Ontario Electricity Supply ForumPEO Mississauga Chapter - September 6, 2007

Rhonda Wright-Hilbig, P.EngMarket Analysis - IESO

The IESO’s Role Within the Industry

• There are a number of different entities but all of them have their own set of accountabilities and defined responsibilities

• The IESO manages Ontario's electricity grid - directing the flow of electricity across the transmission system to meet the province's power needs

• We balance this demand for electricity against available supply through the wholesale market

The Electricity Markets

• Approximately:– 30,000 MW installed capacity– 28,000 km high voltage transmission system– 250 authorized market participants

• Anyone connected to high voltage grid must become an IESO market participant

• Anyone connected to a Local Distribution Company (LDC) has a choice to become an IESO market participant or participate retail market

Ontario’s Electricity Market

Real-time

EnergyEnergyOperating Operating ReserveReserve

Transmission Transmission RightsRights

Ancillary Ancillary ServicesServices

Procurement

Financial Physical

IESO - Administered MarketsIESO - Administered MarketsIESO - Administered MarketsIESO - Administered Markets

The Markets

Electricity Sector Participants

ParticipantsOutsideOntario

Local Distribution Company Network

Embedded LargeCustomer

EmbeddedGenerator

Wholesale Wholesale PricePrice

Low Volume End-use

Consumer

DesignatedConsumer

RPPRPP

Directly ConnectedGenerator

Directly ConnectedLarge Consumer

Transmitters

Retailers

Types of Market Participants

Adjust operations Adjust operations based on dispatch based on dispatch

instructions received instructions received from the IESOfrom the IESO

Submit bids/offersSubmit bids/offers

DISPATCHABLEDISPATCHABLE

Consume or produce as Consume or produce as desired – no dispatch desired – no dispatch

instructionsinstructions

Do not submit Do not submit bids/offers – accept bids/offers – accept

market pricemarket price

NON-DISPATCHABLENON-DISPATCHABLE

Generators and Generators and ImportsImports

Offers Loads and Loads and ExportsExports

Bids

IESO - Administered

Markets

Real-time Energy

Bid and Offer Basics

Price ($/MWh)

Quantity (MW)

$18.00

$20.00

0 40 80

$26.00

20 60 100

$24.00

$22.00

120

(20.5,20) (22,60)(21.6,40) (24,100)(23,80) (24.5,120)(20.5,0)

Price/Quantity Pairs - Offers

Setting the Market Clearing Price

Supply and Demand Determines Price

Optimum Selling Price

Price

Quantity

SupplyDemand

12000

13000

14000

15000

16000

17000

18000

19000

20000

21000

Demand Varies Considerably

Sun. Mon. Tues. Wed. Thurs. Fri. Sat.

TimeTime of of

DayDay

Weekend vs. Weekend vs. WeekdayWeekday

Ontario Demand by Day of the Week for typical October Week

Move to a Summer Peaking Jurisdiction

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

28,000

1994 1996 1998 2000 2002 2004 2006

Year

Peak O

nta

rio D

em

and (

MW

)

Summer Peak Demand Winter Peak Demand

Generator 3

50 MW - $25/MWh

Generator 1

150 MW - $38/MWh

100 MW - $15/MWh

Generator 2

50 MW - $20/MWh

Setting the Market Clearing Price

Offers Are Selected Economically

50 MW

100 MW

150 MW

200 MW

$15 / MWh

$20 / MWh

$25 / MWh

$38 / MWh

12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00

Quantity

Time

Generator 1 Generator 2 Generator 3

20:00

250 MW

Demand and Price

50 MW

100 MW

150 MW

200 MW

$15 / MWh

$20 / MWh

$25 / MWh

$38 / MWh

12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00

Generator 1 Generator 2 Generator 3

20:00

250 MW

Demand

$38$38

$15$15

$25$25

Quantity

Time

50 MW $15 / MWh

$20 / MWh

$25 / MWh

$38 / MWh

16:00 16:05 16:10 16:15 16:30 16:35 16:40 16:45

TimeTime

17:0016:20 16:25 16:50 16:55

MCP$ / MWh

100 MW

150 MW

200 MW

250 MW

Offers and Demand - 5 Minute Intervals

Generator 1 Generator 2 Generator 3

Hourly Ontario Energy Price = $30.42Hourly Ontario Energy Price = $30.42

$25 $25 $25 $25 $25 $25 $25 $38 $38 $38$38$38

Determining Dispatch Instructions

Balancing

DemandDemandSupplySupply

60 Hz60 Hz

Generators + Imports Loads + Losses + Exports

Ensure that supply meets demand within system limits

Security Limits

• Security limits are the reliability envelope in which the market operates; they protect our grid and our neighbours’ grids from disturbances

• Energy will take all available paths to get from supply point to consumption point

• Transmission lines do not control or limit the amount of energy they convey

• Energy flows are managed by dispatching generator output

• Different limits are used under different operating conditions

Prices and Schedules

• Dispatch follows economics as closely as possible• Can’t dispatch based purely on economics

– The unconstrained mode of the dispatch algorithm determines market clearing prices and “market schedules” in the absence of transmission constraints

• “copper plate” model of the grid• Assumes resources can ramp at three times their offered ramp rates

(September 12, 2007)

– The constrained mode of the dispatch algorithm determines dispatch schedules (i.e., dispatch instructions)

• Respects transmission losses, transmission system limits, ramp restrictions on resources

• When a difference in MW occurs between the economic “market schedule” and the practical “constrained schedule” market participants are held whole through Congestion Management Settlement Credits (CMSC)

• The cost of CMSC is recovered through the IESO uplift to loads

Dispatch instructions

• Dispatch instructions:– Primary method for controlling the balance of

supply with demand

– Indicate operating point at the end of a 5-minute interval

– Are sent only if there is a required change in operating point

– Can be refused for reasons of public or worker safety, equipment damage, or legal requirements

Imports and Exports

Imports and Exports

Scheduling Imports and Exports

• Imports and exports are scheduled based on economics compared to internal bids/offers

• Scheduled an hour in advance, scheduled for a one hour block

• Participants must navigate with other jurisdictions, including transmission access

• Electricity interchange improves Ontario reliability, – Imports reduce the price of electricity in Ontario,

effectively add supply– Exports effectively increase demand; exports can be

curtailed in the event of Ontario shortages

Contact us

• IESO website provides up to date prices• IESO publications available to help

businesses understand the market

IESO•1 (888) 448-7777 or •(905) 403-6900•customer.relations@ieso.ca

Ontario Electricity Supply ForumPEO Mississauga Chapter - September 6, 2007Rhonda Wright-HilbigSection Head, Market AnalysisSeptember 6, 2007