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Energy and Ancillary Service Markets and Market Designs

Our market simulation model, Power System Optimizer® (PSO), is highly customizable to realistically simulate a broad range of proposed energy and ancillary service market designs under a broad range of system conditions, including under high-renewable scenarios.

Customizations we regularly employ include nodal or zonal transmission representations, different settlement horizons, forecast uncertainty that is resolved over time, and different types of ancillary service products.  We can model up and down reserves of different types, quality hierarchy among reserves for procurement and replacement (additional higher quality products can be procured to replace lower quality products), and different reserves activation times from initial call. 

This enables us to evaluate the impacts of implementing new reserve products or changing market settlement periods.  For example, we can model the impacts of shortening real-time settlement intervals from one hour to five minutes.  We can also include additional market settlements beyond the traditional day-ahead and real-time markets, such as intra-day cycles.  As markets integrate higher shares of renewable generation and storage assets, it will become increasingly important to introduce intra-day “look-ahead” market cycles.  We can capture the impacts of different load and renewables forecast uncertainties between day-ahead, intra-day, and real-time market settlements, to reflect real-world market conditions. For instance, the simulations can capture that the outcome of today’s real-time market directly affects tomorrow’s day-ahead market.

We also use the alternative PLEXOS model when requested by clients, typically directing their team’s operation of the model.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Energy and Ancillary Service Markets and Market Designs practice.

Benefit-cost analysis of ERCOT's proposed Future Ancillary Services design

For the Electric Reliability Council of Texas (ERCOT), we evaluated the benefits of its proposal to unbundle ancillary services, enable broader participation by load resources and new technologies, and tune its procurement amounts to system conditions. We worked with ERCOT staff to assess each ancillary service and how generation, load resources, and new technologies could participate. We also directed their simulation of the market using PLEXOS, and evaluated other benefits outside of the model.

Simulation of marginal losses implementation in ERCOT

For a group of market participants in Texas, we estimated the impacts of implementing marginal losses in the ERCOT market on system production costs, transmission losses, LMPs, load payments, and generator revenues. We simulated the ERCOT power system using PSO and calibrated the model status quo model to recent generation and load patterns. The study results were made public in a proceeding before the Texas Public Utility Commission.

Congestion revenue rights analysis within CAISO

For a California utility, we developed and ran a PSO model of the entire Western Electricity Coordinating Council (WECC) to capture the expected congestion patterns within the California Independent System Operator (CAISO) for the next year. We provided scenario analysis on high and low gas prices, high and low hydro conditions, and high and low load forecasts to capture possible deviations from the expected market conditions. Our final recommendations to the client were on congestion revenue rights positions to buy to hedge against congestion risk in the market.

Battery storage in PJM's real-time energy and ancillary services markets

For a potential investor in battery storage technology, Brattle experts analyzed PJM’s real-time market participation rules for storage.  We developed a real-time energy and ancillary service bidding strategy that the asset owner could employ to nearly optimize storage operations, given expectations for prices and battery operations and constraints looking forward several hours. Our analysis estimates the net revenues that storage devices of various efficiencies and durations could earn by employing optimal bidding strategies.  We also identified changes in PJM’s real-time bid/offer rules that PJM would have to implement to fully enable optimal battery utilization from a system-wide perspective.  Finally, we estimated the revenues that storage devices of different configurations could earn in PJM’s capacity market, assessed the risk of performance penalties, and identified capacity market design modification that would be necessary to access the capacity value of storage resources.

Implications of market reforms in an RTO

For an RTO, Brattle experts evaluated the effects of coal retirements and increasing wind penetrations on resource adequacy and sub-hourly system performance. Our analysis included probabilistic simulations of several resource adequacy metrics across varied reserve margins and wind penetrations. We analyzed the ability of an energy-only market design to attract new entry and then found the resulting equilibrium reserve margin and level of resource adequacy. We simulated the implications of proposed market reforms on resource adequacy and operations, including increasing energy market price caps, capacity market reforms, and new ancillary services.

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