Ancillary Service Markets - Monitoring Analytics

22 Pages·2012·0.45 MB·English

Section 9 Ancillary Services
Ancillary Service Markets fuel resources, bilateral transactions, hydrological constraints, generation
requirements and reserve requirements.
The United States Federal Energy Regulatory Commission (FERC) defined
six ancillary services in Order No. 888: 1) scheduling, system control and The purpose of the Day-Ahead Scheduling Reserve (DASR) market is to
dispatch; 2) reactive supply and voltage control from generation service; 3) satisfy supplemental (30-minute) reserve requirements with a market-based
regulation and frequency response service; 4) energy imbalance service; 5) mechanism that allows generation resources to offer their reserve energy at a
operating reserve – synchronized reserve service; and 6) operating reserve – price and compensates cleared supply at the market clearing price.3
supplemental reserve service.1 Of these, PJM currently provides regulation,
energy imbalance, synchronized reserve, and operating reserve – supplemental PJM does not provide a market for reactive power, but does ensure its
reserve services through market-based mechanisms. PJM provides energy adequacy through member requirements and scheduling. Generation owners
imbalance service through the Real-Time Energy Market. PJM provides the are paid according to FERC-approved, reactive revenue requirements. Charges
remaining ancillary services on a cost basis. Although not defined by the are allocated to network customers based on their percentage of load, as well
FERC as an ancillary service, black start service plays a comparable role. Black as to point-to-point customers based on their monthly peak usage.
start service is provided on the basis of incentive rates or cost.
The Market Monitoring Unit (MMU) analyzed measures of market structure,
Regulation matches generation with very short-term changes in load by conduct and performance for the PJM Regulation Market, the two regional
moving the output of selected resources up and down via an automatic Synchronized Reserve Markets, and the PJM DASR Market for the first six
control signal.2 Regulation is provided, independent of economic signal, by months of 2012.
generators with a short-term response capability (less than five minutes) or
Table 9‑1 The Regulation Market results were not competitive4 (See 2011
by demand-side response (DSR). Longer-term deviations between system load
SOM, Table 9‑1)
and generation are met via primary and secondary reserve and generation
responses to economic signals. Synchronized reserve is a form of primary Market Element Evaluation Market Design
Market Structure Not Competitive
reserve. To provide synchronized reserve a generator must be synchronized to
Participant Behavior Competitive
the system and capable of providing output within 10 minutes. Synchronized Market Performance Not Competitive Flawed
reserve can also be provided by DSR. The term, Synchronized Reserve Market,
refers only to supply of and demand for Tier 2 synchronized reserve.
Both the Regulation and Synchronized Reserve Markets are cleared on a
real-time basis. A unit can be selected for either regulation or synchronized
3 See 117 FERC ¶ 61,331 at P 29 n32 (2006).
reserve, but not for both. The Regulation and the Synchronized Reserve 4 As Table 9-1 indicates, the Regulation Market results are not the result of the offer behavior of market participants, which was
competitive as a result of the application of the three pivotal supplier test. The Regulation Market results are not competitive because
Markets are cleared interactively with the Energy Market and operating the changes in market rules, in particular the changes to the calculation of the opportunity cost, resulted in a price greater than the
competitive price in some hours, resulted in a price less than the competitive price in some hours, and because the revised market rules
reserve requirements to minimize the cost of the combined products, subject are inconsistent with basic economic logic. The competitive price is the actual marginal cost of the marginal resource in the market.
The competitive price in the Regulation Market is the price that would have resulted from a combination of the competitive offers from
to reactive limits, resource constraints, unscheduled power flows, interarea market participants and the application of the prior, correct approach to the calculation of the opportunity cost. The correct way to
calculate opportunity cost and maintain incentives across both regulation and energy markets is to treat the offer on which the unit is
transfer limits, resource distribution factors, self-scheduled resources, limited dispatched for energy as the measure of its marginal costs for the energy market. To do otherwise is to impute a lower marginal cost to
the unit than its owner does and therefore impute a higher or lower opportunity cost than its owner does, depending on the direction
1 75 FERC ¶ 61,080 (1996). the unit was dispatched to provide regulation. If the market rules and/or their implementation produce inefficient outcomes, then no
2 See the 2011 State of the Market Report for PJM for a full discussion of Ancillary Service markets and issues. amount of competitive behavior will produce a competitive outcome.
