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How does AOCE help ISO/RTO’s acquire adequate grid services capacity needed for reliability

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Richard Brooks's picture
Co-Founder and Lead Software Engineer, Reliable Energy Analytics LLC

Dick Brooks is the inventor of patent 11,374,961: METHODS FOR VERIFICATION OF SOFTWARE OBJECT AUTHENTICITY AND INTEGRITY and the Software Assurance Guardian™ (SAG ™) Point Man™ (SAG-PM™) software...

  • Member since 2018
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  • Dec 12, 2020

New England’s electricity consumers have benefited from a steady stream of reliable electricity over a long period of time, thanks to the proficiency of the professionals at ISO New England that loyally dedicate themselves, each and every day to keeping the lights on. Thank you, ISO New England for your service to the region. Ok, I may be a bit biased due to my 14-year run as an employee of ISO New England, however the record of zero blackouts over the past several years stands alone as a proof point of their good work.

The energy industry stands at the edge of a new frontier as the energy transition evolves.  This transition, which prominently features Green Buyers desiring to reduce GHG, e.g. States and C&I customers, increases in uncertainty with load forecasting, and distributed energy resources forming a distributed supply chain with potentially thousands of flexible resources will require changes in operations and markets in order to continue to operate effectively and efficiently. California has provided a glimpse of the challenges that may lie ahead for New England, as the energy transition unfolds. One important change that must be addressed is the way in which wholesale markets help Green Buyers, i.e. States, C&I and Aggregators, achieve their goals while simultaneously ensuring the reliable delivery of electricity to prevent a situation like California has experienced from happening here in New England.

In my previous two articles I showed how an “Always on Capacity Exchange” (AOCE) helps States and Green Buyers achieve their goals and address the problem of inadequate compensation to generators, and lack of incentives to attract investors into the market, all within a wholesale market AOCE solution operated by ISO New England.

This article is the last in this three-part series showing how AOCE can serve as a viable solution to acquire sufficient capacity, in the form of grid services, to serve the reliability needs of the System Operator, ISO New England.

In step 1 of the “Capacity Acquisition Process”, carried out by ISO New England, State based energy goals are addressed as a first priority, resulting in the acquisition of capacity that will be added to the “capacity needed for reliability bucket”, determined by ISO New England. In step 2, the ISO seeks to acquire sufficient capacity, per essential grid service, as determined by ISO New England to ensure reliable electricity for the region. The capacity acquired in step 2 is added to the “capacity needed for reliability bucket”.  In the event that ISO New England is unable to “fill the bucket” with the amount of grid capacity needed, per each individual grid service identified by the ISO, then the ISO may issue a reliability bid (ISORB) into AOCE, specifying details of the requirement, i.e. the type of grid service needed for reliability, quantity in MW, location where the need exists, along with any other information that may be deemed necessary. Generators with available capacity that has not been committed to an ACC may place an offer on this ISORB. ACC owners that have available capacity may also bid their capacity in AOCE to satisfy the ISORB. At a defined point ISO-NE clears the market to satisfy the ISORB, using a “uniform clearing price” (UCP) process, similar to the DA Energy Market. All offers to satisfy the ISORB clear the market, on a grid service basis to prevent price distortions across services, and receive a CSO along with a capacity payment equal to the amount of MW’s in the CSO multiplied by the UCP. Cost allocations for these capacity payments is determined by ISO-NE based on the locations being served by this ISORB acquired capacity. The ISORB sends a powerful price signal to the market for needed investments in grid services capacity within specific locations.

The ISO may issue ISORB’s at any point throughout a defined Reliability Commitment Period (RCP) in order to ensure adequate essential grid services are available when needed. For example, a solar eclipse is expected to occur in April 2024; the ISO may issue one or more ISORB’s to address the up and down ramping needs to maintain reliability during the eclipse timeline. As forecasting consumer demand is becoming more uncertain, the need for “close in”, e.g. within 30 days of when needed, capacity acquisition will become more essential to the grid operator in order to address forecasting errors and other anomalies that can impact grid reliability, e.g. unplanned outages. For example, an unplanned outage occurring on 12/12/2020, could result in an ISORB for the period starting on 12/14/2020 until such date/time of the expected recovery from the outage.

This concludes the series of articles describing how an “Always on Capacity Exchange” (AOCE), operated as a wholesale market mechanism by ISO New England can serve the New England regions electricity stakeholders to achieve State Energy goals and satisfy the reliability needs of the region at a just and reasonable price point for all stakeholders. I hope this information provides my readers with an understanding of how an AOCE based, wholesale market solution provides a viable pathway forward within NEPOOL. FYI a podcast interview is available from Energy Central describing AOCE,

Happy Holidays to all and avoid that nasty virus – please stay safe.

Bob Meinetz's picture
Bob Meinetz on Dec 12, 2020

"The capacity acquired in step 2 is added to the “capacity needed for reliability bucket”.  In the event that ISO New England is unable to “fill the bucket” with the amount of grid capacity needed, per each individual grid service identified by the ISO, then the ISO may issue a reliability bid (ISORB) into AOCE etc etc etc..."

Richard, it was a multi-tiered, market-based solution like the one you describe above that California thought might help to prevent shortages in late summer. It didn't work, because the complex problem it sought to solve didn't exist. The problem was a lack of reliable electricity.

If you want to prevent a situation like California has experienced, don't use us as an example.

Richard Brooks's picture
Richard Brooks on Dec 14, 2020

Bob, as I understand it, the CA PUC is responsible for Resource Adequacy, not CAISO. Is this correct? If so, AOCE would shift this responsibility to CAISO to operate an AOCE based competitive bidding Resource Adequacy program.

Bob Meinetz's picture
Bob Meinetz on Dec 15, 2020

Richard, officially the CPUC is responsible for creating policy, CAISO is responsible for implementing it. In practice they work together, and have created a loading order which discriminates in favor of unreliable, unpredictable sources to provide resource adequacy.

In August, Californians learned that unreliable sources can't provide reliable electricity. Who woulda thought?

Matt Chester's picture
Matt Chester on Dec 14, 2020

I've appreciated this series, Dick-- thanks for sharing! It seems like these initiatives would be felt and used on the C&I scale; is there any tangible way residential customers would feel/recognize a difference with the AOCE?

Richard Brooks's picture
Richard Brooks on Dec 14, 2020

Matt, FERC Order 2222 opens the door to DER Aggregators to supply residential and other distribution grid resources into 100kw (or greater) capacity offers in wholesale markets.

Efstratios Psarianos's picture
Efstratios Psarianos on Dec 18, 2020

Here's something that may interest you all ... 


Northeast America (NEA) Electricity Profile: Proposal of a Free Trade Area


Richard Brooks's picture
Thank Richard for the Post!
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