Real-Time Balancing Operations and Markets: Key to Competitive Wholesale Electricity Markets

Abstract:

Electricity production and consumption must occur at essentially the same time. Therefore, real-time (minute-to-minute) operations and the associated markets and prices are essential ingredients of a competitive wholesale electricity industry. In addition, these intrahour markets are the foundation of all forward markets and contracts, including hour- and day-ahead markets, monthly futures, and bilateral contracts. Finally, these intrahour operations maintain system reliability by ensuring that enough and the right kinds of supply and demand resources are available when needed. Because of various load, generation, and transmission factors, balancing generation to load on a minute-tominute basis is complicated. Loads are volatile, both from hour to hour and from minute to minute during the morning rampup and evening dropoff. Generators differ substantially in their costs of electricity production. In addition, generators have various idiosyncratic characteristics, such as maximum and minimum output levels and maximum ramprates, that limit their ability to respond rapidly to changes in system load or generation. Finally, transmission characteristics affect the real-time balancing function because of congestion and sudden transmission outages. These factors can lead to dramatic and rapid changes in electricity prices, including occasional negative prices when generators pay someone to take their output.