© 2012 Monitoring Analytics, LLC 2012 Quarterly State of the Market Report for PJM: January through September 181
2012 Quarterly State of the Market Report for PJM: January through September
• The Regulation Market structure was evaluated as not competitive suppliers which failed the three pivotal supplier test in 24 percent of the
because the Regulation Market had one or more pivotal suppliers which hours in January through September of 2012.
failed PJM’s three pivotal supplier (TPS) test in 44 percent of the hours in
• Participant behavior was evaluated as competitive because the market
January through September 2012.5
rules require competitive, cost based offers.
• Participant behavior was evaluated as competitive because market power
• Market performance was evaluated as competitive because the interaction
mitigation requires competitive offers when the three pivotal supplier test
of the participant behavior with the market design results in prices that
is failed and there was no evidence of generation owners engaging in
reflect marginal costs.
anti-competitive behavior.
• Market design was evaluated as effective because market power mitigation
• Market performance was evaluated as not competitive, despite competitive
rules result in competitive outcomes despite high levels of supplier
participant behavior, because the changes in market rules, in particular
concentration.
the changes to the calculation of the opportunity cost, resulted in a price
greater than the competitive price in some hours, resulted in a price less Table 9‑3 The Day‑Ahead Scheduling Reserve Market results were competitive
than the competitive price in some hours, and because the revised market (See 2011 SOM, Table 9‑3)
rules are inconsistent with basic economic logic.6
Market Element Evaluation Market Design
Market Structure Competitive
• Market design was evaluated as flawed because while PJM has improved
Participant Behavior Mixed
the market by modifying the schedule switch determination, the lost Market Performance Competitive Mixed
opportunity cost calculation is inconsistent with economic logic and
there are additional issues with the order of operation in the assignment
• The Day-Ahead Scheduling Reserve Market structure was evaluated as
of units to provide regulation prior to market clearing.
competitive because the market did not fail the three pivotal supplier test.
Table 9‑2 The Synchronized Reserve Markets results were competitive • Participant behavior was evaluated as mixed because while most offers
(See 2011 SOM, Table 9‑2) appeared consistent with marginal costs (zero), about 17 percent of offers
reflected economic withholding, with offer prices above $5.00.
Market Element Evaluation Market Design
Market Structure: Regional Markets Not Competitive
• Market performance was evaluated as competitive because there
Participant Behavior Competitive
Market Performance Competitive Effective were adequate offers at reasonable levels in every hour to satisfy the
requirement and the clearing price reflected those offers.
• The Synchronized Reserve Market structure was evaluated as not • Market design was evaluated as mixed because while the market is
competitive because of high levels of supplier concentration and inelastic functioning effectively to provide DASR, the three pivotal supplier test
demand. The Synchronized Reserve Market had one or more pivotal and cost-based offer capping when the test is failed, should be added to
the market to ensure that market power cannot be exercised at times of
system stress.
5 These TPS results reflect MMU estimates for the period between May 6 and July 21, 2012, when the TPS test was not correctly applied by
PJM.
6 PJM agrees that the definition of opportunity cost should be consistent across all markets and should, in all markets, be based on the
offer schedule accepted in the market. This would require a change to the definition of opportunity cost in the Regulation Market which
is the change that the MMU has recommended. The MMU also agrees that the definition of opportunity cost should be consistent across
all markets.
182 Section 9 Ancillary Services © 2012 Monitoring Analytics, LLC
Section 9 Ancillary Services
Highlights Ancillary services costs per MW of load: 2001 - 2012
• The weighted average Regulation Market clearing price, including Table 9-4 shows PJM ancillary services costs for January through September
opportunity cost, for January through September 2012 was $14.92 per for 2001 through 2012 on a per MW of load basis. The Scheduling, System
MW.7 This was a decrease of $2.11, or 12.4 percent, from the average Control, and Dispatch category of costs is comprised of PJM Scheduling,
price for regulation in January through September 2011. The total cost of PJM System Control and PJM Dispatch; Owner Scheduling, Owner System
regulation decreased by $12.13 from $32.71 per MW in January through Control and Owner Dispatch; Other Supporting Facilities; Black Start Services;
September 2011, to $20.58, or 37.1 percent. In January through September Direct Assignment Facilities; and ReliabilityFirst Corporation charges.
