Should the power industry adapt its approach to capital markets in this environment? The answer, of course, is yes. Multiple frameworks are necessary to establish a power company’s or project’s...
Solving The Crisis In Unscheduled Power
under-schedule load while low price areas may tend to under-schedule generation or over-schedule load. Occasional under-collection of revenue, like over-collection, would be redistributed by a NAESB-created settlement agent to all the interconnected system's BAs according to their share of inadvertent interchange. This ensures energy pricing that discourages congestion by inadvertent interchange.
True economic dispatch decisions for reliability are based not just on energy cost, but also on FCC cost (see Table 1). Two-part pricing of inadvertent interchange (into energy and FCC) makes the price of inadvertent interchange greater when there is under-frequency than when there is over-frequency (see Table 2).
Good FCC is the same as ancillary services deployed to offset bad FCC. The price and effectiveness of ancillary services reflects the speed at which they deploy, from the most expensive and most immediate-frequency response in seconds-to regulation in minutes, to operating reserves in 10 to 15 minutes, to load following in 30 minutes. Inadvertent interchange flows reflect the sudden loss of resources as well as the sudden deployment of resources.
Proper pricing of FCC makes inadvertent interchange comply with good, random control and frequency performance inside the range allowed by NERC's control performance standard CPS1 (the "1" denoting 1-minute-average measurement of frequency). 6 That means a price that penalizes inadvertent interchange for making frequency deviate and rewards it for preventing frequency from deviating more. That price would be driven by the marginal cost of complying with CPS1. 7
"-FCC" is the slope of a line summarizing the history of a BA's contribution to frequency. The NERC JIITF proposed this definition of FCC developed by Howard F. Illian , a member of the NERC JIITF and the NAESB IIPTF and a co-inventor of NERC's control performance standard CPS1. The line's slope is a frequency-error weighted two-dimensional average (see Figure 1) of the BA's hourly inadvertent interchange and the interconnected system's hourly frequency error as plotted in a two-dimensional scatter diagram of those points for all the hours in a month. The line is the ("regression") line ("forced") through the origin that is the least vertical-distance from those points. One month is chosen to get enough history and because the hourly data is all that is available to NERC and is reported to NERC only monthly. One month is also the interval at which NERC assesses CPS1 performance.
Since inadvertent interchange sums to zero across the interconnected system, the FCCs of all the BAs together sum to zero, which is the slope of a horizontal line through the origin that is the line whose slope is the entire system's FCC. That means the upward-sloping lines pay for each hour's 8 share of their positive slopes to the downward sloping lines (see Figure 2). Upward-sloping means inadvertent interchange (which is plotted along the y-axis) is more often than not in the same direction (positive or negative) as frequency error (which is plotted along the x-axis) and, so, is contributing to the frequency error and is hurting frequency. Downward sloping means inadvertent interchange is on average in the direction oposite to frequency error and is