Slide 1: Paid-as-cleared for R2 & R3 activated energy
Paid-as-cleared for R2 & R3 activated energy STUDY under consultation (period of consultation 20/10/17 – 17/11/17) Working Group Balancing 08/11/2017 10:00-12:00
Slide 2: Agenda
Agenda Scope study Basic theory Context study EU benchmark Technical design CBA results Conclusions study Next steps STUDY UNDER CONSULTATION – paid-as-cleared for aFRR & mFRR activated energy 2
Slide 3: Scope study
Scope study Current Current existing Balancing processes Description Procurement Energy settlement terminology Balancing Products Imbalance netting Technical netting of opposed imbalances IGCC N/A TSO-TSO IGCC process between TSOs of different balancing areas Frequency Very fast reserves with as obj
Slide 4: Basic theory paid-as-cleared
Basic theory paid-as-cleared Paid-as-cleared (also called marginal pricing) is a uniform pricing mechanism that offers the same price to all transactions of a given product at a certain point in time based on the marginally accepted order. Paid-as-bid is a pricing mechanism that enables a differ
Slide 5: Context: EU
Context : EU European Balancing Guidelines (EBGL) describe the key principles organization of a regional market for aFRR/mFRR Require the use of harmonized pricing mechanism for the settlement of balancing energy for standard balancing products as soon as a TSO is joining the common European p
Slide 6: Context: Local pre-conditions
Context : Local pre-conditions Transfer of Energy (as each bid need to have an activation price) aFRR: assessment technical implication ongoing in R2 non CIPU mFRR: ToE applicable for all mFRR before end 2018 Merit order activation of energy (bids need to be activated based on their price ra
Slide 7: Theoretical advantages of PAC vs PAB
Theoretical advantages of PAC vs PAB PAID AS CLEARED PAID AS BID Efficient dispatch under imperfect information Simplicity Incentive to bid at (+/-) system marginal cost (efficient if mark-ups do not necessary disappear under PAC? ) convenient way to remunerate heterogeneous products Incre
Slide 8: EU benchmark
EU benchmark aFRR mFRR Currently paid-as-cleared is not applied by many countries STUDY UNDER CONSULTATION – paid-as-cleared for aFRR & mFRR activated energy 8
Slide 9: Technical design mFRR: Content
Technical design mFRR: Content Basic model sophisticated products: indivisible bids (when implemented) Dummy energy Direct activated vs scheduled activated Inversal pricing use of bids for congestion & interTSO STUDY UNDER CONSULTATION – paid-as-cleared for aFRR & mFRR activated energy 9
Slide 10: Technical design mFRR: basic model
Technical design mFRR: basic model The settlement price always equals to the price of the last activated bid, whether entirely or partially In case R3 flex is still at end of MO: the mFRR settlement price is set at the most extreme between the activation price with the “free bids and R3 standard
Slide 11: Technical design mFRR: sophisticated products
Technical design mFRR: sophisticated products Currently all mFRR & aFRR bids are divisible in Belgium The introduction of indivisible bids requires more complex price determination algorithms The proposed heuristic (that would be used in presence of indivisible bids in mFRR) sequentially accep
Slide 12: Technical design mFRR: dummy energy
Technical design mFRR: dummy energy General principle: Only the requested energy is accounted for and settled at the marginal price during the corresponding ISP Dummy energy is not valorized specifically, i.e. the standard block approach prevails STUDY UNDER CONSULTATION – paid-as-cleared for
Slide 13: Technical design mFRR: Direct activations
Technical design mFRR: Direct activations Current To be In case of direct activations, bids could be activated Currently being addressed at European level: if for a limited durations and energy (currently not minimum duration of activation of 15 min required, It problematic in practice due to absenc
Slide 14: Technical design mFRR: Inversal pricing
Technical design mFRR: Inversal pricing Potential solution: • Activation of D bid 100 MWh at 60 €/MWh: Elia receives 6000 € • Activation of I bid 100 MWh at 50 €/MWh: Elia pays 5000€ • Net result for Elia: + 1000€ & potential gains for BSPs (as 2 bids activated) Inversal prices marginal price for
Slide 15: Technical design mFRR: price indetermination
Technical design mFRR: price indetermination In case of price indeterminacies, proposal is settle at the price of the last accepted bid STUDY UNDER CONSULTATION – paid-as-cleared for aFRR & mFRR activated energy 15
Slide 16: Technical design mFRR: use of bids for congestion
Technical design mFRR: use of bids for congestion • Current situation: CIPU bids can be used for both balancing and local congestion purposes • Future situation: EBGL clearly states that “at least balancing energy bids activated for internal congestion management shall not set the marginal price of
Slide 17: Technical design aFRR: two possible basic models
Technical design aFRR: two possible basic models M1: Unique aFRR settlement price per ISP based on M2: Different aFRR settlement prices every X seconds largest activations (with possibly a minimum activation time) • A different marginal settlement price is calculated for • aFRR settlement price for
Slide 18: Linking prices between products?
