Key Findings from the Electricity Market Operation y pBenchmarking Survey 2010

Presented by Tan Liang Ching

02 Nov 2011

1

Background to Surveyg y

• Objective is to establish referenceObjective is to establish reference material among market operators to:• benchmark market processes, and; p , ;

• guide market development

EMC first started the Survey in 2004• EMC first started the Survey in 2004, current 2010 Survey is 7th in the series

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Respondents to 2010 Survey

1. KPX (440.9TWh) – Korea

p y

2. OMEL (275.0TWh) – Spain3. AEMO (188.3TWh) – Victoria, NSW, Queensland etc4. CAMMESA (110.7TWh) – Argentina 5. XM (56.9TWh) – Colombia6 EMC (42 3TWh) Si6. EMC (42.3TWh) – Singapore7. NZX (40.6TWh) – New Zealand8 IMOWA (17 4TWh) – Western Australian8. IMOWA (17.4TWh) – Western Australian9. ELEXON – UK10. WESM – Philippines

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ppFigures in parentheses refer to total load in 2010

Survey Processes

• Feb – Send out survey format for feedback

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y• Mar – Send out revised survey format• May – Collation of survey data returnsy y• June – Compile and analyze survey returns• July – Send out compiled surveysJuly Send out compiled surveys

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Overview of Areas Surveyed

Market Market

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Market Background

Market Data

General Info

System Modeling

Competition

Demand-Side Mgmt

S ttl ty g

Generation and EG

Settlement

Surveillance

Rule ChangeAncillary Services

Capacity Markets

Rule Change

IT Systems

Operator Performance

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Market Background

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Key Market Featuresy

• Most markets settle physical trades,Most markets settle physical trades, gencos free to put in price offers in the wholesale electricity spot market

• KPX (Cost-Based Pool) – Generators submit details of production costs, p ,System Marginal Price set based on the most expensive generation available

• Elexon – Balancing and Settlement Code company

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p y

Main MO Functions

• Common Functions – Pricing,Common Functions Pricing, Settlements, Scheduling, Dispatch

• Market operations are either integratedMarket operations are either integrated with system operation (e.g. AEMO, KPX, XM) or conducted by an independent body (e.g. EMC, IMOWA)

• Some MOs also involved in Transmission Planning (AEMO, KPX), and Market Governance (Elexon, EMC, IMOWA, KPX WESM)

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KPX, WESM)

Products Traded

• Common Products – Energy, ReserveCommon Products Energy, Reserve (different response times), Regulation

• Products traded in Real-time onlyProducts traded in Real time only (AEMO, CAMMESA, Elexon, EMC, NZX, WESM), Day-ahead only (IMOWA, OMEL, XM) or both (KPX)

• Other products – Derivatives, pTransmission Rights, Bilateral Contracts, Capacity, Vesting Contracts, Other A ill S i ( Bl k t t)

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Ancillary Services (e.g. Blackstart)

Locational Pricingg

• No (Elexon, IMOWA, XM)No (Elexon, IMOWA, XM)• Yes –Few nodes or zonal (AEMO/5,

KPX/2 OMEL/2)KPX/2, OMEL/2)• Yes - Many Nodes (CAMMESA/300,

EMC/720 NZX/285 WESM/276)EMC/720, NZX/285, WESM/276)Figure after slashes refers to number of pricing zones/nodes

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Price Ceiling/Floorg

• Price CeilingPrice Ceiling• No (Elexon, KPX, NZX, WESM, XM)

• Moderate (below USD$600) (OMEL IMOWA• Moderate (below USD$600) (OMEL, IMOWA, CAMMESA)

• Very High (above USD$600) (AEMO, EMC)y g ( $ ) ( , )

• Price FloorNo (CAMMESA Elexon KPX NZX WESM)• No (CAMMESA, Elexon, KPX, NZX, WESM)

• Moderate (above –USD$400) (OMEL, XM)

V L (b l USD$400) (AEMO EMC)

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• Very Low (below –USD$400) (AEMO, EMC)

Gate Closure / Trading Periodg

• Most Gate Closure for Real TimeMost Gate Closure for Real Time Dispatch ranges from 1 to 3 hours, except AEMO which is 1 minute

• Trading period ranges from 30-60 minutes, though AEMO/NZX have dispatch interval of 5 minutes

