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The Power Market: E-Commerce for All Electricity Products

Fortnightly Magazine - February 1 2000

e-commerce systems enable an evolutionary, staged deployment of flow-based systems.

Flow-based scheduling is less complicated than contract path scheduling. Given the source and sink of an energy transaction (or a set of energy sources and a set of energy sinks), the use of each flowgate is calculated readily from published tables of distribution factors. The NERC Transaction Distribution Factors are an example of such tables. (See The tables show the usage of each flowgate by a transaction between any source and sink in the network. This technology is rapidly improving, and already is used to determine which transactions are subject to curtailment during TLR events.

Typically, a given transaction will significantly impact only a few flowgates. The transaction distribution factors depend on the physical characteristics of the network, and are not significantly affected by the network flows. Only those flowgates that are "commercially significant" need be scheduled, and other constraints that have little impact on economic transactions can be managed by more traditional methods.

Flow-based scheduling is made easy by software that tracks a participant's flowgate holdings and needs. This software can execute buy and sell transactions for several flowgates with a few "mouse clicks."

Real-time changes in the capacity of each flowgate will occur, both because there are controllable elements in the network and because of line failures and other technical problems. Transmission owners can choose to sell flowgate capacity with a guarantee that unusable rights will be replaced or repurchased at a high price. The cost of buying back these rights would be paid through the higher prices that transmission owners likely would receive for a guaranteed flowgate product and adjustments in access fees.

Flowgate rights also are created by reverse transactions on a flowgate. Reverse flows on a flowgate effectively increase the capacity of the flowgate. The sale of flowgate rights created by reverse flows motivates participants to trade and redispatch generation to mitigate congestion on flowgates.

A single entity can be prevented by tariff from controlling more than a prescribed share of a single flowgate - say 20 percent. Such a limit will prevent abuse of market power by large players.

In a flow-based market, the price of flowgate capacity is determined by the bid and offer prices of participants. The price to move power from a location on the network to any other location easily is computed as a sum of the weighted flowgate prices. This calculation is illustrated in the sidebar on flowgate pricing.

The difference in electric energy prices at two locations, or nodes, will tend to equal the node-to-node transmission price computed as a sum of weighted flowgate prices. Trading will continue until traders find no way to profit from buying energy at one node and transmitting it to another node for sale.

When all flowgates are unconstrained, energy prices will be the same in all locations. When some flowgates are congested and trade at high prices, the market naturally will trade as a coupled set of locational markets with locational prices. Areas or zones with similar transaction distribution factors will have