Comparison of Installed Capacity (ICAP) & Unforced Capacity (UCAP) Capacity Value Calculation Methods Eligibility WG – Meeting #3 July 4, 2017
Overview The following materials provide an examination of the question: Should we use Unforced Capacity (UCAP) MW or Installed Capacity (ICAP) MW to represent capacity when determining capacity values? Outline • High level definition of ICAP & UCAP • Jurisdictional Review of ICAP & UCAP methodologies for Thermal Resources • Example UCAP calculation for Thermal Resources • Outage rate impact on UCAP calculations • Implications of ICAP and UCAP • Jurisdictional review of ICAP & UCAP methodologies for Variable Resources • Example ICAP/UCAP calculation for Variable Resource • Summary of options relative to criteria Public 1
High Level Definitions Installed Capacity (ICAP) – represents physical generating capacity adjusted for ambient weather conditions. Unforced Capacity (UCAP) – represents the percentage of ICAP available after a unit’s forced outage rate is taken into account . Specific Examples for PJM Installed Capacity (ICAP) – A MW value based on the summer net dependable capability of a unit and within the capacity interconnection right limits of the bus to which it is connected. Unforced Capacity (UCAP) - The MW value of a capacity resource in the PJM Capacity Market. For a generating unit, the unforced capacity value is equal to the installed capacity of the unit multiplied by (1- unit's EFORd). Equivalent Demand Forced Outage Rate (EFORd) - A measure of the probability that generating unit will not be available due to a forced outage or forced derating when there is a demand on the unit to generate Public 2
Jurisdictional Review: Capacity Contribution Methodologies for Thermal Generation Implementation (with capacity basis for controllable facilities) Market Methodology Conceptual Overview of Methodology PJM UCAP UCAP= ICAP* (1-EFORd) NYISO UCAP UCAP= DMNC* (1-EFORd) MISO UCAP UCAP= GVTC*(1-XEFORd) Implementation (with capacity basis for controllable facilities) Market Methodology Conceptual Overview of Methodology G Br De-rating Factor De-rated Capacity = Connection Capacity X De-rating Factor Ireland De-rating Factor Marginal category de-rating factor Implementation (with capacity basis for controllable facilities) Market Methodology Conceptual Overview of Methodology ISO-NE ICAP Seasonal Claimed Capability Methodologies are From the PJM,NYISO, MISO market manuals. Public 3 Definition for terms on this slide are found in Appendix 2
Example: UCAP Calculation for a Thermal Resource Example: • Gas Combined Cycle with a Nameplate capacity modified for seasonal nameplate capacity of 500 MW ambient limitations (ICAP). Example:If ambient temprature reduction is • Seasonal Net Dependable Nameplate capacity 10 % of the nameplate capacity. (ICAP) accounts for the impact of rating = 500 MW Ex. ambient weather conditions ICAP = 500 MW * 90% = 450 MW (Summer) on unit performance • Unforced Capacity (UCAP) is the ICAP value of the unit reduced UCAP= ICAP * (1-EFORd) by its recent actual forced outage Forcedoutage rate = 12% rate during system demand UCAP = ICAP * (1- forced outage rate) Ex. If UCAP = 450 MW * (1- 0.12) = 396 MW periods (EFORd) • Generator will able to offer 396 UCAP MW into the capacity auction Public 4
Example: Impact of Differing Outage Rates on UCAP Calculation Units with the same nameplate capacity and ambient temperature impacts can have differing UCAP values due to different forced outage rates. Under an ICAP methodology, a unit with a higher forced outage rate will not be differentiated from one with a lower rate. As such, the same ICAP does not necessarily equate to the same contribution to system reliability. Nameplate capacity modified for seasonal Nameplate capacity modified for ambient limitations (ICAP). seasonal ambient limitations (ICAP). Example: If ambient temperature reduction is Example: If ambient temperature 10 % of the nameplate capacity. reduction is 10 % of the nameplate Nameplate capacity Nameplate capacity Ex. capacity. rating = 500 MW ICAP = 500 MW * 90% = 450 MW rating = 500 MW Ex. ICAP = 500 MW * 90% = 450 MW UCAP= ICAP * (1-EFORd) Forced outage rate = 12% UCAP=ICAP * (1- EFORd) UCAP = ICAP * (1- forced outage rate) Outage rate = 30% Ex. If UCAP = 450 MW * (1- 0.12) = 396 MW UCAP = ICAP * (1- forced outage rate) Ex. if UCAP = 450 MW * (1- 0.3) = 315 MW Public 5
ICAP Methodology Implications By not accounting for outage rates, the ICAP methodology could result in a phenomenon known as adverse selection whereby resources with lower performance and reliability clear the capacity market since such characteristics would enable resources to have lower capacity costs (by saving on plant maintenance). These lower performing but cheaper resources may displace other potential suppliers with better performing resources that would do more to ensure system reliability. ICAP methodology would put more emphasis on performance measurement & penalty mechanisms to incent higher preforming units and ensure acceptable reliability. Nameplate capacity modified for seasonal Outage Rate ambient limitations Outage Rate (ICAP). Outage Rate Outage Rate UCAP MW UCAP MW available available UCAP MW for auction for auction available UCAP MW for auction available for auction Public 6
Implication: ICAP vs. UCAP Since ICAP does not account for failure probabilities for individual generators – penalties for non-performance might need to be significantly larger to result in the same level of system reliability. ICAP Higher penalties for Non- Performance Methodology UCAP Moderate penalties for Methodology Non- Performance Public 7
UCAP Methodology Considerations The UCAP methodology: • UCAP methodology • Provides greater assurance of reliability may create stronger • Reduces risk of paying a premium for under alignment between performing resources capacity payments and • Allows direct comparison of the reliability value resource performance. across a wide variety of resources • Provides better alignment with a ‘Pay-for- Performance’ approach • Solid performance • Allows the clearing price to be established based during periods of on resources that have performed well in the past and increases the value of performing MWs. system demand would • Bolsters auction price signals for new build when result in a higher UCAP needed eligibility for • Provides resource owners’ the relevant lost subsequent auctions . opportunity data necessary when making investment decisions to improve generator performance. Slide content is based on materials presented by Dominion in addressing ISO-NE’s Performance Incentives/ Markets Committee Meeting/ May, 2013 Public 8
Example Calculation for a Variable Resource • No jurisdiction applies nameplate In PJM, the capacity rating for wind capacity to variable resources generators is their average capacity factor Name plate capacity for hours ending 3:00 PM to 6:00 PM for rating = 100 MW the month of June , July and August • Generally, UCAP = ICAP for variable resources In ISO-NE a summer capacity credit is used for wind generation that participate in the capacity auction. • For variable generation the UCAP is The average of median net output from 2:00 PM to evaluated based on the generator's 6:00 PM for June to September in previous five years capacity credit (or) its actual historical generation during peak In NYISO wind generation capacity credit is hours determined by their capacity factor between 2:00 PM and 6 PM during June, July and August • Example: • PJM’s ICAP accounts for wind’s historical operating data during summer peak hours • Example: Wind Farm with a nameplate capacity Outage rate = 0% UCAP = ICAP * (1- forced of 100 MW outage rate) UCAP = 5 MW * (1- 0) = 5 MW • In PJM the outage rate (EFORd) of solar and wind resources is set to zero, since outage information is not collected. (ICAP=UCAP) Public 9
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