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Main Fuel Typesyp

• Coal - AEMOCoal AEMO• Gas - EMC

H d NZX XM• Hydro – NZX, XM• Gas/Coal – IMOWA, WESM• Gas/Hydro - CAMMESA• Coal/Nuclear - KPX• Gas/Nuclear/Wind/Hydro – OMEL

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Embedded Generation

• Differential Treatment for EGs• Sell directly to host retailer to reduce

retailer’s settlement (AEMO)• Receive network incentives from distribution

company such as avoided transmission payments (AEMO)p y ( )

• Only net load, rather than gross load is charged non-reserve charges such as MO/SO fees (EMC)MO/SO fees (EMC)

• Must consume at least 50% of its own generation (EMC, KPX)

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g ( , )

Ancillary Servicesy

• Common typesyp• Reserve (response time, up/down/both)• Regulation (up/down/both)g ( p )

• Specific types • Blackstart/System Restart (AEMO EMC IMOWA)• Blackstart/System Restart (AEMO, EMC, IMOWA)• Reactive Power (AEMO)• Capacity (CAMMESA)Capacity (CAMMESA)• Load Rejection (IMOWA)• Voltage Support (NZX KPX)

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Voltage Support (NZX, KPX)

Capacity Marketsp y

• Reliability Criteriay• Can cater to demand under drought/dry

conditions (CAMMESA, XM)• Expected energy shortfall of 0.002%

(IMOWA) or Expected Loss of Load Probability of 0.5 day (KPX)y y ( )

• Capacity Targets• Best forecast of energy demand inBest forecast of energy demand in

commitment year, accounting for load growth• Set procurement reserve rate (12-20%) from

k f t d d

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peak forecast demand

Capacity Marketsp y

• Pricing MechanismPricing Mechanism• Administered (CAMMESA, KPX, OMEL)

• Auction (XM)• Auction (XM)

• Administered ->Auction (IMOWA)

P t M h i• Procurement Mechanism• Annual procurement

• Contract length of 1 year, up to 25 years (XM)

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Capacity Marketsp y

• Annual Value of Capacity Market up toAnnual Value of Capacity Market up to $USD 3.68Billion (KPX)

• Allocation Mechanism• Allocation Mechanism• Usually borne by Demand/Retailers/Market

Customers through reserve capacity g p yrequirements (IMOWA, KPX, CAMMESA)

• Additional Capacity cost – subsidized by National Treasury (CAMMESA)

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Market Surveillance

• Common objectivesCommon objectives• Improve Transparency

• Market structure conducive for efficient and• Market structure conducive for efficient and fair operation

• Compliance with market rulesp

• Safety and labour control

• Quality of ServiceQuality of Service

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Market Data

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Competition (Generation)p ( )

• Market Concentrated• KPX (Korea Hydro and Nuclear Power Company - 33%)• EMC (3 Gencos – 79%) • NZX (3 Gencos – 80%)

• Market Not Concentrated• AEMO• CAMMESA• OMEL• WESM

XM

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• XM

Competition (Retail)p ( )

• Market Concentrated• KPX (KEPCO practically 100%)

• EMC (4 Retailers – 83%) ( %)

• NZX (5 Retailers – 95%)

• OMEL (4 Retailers – 94%)( )

• Market Not Concentrated• AEMOAEMO

• CAMMESA

• XM

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XM

Demand Responsep

• Dispatchable LoadDispatchable Load• AEMO (1320MW)

Interruptible Load (MW/% of Total Reserve)• Interruptible Load (MW/% of Total Reserve)• AEMO (1320MW)

• EMC (21MW/ 3.0%)

• IMOWA (54MW/ 1.0%)

• KPX (4668MW/ 6.5%)

• OMEL (2500MW)

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Demand Responsep

• Other DR SchemesOther DR Schemes• Retailer/Customer Arrangement – Mostly self-

dispatched so customer can avoid high spot prices (AEMO)

• Remote Air Conditioner / Cold Storage System -C h l i t ll th d i iConsumers who newly install the device are given subsidies (KPX)

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Load Contestabilityy

• Industrial/Commercial/Domestic• AEMO (96%)• Elexon (100%)• OMEL (100%)• NZX • XM

• Industrial/Commercial only• CAMMESA (46%)• EMC (67%)

IMOWA (69%)

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• IMOWA (69%)

Load Contestabilityy

• Sample Load Profiles (NZX)Sample Load Profiles (NZX)• Night/day (domestic): 75%day; 25% night

