The day-ahead market is made up of three market processes that run sequentially. First, the ISO runs a market power mitigation test. Bids that fail the test are revised to predetermined limits. Then the integrated forward market establishes the generation needed to meet forecast demand. And last, the residual unit commitment process designates additional power plants that will be needed for the next day and must be ready to generate electricity. Market prices set are based on bids.
A major component of the market is the full network model, which analyzes the active transmission and generation resources to find the least cost energy to serve demand. The model produces prices that show the cost of producing and delivering energy from individual nodes, or locations on the grid where transmission lines and generation interconnect.
Scheduling coordinators (SCs) are pre-qualified entities authorized to transact in the ISO market. The day-ahead market opens for bids and schedules seven days before and closes the day prior to the trade date. Results are published at 1:00 p.m.
The real-time market is a spot market in which utilities can buy power to meet the last few increments of demand not covered in their day ahead schedules. It is also the market that secures energy reserves, held ready and available for ISO use if needed, and the energy needed to regulate transmission line stability.
The market opens at 1:00 p.m. prior to the trading day and closes 75 minutes before the start of the trading hour. The results are published about 45 minutes prior to the start of the trading hour. The real-time market system dispatches power plants every 15 and 5 minutes, although under certain grid conditions the ISO can dispatch for a single 1-minute interval.
Ancillary services are energy products used to help maintain grid stability and reliability. There are four types of ancillary services products: regulation up, regulation down, spinning reserve and non-spinning reserve.
Regulation energy is used to control system frequency, which must be maintained very narrowly around 60 hertz, and varies as generators change their energy output. Resources providing regulation are certified by the ISO and must respond to automatic control signals to increase or decrease their operating levels depending upon the need.
Spinning reserve is standby capacity from generation units already connected or synchronized to the grid and that can deliver their energy in 10 minutes when dispatched. Non-spinning reserve is capacity that can be synchronized to the grid and ramped to a specified load within 10 minutes.
Learn how to become certified to provide ancillary services here
Congestion revenue rights (CRRs)
These are financial instruments used to offset congestion costs that occur in the day-ahead market process. CRRs are made available through allocation, auction and bi-lateral trades and are settled based on the marginal cost of congestion. A revenue rights obligation pays its holder when congestion is in the same direction as the obligation, and charges the holder if congestion is in the opposite direction. The reverse is true for CRR options.
Access congestion revenue rights market reports here
Learn how to buy and sell congestion revenue rights here
Market participants can buy or sell energy in the day-ahead market with the explicit requirement to buy or sell it back in the real-time market using convergence bidding. There is no requirement for such bids to be backed by physical assets. This type of bidding, also called virtual bidding, pressures prices in the day-ahead and real-time markets to move closer together, or converge, reducing incentives for buyers and sellers to wait to bid physical schedules in the real time market.
Learn how to register for convergence bidding here