Part 1: Optimal Generation Planning
This is the first of a four-part post on EIM benefits and how to maximize them.
While sitting on another trading floor waiting for EIM to go live recently, I took some time to consolidate my thoughts on the Energy Imbalance Market. For the past four years, the CAISO has been aggressively expanding its influence in the West: first with PAC East and PAC West, then with Nevada Energy. Next was the double-barreled shotgun addition of Arizona Public Service and Puget Sound Energy. Then most recently, Portland General Electric joined CAISO’s dance card of new EIM entrants, which is pretty full out to 2020. So if you’re not already in the new market, there’s a high likelihood someone in your organization is doing the analysis to see if you should be.
So, what’s the big deal? Why are so many companies rushing to join EIM? Easy. The answer is money and the amount of it to be made. There are a number of mechanisms through which EIM can provide economic benefits for Western Balancing Authorities:
- Optimal generation planning;
- Re-dispatch across the West;
- Geographic diversity, and;
- Monetization of operational behaviors
Note, “…can provide economic benefits…” in the prior sentence should be taken seriously. Everyone has the opportunity to achieve economic benefits, though certainly, none are guaranteed.
Realizing economic benefits
Optimizing generation alone can lead to significant economic benefits. For PAC’s second quarter in the EIM, a primary driver of benefits identified by the CAISO was improved scheduling practices and more optimal base schedules. Interestingly, CAISO referenced this as a reason their calculations for EIM benefits appear to have fallen quarter-over-quarter. Essentially, CAISO noted that a more optimal base schedule leaves less room for improved real-time dispatch so there are still benefits to PAC for operational efficiency, but the benefits are not as easily quantified by the CAISO (“Quantifying EIM Benefits”, CAISO – 04/30/2015).
Generation planning is a critical workflow for any utility, but in the EIM, it’s also monetized. If your economic models for your resources differ between what you use for optimization versus bidding, then you might be leaving money on the table in the EIM. Ideally, your base schedules should reflect your absolute best unit commitment (assuming you have to fully meet your own load), and your bids should reflect the true cost to commit and dispatch your resources. A sub-optimal commitment will result in a significant redispatch by the CAISO.
This is a double-edged sword, to be sure. Yes, you are benefiting, but the odds increase that you’ll have a fuel management problem since your actual dispatch is no longer tightly coupled to your generation planning process. Maybe you’re packing the line or drafting, and you get into the penalty, which erodes your EIM benefit.
Again, optimal generation planning by itself can notably benefit you – even before joining CAISO’s EIM. What the market does is to bring it into crystal clear focus with a structured and rigorous real-time workflow that revolves around the T-75, T-55, and T-40 deadlines. If you need help generating a resource plan, PCI GenTrader is – and has been for many years – the best and most efficient optimization platform available.