In the first days of its new day-ahead market for grid balancing, the California Independent System Operator (CAISO) and its major participants have experienced some anomalies in terms of phantom congestion, but with the complex system of 3,000 pricing points it is difficult, if not impossible, to troubleshoot and find answers, according to officials at the Folsom, CA-based grid operator. In the meantime last Tuesday, CAISO's transition drew praise from one FERC commissioner.
As with similar wholesale market restructuring in the natural gas sector, the wholesale market restructuring will be transparent to retail energy consumers.
In general, there have been no significant glitches and CAISO officials continue to say they are "very pleased" with the initial days of operation under the Market Redesign Technology Upgrade (MRTU). CAISO is still looking for answers as to why there was some congestion in locational marginal prices (LMP) on the 22nd through 24th day-ahead hours at the end of the first day under MRTU, CAISO spokesperson Gregg Fishman told NGI last Monday.
With the 3,000 pricing "nodes" that are part of the MRTU switch to LMP, tracing problems spotted at given hours for a quick explanation is going to be increasingly difficult, Fishman said. "We'll do our best, but there are no guarantees," he said.
"I applaud the CAISO and its market participants' accomplishment of such a large undertaking, and look forward to celebrating with them the benefits of these efforts during the years to come," said Philip Moeller, a member of the Federal Energy Regulatory Commission (FERC).
Sometimes the perceived "problems" are going to be a matter of semantics from the grid operator's perspective. Participants may not always agree, although most have echoed the CAISO assessment that the transition to MRTU is going well at this point.
Fishman said the LMP is made up mostly of three components -- energy, line losses and congestion -- with energy costs not varying at any of the nodes and line losses being the smallest of the three elements. Thus, if there are differences in LMP at various nodes, congestion is the principal factor.
"It is easy to see a congestion component in one location and not in another, and then assume that the congestion is causing the higher prices," Fishman said. "This is not always the case, however, because there are both generator and load nodes.
"In some cases, the higher price may reflect the true cost for most of the load and the differential, described as a congestion component, reflects that congestion is causing the lower price for a generator node -- not the higher price for most of the load."
The nomenclature often designates a "congestion component" for all of the LMPs on the grid when it may really be a case of one generator not being able to deliver its full output for physical or economic reasons. In that case congestion doesn't really cause the higher prices; the excess generation that is greater than the load is really the cause, Fishman said.
"A generating unit on a radial transmission line may not, under some circumstances, be able to fully deliver its output to the grid, so we say there is 'congestion' at work there," Fishman said. "The price on the generator side of the congested point would be lower than on the other side."
Sometimes, even though it is called "congestion," it isn't really that causing a higher price; it is a lower one on the generator side. "The rest of the grid reflects what the price should be, but behind that congested point, there is more generation than load, so the price is reduced," Fishman said.
FERC's Moeller noted that retail energy customers won't notice anything different in California in the near term -- given the absence of reliability problems in the transition -- but the new design brings them longer-term benefits in the form of what he called "more efficient and reliable use of the transmission grid, better signals for when and where to expand infrastructure, and a more intelligent grid."
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