The increasing focus on renewable energy sources poses unique challenges for participants in Independent System Operators (ISO) and Regional Transmission Organizations (RTO) markets.
Last year, the Federal Energy Regulatory Commission (FERC) issued Order No. 2222 requiring RTO/ISOs to adopt rules allowing Distributed Energy Resources (DERs) to participate in RTO/ISO-administered wholesale electricity markets.
While there are large areas in the US that are served more traditionally by vertically integrated utilities with bilateral trading, most of the electricity in the country is now being delivered through RTO/ISOs.
Challenges of integrating renewable energy resources
The “seams” between an RTO/ISO region and the geographically adjacent region have been “stitched,” resulting in large areas operating under uniform real-time pricing rules. This introduces challenges for integrating renewable energy resources. For example, wide scale balancing may be a better option to deal with the intermittent nature of renewable energy.
As a result, the importance of managing operational uncertainty is growing. Integrated digital solutions for energy trading and market communication software solutions are crucial to handle forecasting, position management, RTO/ISO bid/offer submission, and complex RTO/ISO settlement.
Initiatives set to achieve renewable energy goals
The implementation of FERC Order No. 2222 is ongoing and timelines for market rules vary as legal and technical challenges remain to be solved. In addition, market design reviews are taking place in RTO/ISO, such as PJM (the capacity market and adequacy concerns), ISO New England and ERCOT.
Meanwhile, the Southwest Power Pool (SPP) is working on an initiative to expand into the Western interconnection, which means organizations currently working outside an RTO/ISO organized market would become members of SPP.
This new expanded RTO would then be adjacent to the California ISO (CAISO), who are planning to roll out their Day Ahead Market Enhancements (DAME) in the second half of 2023. To help with uncertainties of renewables, CAISO is introducing imbalance reserves (kind of an insurance to imperfect forecasting) that will be part of a new market initiative called Extended Day Ahead Market (EDAM). Such a program will benefit a broader western US market.
Outside the US, in the Irish Integrated Single Electricity Market (I-SEM), market changes are planned. The Post-DAM daily System Services auction will be consistent with European Union requirements and introduce significant changes in how business is done.
All these initiatives are designed to achieve renewable energy goals, reinforce system reliability and leverage new opportunities to buy, sell and trade power.
Energy trading and market communication software solutions are indispensable for market participants
Regardless of an individual market participant’s approach, they all will need the data, visibility and decision support tools to best operate in short-, mid- and long-term markets.
To navigate the complexities of these markets, energy trading and market communication software solutions are indispensable tools.
Energy Trading and Risk Management (ETRM) systems play a pivotal role in managing the complexities of energy trading, including risk assessment, position management, and portfolio optimization. An ETRM system serves as a centralized platform for managing the entire lifecycle of energy trading activities and creates a single “source of truth” to improve and speed up the decision-making processes.
Users are enabled to conduct scenario analysis, stress testing, and Value at Risk (VaR) calculations. Through near real-time visibility into trading positions, simulating market conditions, and assessing potential outcomes, market participants can make informed decisions, optimize risk-reward trade-offs, and design robust risk mitigation strategies.
In RTO/ISO markets, participants need to submit bids and offers for energy products and services in the Day-Ahead market, Intraday market, and Ancillary Services (including Balancing) market.
Market communication software solutions act as a bridge between market participants and RTO/ISO systems, enabling seamless data exchange. They facilitate bid and offer submissions, automate market data retrieval, and assist in managing settlements. Efficient market communication ensures accurate and timely information flow, reducing the risk of errors and improving operational efficiency.
Real value for market participants is unlocked when ETRM systems are integrated with market communication software solutions. When integrated, data flows seamlessly between the systems, reducing manual errors and ensuring accurate settlement processes. Market participants can automate trade data transfers, settlements, and invoices, improving operational efficiency and reducing reconciliation efforts.
Furthermore, advanced forecasting models integrated into the software can help market participants accurately predict renewable energy generation and facilitate optimal bidding and scheduling strategies.
Near real-time data analysis and reporting capabilities enable market participants to adapt quickly to changing renewable energy availability and market conditions.
Hitachi Energy delivers real value for RTO/ISO markets participants
Hitachi Energy has worked with RTO/ISO markets participants for over two decades, bringing value with its nMarket scheduling and settlement solution, which now has been tightly integrated with its award winning ETRM system, TRMTracker. It enables users to automate and optimize all front and back-office workflows for ISO/RTO markets, thereby creating a seamless bid-to-bill platform for straight-through processing.
Hitachi Energy’s RTO/ISO solutions allow users to operate within a single user interface to determine optimal utilization of all assets, apply ‘what-if’ analysis, stress testing, risk management and hedging, and simplify bid/offer submission through direct ISO/RTO communication. It also manages settlement statements and performs shadow settlement and dispute management.
Robust software solutions are vital for success in RTO/ISO markets
In the dynamic and evolving energy landscape, energy trading and market communication software solutions have become crucial for market participants in ISO/ RTO markets. These solutions streamline operations, improve efficiency, and enable market participants to navigate the challenges associated with renewable energy integration.
By integrating ETRM systems with energy trading and market communication software, market participants can achieve better risk management, optimize portfolios, and make informed trading decisions. As renewable energy continues to reshape the energy sector, investing in robust software solutions is vital for successfully participating in RTO/ISO markets going forward.
For further insight into how an Energy Portfolio Management System can streamline your energy trading, contact us now