Sygnity Capacity Market: for whom and why?

Piotr Karwaczyński, Adam Larysz

With the entry into force of the Act of 8 December 2017 on the capacity market [1] in Sygnity, we started conceptual work on an IT solution that could bring measurable benefits to entities that will function in the emerging market in the future. We got acquainted with the new field, established contact with several entities – future power suppliers, participated in training sessions and seminars dedicated to future market participants. Based on the acquired knowledge and opinions, we have developed the concept and prototype of the application. Observing the significant market interest in our idea, we have invested in preparing the Sygnity Capacity Market (SCM) solution.

One of the first implementation decisions was the selection of the proven Sygnity Forecast application platform as the “chassis” for the new solution. After completing the main part of SCM, including record part (capacity market units, physical units, capacity contracts, secondary market transactions, etc.), handling of threat periods or tools for monitoring compliance with capacity obligations, we decided to acquire a partner who is a capacity market participant with whom we could jointly continue product development .

Thanks to this, we build our solution in such a way that it meets the business and functional expectations of the actual user.

In this study, we present the main functional areas of the application we built, indicate their potential recipients and outline the value that these functions can bring.

Some of these functionalities are illustrated by application screens. The data visible on the forms comes from publicly available sources. Part of the data was randomly generated and may not have any business justification.

1. Monitoring compliance with the capacity obligation

When fulfilling the obligations arising from capacity contracts, the basic need of the capacity provider will be access to current information about the amount of its capacity obligations and about the possibilities of supplying power to the National Power System. In the SCM application, we have introduced dedicated screens to visualize these values in a 24-hour perspective. Anticipating the diversity of monitoring needs, we’ve decided to introduce significant configuration options. Adding a new monitoring screen and configuring its content is an administrative and not a programming operation. Below is an example screen monitoring the balance of liabilities and capabilities of the power market units (PMU).

The left side of the screen presents power market units (PMU) placed in a hierarchical structure of groups. Their organization can typically result from the division by organizational units, companies or energy generation technology. The application does not impose division, allows you to build any hierarchy by adding new groups and determining their level of depth.

Each of the PMU or groups can be described by a set of attributes, each of which represents an hourly value matrix (right, bottom of the screen). Adding and organizing attributes to form a hierarchy, as with operations on the PMU hierarchy, is an administrative task. Attributes can be fed with data in several ways. First of all, they can be assigned tasks that import data of a specific type, either those recorded directly in the SCM (e.g. net achievable power) or coming from external systems (e.g. power plant losses).

The second way to supply attributes with data is to define formulas in notation similar to that used in MS Excel. In this way, based on the values of one attribute, you can calculate derived values (e.g. aggregates) and save them in other attributes. To define the conversion, you can use the library of over 400 standard functions [2]. Another method of feeding attributes with data is manual feeding, performed by entering an hourly value schedule.

Many mechanisms are available to improve the entry of values: filling a selected range of cells with a specific value, importing data from an MS Excel file, pasting a matrix from MS Excel, filling a value in a specific hourly interval, etc.

Attributes time histories can be visualized on the chart (right, top of the screen). You can present multiple data series on one chart using several standard chart types. Graph fragments can be enlarged, removed, and saved to a graphic file as needed. You can modify the display style for both data series and chart elements. It is also possible to adapt the chart to specific needs, going beyond the configuration possibilities, through programming activities.

2. Management of capacity obligations

Capacity market units may come into possession of a capacity obligation by winning a capacity auction and by signing a capacity contract (primary market) or by entering into transactions transferring the capacity obligation to them from other units (secondary market). In SCM, capacity obligations arising from concluded capacity contracts are recorded in the records of capacity contracts.

Each registered capacity contract must have an indicated auction from which it originates, the PMU to which it relates, the power provider, the period for which it applies, as well as the capacity volume and net price including public aid granted to the unit from other sources. For long-term contracts, the application includes a mechanism for indexing prices with inflation coefficients.

Transfers of capacity obligations between PMU are recorded in the transaction records. The transaction clearly specifies between which PMU the capacity obligation is transferred and what is the original source of this obligation (i.e. the auction that created it and PMU who purchased it at this auction).

The transferred capacity obligation is in the form of a 24-hour schedule. In SCM, while registering transactions, you can use many functions to improve the introduction of the correct schedule (presentation of limits on the handing and receiving side, value validation mechanism, graphic signalling of exceedances, pasting the matrix from the MS Excel spreadsheet, filling the schedule with values in given hours, dates, in zones, etc.). Transactions, due to the complex life cycle set by legal regulations [3], are described by an attribute indicating their current status.

The user has an insight into the capacity obligation of a capacity market unit in two perspectives. The first of them presents the summary schedule of the PMU capacity obligation at each hour, with the option of displaying its components from individual contracts and transactions.

In addition to the hourly grain, capacity obligations can be presented in aggregate (sum, average) for days or months. In addition to the schedule with volume, the user has an insight into the schedule with prices (average prices weighted by volume) every hour, also with the option of viewing component prices.

3. Transfer of capacity obligation

Having in the IT system data describing the possibilities of supplying power by the PMU (including net available capacity, corrective availability factor, information about planned and unplanned non-availability) and data representing PMU’s obligations on the capacity market (capacity obligations from the primary and secondary market), you can automatically and algorithmically respond to availability fluctuations.

