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SEM Update: Report on First Six Months

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SEM Update: Report on First Six Months SEM Update: Report on First Six Months To: SEM Committee From: Market Monitoring Unit 550 7000 500 6000 450 400 5000 350 4000 300 MW €/MWhr 250 3000 LOAD SMP 200 150 2000 100 1000 50 0 0 00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Shadow Price Uplift LOAD 22 July 2008 1. INTRODUCTION This is the first six‐month report of the Single Electricity Market (SEM) prepared by the Market Monitoring Unit (MMU). The aim of this report is to provide an unbiased assessment of the market. This report covers the first six months of market activity since SEM Go‐Live (1 November 2007 to 3o April 2008) and gives a statistical overview of the market, providing analysis and comparison of market prices to selected indices. The impact of carbon increases on prices and generator offers is also covered, along with an overview of the trends in commercial offers submitted by generators, generator market schedules, peak prices and some coverage of specific events. Constrained‐on and off volumes are also presented and discussed for selected units. Disclaimer: This report is largely data‐oriented. It is largely based on data provided to the MMU by SEMO (the Market Operator). Although every attempt has been made to ensure all data included in this report correct, the MMU cannot accept responsibility for the accuracy of the data presented in this report. 1 Table 1: Summary of Ownership of Generator Units Discussed in this Document: Parent Group Sub Group Unit Technology Viridian Group NIE Energy PPB *Premier Power Limited Ballylumford 10 CCGT Ballylumford 31 CCGT Ballylumford 32 CCGT Ballylumford Unit 4OCGT *AES Kilroot Kilroot 1COAL Kilroot 2COAL Huntstown Power HPC1 / Huntstown 1CCGT VPL / Huntstown 2CCGT ESB Group ESB PG Moneypoint 1COAL Moneypoint 2COAL Moneypoint 3COAL Poolbeg 4CCGT Aghada 1OCGT North Wall 4CCGT Tarbert 3OIL Tarbert 4OIL Great Island 3OIL Poolbeg 1OCGT Marina CCGT West Offaly/Shannonbridge Peat Lough Ree/Lanesboro Peat Erne Hydro Liffey Hydro ESBI Coolkeeragh CCGT Synergen Dublin Bay CCGT Hibernian Wind Power Derrybrien Wind Tynagh Energy Tynagh CCGT Edenderry Edenderry Peat Aughinish Alumina Sealrock CHP Northern Ireland Energy Holdings Moyle Interconnector Scottish & Southern Energy Airtricity Meentycat Wind * AES Kilroot and Premier Power Limited are not affiliated with Viridian or NIE Energy PPB. However, the units considered in this document are contracted to NIE Energy PPB. 2 CONTENT 1. Introduction page 1 2. Content page 3 3. Pricing & Demand page 4 4. Market Trends page 11 5. Generator Trends page 18 6. Commercial Offers of Selected Generators page 31 7. Price Setting page 38 8. Generator Revenue & Capacity Payments page 43 9. Specific Events page 46 3 2. PRICING & DEMAND Overview Demand‐weighted average SMP1 for the first six months was €76.43/MWh. The highest prices were considerably above this reaching €524/MWh on 24th November; the lowest price was €29/MWh and occurred on the 8th December. Average system demand (or load) for the first six months of SEM was 4,455MW. Overall market wind generation met 6% of demand, with its contribution to meeting demand in individual half‐hour trading periods varying between a minimum of 0.2% and a maximum of 18.3% over the entire six months. Table 2: Market Summary SMP* System Demand (MW) Wind Generation (MW) (€/MWh) Average 4,455 265 76.43 Minimum 2,501 9.2 29.31 Maximum 6,553 633 524.65 * Demand Weighted Average 1 System Marginal Price (SMP): This is the market price, which includes the shadow price and uplift elements. The shadow price is calculated by the MSP Software as the marginal cost per MWh of production in each half hour, derived from a pass of the software which treats the unit commitment as fixed, thereby ignoring start‐ up and no‐load costs. Uplift includes the start‐up and no‐load elements of generators’ commercial offer data (COD) not otherwise recovered. 4 Figure 1 shows average SMP for each half‐hourly trading period. The broken lines indicate the maximum and minimum SMP for each period. This illustrates the intraday price shape over the period. 