2% Shift Factor dispatchable rule discussion
and alternatives for the 2% rule
Kris Dixit
1
Goals
• Discuss the merits of the 2% shift factor dispatchable rule and
conceptually understand its impact on convergence
• Discuss 2% rule and possible options that will meet the original intent
while maintaining convergence between the three markets
2
Example – 1: CRR Market
Line is overloading due to flow
that is being driven by sink bids
on the load zone in the CRR
auction.
A
Gen D has a -10% SF on this
constraint but there are no
counter flow offers on this node.
This is the only generator with a
–ve shift factor on the constraint
G
D
B
Bus B has a load that is being
driven by its LDF due to Load
Zone (sink) bids
• With no CRR counter-flow bids, there is technically no generation on D in
the auction. Within this model, Gen D is offline
• The fact that Gen D is offline, allows for line to congest and create a
shadow price, thus causing a price difference between A and B in the CRR
auction
3
Issue 2 Example – 2: DAM Market
Line is overloading due to flow
that is being driven by sink bids
on the load zone in the DAM.
A
Gen D has a -10% SF on this
constraint but there are no
energy offers on this node
G
D
B
Bus B has a load that is being
driven by its LDF due to Load
Zone (sink) bids
• With no offers on bus D (TPO or energy), generator D is offline in the DAM.
This generator may have no offers because it may intend to come online
as merchant or has sold capacity bilaterally.
• The fact that Gen D is offline, allows for line to congest and create a
shadow price, thus causing a price difference between A and B in the DAM
4
Example – 3: RT Market
Line is overloading due to real
time flow
Gen D has a -10% SF on this
constraint. Gen D is offline. This
is the only generator with a -ve
shift factor on the constraint
X
D
A
B
Bus B has a load that is being
driven by its demand
• Generator D is offline.
• Due to loads on B line A-B starts to congest
• ERCOT operations would use the 2% rule to identify all generators with >
2% shift factor on the constraint that are dispatchable.
• In this case there are no dispatchable generators with greater than 2%
shift factor and the constraint is deactivated
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Summary
• Identical situation occur in DAM, CRR and RT markets. However,
congestion only occurs in DAM and CRR markets and not in RT
• Nearly impossible for ERCOT’s DAM and CRR Team to account for these
constraints since they are being driven by information on dispatchable
generators that is not available in advance
• The 2% dispatchable rule creates a fundamental disconnect between the
CRR, DAM and RT markets, that cannot be accounted for in the CRR and
DAM markets
• This leads to divergence between the three markets
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The 2% rule
• The 2% rule has been discussed in detail at CMWG and WMS
• The intent of the 2% rule was to make sure that the market did not show
price signals for smaller lines that may have no locational benefit once
generation is built
• However the 2% rule does not remain consistent through generation
development cycles (see slides 10,11,12)
• The 2% rule cannot be seamlessly transitioned to the CRR and the DAM
markets, since the minimum shift factor used is 0.0001 in those markets
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Our Proposal
• Eliminate 2% dispatchable rule.
• Reapply the 2% rule differently by deactivating constraints on lines lower
than a specific MVA threshold
• For example: if we deactivated all transmission lines with capacities less
than 50MVA
• Such a rule can be seamlessly used across all three markets and could
remain consistent through development cycles
• Creates certainty for market participants that are trying to understand
market exposures
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Appendix
9
Issue 1 Example – 2% rule at timestamp T = 0
C
Bus C has a +10% SF on this
constraint but does not see any
price signal. There is no
generator on this node.
Bus D has a -10% SF on this
constraint but does not see any
price signal. There is no
generator on this node.
D
50 MW line loaded to 102%
A
•
•
•
•
•
B
In this specific example the line A to B is overloading and there is no generator
that has > 2% shift factor on this constraint.
If there was a generator at bus C, it would have a +10% shift factor on the
constraint
If activated this constraint would create a negative price on bus C, consistent
with the reliability state.
Based on the 2% rule, this constraint is deactivated and SCED does not
produce a price signal at bus C consistent with this state.
Prices at all four points are identical, masking the underlying reliability issue
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Issue 1 Example – 2% rule at timestamp T = 1
C
There is now a generator on this bus
with a +10% SF on this constraint.
Now we see price signals since there
are generators with shift factors
greater than 2%
Bus D has a -10% SF on this
constraint. This bus will now see
a price signal associated with the
reliability issue
D
50 MW line loaded to 102%
A
•
•
•
•
•
•
B
Based on the historical price signals produced by SCED, bus C seems to have a
good pricing profile and a developer decides to build a generator on bus C.
Since there are no historical price signals, developer will never recognize
reliability issues
ERCOT and TDSP screening studies may catch this issue, only if they show up in
typical base cases. If not, developer builds generation.
When developer builds the intended generation, ERCOT would activate the
constraint and the generator would become a discount to the rest of the system
The only remedy would be a SPS, specifically at higher SF levels.
Point D would have been a better siting location
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Issue 1 Summary
• The 2% rule is inconsistent through generation development cycles
• The 2% rule masks potential reliability issues that are supposed to be
discovered through price signals
• The 2% rule is a throwback to zonal congestion management and is no
longer relevant to the design intent of the nodal market
12