arkansas was below freezing and Oklahoma City saw temperatures below 20 degrees.

SPP Major Weather Stations2

Comparing these temperatures to last year, we can start to understand the impact that these temperatures could have on SPP market. Minimum temperatures over the first three days of the month were 10 to 15 degrees cooler than minimums from all of March of 2013.

SPP Major Weather Stations Data Grid

Temperatures were not the only items to stray from 2013 values. Gas prices across the US have been higher in 2014 compared to previous years. Extremely cold weather, which puts pressure on natural gas supply, almost became the norm for many markets. For example, average prices in New England have averaged above $150 / MWh for the first part of 2014 as a result of gas supply and prices. Even CAISO has seen gas shortage issues in Southern California. The graphic below illustrates this and demonstrates the price spikes observed at two major hubs (Demarc and ONEOK) during the winter of 2014 in SPP. The second spike, which occurred during the cold snap, primarily impacted the Demarc hub; however, general trends for all hubs in the region were higher.

ICE 10x Day Ahead Gas Indices2

These higher prices mean gas plants may have limited supply. If gas is available, plants may have to bid higher prices into the energy market to cover their higher cost to fuel the unit. And that is exactly what happened.

During the weather event, continually high prices were seen across the footprint. Most zones in SPP hit prices close to $200/MWh in the new day-ahead market. These prices lasted beyond the weather event as high gas prices and generator issues continued to strain supply. The graphic below summarizes these high prices- the highest peaks occurring during and immediately following the cold weather event.

SPP DAH Power Prices2

Equally interesting was the real time market. Real time balancing markets aren’t new in SPP- the Energy Imbalance Service (EIS) market was in place prior to March 1st. The process for clearing has been updated, though, and is now based on changes from the day-ahead process and reserve needs as well. Real time markets can be more volatile, especially when their intent is to balance differences between the results of day-ahead and actual. Looking at real time prices, we can see that a major system issue occurred on March 3rd that pushed prices across the grid close to $1,400/MWh as shown below.

SPP RT5AVG Power Prices2

We can look at the generation data to understand what causes prices to spike to these types of levels.

Hourly Generation by Fuel Type2

On March 3rd two generation changes occurred.

1) Wind generation (the light blue region) decreased considerably. At 6:00 AM on 3/3/2014 wind generation accounted for only 531MWs of power on the grid. This is only 25% of the 2,198MWs that were on the grid just 24 hours earlier. SPP indicated that the cold weather led to the icing of some wind farms, which was difficult to predict. An article summarizing this is located in the last section of this document.

Hourly Generation by Fuel Type inset

Looking at the wind forecast below for that same period and the hours leading up to March 2nd we can see the major gap between forecasted wind generation (Gray, Red and Blue lines) and actual wind generation (Yellow line).

SPP Hourly Wind Generation Forecast Vs Actual2

2) The second noted generation change is likely related to the first: more expensive peaking oil generators are turned on to make up for missing wind generation. These are the small red bars that appear in the graph. Oil is not cheap and it is, obviously, more expensive than wind where there is no fuel cost. But it is extremely beneficial to an electric grid. Oil units are quick to start and can respond to market issues in the real time.

All-in-all, it was an exciting first week of the market. Prices responded to grid conditions. Grid conditions were driven by the usual culprits- temperature, demand, fuel prices and generator availability. A week later the market has slowed down with Day-ahead prices trending between $20 and $60 and real time prices are nowhere near the extreme values seen just days before.

The ABB teams were ready and supporting the market as the events unfolded. Velocity Suite was ready on go-live date providing data to clients as the results were posted. New reports (many of them were used in the examples above) were available to support analysis of the new market. The ABB nMarket software for SPP underwent a technology uplift and was re-platformed for the launch of the new market. nMarket had been available throughout Market Trials and Parallel Operations to support testing and all new market activities for market participants in SPP. This includes a bid-to-bill transaction management platform for bidding, position management, DA and RT scheduling, dispatch, meter data management, shadow settlements, and reporting.

This won’t be the last market event in SPP. Summer is just around the corner and this could mean more high demand and high prices. SPP is also planning the Phase II enhancements to the new Integrated Marketplace, which includes the adoption of FERC Order 755 and modeling enhancements for combined cycle resources. The ABB teams are ready for action and we look forward to supporting the SPP market in the months and years to come.

If you want to learn more about this event from SPP, please click here.

If you want to learn more about Enterprise Software solutions around SPP (including nMarket and Velocity Suite)- please click here.

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