550 7000 500 6000 450 400 5000 350 4000 300 MW €/MWhr 250 3000 LOAD SMP 200 150 2000 100 1000 50 0 0 00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Shadow Price Uplift LOAD Figure 1: SMP, Uplift, Limits of SMP & Market Load Intra‐day peak prices generally corresponded with periods of highest demand. The range of prices was also greatest for these periods. Similarly, the daily lowest prices generally correspond with lowest demand. Discussion of the underlying drivers of SMP, peak prices and price setting is discussed below in more detail. On one occasion overnight prices (00:00 – 05:30), when demand is generally at its lowest, were particularly high. This resulted from the way in which uplift is calculate and is discussed in more detail in Section 8. Generally other occasions where SMP rose above €300/MWh can be attributed to the scheduling of Kilroot at a price which reflects the costs of switching the plant to oil burning mode. In these instances there was little or no contribution from uplift to SMP. This is discussed in more detail in Section 6. 5 Load & Price Duration Curves In the SEM prices are based on the (unconstrained) least cost production schedule. Prices are set by the marginal cost of meeting demand for each trading period (with uplift applied where start‐up costs and no load costs are not fully recovered). This is a fundamental aspect of the pool mechanism chosen in the High Level Design. Meeting the peak in demand generally results in a higher price per megawatt hour – this is a result of to the need to incur start‐up and no load costs as additional plant is needed to meet demand and/or using relatively expensive generation to meet demand as the availability of less expensive plant becomes limited. How peak prices are being set in the SEM is considered in more detail in subsequent sections. The price duration curve in Figure 2 illustrates the percentage of time the SMP exceeds a particular value. For example, the SMP exceeded €100/MWh just over 11% of time during the first six months and SMP for the median trading period was €61/MWh. As already noted prices are generally highest at times of peak demand; figure 2 shows how the costs associated with meeting this demand affected the distribution of prices. 600 500 400 300 (€/MWh) SMP 200 100 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Time Exceeding Figure 2: Price Duration Curve for All Periods 6 In Figure 3, the Price Duration graph is shown for peak periods – defined as 16.30 to 20.00 on business days in line with the definition used for the 2007/2008 Directed Contract process. As expected, prices during these periods are generally higher. The vast majority of peak prices were experienced during these periods. The relationship with load is also indicated by the fact that for these periods SMP exceeded €100 for 44% of time. As the SEM develops it will be possible to consider the implication of this price distribution in more detail. 600 500 400 300 (€/MWh) SMP 200 100 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Time Exceeding Figure 3: Price Duration Curve for Peak Periods Figure 4 shows a Load Duration curve for the six months after the market started. This graph illustrates the relationship between the unconstrained market load and the utilisation of capacity needed to meet this load. For example, 6,000MW of capacity was required to meet load for 2% of time during the first six months. And for less than 2.5% of time the capacity required to serve load was below 3,000MW. 7 7000 6000 5000 4000 (MW) 3000 Load 2000 1000 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Time Exceeding Figure 4: Load Duration Curve for All Periods 8 Load & Price SMP and load, as well as having a clear intraday relationship, are also correlated across the entire 6‐month period. Overall there is a correlation coefficient of 0.47 between half‐hourly demand and SMP. Table 3 shows this level of correlation for the period also applies to individual months – albeit with a weakening for March and April. Table 3: Monthly SMP & Demand Summary Nov Dec Jan Feb Mar Apr Demand Weighted Average SMP (€) 67.96 66.34 81.19 76.17 78.90 88.79 Average Demand (MW) 4,528 4,408 4,605 4,595 4,363 4,242 Demand ‐ SMP Correlation Coefficient 0.55 0.48 0.50 0.52 0.47 0.49 Figure 5 shows the weekly rolling average load against weekly rolling average SMP, which again demonstrates this correlation, as well as the weakening towards the end of the period. Figure 5: Weekly Rolling Average SMP & Load 9 From Figure 6 it can be seen that during the end of December the SMP was relatively low, as there was a lot of spare capacity available and demand could be met by the more efficient and less expensive plant available.
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