• Internally switched weekend day weekend night• Internally switched weekend day, weekend night, weekday, weeknight (domestic and commercial)

• Street lighting (public)g g (p )

• Dairy milking shed (commercial)

• Telecom payphones (commercial)Telecom payphones (commercial)

• Traffic signals (public)

• Mobile phone towers (commercial)

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• Mobile phone towers (commercial)

Interconnections

• With Gross Import/Export• CAMMESA – (2420GWh/359GWh)• OMEL – (3617GWh/11941GWh)

S ( G / G )• WESM – (127GWh/63GWh)• XM – (9.8GWh/797.7GWh)

• Without Import/Export• Without Import/Export• AEMO• EMCEMC• IMOWA• NZX

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• KPX

Price Revision

• Price Revision Allowed• AEMO• CAMMESA• Elexon• EMC• WESM

• Revision usuallyy• made within a few business days, and;• affect only few periods except WESM

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y p p

RT Dispatch Schedule Freqp q

• 5 mins – AEMO, KPX, NZX5 mins AEMO, KPX, NZX• 30 mins – EMC

60 i CAMMESA OMEL WESM• 60 mins – CAMMESA, OMEL, WESM• 90 mins – XM• 24 hrs – IMOWA

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Settlement

• Dailyy• Elexon ($USD 2.4 billion, 240 companies)• EMC ($USD 12.89 billion, 23 companies)( , p )• KPX ($USD 57.5 billion, 420 companies)• OMEL• XM ($USD 4.89 billion, 110 companies)

• WeeklyWeekly• AEMO ($USD 13.82 billion, 98 companies)• IMOWA ($USD 200 million, 27 companies)

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IMOWA ($USD 200 million, 27 companies)

Settlement

• MonthlyMonthly• CAMMESA ($USD 8.0 billion, 788 companies)

• NZX• NZX

• WESM ($USD 1.17 billion)

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Settlement

• Payment Deadline from SettlementPayment Deadline from Settlement• <5CDs – AEMO, IMOWA, OMEL

• 6-20CDs – EMC NZX XM• 6-20CDs – EMC, NZX, XM

• >20CDs – CAMMESA, Elexon, KPX, WESM

Collateral Req irement• Collateral Requirement• Yes (net exposure ranging from 30-70 days)

• No - CAMMESA

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Settlement

• DefaultsDefaults• IMOWA – 3 defaults, total value of

$USDm1.9 million

• Treatment of Customers of Defaulting Retailer• Transfer to retailer of last resort (AEMO,

Elexon, EMC, IMOWA, OMEL, WESM)

• No special treatment (CAMMESA, KPX, NZX, XM)

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Rule Change Processg

• Generally similar across different marketsy• Process in EMC’s case

• Any party can propose rule changeAny party can propose rule change• Rules Change Panel (RCP) comprising

industry stakeholders with prioritise issue by i it i t ith h l f EMCassessing its impact, with help of EMC

• If prioritised, EMC will analyse and make recommendationrecommendation

• RCP support change EMC Board adopt change EMA approve change

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MO Service Costs

Operator Cost Staff p($USDm) Numbers

CAMMESA 8.6 147EMC 22.7 56IMOWA 11.8 27WESM 67WESM - 67XM 22.9 151

Figures only as general reference, as differentMOs may have different scope and responsibilities

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Areas where NEMS does well

• Nodal pricing with large number of locations p g gpriced

• Most ancillary service products procured titi l d ti i d ithcompetitively and co-optimised with energy,

quantity dynamically determined• Low number of state-owned generation• Low number of state-owned generation

companies, none fully state-owned• Comprehensive set of forecast schedules, p ,

with broad info coverage• No market defaults

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Areas to Explorep

• Few risk management toolsg• Lack of products to manage risks (e.g.

forwards, FTRs) • Low fuel diversity

• Significant reliance on oil and gas, compared to other jurisdictionsother jurisdictions

• Limited interruptible load (IL) participation• Lowest installed capacity of IL at 21MW• Lowest installed capacity of IL at 21MW• Limits on percentage of reserves which IL can

provide

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Areas to Explorep

• Limited demand-side management gprograms• Most jurisdictions have some demand-side

initiative/ dispatchable load programme• No full retail contestability

H lf f d j i di ti h t d d• Half of surveyed jurisdictions have extended contestability to domestic consumers

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Thank you

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