2012, the weighted Regulation Market clearing price was 72 percent of Supplementary Operating Reserve includes Day-Ahead Operating Reserve;
the total regulation cost per MW, compared to 52 percent of the total Balancing Operating Reserve; and Synchronous Condensing.
regulation cost per MW in January through September 2011.
Table 9‑4 History of ancillary services costs per MW of Load8: January
• The weighted average Tier 2 Synchronized Reserve Market clearing price
through September, 2001 through 2012 (See 2011 SOM, Table 9‑4)
in the Mid-Atlantic Subzone was $7.06 per MW in January through
Scheduling,
September 2012, a $4.94 per MW decrease from January through Dispatch, and Synchronized Supplementary
September 2011.7 The total cost of synchronized reserves per MW in Year (Jan‑Sep) Regulation System Control Reactive Reserve Operating Reserve
2001 $0.55 $0.43 $0.22 $0.00 $1.18
January through September 2012, was $10.96, a 23 percent decrease from
2002 $0.47 $0.52 $0.21 $0.00 $0.66
the total cost of synchronized reserves ($14.21) during January through 2003 $0.53 $0.59 $0.23 $0.09 $0.88
September 2011. The weighted average Synchronized Reserve Market 2004 $0.50 $0.64 $0.25 $0.14 $0.90
2005 $0.78 $0.47 $0.25 $0.11 $0.88
clearing price was 64 percent of the weighted average total cost per MW
2006 $0.55 $0.48 $0.28 $0.07 $0.44
of synchronized reserve in January through September 2012. The price to 2007 $0.65 $0.47 $0.29 $0.06 $0.58
cost ratio was 84 percent in January through September 2011. 2008 $0.75 $0.34 $0.29 $0.07 $0.55
2009 $0.36 $0.36 $0.36 $0.05 $0.47
• The weighted DASR market clearing price was $0.91 per MW in January 2010 $0.37 $0.38 $0.36 $0.06 $0.75
through September 2012. In January through September 2011, the 2011 $0.35 $0.36 $0.39 $0.09 $0.87
2012 $0.23 $0.44 $0.44 $0.03 $0.75
weighted price of DASR was $1.04 per MW. The average hourly purchased
DASR was 7,042 MW, an increase from 6,622 MW during the same period
Conclusion
of 2011, reflecting PJM’s larger footprint with the integration of DEOK on
January 1, 2012. The MMU continues to conclude that the results of the Regulation Market are
• Black start zonal charges in January through September 2012 ranged not competitive.9 The Regulation Market results are not competitive because
from $0.02 per MW in the ATSI zone to $1.80 per MW in the BGE zone. the changes in market rules, in particular the changes to the calculation of
the opportunity cost, resulted in a price greater than the competitive price in
some hours, resulted in a price less than the competitive price in some hours,
and because the revised market rules are inconsistent with basic economic
8 Results in this table differ slightly from the results reported previously because accounting load is used in the denominator in this table.
9 The 2009 State of the Market Report for PJM provided the basis for this recommendation. The 2009 State of the Market Report for PJM
7 The term “weighted” when applied to clearing prices in the Synchronized Reserve Market means clearing prices weighted by the MW of summarized the history of the issues related to the Regulation Market. See the 2009 State of the Market Report for PJM, Volume II,
cleared synchronized reserve. Section 6, “Ancillary Service Markets.”
© 2012 Monitoring Analytics, LLC 2012 Quarterly State of the Market Report for PJM: January through September 183
2012 Quarterly State of the Market Report for PJM: January through September
logic and the definition of opportunity cost elsewhere in the PJM tariff. This Overall, the MMU concludes that the Regulation Market results were not
conclusion is not based on the behavior of market participants, which remains competitive in January through September 2012 as a result of the identified
competitive. market design issues. This conclusion is not the result of participant behavior,
which was generally competitive. The MMU is hopeful that the opportunity
PJM agrees that the definition of opportunity cost should be consistent cost issue can be resolved in 2012 as part of the regulation market redesign.
across all markets and should, in all markets, be based on the offer schedule The MMU concludes that the Synchronized Reserve Market results were
accepted in the market. This would require a change to the definition of competitive in January through September 2012. The MMU concludes that the
opportunity cost in the Regulation Market which is the change that the MMU DASR Market results were competitive in January through September 2012.
