Experience with ancillary services in ISO New England´s LMP markets

Summary form only given. The current ancillary services markets in ISO New England include two components: a locational forward reserve market and a real-time co-optimized energy and reserve markets. The locational forward reserve market was initiated in 2003, and was a capacity-type Forward purchase of non-spinning reserves to address the lack of revenue experienced by existing non-spinning reserve resources with low capacity factors but with high availability. The real-time energy and reserve market was instituted in October of 2006 to procure 10-min spinning, 10-min non-spinning and 30-min operating reserves along with energy at a system-wide level as well as locationally on a 5-min basis. Different from many existing reserve market markets, this real-time reserve market does not accept bids but has similar outcomes as the previous real-time markets. It uses penalty prices (similar to price caps) to value reserves when the system is short of meeting requirements or re-dispatch costs (if any) to value reserves when supply meets or exceeds requirements. In addition, the real-time reserve market optimizes the level of reserve import to a local reserve zone, maximizing the utilization of transfer capacity over an interface. As of today, the ISO NE´s ancillary service markets have been working successfully. And ISO NE´s external and internal ISO Market Monitor assessments of the market seem to indicate that the market design is working.