SPP MMU suggests creating seasonal availability market to ease energy transition

Southwest Power Pool's market monitoring unit is floating the idea of creating a seasonal availability market as a novel alternative to a capacity market to ensure that resources show up when they are needed most, the MMU told stakeholders May 24.

"If availability isn't valued and priced separately from energy, reliability is being socialized across the region without the right market signals to improve it," John Luallen, a manager at the SPP MMU, said during a meeting of the Market Working Group.

The idea of an availability market came up in the context of proposed changes to SPP's accreditation for thermal resources. As conventional generators retire, the proposal seeks to better measure the performance of the remaining thermal resources needed to balance the growth of renewables.

SPP currently accredits thermal resources by testing them for at least one hour during the summer season at least once every five years. Stakeholders have been working out the details of a new proposal, which would base accreditation on performance during four out of the five most recent years, excluding events that are out of management control such as transmission outages, fuel supply problems, and catastrophic events.

The leading stakeholder accreditation proposal would include two four-month seasons. Summer would cover all hours from June through September, and winter would cover all hours from December through March. SPP staff has proposed to phase in the new performance-based accreditation over six years.

MMU concerns

But the MMU is raising concern with this approach, noting that SPP estimates it would lead to a planning reserve margin of 25%-40%. The large resource planning margin would force new capacity to be built, but it does necessarily promote available capacity, the MMU said in its presentation.

For instance, more gas resources would not have helped during the 2021 winter weather event, the presentation said. Resources that have high performance will end up subsidizing resources that have poor performance, the presentation said. And there is no differentiation between resources that have long planned outages and resources the have shorter planned outages, the presentation said.

Instead of the proposed approach, the MMU suggested creating an annual auction of resource availability, the presentation said. While this approach could mesh with parts of the current accreditation proposal, it would not excuse outages and to events that are out of management control.

Availability market

Under the MMU proposal, load would purchase available capacity to meet a quarterly requirement based on non-coincident peak, and the capacity must be delivered by load zone, the presentation said. Asset owners would offer a certain number of megawatts into the availability market, and they would have flexibility about which resources to use to fulfill that obligation, the presentation said. Generators could only offer accredited capacity into the auction, the presentation said.

After the annual auction, there would be monthly auctions where generators can purchase replacement capacity, for instance, if they need to take a scheduled or unscheduled outage, the presentation said. Capacity that has cleared in the annual auction or monthly replacement auction must offer in the day-ahead market, the presentation said. The day-ahead market offers one more opportunity to purchase replacement capacity, the presentation said.

Cleared capacity that is not offered in the day-ahead market will incur an unavailability penalty, the presentation said. Similarly, cleared capacity not offered into the real-time market will also incur an unavailability penalty.

Capacity worries

Carrie Dixon, senior manager of market operations at Xcel Energy, asked how the availability market differs from the capacity markets used by other grid operators. "There's no guarantee that capacity markets are the right answer to having available generation to cover your demand," she said.

Jared Greenwalt from the MMU said that the main difference is the time frame. Capacity markets are focused on one year to several years in advance, but a whole lot can happen within a year, he said. In contrast, the availability market would be granular and focused on the shorter term, he said.

"We need to do something, and we think this is an improvement that adds revenue so market participants can pay for the equipment and staffing it takes to remain available," Greenwalt said.