Ensuring accuracy in deemed and reserve offers
To maintain the security, reliability and efficiency of the market, it’s important that generators make accurate offers when competing to sell their electricity on the wholesale electricity market.
Generators are required to have robust processes in place, so their offers never exceed their capability to generate.
This case study highlights the importance of reviewing offers, particularly when relying on the deemed offer rollover. Deemed offers similarly apply to reserve offers so this case study equally applies to ancillary service agents.
Note: dates and quantities have been changed for anonymisation purposes. For this case study, the apparent dispatch non-compliance and consequential market impact is not considered.
Background
The Electricity Industry Participation Code 2010 requires generators to submit offers at least 71 trading periods (approximately 1.5 days) before the beginning of the trading period the offer relates to.
If a generator has not submitted an offer for a trading period, their offers for the current trading day will roll over to corresponding trading periods in two days’ time – this is called a ‘deemed offer’.
Every trading day deemed offers are automatically created for any missing offers and sent to the system operator as available generation.
Potential impacts to the market
A generator with a deemed offer it could not meet would have this offer modelled by the system operator as available generation. If the generator received a dispatch instruction based on this offer it would not be able to comply. This may result in the system operator dispatching more expensive generation with a higher cost dispatch solution, ie higher spot prices.
Circumstances of the case
A participant has regularly relied on deemed offers when there is no change in offered megawatts (MWs) or price. In this case, the participant expected a decrease in generation capacity on 19 April 2024 from trading period 5 onwards.
Accordingly, on 18 April 2024, the participant’s trader decreased their offers from 20MW to 8MW from trading period 5 on 19 April to trading period 48 on 20 April. The trader did not submit any offers for further dates. See figure 1.
As no offers were made by the participant beyond 20 April, the 19 April offers were applied as deemed for 21 April. See figure 2.
A different trader took over for the following week. Due to an oversight, the offers for trading periods 1 to 4 on 21 April were not revised to 8MW. The trader also did not submit any new offers that week. This meant the deemed offer was repeated on 21, 23 and 25 April. See figure 3.
The participant discovered the situation on 26 April and corrected the incorrect offers for 27 April. Overall, incorrect offers were submitted for trading periods 1 to 4 on 21, 23 and 25 April 2024.
During these periods:
- the participant was offering 20MW when it should have been offering 8MW
- the system operator was dispatching the station at between ~12MW and ~15MW while the participant was only generating between ~4MW and ~8MW.
Clauses breached
Clause 13.9A of the Code states that the total MW specified in each offer submitted by a generator must not exceed the total MW that the generator expects to be capable of generating.
The participant breached clause 13.9A on 19, 21 and 23 April 2024 when it submitted offers for trading periods 1 to 4 on 21, 23 and 25 April that exceeded its generating capability.
Recommendations from the case study
The Electricity Authority reminds participants of the importance of reviewing daily offers, even when relying on the deemed offer rollover. This can include reviewing the forward schedules from the system operator published on the Wholesale Information Trading System.
Lessons learned
To prevent this happening again, the participant has taken the following steps:
- The trading team discussed and reviewed the importance of confirming daily offers of generating units.
- The participant reviewed their process and protocol for handovers between traders.
Compliance comments
- The Electricity Authority expected the participant to have picked up this mistake sooner. We expect participants to monitor their compliance with dispatch instructions by using alarms and other appropriate methods.
- The participant self-reported the alleged breach, meeting their obligation under Regulation 7 of the Electricity Industry (Enforcement) Regulations 2010 to report possible breaches of Part 7, 8, 9, or 13 of the Code as soon as practicable.
- Deemed offers similarly apply to reserve offers so this case study equally applies to ancillary service agents.
Code provisions
The relevant Code provisions are set out below.
13.6 Requirements for generators when submitting offers
(1) Each generator with a point of connection to the grid, and each embedded generator required by the system operator to submit an offer under clause 8.25(5), must—
(a) submit to the system operator an offer for each trading period in the schedule period, under which the generator is prepared to sell electricity to the clearing manager; and
(b) ensure that the system operator receives an offer at least 71 trading periods before the beginning of the trading period to which the offer relates.
13.8 Deemed offers
(1) This clause applies if, on any trading day ("the current trading day"), a generator has not submitted an offer for a trading period in the trading day following the next trading day.
(2) A generator is deemed to have submitted, for that trading period, an offer that is the same as the offer the generator made for the corresponding trading period on the current trading day, and clause 13.9A applies accordingly.
(3) A deemed offer under subclause (2) applies until the generator revises the offer in accordance with clauses 13.17 to 13.19.
13.9A Offer not to exceed capability
(1) The total MW specified in each offer submitted by a generator must, in relation to the generating plant that is the subject of the offer, not exceed the total MW that the generator expects to be capable of generating at the relevant point of connection to the grid for the relevant trading period.
(2) Subclause (1) does not apply to an intermittent generator.