Linking prices between products? • Cross-product pricing FRR vs. IGCC => considered irrelevant • Cross-product pricing aFRR vs. mFRR => little added value • Heterogeneity of products suggests that different settlement prices should apply, • Disturbs coherence between clearing prices and acceptance/r
Slide 19: CBA: assumptions
CBA: assumptions Set of bids • Dataset used for the simulations are available aFRR and mFRR bids for entire year 2016 • No additional bids have been populated for the purpose of the simulations / overall liquidity has not been artificially improved • All aFRR & mFRR bid prices are unchanged (altho
Slide 20: CBA results: aFRR
in cost between the simulations. CBA results: aFRR Summary of aFRR simulations aFRR (total costs) Inc Dec Inc + Dec Historical pro-rata activation 12.878.938 € -3.304.405 € 9.574.533 € Simulated merit order activation PAB 11.734.581 € -4.006.891 € 7.727.690 € Simulated merit order activation PAC M1
Slide 21: CBA results: mFRR
CBA results: mFRR Summary of mFRR simulations mFRR (total costs) Inc Dec Inc + Dec Historical prioritized activation 8.922.073 € -167.174 € 8.754.898 € Simulated merit order activation PAB 4.503.878 € -357.884 €1 4.145.993 € Simulated merit order activation PAC 5.167.830 € 36.133 € 5.203.963 € mFRR
Slide 22: Liquidity difference aFRR vs. mFRR
Liquidity difference aFRR vs. mFRR Typical aFRR merit order: Typical mFRR merit order: • 2 bids / 2 prices stemming from 2 market parties • > 10 bids, > 6 price steps, from > 3 market parties • Prices are often corrected to fit into caps & floors • Free prices mFRR INC mFRR INC aggr. bids aggr. bids
Slide 23: Recommendations
Recommendations Implementation of marginal pricing for FRR activated energy is in general desirable, but there are preconditions Technical implementation of PaC mFRR • precise price formation heuristic is presented for mFRR TOE • Pre-conditions: R3 non-CIPU • Merit order activation Free & Std bids M
Slide 24: Next steps
Next steps • 8 /11: stakeholder workshop (today) • 17/11: End of consultation • End of November: adaptations of the study based on consultation results • Mid December: publication of final study on ELIA’s website • Implementation will be made according to the plan proposed in final version of the st
Slide 25: Many thanks for your attention!
Many thanks for your attention! ELIA SYSTEM OPERATOR Boulevard de l'Empereur 20 1000 Brussels +32 2 546 70 11 info@ elia.be www.elia.be An Elia Group company 25
Slide 26: Back Up Pro-Rata vs Merit order
Back Up Pro-Rata vs Merit order STUDY UNDER CONSULTATION – paid-as-cleared for aFRR & mFRR activated energy 26