Thursday, February 21, 2019

MMU Report: Wind Forecast Errors Drive SPP Price Spikes

By Tom Kleckner

SPP saw an increase in price spikes and overall prices during October and November thanks to above-normal scarcity pricing, according to the Market Monitoring Unit’s fall State of the Market report.

The Monitor attributed the scarcity increases to higher volatility in wind output, pointing to an increase in mid- and long-term wind forecast errors as the primary culprit. It also said a 72% increase in natural gas spot prices at the Panhandle hub ($2.13/MMBtu to $3.67/MMBtu) and unplanned generator outages or derates contributed to the uptick.

Volatility of wind output | SPP

Redispatch costs increase faster with more expensive gas until scarcity occurs, the MMU said, driving up the number of scarcity events.

“Since the scarcity caps are price-based, they are reached more frequently due to increased gas prices,” the report said.

The long-term wind forecast, used for the day-ahead reliability unit commitment’s wind output, had an average error rate of 7.8% in 2018, almost double the 2016 average of 4.3%. The mid-term load forecast, used four hours ahead of the intra-day RUC processes, had an average error rate of 4.5% last year, 28% higher than 2016’s average of 3.5%.

Wind output versus day-ahead RUC wind forecast, Sept. 3 | SPP

When large wind dips are not accurately forecasted, the market will often be short rampable capacity, the MMU said. This forces SPP operators to manually force more capacity online.

The real-time marginal energy price peaked at $1,575/MWh at 2:40 p.m. on Sept. 3. Operators responded to an unexpected sudden drop in wind output by adjusting the load offset and manually committing quick-start units. It took three intervals before prices dropped back below triple digits.

MMU Executive Director Keith Collins | © RTO Insider

The Monitor said there is no “current answer for better forecasting” fluctuations in wind energy but noted a ramp product would “help abate these price spikes” by reducing their frequency and effects.

“By reserving ramp for unexpected conditions, such as wind drops or unit trips, the market will be better positioned when these events occur,” the MMU said.

SPP’s Market Working Group is coordinating staff’s development of a ramping product. Staff is currently testing different alternatives.

The fall report covers September, October and November. The MMU will host a webinar on Friday at 1 p.m. CT to discuss the report.

The report also indicates the following:

  • Energy prices have climbed slightly, with fall prices averaging around $27/MWh.
  • The number of intervals with negative energy prices continues to decline.
  • Overall congestion across the SPP footprint has declined.

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