has recommended. The MMU also agrees that the definition of opportunity
cost should be consistent across all markets. Regulation Market
The structure of each Synchronized Reserve Market has been evaluated and The PJM Regulation Market in January through September, 2012, continued
the MMU has concluded that these markets are not structurally competitive to be operated as a single market. There have been no structural changes since
as they are characterized by high levels of supplier concentration and December 1, 2008.10
inelastic demand. (The term Synchronized Reserve Market refers only to Tier
Proposed Market Design Changes
2 synchronized reserve.) As a result, these markets are operated with market-
clearing prices and with offers based on the marginal cost of producing Although the current market design satisfies the requirements of regulation,
the service plus a margin. As a result of these requirements, the conduct namely that it keep the reportable metrics CPS1 and BAAL within acceptable
of market participants within these market structures has been consistent limits, a new market design initiative began in 2011 in response to a FERC
with competition, and the market performance results have been competitive. rulemaking.11 On October 20, 2011, FERC issued Order No. 755 directing PJM
However, compliance with calls to respond to actual spinning events has been and other RTOs/ISOs to modify their regulation markets so as to make use of
an issue. As a result, the MMU is recommending that the rules for compliance and properly compensate a mix of fast and traditional response regulation
be reevaluated. resources.12
The MMU concludes that the DASR Market results were competitive in On March 5, 2012, PJM filed proposed tariff revisions intended to implement
January through September 2012, although concerns remain about economic Order No. 755.13 The MMU protested that the Commission should not
withholding and the absence of the three pivotal supplier test in this market. approve PJM’s filing until PJM completed and filed undeveloped aspects of
its proposal.14 The MMU also protested that PJM’s proposal failed to reflect
The benefits of markets are realized under these approaches to ancillary
the incremental cost of providing capability or the true lost opportunity cost
service markets. Even in the presence of structurally noncompetitive markets,
of capability. The Commission required that PJM, through the stakeholder
there can be transparent, market clearing prices based on competitive offers
process, address the issues raised by the MMU and other parties and resubmit
that account explicitly and accurately for opportunity cost. This is consistent
10 All existing PJM tariffs, and any changes to these tariffs, are approved by FERC. The MMU describes the full history of the changes to the
with the market design goal of ensuring competitive outcomes that provide tariff provisions governing the Regulation Market in the 2011 State of the Market Report for PJM, Volume II, Section 9, “Ancillary Service
Markets.”
appropriate incentives without reliance on the exercise of market power and
11 See 2011 State of the Market Report for PJM, Appendix F, “Ancillary Service Markets”.
with explicit mechanisms to prevent the exercise of market power. 12 Frequency Regulation Compensation in the Organized Wholesale Power Markets, 137 FERC ¶ 61,064 (2011) (“Order No. 755”).
13 PJM filing in Docket No. ER12-1204.
14 Protest of the Independent Market Monitor for PJM filed in Docket No. ER12-1204 (March 26, 2012); Answer and Motion for Leave to
Answer of the Independent Market Monitor for PJM filed in Docket No. ER12-1204 (April 25, 2012).
184 Section 9 Ancillary Services © 2012 Monitoring Analytics, LLC
Section 9 Ancillary Services
their proposal.15 Since this decision, PJM and the MMU have worked with the Table 9‑6 Impact on PJM Regulation Market of currently regulating units
membership to address the issues identified by the Commission. At the time of scheduled to retire through 2015 (New Table)
this report, the only remaining difference between PJM and the MMU is the Settled MW of Units Percent Of
definition of performance related costs which both PJM and the MMU have Current Regulation Settled MW, Units Scheduled To Scheduled To Retire Regulation MW To
Units, Jan‑Sep, 2012 Jan‑Sep, 2012 Retire Through 2015 Through 2015 Retire Through 2015
agreed will be resolved in the Cost Development Subcommittee (CDS).
296 7,608,983 52 171,402 2.25%
Market Structure
Demand
Supply
Demand for regulation does not change with price. The regulation requirement
Table 9-5 shows capability, average daily offer and average hourly eligible
is set by PJM in accordance with NERC control standards, based on reliability
MW for all hours as well as for off-peak and on-peak hours. The average
objectives and forecast load. The requirement is 1.0 percent of the forecast
hourly regulation capability increased in January through September of 2012,
peak load for on peak hours and 1.0 percent of the forecast valley load for off
to 9,413 MW from 8,808 MW in the same time period of 2011.
peak hours. Table 9-7 shows the required regulation and its relationship to the
supply of regulation.
