IEEE Power & Energy Magazine - November/December 2017 - 77

Intraday Markets
In northwest Europe (France, Belgium, The Netherlands,
and Germany), short-term markets remunerate flexible
thermal capacity through day-ahead, intraday, and realtime balancing markets. Unlike in the United States, formal
intraday energy markets play an important role for market
participants to adjust their positions as wind, solar, and load
forecasts evolve (although CAISO has recently introduced a
15-min market). In Germany, volume in the intraday market doubled from 2014 to 2015, to approximately 8% of total
market transactions. Germany, unlike the other three countries, has a formal auction rather than a bid-ask matching
system for such trading.
Other enhancements might also increase market efficiency
and rewards to flexible capacity. These include coordination
of neighboring balancing markets, allowing virtual trading
between the day-ahead and other markets, and shorter settlement intervals. It is also important that the present capacity
november/december 2017

Net Load

and wind forecasts and backward at historical forecast errors,
uninstructed deviations, and so forth. Transparent price signals are sent to the market, reflecting the opportunity cost
incurred by the marginal ramping resource to provide the
ramp capability or the demand curve specifying the value the
regional transmission organization (RTO) is willing to pay for
the required amount. The ramp capability product is included
in each market, including day-ahead and real-time, so that
flexible resources are committed and dispatched to meet the
operational ramping needs.
Analyses of production results have validated the anticipated benefits in MISO. As Figure 5(a) illustrates, the ramp
product resulted in about US$4.2 million of annual cost savings as well as reduced price volatility and improved dayahead and real-time price convergence. Figure 5(b) compares market outcomes with and without the product and
reveals reduced scarcities and price spikes at a modest procurement of capability cost.
In addition to valuing flexibility in the real-time market
via ramping products, CAISO has also modified its annual
resource adequacy program to require that a certain amount
of contracted capacity be flexible resources that can respond
to real-time dispatch instructions and start at least twice daily
and that are also responsive enough to meet anticipated ramp
needs. This requirement recognizes that the net load shape
for the ISO sees an increasing need of ramping in the evening when solar production decreases while loads increase.
The flexible capacity product is combined with a must-offer
obligation such that resources must offer this flexibility in
real time. The product aims to ensure flexibility is available
in the long term (compared to the flexible ramp product,
which focuses more on short-term needs) and is used to meet
a set of different ramp needs throughout a month, including
the largest ramp of the month (A), the smallest of the largest
daily ramps of the month (B), and secondary ramps (C and
D). See Figure 6.

8:00

Single-Interval Real-Time
Dispatch to Meet Unit
Dispatch System
Target at 8:10
Ramp Requirements Enforced
to Be Capable of Moving from
8:10 to 8:20 with Specified
Projected MW Uncertainty Level

8:05

DAM

8:10

8:15

8:20
Time
(a)

8:25

8:30

8:35

Financial Market
FRAC
IRAC

Physical Market
Look Ahead
LAC
LAD/UDS
AGC

Enhanced
Objective Function
and Ramp Constraint

DAM: Day-Ahead Market
FRAC: Forward Reliability Assessment Commitment
IRAC: Intraday Reliability Assessment Commitment
LAC: Look-Ahead Commitment
LAD: Look-Ahead Dispatch (Currently UDS)
AGC: Automatic Generation Control
(b)
Source: MISO

figure 4. The ramp capability product at MISO.

mechanisms, which pay to keep capacity that would otherwise
retire on standby, not distort spot-pricing signals.

Getting the Price Right
Electricity market designs most commonly clear for energy
by matching offers to sell from the supply side and bids to
buy from the demand side. The resulting prices for energy
and ancillary services reflect the short-run marginal costs of
the most expensive resource on the supply side or the marginal value of electricity on the demand side.
In theory, this construct of electricity market design is
intended to provide sufficient incentives for both short-run
operations and long-run investments. However, in practice, due
to lack of significant direct participation by the demand side
in electricity markets, the ISO is forced to intervene in times
of scarcity to meet inelastic demand. If the market design also
features an inadequate scarcity pricing mechanism not properly
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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2017