Decision on bid cost recovery and variable energy resource - PowerPoint PPT Presentation

Decision on bid cost recovery and variable energy resource settlement Greg Cook Director, Market and Infrastructure Policy Board of Governors Meeting General Session July 16, 2015 ISO Confidential

This initiative provides further enhancements to FERC Order 764 and bid cost recovery changes from 2014. • Item 1 - modify existing financial settlement rules to ensure fair treatment of variable energy renewable resources that provide economic bids to the ISO market. • Item 2 - minor enhancements to a bid cost recovery metric calculation used in settlement of all resources. Slide 2 ISO Confidential

Item 1 - Settlement modifications for economically bidding variable energy resources Existing Proposed Variable Residual Variable Residual energy imbalance energy imbalance resource energy settled resource energy settled output at $0/MWh bid output at $40/MWh following price rather than following LMP forecast $40/MWh LMP forecast LMP = $40/MWh Bid = $0/MWh LMP = $40/MWh Bid = $0/MWh Hour 1 Hour 2 Hour 1 Hour 2 Slide 3 ISO Confidential

Proposal modifies the settlement of variable energy resources to remove disincentives for economic bids. • Pay residual imbalance energy resulting from variations in a resource’s intermittent energy source the locational marginal price. – Not subject to mitigation measures that apply to uninstructed deviations. • Continue to pay the resource’s bid price for residual imbalance energy resulting from an ISO dispatch based on its economic bid. – Subject to uninstructed deviation mitigation measures. Slide 4 ISO Confidential

Item 2 - Minor modifications to bid cost recovery metric to ensure mitigation is consistent with the original policy intent. • Metric is applied to all resources to ensure that a resource’s bid cost recovery payment is based on costs for energy that it actually delivered. • Management proposes minor enhancements to the metric so that it accurately calculates whether mitigation is appropriate. – Avoids anomalous mitigation in instances when a resource is fully responding to ISO dispatch. – Avoids mitigation when a resource is producing energy above its minimum operating level. Slide 5 ISO Confidential

Stakeholders support the proposal. • Item 1 - Stakeholders support the proposal but some would like the ISO to consider a more comprehensive review of energy classifications used for financial settlement of variable energy resources. • Item 2 - Stakeholders unanimously support the modifications to the day-ahead metered energy adjustment factor. Slide 6 ISO Confidential

Management recommends the Board approve the proposal which further refines existing policy. • Proposed refinements ensure variable energy renewable resources are equitably settled and further incentivizes economic bids to the ISO market. • Minor enhancements to metric that ensure bid cost recovery is only paid on energy actually delivered. Slide 7 ISO Confidential