Table 9‑5 PJM regulation capability, daily offer16 and hourly eligible: January
through September 2012 (See 2011 SOM, Table 9‑5)17
Table 9‑7 PJM Regulation Market required MW and ratio of eligible supply
Regulation Average Daily Percent of Average Hourly Percent of to requirement: January through September 2012 and 2011 (See 2011 SOM,
Period Capability (MW) Offer (MW) Capability Offered Eligible (MW) Capability Eligible
Table 9‑6)
All Hours 9,413 6,656 71% 3,089 33%
Off Peak 9,413 3,025 32% Average Required Average Required Ratio of Supply To Ratio of Supply To
On Peak 9,413 3,164 34% Regulation, January Regulation, January Requirement, January Requirement, January
Through September Through September Through September Through September
Month 2011 2012 2011 2012
The supply of regulation can be affected by regulating units retiring from Jan 960 1,005 3.19 3.29
Feb 897 979 3.06 3.45
service. Table 9-6 shows what the impact on the Regulation Market would be
Mar 823 876 3.02 3.14
if all units retire that are requesting retirement through the end of 2015. Apr 748 826 2.88 3.19
May 786 918 2.84 3.26
Jun 1,037 1,055 2.81 3.21
Jul 1,214 1,246 2.79 2.94
Aug 1,093 1,134 2.83 2.97
15 139 FERC ¶ 61,130 (2012) at PP 71, 73–74 (“[W]e agree with the IMM that PJM’s performance payment fails to specify how clearing Sep 922 941 2.74 3.33
prices will reflect the actual requested mileage based on the regulation signal. While PJM describes the basic components of its proposal,
PJM fails to explain how these components will be combined to calculate the accuracy score. While PJM’s Manual 12 provides that the
accuracy score will be the weighted average of the three components (i.e., the Energy Score, the Delay Score and the Correlation Score),
PJM’s proposal fails to define the process for calculating the various component scalars. Accordingly, we direct PJM to include in its
compliance filing additional tariff language detailing each component of the accuracy score, and describing how each component scalar
in the accuracy score calculation will be determined. As to the IMM’s argument that the interaction between the performance offer and
performance clearing price erroneously assumes a fixed relationship before the actual hour between a MW of cleared capability and
the amount of work done, as we state above, we direct PJM to submit a compliance filing regarding the components of the accuracy
score. Similarly, because the accuracy score affects eventual settlement, we will require PJM to submit as part of its compliance filing,
additional tariff language outlining the settlement process. This should include how the accuracy score is used to determine payments
and how settlement is affected by make-whole payments.”)
16 Average Daily Offer MW exclude units that have offers but make themselves unavailable for the day.
17 Total offer capability is defined as the sum of the maximum daily offer volume for each offering unit during the period, without regard
to the actual availability of the resource or to the day on which the maximum was offered.
© 2012 Monitoring Analytics, LLC 2012 Quarterly State of the Market Report for PJM: January through September 185
2012 Quarterly State of the Market Report for PJM: January through September
Market Concentration Table 9-9 includes a monthly summary of three pivotal supplier results. In
January through September 2012, 44 percent of hours had one or more pivotal
Table 9-8 shows Herfindahl-Hirschman Index (HHI) results for the January
suppliers which failed or should have failed PJM’s three pivotal supplier test.18
through September 2012 period. The average HHI of 1529 is classified as
moderately concentrated.
The MMU concludes from these results that the PJM Regulation Market in
January through September 2012 was characterized by structural market
Table 9‑8 PJM cleared regulation HHI: January through September 2012 and
power in 44 percent of the hours.
2011 (See 2011 SOM, Table 9‑7)
Weighted Table 9‑9 Regulation market monthly three pivotal supplier results: January
Market Type Minimum HHI Average HHI Maximum HHI
through September 2010, 2011 and 2012 (See 2011 SOM, Table 9‑9)19
Cleared Regulation,
January through September, 2012 810 1529 4962 2012 2011 2010
Cleared Regulation, 2012 Percent of 2011 Percent of 2010 Percent of
January through September, 2011 818 1645 3683 Month Hours Pivotal Hours Pivotal Hours Pivotal
Jan 71% 95% 74%
Figure 9-1 compares the January through September 2012 HHI distribution Feb 67% 93% 70%
Mar 64% 94% 83%
curve with distribution curves for the same period of 2011 and 2010.