The purpose and form of such an algorithm are very much dependent on the organizational and technical conditions of the enterprise. On the one hand, the operation of the algorithm will obviously depend on the availability and timeliness of the input data. On the other hand, after proposing the pool of transactions by the algorithm, you will need appropriate substantive competence and decision-making possibilities of the user to verify and approve his results.

An additional factor significantly affecting the form and objectives of the algorithm is the possibility (or lack thereof, as is currently the case) of integration with the Power Market Register [4]. The need to manually enter transactions in PURM results in the pursuit of minimizing the number of transactions proposed by the algorithm, even at the cost of losing some of the revenue.

On a general level, the algorithm for power capacity transfer consists of the following elements:

determination of stimuli that trigger the algorithm,
determining the time range and PMU pool on which the algorithm operates,
identification and prioritization of capacity obligations requiring transfer,
identification and prioritization of the possibility for PMU to accept additional capacity obligations,
defining transactions that transfer the capacity obligation by priority,
analysis of the resulting, proposed transactions by the application user,
approving or rejecting proposed transactions.

We expect that the capacity transfer algorithms will be specific to our customers and will be part of their competitive advantage in the capacity market. Hence, one of the design assumptions of SCM applications is the ability to design, implement and implement dedicated algorithms for various clients in such a way that each of them has access only to their own algorithm.

4. Operation support during periods of danger

The threat period will be announced by the TSO no later than 8 hours before its commencement. Along with information about the occurrence of the threat period, the parameters will be published to calculate the adjusted capacity obligation (ACO) of capacity market units.

Registering the threat period in the SCM application, both actual and test, involves entering its parameters at appropriate times. We assume that ultimately the Power Market Registry will be able to provide other applications with information about the occurrence of a threat period in a way that does not require human involvement.

Following the registration of the threat period, the application may send appropriate SMS or email notifications to any pre-defined group of recipients. Then, the SCM automatically calculates the ACO for all PMU providing capacity under a given threat period.

Based on the calculated data, the application enables the user to monitor the adjusted capacity obligation in relation to available and non-available capacities, at the level of PMU, PMU group, organizational unit or the entire enterprise. In the event of a power deficit, the application may automatically or on demand of the user perform the power obligation transfer algorithm.

5. Billing algorithms

We offer application support for two areas of the power market settlement:

(1) keeping internal accounts of participation in the capacity market and

(2) generate control settlement reports.

5.1. Internal settlements

An energy company which includes entities that are power suppliers can implement its own internal policy for managing capacity obligations and related risks and opportunities. The scale of benefits that an enterprise can obtain from this approach is directly proportional to the number of capacity providers and capacity market units it has.

Due to additional internal rules of operation, there is a natural need to properly adjust the cost and benefits redistribution resulting from participation in the capacity market.

The complete information registered in the SCM solution regarding the planned and executed power supply by the PMU can be used as input to the billing algorithm. One of the modules of the SCM solution is a tool including giving the ability to generate settlements based on a defined algorithm, storing sets of data for which settlements were generated and allowing to make settlements adjustments.

5.2. Control settlements

Power market financial settlements are carried out by the power market settlements manager, based on the instructions of the Transmission System Operator. TSO, based on, among others concluded capacity contracts, measurement data on the physical units constituting the PMU and information on threat periods sets the amounts due and penalties for power suppliers. Power suppliers, having the source billing data and knowing the billing algorithm, are able to control the correctness of the calculated amounts.

Due to the complexity of the settlement process and the large number of entities involved in this process, and thus the presence of many potential sources of error, such control on the side of those directly concerned seems to be fully justified.

As of the day of writing the paper, it is uncertain whether the power suppliers will have complete input data (e.g. data on the total ACO performance for the purposes of the bonus calculation). However, given the widespread pursuit of transparency of activities, we assume that such data will be published.

6. Summary

Answering the title question: SCM is an IT solution developed for power suppliers who manage a significant number of PMU or plan to be active in the secondary market. Such a definition of a group of potential recipients results from the benefits that it can bring to operating activities:

to provide a consistent and up-to-date view of capacity obligations arising from primary and secondary markets at each hour, both at the level of a single PMU and any group thereof,
enabling efficient response in the event of a threat period,
automation and algorithmization of complex activities, such as optimal transfer of capacity obligation, reallocation of performance of the capacity obligation, or transaction life cycle management (especially after the creation of the system supporting the secondary market and access to interfaces by the Power Market Register),
improving the internal billing process and the billing control process,
extending the possibilities of enterprise information management and making knowledge-based decisions.

It is difficult to judge how much the secondary market will develop and thus the number of transactions that market participants will have to deal with. However, the legal possibility of very small sharing of capacity obligations and the potential to optimize revenues may lead to the need to control thousands of transactions. In such a scenario, it is difficult to imagine effective actions without proper application support.

Literature

[1] Act of 8 December 2017 on the capacity market, Journal of Laws 2018 item 9.
[2] GrapeCity Inc .: Spread Formula Reference Documentation, https://www.grapecity.com, 2019.
Polskie Sieci Elektroenergetyczne S.A .: Power Market Regulations of March 27, 2018, https://www.pse.pl/regulamin-rynku-mocy.
[4] Polskie Sieci Elektroenergetyczne S.A .: Power Market Register – Power Market Participant Portal (PURM), https://purm.pse.pl, 2019.