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Is there life in other markets? BPA explores preschedule capacity
7/15/2014 12:00 AM
BPA launched a new process this spring to acquire preschedule (day-ahead) capacity from third-party suppliers. The goal was to prevent occasional balancing reserve reductions caused by hydropower constraints. The process worked well, but BPA wasn’t always able to acquire the amount of capacity it needed. BPA is interested in working with potential suppliers to make the process more effective.
Curtailing wind energy is sometimes necessary to protect the reliability of BPA’s high-voltage transmission grid across the Northwest. But wind curtailments aren’t ideal for BPA or its wind customers.
In recent months, BPA established an elaborate – yet efficient – cross agency process to reduce the occasions on which BPA has to curtail wind generation. The new procedure addresses occasional constraints that can diminish the federal hydropower system’s capacity to balance supply and demand for power.
The process allowed BPA to explore an untested capacity market this spring to acquire balancing reserves from third-party – or nonfederal – sources.
BPA’s goal was to determine if excess preschedule (day-ahead) capacity exists in the Northwest; whether suppliers are willing to sell it in 24- to 48-hour blocks (and at what price); and whether BPA can rely on that third-party capacity when federal balancing resources are unavailable.
“Establishing the ability to acquire nonfederal balancing reserves is an important strategic objective for BPA,” said BPA Administrator Elliot Mainzer. “This has been a very successful initiative built on effective teamwork and collaboration with external partners. I applaud the work that’s been done and look forward to seeing where we can take it from here.”
BPA used the new process for the first time in April and continued to purchase preschedule capacity through May. The results of this effort are helping BPA and its stakeholders fine-tune the strategy for acquiring balancing service in the future.
Generation = Demand
It’s a simple equation: The amount of energy produced must always equal the amount being consumed. But maintaining the balance, a responsibility of BPA’s Transmission Services – as a “balancing authority” – is not so simple.
In the BP-14 rate case, BPA agreed to hold a specified amount of incremental balancing reserve capacity (referred to as incs – the ability to increase hydro generation) in the federal hydropower system. But sometimes operational constraints, such as oversupply conditions, prevent BPA from providing the full amount.
“When river flows are high and there’s not enough demand for power, storage isn’t always an option; meaning we’re often forced to choose between sending water through the turbines – generating – or spilling water over the dam,” explains Matt Schroettnig, account specialist in Power Services.
But too much spill can create a hazardous level of total dissolved gas in the river, which can be deadly to endangered salmon and other aquatic species.
“During high flow conditions, we may need to reduce the amount of balancing reserves supplied by the FCRPS in order to keep total dissolved gas within established water quality standards,” says Steve Kerns, manager of Short-Term Planning in Power Services. That gives operators more flexibility to move water through the turbines to better manage the oversupply conditions.
“In fact, we have had periods of time every year since 2011 where we have needed to reduce balancing reserves,” Kerns adds.
But reserve reductions leave variable generators with less protection against curtailments. When a wind project doesn’t generate as much energy as it has scheduled across the transmission system, and when BPA doesn’t have enough balancing capacity to make up for the unexpected difference, BPA may have to cut back the wind generator’s transmission schedule.
So in a partial settlement agreement during the BP-14 rate case, BPA committed to acquiring capacity from third-party suppliers to make up for any shortfalls in federal balancing capacity caused by operational constraints. Without knowing how often the preschedule capacity would be needed or how much it would cost, BPA agreed to set a $2 million annual budget for the purchases.
April showers bring May power
A wet spring translated into a large supply of hydropower fuel, stored in the form of snowpack in the Canadian Rockies and mountains of Montana and Idaho. As the snowpack began to melt and run downstream, BPA had to pull out all the stops to avoid power oversupply this spring.
Under normal conditions, BPA carries 900 MW of inc capacity in the federal hydropower system. But as flows picked up in early May, BPA found itself limiting reserves by as much as 500 MW on an almost daily basis.
With its new process in place, BPA was able to go to the market to replace the shortfall in federal capacity.
“This is an entirely new type of capacity product and process for BPA,” Schroettnig says. “Everything about it is brand new.”
For one, BPA’s Power Services – which seeks to acquire the capacity on Transmission’s behalf – only has a couple days’ notice that the hydro system will be constrained. This means BPA has to purchase the capacity in the pre-schedule time frame – an anomaly in the world of transmission operations.
“Typically, transmission providers will attempt to purchase capacity months, or sometimes even years in advance,” says Andy Meyers, manager of Power Prescheduling, the group responsible for much of the implementation. “We didn’t know if anybody would have excess capacity they were willing to sell in that time frame, especially during the spring.”
The hydro conditions this spring gave BPA the chance to find out. To make the acquisitions, employees coordinated this complex series of actions:
Confirm the balancing capability of the FCRPS and reduce capacity if there are operational constraints (that’s done in Power’s Short-Term Planning group);
Determine the need to purchase balancing reserves from a third party (that’s done in Power Prescheduling);
Issue a purchase order for the balancing reserves (done in Transmission Technical Operations);
Issue a request for offers for the estimated amount of reserves to a prequalified set of suppliers (that’s done in Prescheduling, but the prequalification process is managed in Transmission Technical Operations);
Select a bidder (done in in Prescheduling with tools developed by Power Market Analysis and Pricing);
Schedule the third-party reserves, if BPA needs to call on them (done in Prescheduling); and
Deploy the capacity, if needed (done in Transmission Technical Operations).
And that’s the simplified version.
It doesn’t take into account that the Preschedule staff had to receive new delegations of authority to purchase the reserves. Previously, the group was only responsible for scheduling energy, not acquiring it.
Nor does that list convey all the work that went into streamlining the billing process (which crosses both Power and Transmission Services, not to mention the capacity supplier) as well as the work to track the budget to prevent BPA from exceeding the $2 million budget.
Oh – and the entire process has to be performed within a matter of hours, each time BPA determines a need for the purchase. The request for offers has to be issued by 5 p.m. the day before BPA expects it will need the reserves. Bids from suppliers are due by 9 a.m. the following morning, and the supplier(s) is selected by 10 a.m.
Room for improvement
So far, the findings are mixed. BPA’s process worked well and the agency was able to acquire reserves on a number of days to make up for the shortfall in federal capacity, reducing the amount of curtailments imposed on variable generators. But there usually wasn’t sufficient response from suppliers, and BPA couldn’t always replace the full amount of the shortfall. And with prices that were higher than expected, BPA expended the full $2 million budget in a matter of weeks.
“There just didn’t seem to be a lot of excess capacity out there,” says John Wellschlager, Power account executive. “One reason might be the timing. Thermal generators tend to schedule maintenance shutdowns during the spring, when there’s usually a lot of hydropower and energy prices are low.”
Wellschlager says it’s also possible that generators don’t want to risk selling capacity that they might end up needing themselves during that same time period.
In ongoing workshops to prepare for the BP-16 rate case, BPA and its stakeholders are discussing these findings and will work together to refine the acquisition process. For example, some customers have suggested giving suppliers more notice. But the timing is tricky – BPA can’t seek the third-party capacity until it is certain that the federal capacity will be limited.
BPA is interested in working with potential suppliers on ideas to make this process more effective.
“Ultimately, we want to provide our customers the best service at the best rate,” says Schroettnig. “The experience we’ve gained from testing this market will help us get there.”
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