Apr 41% 97% 82%
May *37% 95% 79%
Figure 9‑1 PJM Regulation Market HHI distribution: January through Jun *40% 89% 81%
September of 2010, 2011 and 2012 (See 2011 SOM, Figure 9‑1) Jul *13% 89% 75%
Aug 32% 83% 69%
1,200 Sep 35% 87% 70%
2012
1,000 2011 Market Conduct
2010
Offers
800
Regulation Market participation is a function of the obligation of all LSEs
to provide regulation in proportion to their load share. LSEs can purchase
ours 600 regulation in the Regulation Market, purchase regulation from other providers
H
bilaterally, or self-schedule regulation to satisfy their obligation (Figure 9-2)20
400
200
0
601-700 701-800 801-900 901-1000 1001-1100 1101-1200 1201-1300 1301-1400 1401-1500 1501-1600 1601-1700 1701-1800 1801-1900 1901-2000 2001-2100 2101-2200 2201-2300 2301-2400 2401-2500 2501-2600 2601-2700 2701-2800 2801-2900 2901-3000 3001-3100 3101-3200 3201-3300 3301-3400 3401-3500 3501-3600 3601-3700 112890 TTShheeee MrPeJsMMuUl t“ sMm faoonrn uMitaola r2ys,8 tJ:hu Oen peae parpanltdiicn Jagut ilAoy,ng 2r oe0ef1 mt2h eaenr eTt P AMSc McteoUsut n ebstyitni mPgJ,a”M tRe aes.nvids ibornin 5g4s, a(Oncyt iosbsuere s1 t, o2 0t1h2e )a; tptaernat i4o.n2 , opfp P 1JM5-.16.
HHI Range
186 Section 9 Ancillary Services © 2012 Monitoring Analytics, LLC
Section 9 Ancillary Services
Figure 9‑2 Off peak and on peak regulation levels: January through Table 9‑10 Regulation sources: spot market, self‑scheduled, bilateral
September 2012 (See 2011 SOM, Figure 9‑2) purchases: January through September 2012 (See 2011 SOM, Table 9‑10)
600,000 Spot Self Scheduled Bilateral Total
Off Peak Self Scheduled Regulation (MW) Month Regulation (MW) Regulation (MW) Regulation (MW) Regulation (MW)
On Peak Self Scheduled Regulation (MW) Jan 553,686 164,806 21,261 739,753
Off Peak Regulation (MW) Feb 481,004 175,757 20,456 677,217
500,000 On Peak Regulation (MW) Mar 477,564 144,408 19,683 641,655
Apr 426,564 124,750 21,083 572,397
May 542,585 97,574 17,849 658,008
Jun 582,078 140,769 22,309 745,156
400,000 Jul 819,897 63,415 19,711 903,024
Aug 710,715 95,949 17,687 824,350
Sep 515,732 113,351 19,726 648,809
300,000
Demand resources offered and cleared regulation for the first time in November
2011. Since they do not offer energy, demand resources self schedule rather
200,000 than offer into the market.21 The impact of demand response on the Regulation
Market has been negligible.
100,000 The Minimum Regulation MW parameter was reintroduced in 2012. This
parameter allows regulation owners to specify a minimum amount of
regulation that can be cleared, which imposes a constraint on the ASO’s three
0
product optimization. For the marginal unit, the ASO may need to clear less
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
than an individual unit’s offered amount of regulation in order to meet the
regulation requirement. As a result of this parameter, there are a significant
Increased self-scheduled regulation lowers the requirement for cleared
number of hours in which the ASO will have to clear more MW than is optimal
regulation, resulting in fewer MW cleared in the market and lower clearing
or skip the marginal unit and clear a more expensive unit resulting in a higher
prices. Of the LSEs’ obligation to provide regulation during January through
Regulation Market Clearing Price.
September 2012, 80 percent was purchased in the spot market (84 percent in
January through September 2011), 17 percent was self-scheduled (13 percent
in January through September 2011), and 3 percent was purchased bilaterally
(3 percent in January through September 2011) (Table 9-10).
21 The demand resources self schedule because SPREGO might otherwise schedule them for energy which they cannot provide.
© 2012 Monitoring Analytics, LLC 2012 Quarterly State of the Market Report for PJM: January through September 187
2012 Quarterly State of the Market Report for PJM: January through September
Market Performance Figure 9‑3 PJM Regulation Market daily weighted average market‑clearing
price, marginal unit opportunity cost and offer price (Dollars per MWh):
Price January through September 2012 (See 2011 SOM, Figure 9‑3)
The weighted average regulation market clearing price for January through $60.00
September, 2012, was $14.92. This is a 12.4 percent decrease from the Weighted average Regulation Market clearing price
Weighted average opportunity cost
weighted average market clearing price of $17.03 for the same period in 2011. Weighted average offer price
Figure 9-3 shows the daily average Regulation Market clearing price and the $50.00
opportunity cost component for the marginal units in the PJM Regulation
Market. Table 9-11 shows monthly average regulation market clearing price,
average marginal unit offer price, and average marginal unit LOC. All units $40.00
chosen to provide regulation received the higher of the clearing price, or the
unit’s regulation offer plus the individual unit’s real-time opportunity cost,
$30.00
based on actual LMP.22
The average offer (excluding opportunity cost) of the marginal unit for the
$20.00
PJM Regulation Market during January through September, 2012, was $7.60
per MWh, a decrease from the average offer in January through September
2011 of $10.43 (Table 9-11). The average opportunity cost of the marginal
$10.00
unit for the PJM Regulation Market in January through September 2012 was
$6.18. This is a decrease from the average opportunity cost for the marginal
unit during the same period of 2011 of $6.00. In the PJM Regulation Market
$0.00
the marginal unit opportunity cost was 42.9 percent of the RMCP. This is an Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
decrease from the January through September, 2011, average of 63.5 percent.
Figure 9-4 shows the level of demand for regulation by month in January
through June 2012 and the corresponding level of regulation price.
22 See PJM. “Manual 28: Operating Agreement, Accounting,” Revision 54, Section 4.2, “Regulation Credits” (October 1, 2012), p. 14. PJM
uses estimated opportunity cost to clear the market and actual opportunity cost to compensate generators that provide regulation and
synchronized reserve.
188 Section 9 Ancillary Services © 2012 Monitoring Analytics, LLC
Section 9 Ancillary Services
Table 9‑11 PJM Regulation Market monthly weighted average market‑ Figure 9-5 compares the regulation total cost per MWh (clearing price plus
clearing price, marginal unit opportunity cost and offer price (Dollars per post market opportunity costs) with the regulation clearing price.
MWh): January through September 2012 (New Table)
Figure 9‑5 Monthly weighted, average regulation cost and price: January
Weighted Average Regulation Weighted Average Regulation Weighted Average Regulation
Month Market Clearing Price Marginal Unit Offer Marginal Unit LOC through September 2012 (See 2011 SOM, Figure 9‑5)
Jan $13.27 $10.58 $2.70
Feb $11.52 $8.84 $2.68 $40.00 100%
Weighted average Regulation Market clearing price
Mar $12.30 $8.82 $3.48
Cost of regulation
Apr $12.71 $8.63 $4.07 $35.00 Price as a percentage of cost 90%
May $16.80 $6.52 $9.89
Jun $13.83 $6.21 $6.94 80%
Jul $19.32 $6.60 $10.70
$30.00
Aug $15.12 $6.50 $7.37
70%
Sep $13.67 $5.46 $7.16
$25.00
60%
Figure 9‑4 Monthly average regulation demand and price: January through
h
September 2012 (See 2011 SOM, Figure 9‑4) W $20.00 50%
M
$/
1,400 $25.00 40%
Regulation required $15.00
Weighted average Regulation Market clearing price
30%
1,200
$10.00
$20.00
20%
1,000
$5.00
10%
$15.00
800 $0.00 0%
W Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
M
600
$10.00 Total scheduled regulation MW, total regulation charges, regulation price and
regulation cost are shown in Table 9-12.
400
$5.00
200
0 $0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
© 2012 Monitoring Analytics, LLC 2012 Quarterly State of the Market Report for PJM: January through September 189
2012 Quarterly State of the Market Report for PJM: January through September
Table 9‑12 Total regulation charges: January through September 2012 The integration of the Trans-Allegheny Line (TrAIL) project resulted in
(See 2011 SOM, Table 9‑11) a change to the interface defining the Mid-Atlantic subzone of the RFC
Simple Average Weighted Average Synchronized Reserve Market.23 After the implementation of TrAIL, Bedington
Scheduled Total Regulation Regulation Market Regulation Cost of – Black Oak became the most limiting interface. PJM reserves the right to
Month Regulation (MWh) Charges Clearing Price Market Price Regulation
revise the interface defining the Mid-Atlantic Subzone in accordance with
Jan 739,753 $13,338,201 $13.70 $13.41 $18.03
Feb 677,217 $10,108,296 $12.09 $11.89 $14.93 operational and reliability needs.24 From May 20, 2011, through the end of
Mar 641,655 $11,109,763 $12.44 $12.61 $17.31 September 2011, the percent of Tier 1 synchronized reserve available west of
Apr 572,397 $9,038,430 $12.76 $13.01 $15.79
the interface that is available in the Mid-Atlantic subzone (transfer capacity)
May 658,008 $16,248,950 $16.85 $17.44 $24.69
Jun 745,156 $14,181,461 $14.02 $14.91 $19.03 was set to 30 percent. Since then, PJM changed the transfer capacity several
Jul 903,024 $29,228,039 $19.37 $20.73 $32.37
times, varying from 50 percent to 15 percent at the end of 2011. From January
Aug 824,350 $18,273,264 $15.21 $15.86 $22.17
through September 2012, the transfer capacity has remained at 15 percent.
Sep 648,809 $13,593,245 $13.83 $14.41 $20.95
Market Structure
Table 9-13 provides a comparison of the average price and cost for PJM
Regulation. The difference between the Regulation Market price and the actual Supply
cost of regulation was less in January through September 2012 than it was in
In January through September, 2012, the supply of offered and eligible
the same period of 2011.
synchronized reserve was both stable and adequate. The contribution of
DSR to the Synchronized Reserve Market remained significant. Demand
Table 9‑13 Comparison of average price and cost for PJM Regulation, January
side resources are relatively low cost, and their participation lowers overall
through September 2006 through 2012 (See 2011 SOM, Table 9‑12)
Synchronized Reserve prices. The ratio of offered and eligible synchronized
Weighted Regulation Weighted Regulation Regulation Price
reserve MW to the synchronized reserve required (1,300 MW) was 1.26 for
Year Market Price Market Cost as Percent Cost
2006 $32.69 $44.98 73% the Mid-Atlantic Subzone.25 This is a 15.6 percent increase from the first six
2007 $36.86 $52.91 70%
months of 2011 when the ratio was 1.09. Much of the required synchronized
2008 $42.09 $64.43 65%
2009 $23.56 $29.87 79% reserve is supplied from on-line (Tier 1) synchronized reserve resources. The
2010 $18.08 $32.07 56% ratio of offered and eligible synchronized reserve to the required Tier 2 for
2011 $17.03 $32.71 52%
all cleared Tier 2 hours in January through September 2012 was 4.3 for the
2012 $14.92 $20.58 72%
Mid-Atlantic Subzone. This is a 27 percent increase from January through
September 2011 when the ratio was 3.09. For the RFC Zone the offered and
Synchronized Reserve Market
eligible excess supply ratio is determined using the administratively required
level of synchronized reserve. The requirement for Tier 2 synchronized reserve
PJM operates two synchronized reserve markets. The RFC Synchronized Reserve
is lower than the required reserve level for synchronized reserve because there
Zone reliability requirements are set by the ReliabilityFirst Corporation. The
Southern Synchronized Reserve Zone (Dominion) reliability requirements are
set by the Southeastern Electric Reliability Council (SERC).
23 PJM.com “TrAIL Operational Impacts,” <http://www.pjm.com/~/media/committees-groups/committees/oc/20111018/20111018-item-08-
trail-operational-impacts.ashx> (October 2011).
24 See PJM, “Manual 11, Energy and Ancillary Services Market Operations,” Revision 52 (October 1, 2012), p. 72.
25 The Synchronized Reserve Market in the Southern Region cleared in so few hours that related data for that market are not meaningful.
190 Section 9 Ancillary Services © 2012 Monitoring Analytics, LLC